TaxTMI 
TaxTMI 
2025 (6) TMI 1191
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....e the larger purpose to exact tax owed to 'Caesar' for the State and that the final arbiter of national interest is the 'keeper of the frontier' with any clarification that may further the provisioned purpose being needless and inexpert. That 'trampolines' happened to be victim of such 'national interest' is not cause for amusement but poignant reminder of times past when 'information access' was mere jargon of fantasy merchants and those who did not know sought from those who did. 2. The 'trampolines' and 'tag arenas' in the dispute were sourced from producers in Subic Bay Free Port Zone in the Philippines and that was all it took to set the cat among the pigeons for that country, by caprice of contiguity and from prospect of prosperity, happened to be a Member-State in the Association of South East Asian Nations (ASEAN) with which the Republic of India treated over many areas of mutual interest, including trade, to conclude the ASEAN India Free Trade Agreement (AIFTA). From this Agreement was birthed concessions that the Central Government saw fit to provide through notification [notification no. 46/2011-Cus dated 1st June 2011] issued under authority of section 25 of Cus....
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....s which is where the representation for both sides come forward to enlighten us. Before doing so, it would serve us all well to set the setting, so to speak, because if there is one feature of customs 'trolling' worth waxing on, it is assessment - where rate and value fuse to have a blast - to duties under the authority of section 17 of Customs Act, 1962 and the essence of statute that brings '265. Taxes not to be imposed save by authority of law No tax shall be levied or collected except by authority of law.' of the Constitution to life. Both factors are not only being honed constantly but are expected to be in harmony with practices among the Member-States that make up the World Customs Organization (WCO). Because 'value' is in dispute here only consequentially, that aspect is parked for the nonce. 5. With the substitution of the Indian Tariff Act, 1934 by the Customs Tariff Act, 1975, the First Schedule, intended for publicizing one prong of tax policy of the Government of India, legislated a hierarchy of goods starting with live animals and featuring entries that, for now and time to come, could find fitment for anything and everything. The Harmonized Sy....
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.... goods, even if one of them gives a more complete or precise description of the goods. xxxxx (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. 4. Goods which cannot be classified in accordance with the under the heading appropriate to the goods to which they are most akin. xxxxx' 6. The law [section 46 of Customs Act, 1962] requires an importer to file bill of entry within stipulated period after arrival of goods at the destined customs station and regulations [Bill of Entry (Electronic Integrated Declaration and Paperless Processing) Regulations, 2018] stipulate particulars to be declared which, inter alia, include tariff item in First Schedule to Customs Tariff Act, 1975. Re-assessment under section 17 of Customs Act, 1962 may occur by altering the classification and the process established by law precludes such alteration, in the absence of concurrence from importer, without setting out reasons. The scope and extent of onus, and that of discharge thereof was examined by the Hon'ble Supreme Court and the funda....
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....tion for assessment to duties of customs. 8. M/s Lulu International Shopping Malls Pvt Ltd imported 'amusement equipments tag, trampoline', as declared in bill of entry no. 2144181/28.12.2020 at Kochi Customs accompanied by commercial invoice [no. Inv-1318/29.10.2020 of M/s Play Mart International EOOD, Bulgaria] for EUR401032.82 which was self-assessed for impost at rate of duty corresponding to tariff item 9506 9190 of First Schedule to Customs Tariff Act, 1975 and claimed to be exempted under the authority of notification [no. 46/2011-Customs dated 1st June 2011 at serial no. 1578 (II)], enumerating specific goods from ASEAN countries, against 'certificates of origin (CoO) [reference no. 20087/23.12.2020 and reference no. 21003/05.01.2020]' issued by competent agency. Discharge of duty liability of Rs. 66,05,010.60, restricted to 'integrated tax' at 18% ad valorem on assessable value of Rs. 3,66,94,503.03, was not acceptable to customs authorities as the articles of import were alleged to be ineligible for benefit of exemption which was restricted to 'Articles and equipment for general physical gymnastics or athletics:' corresponding to sub-heading 9506 91 of Firs....
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....y seller and the other through their designated bank. The deposition also elicited that the impugned goods were installed in the 'amusement area' of malls owned and operated by the appellant as detailed in the brochure and web-site and that 'goods and service tax (GST)' charged on collections as supplier of 'recreational, cultural, and sporting services' was deposited in the treasury of the exchequer. 11. The appellant's bank was able to furnish the commercial invoice, packing list and bill of lading with 'HS code 95069900' in the contents and of particular interest to the adjudicating authority was certificate of origin [reference no. 20079/09.12.2020] that differed from the two made available for clearance of goods and issued prior to arrival of goods. The SWIFT transaction statements pertaining to the import revealed payments towards invoices raised for installation services which set in motion action for proposing enhancement in assessable value. It was further clarified by the employee that the packing list and certificate of origin were reissued owing to erroneous HS code that was corrected to 95069190 and the latter had had to reissued once again to reflect the value (FOB....
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....cern and it made good commercial sense to hold the supplier accountable for its proper working rather than endanger the lives and limbs of persons. He pointed out that onus for displacement of declared value rested on customs authorities except in circumstances of sale between related parties in which relationship influence the price and in which recourse was had to rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. Furthermore, he argued that evidence obtained from electronic storage was inadmissible except by conformity with section 138C of Customs Act, 1962. 14. Turning to the issue of entitlement to benefit of preferential rate notified for imports from ASEAN countries, it was contended that denial was grounded on every projection other than that which should have, viz., descriptions below headings pertaining to the proposed tariff line which should conform both to the General Rules for Interpretation of the Tariff as enacted and in the manner laid down by the Hon'ble Supreme Court in Hindustan Ferodo Ltd v. Collector of Central Excise [1997 (89) ELT 16 (SC)] and in HPL Chemicals Ltd v. Commissioner of Central Excise, Chandigarh [2006 (197) ....
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....ry. 16. Learned Authorized Representative further submitted that the goods had been attempted to be passed off as equipment for general exercise even though 'trampoline' and 'tag arena' are equipment to be used for games of amusement and fun which was clear from the brochure and web-site of 'Funtura', the branded leisure and relaxation space in the malls operated by the appellant. For this, he relied upon the items enumerated in the Explanatory Notes to the Harmonized System of Nomenclature (HSN) pertaining to the rival sub-headings. That this was so, according to Learned Authorized Representative, was further established by the HS Code in the bill of lading, packing list, invoice and certificate of origin issued by the seller and the subsequent corrections in the certificate of origin and the packing lists were intended, and at the instance of the appellant, to prevent customs authorities from raising queries about the classification. He pointed out that the impugned order had dealt extensively with the email correspondence pertaining to the intended purpose of the goods as amusement games and also about the deliberate segregation of the total price payable. He submitted t....
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....ommissions and brokerage, engineering, design work, royalties and licence fees, costs of transportation to the place of importation, insurance, loading, unloading and handling charges to the extent and in the manner specified in the rules made in this behalf:...' in section 14 of Customs Act, 1962 in pursuance of which '(1) In determining the transaction value, there shall be added to the price actually paid or payable for the imported goods.- xxxx (e) all other payments actually made or to be made as a condition of sale of the imported goods, by the buyer to the seller, or by the buyer to a third party to satisfy an obligation of the seller to the extent that such payments are not included in the price actually paid or payable. Explanation.- Where the royalty, licence fee or any other payment for a process, whether patented or otherwise, is includible referred to in clauses (c) and (e), such charges shall be added to the price actually paid or payable for the imported goods, notwithstanding the fact that such goods may be subjected to the said process after importation of such goods' is to be applied and contingent upon '(3) Determinati....
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....countal, be excluded entirely or only included partially by having to be amortized over a period. Though the constitutional distribution of authority for levy of duties of customs is, in the Seventh Schedule, restricted to goods, that the measure of the tax, impliedly, should include costs of services connected with the sale which merely happens to be deferred for payment from mutual convenience is not antithetical. Being addition of price connected with sale and attributable to imports, without illegitimizing price paid for the goods, and only contingent upon redaction from the selling price, it stands in stark contrast with resorting to illicit channels for payment. Generally, the mechanics of such adjustment is devoid of circumstances that prompt confiscation and penalties as consequence. This is corollary to price being, unquestionably, consensus ad idem in the agreement to buy and sell and the deeming fiction, as set out in section 14 of Customs Act, 1962, from beginning days for invisible, and merely attributable, 'costs and services' to be included in 'transaction value' for assessment and which, in turn, is described around 'price' for avoidance of complexity. An additional....
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....n the theory that the Legislature while enacting a law has a complete knowledge of the existing laws on the same subject matter, and therefore, when it does not provide a repealing provision, the intention is clear not to repeal the existing legislation.....presumption against a repeal by implication;......The doctrine of implied repeal is based on the theory that the Legislature, which is presumed to know the existing law, did not intend to create any confusion by retaining conflicting provisions and, therefore, when the court applies the doctrine, it does not more than give effect to the intention of the Legislature by examining the scope and the object of the two enactments and by a comparison of their provisions. The matter in each case is one of the construction and comparison of the two statutes. The Court leans against implying a repeal, "unless two Acts are so plainly repugnant to each other that effect cannot be given to both at the same time, a repeal will not be implied, or that there is a necessary inconsistency in the two Acts standing together." (See Craies on Statute Law, Seventh Edition, page 366, with reference to Re: Berrey (1936) Ch. 274). To determine wheth....
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....orted Goods) Rules, 2007 to be unimplementable insofar as ' installation and commissioning' is concerned. 20.2 In the present dispute, 'condition of sale' has been inferred from documents and the factum of separate payments to the same seller. That 'installation and commission' was contracted to the Bulgarian supplier is not in dispute and that payment was made through bank remittance is not in controversy. It only needs to be ascertained if the enhancement has been prompted by finding that 'installation and commissioning' was 'condition of sale' or was merely an option exercised by the appellant. We are inclined to accord primacy to the submission of appellant that it was the latter for even if it were not 'condition of sale', it would be sound for any importer, especially where safety in usage is of undoubted priority, to requisition the services of the seller for 'installation and commissioning' of equipment. In such instances, the seller does not even have to make rendering of such service to be 'condition of sale' and, in the absence of such condition, a narrow construct of rule 10 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 precludes an....
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.... tax (GST)' with effect from 1st July 2017. 21. For all the above reasons of having failed to demonstrate 'installation and commissioning' being 'condition of sale', such service being not only taxable upon being undertaken in India but also with 'revenue neutral' impact in circumstances of entitlement to exemption in the impugned notification, proposal for enhancement of value resting solely on an agreement that not only was lacking in provenance in accordance with section 138C of Customs Act, 1962 but also inadequate for evidencing that such service was 'condition of sale' and the factual matrix not excluding the inappropriateness of invoking extended period of limitation, resort to rule 10(1)(e) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 is questionable. 22. The placement of the dispute squarely within the impugned chapter of First Schedule to Customs Tariff Act, 1975 causes no controversy over the nature and purpose of the article of import and it has not been alleged that the goods were incorrectly described in the documentation accompanying, or declaration in, the bill of entry. It only remains to be seen, and in the context of the ....
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....clusion that may be drawn from the dismissive reliance placed on publicity material. That 'trampoline' is an Olympic sport is on record; it is not, insofar as arguments go, a contrivance for masquerading fun activity as a sport and not that it is of any relevance as 'sports' is not defined in terms of such inclusions but, that it is, takes away any possibility of questioning such activity as sport for any reason whatsoever. 24. Documentation with HS Code identifying with the revised classification is one of the grounds adduced in the impugned order for the substitution. That these were issued from supplier's end has been eulogized for authenticity of classification. It would appear that these are commercial documents and not statutory requirements of customs law in the country of shipment. A declaration in a document that is mandated by law, with detriment as consequence of misdeclaration, may, without further ado, be conferred with sanctity that invoice and packing do not acquire. These are amendable by mutual consent and, potentially, approvable for rectification through section 149 of Customs Act, 1962. It is on record that both certificate of origin and packing list bor....
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....these are bundled with the appropriate codes from the Harmonized System of Nomenclature (HSN), limited to duties imposed on export goods. Most countries have few articles that are burdened with export duties and there is no reason to believe that Philippines is any different; even if there were export duties on many more goods than in the tax policy of India, the impugned order, in the lack of such elaboration of background for its conclusions, is but hedged speculation instead of authoritative findings. 26. Generally, the six digit codes in the ninety seven chapters of the Harmonized System of Nomenclature (HSN), replicated in the import tariff with or without additional digits for local detailing, is also deployed for other purposes that lie within the remit of other agencies without drawing upon the customs statutes and significance that these have in assessment of imported goods is absent in assessment of export goods, let alone for any other purpose. Without statutory prescription, coupled with penalties for misdeclaration, the same extent of diligence in determination cannot be attributed to inclusion elsewhere. Most often, it is source of statistical data on which nothing....
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.... that which surfaces only by elimination at each stage of the sequence. Moreover, the hierarchical structure, as prescribed in rule 6, was also to be observed impeccably for discernment of the more appropriate of sub-headings and tariff items therein should the heading and the sub-heading thereafter respectively not provide the answer. The exercise under rule 1 and rule 3 therein was to be carried through to the 'eight digit' level for any claim to integrity. The adjudicating authority was, effectively, required to place the impugned goods within the appropriate heading by deeming that no classification had been claimed by importer. This the adjudicating authority, by prefacing the exercise with discarding the claimed classification, did not. 28. In the impugned order, the finding of appropriateness of the proposed classification for 'trampoline' has been erected, by relying on the decision of the Hon'ble Supreme Court in Commissioner of Central Excise, Customs & Service Tax, Vishakapatnam v. JOCIL Ltd [2011 (1) SCC 681], on the foundation that classification should be based on 'essential character' over which was placed the publicity materials of the appellant, the descrip....
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....ly be applying contorted logic in arriving at the correct classification but would also amount to ignoring the express identification offered in Chapter 38 of the First Schedule of the Customs Tariff Act, 1975. xxxxx 17. Having held thus, it is also important to note that the interpretive powers of this Court are significantly curtailed by the presence of a specific enumeration in Chapter 38 of the Tariff Schedule. This Court, while deciding an issue of classification, can only adjudicate along the lines of settled norms and precedents drawn from statutory interpretation and judicial precedents.' appears to have been conventionally overlooked for its potential of disrupting the proposed outcome and omitted to take note of the legal provisions restricting even the highest court in the land. The decision in re Goodyear India Ltd was not only rendered in the context of the erstwhile schedule in Tariff Act, 1934 and lacking the statutory frame of definitive rules for interpretation but also, in the lack of definition of the object of usage, from 'The subject "motor vehicle" is not defined in the Act or in the Rules prescribed thereunder, nor even in Item No....
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....spective to conclude similarity thus '20.7.........Now the question is whether the essential character of Tag arena is that of a sport or of a general physical activity. In order to answer the same I proceed to draw an analogy between Tag arena and the sport of football. Football involves activities such as sprinting, walking, jumping, dribbling, leaping etc. It also involves strategy and tests the Intelligence of the player. But the essential character of football is that of a sport which is played under a set of rules. The primary aim of the players is to win by scoring goals-and-preventing the opposite team from scoring goals. In the process, the players will engage in activities such as sprinting, walking, jumping, dribbling, leaping etc. However, it is an undisputed fact that the primary intention of football is not engage the players in sprinting, walking, jumping, dribbling or leaping. Any health related benefits that accrue from the physical activities involved in the game are incidental and can only be treated as incidental gains and not as its essence. Therefore, the essential character of football is that of a sport and not that of a general physical activi....
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....ities are also. Moreover, the qualifier, 'not specified elsewhere' conveys the intent of 'articles and equipment' for activities specified elsewhere in chapter 95 of First Schedule to Customs Tariff Act, 1975 not being covered by this heading even as coverage of 'articles and equipment' for 'other' 'sports and out-door games' suggests not only unspecified 'sports and out-door games' but also that the preceding enumerations are also sports; de hors such interpretation, 'other' in the heading is superfluous. The case of customs authorities are that the activities performed on the impugned goods are neither sports nor general physical exercise and, yet, the impugned goods have been brought within the headings, even if relegated to the residuary of residuaries as perceived by them. We cannot but infer therefrom that the heading vis-à-vis its internal architecture has not been considered in the impugned order. 34. Despite the generality of the activity specified in the heading, with just two of the equipment and one of sports relieved of potential for disputation, there is no paucity of enumerations below among which several are sub-classifications - distinguished by '-' ....
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....the chapter. There is no definition of 'sports' in the chapter or, for that matter, anywhere else in the statutes that could be legally referenced by 'proper officer'; neither is there any for 'outdoor games' but, with self-extinguishment on factual bedrock in the show cause notice, that need not detain us. We are in the same constraining space that the Hon'ble Supreme Court was in re Goodyear India Ltd save without concession from either side on authority for assigning a meaning to any of the expressions. In the circumstances of lack of any guide, not only is the onus devolving on the 'proper officer' so difficult to discharge as not to be ventured upon, leaving it to the tax policy formulators to fix by appropriate tax rates. Even otherwise, the modules in the 'tag arena' are nothing but occasion of general physical exercise which covers a wide range of intense personal experiences to promote health and well-being. 'Trampoline' are, undeniably, equipment for gymnastic sports. Both the impugned articles do not overlap, even in passing, into 'games' and, hence, not susceptible to inclusion in the residuary entry for that reason. Moreover, with sub-classification hatched from the he....