TaxTMI 
TaxTMI 
2024 (7) TMI 325
X X X X Extracts X X X X
X X X X Extracts X X X X
....a Customs. The chronological events pertaining to the present case are as per the following table: - Date Particulars August 1998 Customs Authorities in Mumbai initiated proceedings against the Company for changing the classification from CTH 2309.90 to Heading 0511. 18.02.1999 Order passed by the Commissioner (Appeals), Mumbai accepting the Company's submissions and holding that the said goods are correctly classifiable under CTH 2309.90. 09.04.1999 Bill of Entry no. 756 filed for import of such goods in Kolkata port. 13.04.1999 Provisional assessment of the goods imported at Kolkata port opted for as department insisted on classification under the Heading 0511. 22.04.1999 and 24.04.1999 Show Cause Notice was issued demanding duty on the goods relating to past imports made at Kolkata port. 10.01.2001 Order passed by CEGAT, Mumbai allowing appeal filed by the Department and holding that the imported goods were classifiable under CTH 0511. 15.03.2001 and 22.03.2001 The Company voluntarily paid the duty under protest to the departmental authorities. 29.01.2002 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Tribunal in the case of Nishiland Park Ltd. v. Commr. of Customs as reported at 2002 (142) E.L.T. 174 (Tri. - Mumbai) had an occasion to decide on the imposition of penalty on an identical issue. The Hon'ble Tribunal held that : • "Redemption fine & Penalty- Customs-Appellants under bona fide belief that goods classifiable under Heading No. 95.08 of Customs Tariff Act, 1975, previous import by another importer having been classified them under R.F. Reduced penalties imposed on appellants set aside" 17.. It can be seen that the Tribunal in that case set aside the penalties imposed based on the classification of other importers . In the case before me appellants are on a stronger footing in as much that the classification of the 'said products' was under Chapter Heading No. 23.09 was held in their own case during the relevant period. 18. In light of above discussions , I am of the view that the imposition of the penalty on the appellants under Section 114A of the Customs Act, 1962 and the personal penalties imposed under Section 112(a) of the Customs Act , 1962 is unwarranted and are liable to be set aside." 10.03.2010 The Hon'b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he difference of opinion was resolved by the Ld. Third Member, after which, vide Final Order Nos. A/691-693/KOL/2005 dated 22.09.2005 [2006 (197) E.L.T. 428 (Tri. - Kolkata)], the demand of duty came to be confirmed and penalty reduced to Rs.25,00,000/- against the appellant-company; the penalty on the other two appellants therein, namely, Shri Vickram Jaitha and Shri R.V. Jaitha was reduced to Rs.2,00,000/- (Rupees Two Lakhs) each. 4.2. Being aggrieved, the appellants moved the Hon'ble Calcutta High Court by way of Writ Petition No. 2013 of 2005. The Hon'ble Calcutta High Court vide Order dated 12.12.2005 set aside the above Order of the Tribunal dated 22.09.2005 and remanded the matter back to the Tribunal. 5. The appellant was always contending that the imported goods viz. Artemia Cyst (Brine Shrimp Eggs), would fall under Chapter Heading 2309.90 of the Customs Tariff Act whereas the Department held the view that they should fall under Chapter Heading 0511.99 5.1. Before the Tribunal, the Ld. Advocate appearing for the appellants had submitted that: "...the imposition of the penalty is the only question which has been referred back by the Hon'ble High Cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 2-994, was not available to the appellants, to my mind remanding the matter back to the adjudicating authority for deciding availability of exemption under Notification 163/94 would serve no purpose. Since it is not clear from the records of the case whether the rescinding/superceding Notification No. 47/96-Cus., dated 23rd July, 1996 was placed before Hon'ble Member (J) or not, to my mind had the said rescinding/ superceding notification been produced before the Hon'ble Member (J), she would have come to a different conclusion. 11. In view of the above discussions, I am of the view that as the question of classification of the 'said products' has been settled against appellants and the benefit of Notification No. 163/94-Cus., dated 29-94 is not available to the appellants, the matter does not require any fresh consideration by the adjudicating authority. 12. So far as the penalty is concerned, the Hon'ble High Court had directed the third member to decide the issue relating to the reduced penalties. I now take up the issue of the imposition of the penalty. The Hon'ble High Court while disposing writ petition No. 2013/2005 directed the Tribunal as follows : ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts the doing or omission of such and act." It is undisputed that the penalty can be imposed under the above sections if the conditions as enumerated are satisfied for imposition of the penalty. 15. In this case, during the relevant period of imports, the appellants declared the said goods under Chapter Heading No. 2309.90, based on an order of the Commissioner (Appeals) in their own case and in respect of the very same 'said goods, imported at Mumbai. The order of the Commissioner (Appeals) in the appellants case at that time was based on the fact that other importers were also classifying the said products under Chapter Heading No. 23.09. As such, armed with the order of Commissioner (Appeal) in their favour, the appellant's classification of the said products under Chapter Heading No. 23.09 cannot be faulted with, as an act done, with mala fide intention to evade duty. To my mind, anyone would have done the same way. This act of classifying the said products under Chapter Heading 23.09 by the appellants is reflective of their bona fide impressions and cannot by any stretch of imagination, would attract penal provisions of Sections 112(a) and 114A of the Cu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....need not be taken to other aids. Similarly in the case of classification of goods if the plain and simple meaning of the words can classify the goods the goods have to be classified accordingly. But sometimes the classification of the goods permits an investigation into the purpose of the legislature in fixing a duty for particular goods as well the purpose for which the goods are used. In this particular case we are concerned with the interpretation of the words 'prawn feed.' What is to be considered here is the use of the product. One has to see whether it can be used as such product. I do not think it really matters if a product undergoes some change after importation till the time it is actually used provided it remains the same product and it is used for the purpose specified in the classification. For example, if mangoes were classified as a product, I think if raw mangoes were imported and subsequently by some process there was a change in the condition, i.e. ripeness the product would still be classified as mango. This is because the essential nature and character of the product remains the same. In this case it is essential to determine whether the nature and character of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y grows, it does not change its nature and character. If there is no embryo within the eggs then there is no living organism and these eggs cannot be used as prawn feed. I am of the opinion that if an embryo is within an egg and it is subsequently incubated in controlled temperature and under hydration, the larvae which are subsequently born do not assume the character of any different product but remain in nature and characteristics the same product or organism which is within the egg. Therefore, if the eggs did contain an embryo they could be classified as feeding materials for prawns and ought to have been so classified. These embryos may not be proper prawn feed at the time of importation but could become so, after incubation. Refusing to classify the product as prawn feed on this basis is not reasonable. In deducing the above principle I have taken a lot of guidance from the case of Commissioner of Incometax. v. Venkateswara Hatcheries (P.) Ltd. reported in (1999) 237 ITR 174 (S.C.) (supra). 14. Therefore, in the circumstances there has to be a factual enquiry which has not been done. 15. I do not agree with the submissions of Mr. R.K. Chowdhur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on the earlier decision of the Mumbai Bench of the CESTAT in the case of the same appellant [ref. 2001 (129) E.L.T. 502 (Tri. - Mum.)], which was upheld by the Hon'ble Supreme Court [ref. 2002 (144) E.L.T. A204 (S.C.)]. He submits that the Hon'ble High Court had observed that if there is an embryo within the egg(s), then it would mean that there is a living organism within it; if there is no embryo within the eggs, then there is no living organism and these eggs cannot be used as prawn feed. It is submitted that the Hon'ble High Court had taken the view that: "...if the eggs did contain an embryo, they could be classified as feeding materials for prawn and ought to have been so classified. These embryos may not be proper prawn feed at the time of importation but could become so, after incubation. Refusing to classify the product as prawn feed on this basis is not reasonable..." 8.1. He submits that the Hon'ble High Court had further pointed out that the enquiry should have been made whether the imported goods contained an embryo or a living organism and that this factual enquiry ought to have been made upon notice to the Writ Petitioner (the present appellant) and....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in any manner that the goods were not Prawn Feed. In the said statement of Sri Jaitha, it was clearly stated that the goods are Prawn Feed and nothing else and that these are internationally accepted and dealt with as Prawn Feed. In the said statement, details of various evidence in this regard were also mentioned. During the said statement, a question was put to Sri Jaitha as to what happens to the unhatched cysts to which he replied that these are destroyed and thrown away. We submit that absolutely nothing turns on the said part of the statement and it does not in any way show as if the goods imported by us were not Prawn Feed or as if the goods imported by us were converted in India into any new or different product as has been sought to be erroneously and incorrectly alleged in the show cause notice." (Emphasis supplied) 11.1. The adjudicating authority, in his findings, has held as under: - "The consignment intercepted by DRI was allowed provisional-release at the request of the importer, securing the differential duty by Bank Guarantee. The importer, during the course of investigation, submitted several documents in support of their claim that the goods impor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wide, processed and packed for easy transportation. After harvesting, these undergo a lot of process which inactivate their development and only in controlled laboratory condition, the seeds will hatch into live feed for Prawn. These are complete food for Prawn and sufficient in Fatty Acid, Protein, etc. These have got no other use in India except in Hatcheries. It is, therefore, clear that the goods as imported need a lot of careful processing before these are fed to Prawn. Artemia Cysts are, in fact, inactivated eggs imported in dehydrated and dormant condition in sealed can and what are fed to Prawn are active Napulii produced after careful processing of the seeds. From the statement referred to in earlier paragraph it is also clear that the entire quantity Imported will not hatch into Larvae and unhatched portion is destroyed. Coming to the question of classification, Chapter-5 of the Customs Tariff Act does not cover edible product (other than Guts, Bladder and Stomach of Animals, whole and pieces thereof and animal blood, liquid or dried). Admittedly, the goods as imported, are not edible and, therefore, these are not excluded from Chapter 5. It is, thus, un....
X X X X Extracts X X X X
X X X X Extracts X X X X
....AT Order dated January 10, 2001. While dismissing the appeal the Hon'ble Supreme Court held "We have heard Learned Counsel for the appellant. We find no merit in the appeal. The Civil Appeal is dismissed with cost". In view of dismissal of the appeal by the Hon'ble Apex Court, the issue of classification of the subject goods under CTH 05.11 has attained finality. On the question of leviability of SAD, the importer explained that the goods were imported for the purpose of sale and these were actually sold from Calcutta where Sales Tax is chargeable on sale or purchase of goods. However, as discussed in the preceding paragraph, the imported items need to undergo a hatching process after importation resulting into a different item which is then fed to the prawn. The item imported is not a prawn feed itself but merely a raw material in preparation of a different item i.e., used as prawn feed. What are being sold by the importer are prawn feed which is clearly different from Artemia Cysts-Brine Shrimp Eggs imported in this case." [ref. Order-in-Original dated 06.11.2002/25.11.2002 passed by the Commissioner of Customs, Custom House, Calcutta] (Emphasis ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r a particular heading and that eggs without larvae would be classifiable under a different heading. They were always disputing the classification under CTH 0511.99 as adopted by the Revenue, taking the stand that the same would fall under CTH 2309.90. 13.2. In the Final Order Nos. A/691-693/KOL/2005 dated 22.09.2005, the Kolkata Tribunal has gone through the statements recorded from the directors of the appellant-company and noted the following facts about the Artemia Cysts: - "7. Artemia Cyst are necessarily to be hatched first and only hatched Artemia Nauplii are fed to Prawn Larvae. The Brine Shrimp Eggs are collected in Cyst form Salinas worldwide, processed and packed for easy transportation. After harvesting, these undergo a lot of process which inactivate their development and only in controlled laboratory condition, the seeds will hatch into live feed for Prawn. These are complete food for Prawn and sufficient in Fatty Acid, Protein etc. These have got no other use in India except in Hatcheries." (Emphasis supplied) 13.3. After this, the Tribunal considered the identical litigation taken up at Mumbai in respect of the same appellant and has recorded as un....
X X X X Extracts X X X X
X X X X Extracts X X X X
....toms Tariff which is based on the HSN and not 'larvae' which are 'prawn feed'. (d) We have examined the alternative classification under chapter 23 of the Customs Tariff note under Chapter 23 provides as under : "Heading No. 23.09 includes products of a kind used in animal feeding, not elsewhere specified or, included, obtained by processing vegetable or animal materials to such an extent that they have lost the essential characteristics of the original material, other than vegetable waste, vegetable residues and by-products of such processing" and the headings read as "23.09 - Preparation of a kind used in animal feeding. 2309.10 Dog or cat goods, put up for retail - sale 2309.90 Other" - A perusal of the Chapter above notes would indicate that if it is to be classified as a preparation of a kind used in animal feeding, in the present case, the larvae after processing are used as feed, therefore, the larvae as imported, would be classified under 2309. Since 'larvae' have not been imported and it is only that in egg form imports are effected the classifica....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rine Shrimp Eggs under Chapter Heading 0511 as against Chapter Heading 2309 as claimed by the importer, the Ld. Member (Judicial) took note of the fact that the appellant had adduced an alternate plea that if the goods are classifiable under CTH 0511, then they would be entitled to exemption in terms of Notification No. 163/94-Cus. dated 02.09.1994. The ld. Member (Judicial) noted that this Notification in question exempted animal embryos falling under the heading 0511 from the whole of the Customs duty. Since this matter was not argued before the adjudicating authority, she took the view that the matter ought to be remanded to the adjudicating authority to consider extending the benefit of exemption granted under Notification No. 163/94-Cus. dated 02.09.1994, even as she also took the view that the product in question would merit classification under CTH 0511. 13.5. After this, in view of the difference of opinion between the two Members, the matter was referred to a Third Member. During the hearing, it was brought to the notice of the Bench that Notification No. 163/94Cus. dated 02.09.1994 had been rescinded / superseded vide Notification No. 47/96-Cus. dated 23.07.1996 and th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the reduced penalties and therefore, the earlier order to the extent that penalty provisions were not considered by the Ld. Third Member, was quashed. 16. After this, the matter was referred to a Third Member, who, after going through the case history and arguments put forth by both sides, passed the Final Order Nos. A/294-296/KOL/2006 dated 02.03.2006. The Ld. Third Member has considered the submissions from both the sides and noted that the appellant sought to classify the Artemia Cysts (Brine Shrimp Eggs) under CTH 2309.90 whereas the Department was of the view that the same would be classifiable under CTH 0511.99. The Ld. Third Member also took into consideration that an identical issue had come up before the Tribunal at Mumbai, which had held that the product in question would fall under CTH 0511.99. He also considered the alternate pleading of the exemption sought under Notification No. 163/94Cus. dated 02.09.1994 and after noting that this Notification was rescinded vide Notification No.47/96Cus. dated 23.07.1996, held that the benefit of the same is not applicable for the imports made during the period from October 1998 to February 2001. He has gone through ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Shrimp eggs would necessarily have to be classified in the 'other category' under the heading 0511 for reasons given by me below. 12. It is the categorical case of the writ petitioner that these goods which were imported by them were fertilised eggs. They contained embryos or little organisms enclosed within the cysts, which upon incubation in controlled temperature and hydration would become larvae which could be used as prawn feed, it is submitted. 13. If there is an embryo within the egg, then there is a living organism within it. Upon such incubation the living organism merely grows, it does not change its nature and character. If there is no embryo within the eggs then there is no living organism and these eggs cannot be used as prawn feed. I am of the opinion that if an embryo is within an egg and it is subsequently incubated in controlled temperature and under hydration, the larvae which are subsequently born do not assume the character of any different product but remain in nature and characteristics the same product or organism which is within the egg. Therefore, if the eggs did contain an embryo they could be classified as feeding materi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ty had very limited scope to fulfil this condition. The imports pertained to the year 1998-2000 and, as has been highlighted above, the appellants never took the stand that the eggs in question were required to be tested in order to find out as to whether embryos / live organisms were in existence or not. Therefore, the Revenue has gone by the documentary evidence placed and the Chapter Notes and HSN details of Artemia Cysts and came to the conclusion that the product in question correctly falls under CTH 0511. 19.2. While several challenges have been made from time to time before the Hon'ble High Court and the matter has also been re-visited by the Tribunal on several occasions, this point was never taken up nor argued at any material point of time. 19.3. In fact, from the Final Order dated 02.03.2006 passed by the Tribunal, it can be seen that the appellant has clearly stated that: - "...the imposition of the penalty is the only question which has been referred back by the Hon'ble High Court and he concedes, he does not have a case on merits. He also concedes the fact that the benefit of Notification No. 163/94 is not available to them in this case. He submit....