TaxTMI 
TaxTMI 
2025 (5) TMI 2015
X X X X Extracts X X X X
X X X X Extracts X X X X
....orted at JNCH, Mumbai by M/s. Video Jet Technologies (I) Pvt. Ltd. and transferred to M/s. Geet Enterprises, 428, Ground Floor, FIEE, Patparganj Area, Delhi, their C&F agent as declared under Chapter 32 of Customs Tariff Act, 1975 and order to reclassify the declared items in Customs Tariff Head 29141200 of the Customs Tariff Act, 1975. (ii) I order confiscation of the impugned goods seized as per Annexure to Panchnama dated 25.9.2017 under section 111(d) of the Customs Act, 1962. (iii) I impose penalty of Rs. 10,00,000/- (Rupees ten lakh only) on M/s. Videojet Technologies (I) Pvt. Ltd. under section 112 of the Customs Act, 1962. (iv) I impose penalty of Rs. 25,00,000/- (Rupees Twenty Five Lakh only) on M/s. Videojet Technologies (I) Pvt. Ltd. under section 114AA of the Customs Act, 1962. 2. The above order was affirmed in the impugned order of the Commissioner (Appeals). In this appeal, the appellant prayed for setting aside the impugned order and to restrain the departmental officers from taking any proceedings for recovery of duty, interest and penalty. Since the appellant made the mandatory pre-deposit under section 129E of the Customs Act, 1962 C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l No. 171710720ZH 5. They sent the samples for testing to the Chief Examiner, Central Revenue Control Laboratory CRCL with test memos as follows: (i) Description & ingredient along with percentage of each sample. (ii) Whether Butanone (Methyl ethyl Ketone/MEK) present or otherwise. (iii) % of Butanone/MEK in each part number. (iv) Presence of intoxication or psychotropic substances or effects thereof. 6. CRCL sent reports on 2.11.2017 which did not exactly answer the four questions in the test memos. The test reports were as follows: (i) Representative sample 20577, one gallon Expiry date 10.3.2019, S.No. 170691457EG Report - The sample is in the form of dark blue coloured liquid. It is mainly composed of volatile organic solvent (Butanone=Methyl ethyl Ketone) along with organic colouring matter & polymeric compound based on acrylate. NVR=8.4% by mass. (Butanone) Volatile Organic solvent=89.0% by volume. It gives tack free adherent coating. (ii) Representative sample V720-D expiry date 12.7.2019, Serial No.171930817ZH (750 ml) Report- The sample is Butanone (methyl ethyl ketone) in the f....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that NOC from the Narcotics Commissioner was required. To arrive at this conclusion, he relied on the order dated 3.11.2017 passed by the Narcotics Commissioner stating the NOC will be required if MEK is present in any item and such MEK can either be extracted from such item and/or such an item can be used in place of MEK (may not be as efficiently as MEK) for manufacture of Narcotic Drugs or Psychotropic Substances. 12. Since the appellant had not obtained an NOC before import, he held that the goods were liable for confiscation under section 111(d) of the Customs Act. He also held that the appellant had, through various acts of omission and commission, rendered themselves liable to penalty under section 112 and 114AA of the Customs Act. 13. In the impugned order, the Commissioner (Appeals) upheld the order of the Joint Commissioner only on the ground that the appellant had not made any new submissions which were not raised before the Joint Commissioner. In other words, he did not apply his mind to the submissions made by the appellant because there were no new submissions and on the submissions already made before the Joint Commissioner, he simply accepted the findings of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he imported goods under section 111(d) of the Customs Act and the penalties imposed under section 112 and 114AA on the appellant also cannot be sustained. 17. Learned counsel submits that the short issue to be decided is if import of the disputed goods which contain MEK requires an NOC from the Narcotics Commissioner as per the RCS Order. Consequently, whether the appellant violated the RCS Order and whether the goods were liable for confiscation under section 111(d) of the Customs Act and whether the appellant was liable to penalties. 18. Even before importing the imported goods, the appellant had met the Narcotics Commissioner on 11.6.2015 and submitted a representation on 8.6.2015 stating that the inks which they import contain MEK ranging from 35% to 90% and seeking clarification if any NOC is required for their import under the RCS Order. The appellant followed it up with reminders. No reply was received and hence they had filed Writ Petition No. 10730 of 2017 in Bombay High Court and the High Court passed order dated 13.10.2017 directing the Narcotics Commissioner to decide on the representations of the appellant. Thereafter, the Narcotics Commissioner passed an Order d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....appellant prays that the impugned order may be set aside and the appeal may be allowed. 21. Learned authorised representative for the Revenue vehemently supported the impugned order and submitted that the appellant violated the RCS Order by importing the inks and ink consumables which have a large percentage of MEK without obtaining an NOC from the Narcotics Commissioner. He further asserted that since the major composition of the imported goods was MEK, they should be classified as such under CTI 29141200. He therefore, prays that the impugned order may be upheld and the appeal may be dismissed. 22. We have considered the submissions on both sides and perused the records. We now proceed to decide the issues identified by us in paragraph 2 above. Rejecting the classification of the imported goods under Chapter 32 of the Customs Tariff and reclassifying them under Customs Tariff Item CTI 29141200 (as Methyl Ethyl Ketone) 23. The appellant classified the imported goods as inks and ink consumables under Chapter 32. As per the order of the Joint Commissioner, upheld by the Commissioner (Appeals), they deserve to be classified as MEK under CTI 2914 1200 for the reason that o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable. (c) When goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. (emphasis supplied) 26. Applying Interpretation Rule 1, we proceed to examine the chapter notes of the two chapters. Chapter note 1(a) states that „Except where the context otherwise requires, the headings of this chapter apply only to "separate chemically defined organic compounds, where or not containing impurities". Chapter Note 1(a) to Chapter 32 states that „this chapter does not cover "separate chemicall....
X X X X Extracts X X X X
X X X X Extracts X X X X
....organic colouring matter & polymeric compound based on acrylate. The proportion of other materials has not been indicated. Sample V720-D expiry date 12.7.2019, and Sample V-902Q expiry date 20.12.2019 were reported to be Butanone (methyl ethyl ketone) in the form of colourless liquid. It is not clear if there were any other ingredients also and if so, what the percentage of MEK was. 30. A question which may arise is if the goods are predominantly MEK, why can they not be classified as MEK by treating the other materials as impurities, etc.? If a good has over 90% of one ingredient and only 10% of others, why cannot it be classified based on the overwhelming ingredient? The answer to these questions lies in interpretative rule 3(a) which holds that „Goods which are mixtures of two or more substances should be classified based on that substance which gives it its essential character‟. 31. One ingredient may be overwhelming by quantity quite a different ingredient may give the good it its essential character and if so, the latter is relevant for classification. For example, a tablet of 500 mg of say, Amoxycillin, will actually weigh several grams. The active ingredie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fiscation under section 111(d). As per this section, goods will be liable to confiscation if they are imported contrary to any prohibition imposed under the Customs Act or any other law for the time being in force. There cannot be any dispute that the RCS Order being a sub-ordinate legislation under the NDPS Act, is a law for the time being in force. 36. The Joint Commissioner confiscated the goods referring to the order passed by the Narcotics Commissioner which is not „a law for the time being in force‟. 37. A plain reading of the relevant portions of the RCS Order shows that it has been issued under section 9A of the NDPS Act and it regulates various controlled substances including MEK. It has the following three Schedules and each controlled substance is listed in one or more of these schedules : (i) Schedule-A Controlled substance whose manufacture, distribution, sale, purchase, possession, storage and consumption are regulated (ii) Schedule-B Controlled substance whose export from India is subject to controls (iii) Schedule-C Controlled substance whose import into India is subject to controls 38. Schedule C and the corresponding....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ommissioner within a period of seven days of import. 39. The short point to be seen is if the imported goods are covered in Schedule C of the RCS Order. A plain reading shows that MEK is covered at S.No. 10 of Schedule C. Goods or materials which contain MEK or preparations of MEK or salts of MEK are not covered by S.No.10. Wherever the intention was to cover not only the controlled substance but also its salts Schedule C indicates so. The relevant entries are: 5. Ergometrine and its salts 6. Ergotamine and its salts .... 8. Lysergic acid and its salts ....... 13. Phenylacetic acid and its salts 40. Wherever the intention was to cover not only the controlled substance but also its salts and preparations, the Schedule indicates so. The relevant entries are: 4. Ephedrine, its salts and preparations thereof ........... 11. Norephedrine (Phenylpropanolamine), its salts and preparations thereof ........ 13. Phenylacetic acid and its salts .............. 16. Pseudoephedrine, its salts and preparations thereof 41. In respect of one precursor, viz., Safrole, any essential....