TaxTMI 
TaxTMI 
2024 (10) TMI 17
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....2/2009-Cus. dated 31.12.2009 and also Notification No. 50/2017-Cus. dated 30.06.2017 which attracted basic Customs duty @7.5%. Based on the composition and function / usage of the subject imports, the Department was of the view that the subject imports were friction materials, classifiable under CTH 6813 8900 and therefore, a Show Cause Notice dated 30.11.2018 was issued proposing to deny the benefit of aforesaid Notifications and seeking to demand differential duty of Rs.7,53,82,791/- under Section 28(4) along with interest under Section 28AA of the Customs Act, 1962 (ACT) and confiscation of goods under Section 111(m) of the ACT, besides proposing to impose penalties under Section 112(a)/ 114A. After the due process of the law, the Adjudicating Authority vide the impugned order dated 26.06.2019 had dropped the proposed proceedings of demand of duty, interest and levy of fine and penalty. Being aggrieved, the Revenue has filed the present appeal 3.1 Shri R. Rajaraman, Ld. Authorised Representative for the Department, affirmed the Grounds of Appeal and averred that the imported item is a friction material in powder form which is formed by high level of processing of each individua....
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....HSN explanatory notes, are in a specific shape or form and it is an admitted position that the goods in the present case are in a powder form, as presented at the time of assessment. It was averred that it was necessary that the goods, to merit classification under CTH 6813, must have a specific shape, size, form etc., and in this regard placed reliance on the order issued by the Authority for Advance Ruling under GST, Maharashtra in the case of In Re: Compo Advice India Pvt. Ltd. [2019 (20) GSTL 188 (AAR-GST)] wherein it was held that only those friction material, which are in different shapes are classifiable under heading 6813. It is submitted that the heading 6813 covers 'Friction material and articles thereof not mounted' and since the goods in the present case are in powder form, which certainly are not mounted on any part or on any assembly or sub-assembly of an automobile, it does not merit classification under CTH 6813. 4.2 It was submitted that in terms of Annexure III to Customs Tariff (Determination of Origin of Goods under the Preferential Trade Agreement between the Governments of the Republic of India and Republic of Korea) Rules, 2009, the preferential treatment ca....
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..... As per the importer's submissions, the processes they undertake to manufacture Brake Pads from the imported materials are after remixing the materials undergoes a process of hydraulic press, forming, Clamping, curing for 8 hours for binding to become solid and finally grinding to become Brake Pads. It is seen that the Respondent classified the subject mixtures under CTH 3824 9090 / 3824 7900 and had availed the benefit of Notification No. 152/2009-Cus. dated 31.12.2009 and also Notification No. 50/2017-Cus. dated 30.06.2017. The Department issued a Show Cause Notice dated 30.11.2018 proposing to demand differential duty on the subject goods imported vide Bills of Entry Nos. 2411709 dated 12.07.2017 and 2498317 dated 18.07.2017 and also on previous imports as detailed in Annexure I to the Show Cause Notice on the ground that these materials are correctly classifiable under heading CTH 6813 8900 as friction materials and consequently are not eligible for the benefit of the above-mentioned exemption Notifications. 8. In order to determine appropriate classification of the imported 'Materials', a study of relevant provisions of Customs Tariff Act including Section Notes and Chap....
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....nt which gives them essential character. 10. The main allegation of the Department is that the imported item is a friction material in powder form which is formed by high level of mixing of ingredients which is ready to be Bonded directly to manufacture Brake Pads. It was alleged that the item imported and declared as 'binding material' as per the Material Safety data Sheet (a copy extracted below), the composition of the imported item and its function / usage when compared with the technical literature matched with that of a friction material. Further, a composite friction material comprised of a binder, fibres, friction modifiers and fillers, all of which are based on major function they perform apart from controlling friction and wear performance. Therefore, since the description, usage, functionalities and composition of the product being imported by the importer matches that of a friction material, it was alleged that the product is not a miscellaneous chemical as classified by the importer under CTH 38249090/ CTH 38247900. It was alleged that the importer's classification under CTH 3824 9090/ CTH 38247900 as incorrect as CTH 3824 is only a residual entry and resort to it is ....
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.... attained the form of brake lining or pads. So, the imported materials are more appropriately classifiable as 'friction material' not containing asbestos under 6813 8900. 12. The importer vide his letter dated 25.07.2017 addressed to the Departmental Authorities has informed that the 'Material' imported mainly consists of 60% binding materials and as such sought classification under 3824 of Customs Tariff Act, 1975. Material Safety Data Sheets and the Chemical Test Reports don't indicate the physical proportion of various organic and inorganic chemicals or metals present therein. However, what is important is the essential character of the 'Material' imported for its classification. Material Safety Data Sheets of the products clearly indicate that the name of the material is known as 'Friction Materials". It is also noted that the importer was declaring as "Friction Materials" in the initial years of import as evidenced by the Bill of Entry No. 3845778 dated 19.11.2013 as given below: Consequent to raising of Audit Objection in Nov,2013 and issuance of a show cause notice on the issue of classification, the importer has started declaring the imported powder mixture as "Material" ....
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....and after July 1, 1987 liable to tax at 15 per cent." Though the above case laws have been rendered in the context of Sales Tax issues, the same are relevant and equally applicable to the facts of this appeal. 13.2 Considering the composition of the materials and their usage in the manufacture of the brake pads indicate that imported materials are more appropriately classifiable under Chapter Heading 6813 as friction material. Even the Material Safety Data Sheet also indicates the name of the material as friction material and by synonyms as friction lining and brake lining as evidenced by the material safety data sheet extracted above. 14. It is ascertained that Brake Pads are a component of disc brakes used in automotive and other applications. Brake pads are steel backing plates with friction material bound to the surface that faces the disc brake rotor. The components of the brake pad are Steel back plate, welded metal net (for mechanical bonding of friction material), underlayer( for reducing heat transfer from friction material to the brake caliper and also reducing noise generation), Friction material (High Quality Friction Material for optimum braking). From the above it....
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....aterials in powder form is not legally acceptable. In Para No. 11 above, it has been discussed that friction powder containing asbestos is to be classified under CTH 68138100 whereas without asbestos in classifiable under CTH 68138900. Thus, chapter heading 6813 includes both friction materials and also articles of friction materials. As such the contention of the Importer Respondent that Friction Materials unless they become an article cannot be classified under Chapter heading 6813 is not acceptable. 15. We also find that the classification adopted by the assessee is incorrect as the Chapter 38 covers prepared binders for foundry moulds or cores which are meant for a different purpose other than for use in automobile industry. Foundries specialize in metal casting to create both ornamental and functional objects made of metal. The casting process includes patternmaking, creating a mould, melting metal, pouring the metal into a mould, waiting for it to solidify, removing it from the mould, and cleaning and finishing the object. We also find that CTH 3824 includes chemical products and preparations of the chemical or allied industries (including those consisting of mixture of natu....
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....e applicable rate was 28% under GST Law. 16.2 Similarly, in another decision by the Advance Ruling Authority of GST, Tamil Nadu it was ruled that Disc Brake Pads consists of friction material which is made up of organic fibers and minerals and graphite bonded with a steel baking plate forming an integrated component and are used in automobile vehicle brakes to stop or slow down the vehicles and so is classifiable as a part of motor vehicle under Tariff item 87083000 as Brakes and Servo Brakes and parts thereof attracting 14% CGST and 14% SGST. 16.3 These two rulings have no relevance for deciding the classification dispute in this appeal. The issue to be decided here is whether the mixture of chemicals and metal wires declared as Binding Material is classifiable under Chapter Heading No. 38249090 / 38247900 or under Chapter Heading No. 68138900 of Customs Tariff Act, 1985 and not the classification of Disc Brake Pads as given in detail in the above rulings. 16.4 Any advance ruling is mandatorily applicable to the applicant and the concerned field formation and will have only persuasive value in respect of third parties. The provisions of the Customs Tariff Act and the correct in....
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....ibunal Bombay has held that the classification of imported goods to be determined in accordance with Indian Customs Tariff and not solely on the basis of code mentioned in Certificate-of-Origin. In the context of import of RBD Palmolein mixture under Indo-Sri Lanka Free Trade Agreement (ISFTA), in the case of Sheel Chand Agrolls P. Ltd. Vs. Commissioner of Customs (Preventive), New Delhi [2016 (331) ELT 251 (Tri.-Del.)], the Tribunal Delhi has held that the Country of Origin requirements were satisfied even if the goods were classified differently in the Country of Origin Certificate issued. 17. In view of the foregoing discussions, we are of the considered opinion that appropriate classification of the imported product is not under CTH 3824 9090/3824 7900 as classified by the importer respondent. The Revenue was seeking to classify the product under CTH 6813 8900 as friction materials. After going through the provisions of the Customs Tariff Act and after considering the nature and composition of imported product and its essential character and the use to which this material is put to, we hold that it is more appropriately classifiable under CTH 6813 and not under CTH 3824. In vi....
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....e same set of facts another SCN based on the same/similar set of facts invoking the extended period of limitation on the plea of suppression of facts by the assessee cannot be issued as the facts were already in the knowledge of the department. It was observed in para 14 as follows : "14. We have indicated above the facts which make it clear that the question whether M/s. Pharmachem Distributors was a related person has been the subject-matter of consideration of the Excise authorities at different stages, when the classification was filed, when the first show cause notice was issued in 1985 and also at the stage when the second and the third show cause notices were issued in 1988. At all these stages, the necessary material was before the authorities. They had then taken the view that M/s. Pharmachem Distributors was not a related person. If the authorities came to the conclusion subsequently that it was a related person, the same fact could not be treated as a suppression of fact on the part of the assessee so as to saddle with the liability of duty for the larger period by invoking proviso to Section 11A of the Act. So far as the assessee is concerned, it has all along been co....
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.... an identical amount is not correct." 9. Allegation of suppression of facts against the appellant cannot be sustained. When the first SCN was issued all the relevant facts were in the knowledge of the authorities. Later on, while issuing the second and third show cause notices the same/similar facts could not be taken as suppression of facts on the part of the assessee as these facts were already in the knowledge of the authorities. We agree with the view taken in the aforesaid judgments and respectfully following the same, hold that there was no suppression of facts on the part of the assessee/appellant. 10. For the reasons stated above, Civil Appeal Nos. 2747 of 2001 and Civil Appeal No. 6261 of 2003 filed by the assessees are accepted and the impugned orders are set aside on the question of limitation only. The demands raised against them as well as the penalty, if any, are dropped" We also find that the Hon'ble Supreme Court's decision in the case of Northern Plastic Ltd. Vs. Collector of Customs & Central Excise [1998 (101) ELT 549 (SC)] held that merely claiming the benefit of exemption or a particular classification under the Bill of Entry does not amount to mis-declara....