TaxTMI 
TaxTMI 
2025 (10) TMI 976
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....ate of universally accepted rules of engagement circumscribed by tax policy of a State framed for the time within doctrines and precedents that guide judicial approval of enforcement behaviour on the part of the tax collector visible as the lordly monarch of all he surveys. The thread of constancy spanning this spectrum is '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 of India as touchstone and yardstick. The complexity of the dispute, stemming from multiple rates of duty on import of vehicles, and not necessarily restricted to the genre of 'off-road' vehicles, together with continued regulatory oversight under authority of another law, provisioning for public safety of the common weal, by another agency concerned with the product emerging as conveyance or carrier, has at its core the intent of segregation set out for discriminatory tax treatment. 2. While goods answering to generic description corresponding to heading 8702 and heading 8704 of First Schedule to Customs Tariff Act, 1975, even though presented for clearance as parts, components and sub-assembly earmarked, by....
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....otification and from value of Rs. 30,00,000 apiece allegedly not included in contract price of Rs. 8,00,82,42,472 as consideration totaling Rs. 8,26,02,42,472 for sale by the overseas supplier, was issued. Together, one [order-in-original no. 12/2022-23/CAC/CC(IMPORT-I)/MKK dated 25th May 2022] of the impugned orders has made out a case for recovery of differential duty of Rs. 128,68,24,528, and the other [order-in-original no. 66/2022-23/CAC/CC(IMPORT-I)/VP dated 17th January 2023] Rs. 27,18,01,616, by adopting rate applicable to imported vehicles that are not 'completely knocked down (CKD)' even while conceding that, taken together, several vehicles of the brand, type and model supra would emerge on putting together of the imported goods in the expert hands of M/s GMMCO with the exclusion laid on the bedrock of not answering to the two 'qualifiers' corresponding to the lower rates of duty. 4. Learned Counsel for M/s Coal India Ltd, supported in argument by Learned Counsel and Learned Consultant for other appellants, pressed that their claim of coverage within the impugned notification should not have been denied in view of conformity with the first of the descriptions therein.....
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....ther evolution of the scheme, the 'gold standard' was elevated from concept to default rendering the 'declared value', corresponding to 'price', as the default for assessment. Section 14 of Customs Act, 1962, consequently, is authority for 'transaction value' as declared or, by reason of availability of a more real price, as 'substitute value' of imported goods on evidence of actual remittance and the Rules framed thereunder for other potential contingencies of 'supplementing' and 'surrogate' values. 8. Without detracting from the integrity of 'price' as actual consideration, the imperative of non-discriminatory non-distortionary assessment persuades adoption of 'surrogate value', in place of 'declared value' in accordance with pre-determined principles for specified circumstances, whether of 'relationship' or of 'commercial dominance', having influenced price, under the authority of rule 3 of Customs Valuation (Determining of Value of Imported Goods) Rules, 2007 by recourse to rule 3(3) or rule 12 therein. 9. There, also, is provisioning for 'supplementing value', which, too, is no reflection on the integrity of 'price' as actual consideration for goods, owing to inextricabi....
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....n' of the assessing authorities. Arrogation of like flexibility for other 'values' is neither envisaged in the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 nor appropriate to be accommodated in like manner when prejudicial to the scheme of taxation or bounds of constitutional propriety. 10. Reverting to the valuation dispute, it is see that, by referring to the tripartite contract [no. CIL/C2D/190T Dumper/R-66/17-18/153 dated 2nd December 2019] supra, the adjudicating authority held in the impugned order that '52.5 This, I find that the entire contract price was bifurcated into the following parts: i. CIF value of the equipment. ii. Erection and communication charges per equipment. iii. Price of all items sourced in India required for fitting in equipment during commission in of the equipment. iv. Price of consumables to be supplied after commissioning On perusal of the same it can be inferred that Noticee no. 1 had not ordered for the goods in the condition as imported. They had ordered for supply, installation and commissioning of 102 nos. of 190 Tonnes rear dumpers along with consumables thereaf....
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....sment. 12. According to Learned Counsel for appellant-importer, the amount in dispute related to a transaction, involving the other appellant herein, even if it be tri-partite, located in the territory of India and themselves, covering consideration for activity to be undertaken in domestic area and subjected to domestic taxation. He pointed out that it was specific quid pro quo between them with no concern to the seller in the course of international trade. He contended that the 'declared value' has not been questioned nor rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 ever invoked for such purpose and 'supplementing value' is contingent only upon payment due, either directly or indirectly, to seller of, and only for, goods, with even that, strictly within the stipulations in rule 10 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 if constitutional propriety were not to be molested. Conceding the contractual necessity of getting such activity undertaken by the other appellant in the proceedings, it was contended that such was not 'condition of sale' except by mutual concurrence; the goods, according to him, were n....
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....in the contract independent of the contract of sale. As pointed out by Learned Counsel, the observation of the Hon'ble Supreme Court in re Essar Steel Ltd 'A cursory reading of the Section makes it clear that Customs duty is chargeable on goods by reference to their value at a price at which such goods or like goods are ordinarily sold or offered for sale at the time and place of importation in the course of international trade. This would mean that any amount that is referable to the imported goods post-importation has necessarily to be excluded. It is with this basic principle in mind that the rules under sub-clause 1(A) have been framed and have to be interpreted. is salutary guidance. For all these factual reasons, the payment does not constitute 'cost and service' liable to be added to the assessable value for determination of duty liability; we set aside the demand arising from addition of services to the cost of goods. 16. The negation of claim for the least of the rates of duties enumerated in the impugned notification rests on examination of six consignments imported vide bills of entry no. 9284011/23.10.2020, no. 9284020/23.10.2020, no. 9284056/23.10.2020, ....
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....39;s empanelled Chartered Engineer Shri Rajendra S. Tambi, conducted the re-examination of goods. The Chartered Engineer Shri Rajendra S. Tambi, submitted the Chartered Engineer Certificates vide Ref No's: CE1227 and CE1226 both dated 09.11.2020 &CE1306, CE1307, CE1308 and CE1309 all dated 19.11.2020, for the six Bills of Entry as mentioned in para 2 above wherein he made the following submissions in his reports: (a) The chassis inspect bearing numbers CAT0789DHSPD00949 and CAT0789DHSPD00951, imported vide BOE's 9284056 and 9284073 respectively, were in pre-assembled condition having all cylinders, valves, hoses, pipes, hydraulic and electrical mechanism assembled together and were basically, sub-assemblies of the dumpers. (b) The engines inspected bearing numbers: 7TR03826 and 7TR03831, imported vide BOE's 9284056 and 92.84073 respectively, were in pre-assembled condition although not mounted on the chassis. (c) Transmission Mechanisms bearing serial numbers: 90001873 and 90001825, imported vide BOE's 9284056 and 9284073 respectively, mentioned in packing list as "BANJO", were also in pre-assembled form although not mounted on the chassis....
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....L, were not as per their declaration and mis-declared as "CATERPILAR MAKE 190T REAR DUMPERS MODEL 789D IN CKD CONDITION, CONTAINING ALL NECESSARY COMPONENTS FOR ASSEMBLING A COMPLETE VEHICLE AS PER CONTRACT HAVING ENGINE, GEARBOX AND TRANSMISSION MECHANISM NOT IN. A PRE-ASSEMBLED CONDITION". However, the goods were found to be with pre-assembled engine, gear box and transmission mechanism which were not eligible for the BCD @ 15% claimed by the importer, vide Serial No: 524 (1) (a) of exemption Notification No: 50/2017 dated 30.06.2017 as amended by Notification No: 25/2019 dated. 06.07.2019. Further, as all the previously cleared and provisionally released consignments were completely identical in nature, the benefit claimed by importer as mentioned above, was not applicable for all previously cleared 50 Bills of Entry also. Therefore, the goods covered vide 84 Bills of Entry mentioned in both subject SCNs dated 27.05.2021 and 08.07.2021, were liable for confiscation under Section 111(m) of Customs Act 1962, and the importer M/s NCL, was liable for penal action under section 114A and 114 AA of the Customs Act 1962, as they have knowingly and intentionally made use of false and inc....
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....transport of goods' corresponding to heading 8704 of First Schedule to Customs Tariff Act, 1975. 20. It is common ground that the impugned goods do not have the appearance of 'motor vehicle', as would be the expectation from 'The titles of Sections, Chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Sections or Chapter Notes...' in rule 1, but, by operation of '(a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished articles has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or failing to be classified as complete or finished by virtue of this rule), presented unassembled or dis-assembled.' in rule 2 of General Rules for the Interpretation of the Import Tariff appended to Customs Tariff Act, 1975, it is. And, thereby, the claim for the notification which, for the specific entry, applies to goods covered by ....
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....onents, and goods put up in sets, which cannot be classified with reference to sub-rule (a) of Rule 3, shall be classified as if they consisted of the material or component which gives them their essential character. In the present case, the goods in question admittedly contain 53.6% Sodium Chloride and their essential character is derived by the Sodium Chloride, which is salt. Since in the present case the salt is unfit for human consumption, the same would be classifiable as "Denatured Salt" under the specific Heading No. 25.01 and not under Heading 38.23 which is a residuary Heading. 29. This apart, classification of goods is a matter relating to chargeability and the burden of proof is squarely upon the Revenue. If the Department intends to classify the goods under a particular heading or sub-heading different from that claimed by the assessee, the Department has to adduce proper evidence and discharge the burden of proof. In the present case the said burden has not been discharged at all by the Revenue. On the one hand, from the trade and market enquiries made by the Department, from the report of the Chemical Examiner, CRCL and from HSN, it is' quite clear that t....
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.... principle of classification to deny it the parentage and consign it to an orphanage of the residuary clause." and in Hindustan Ferrodo Ltd v. Commissioner of Central Excise, Bombay [(1997) 2 SCC 677] thus '4. It is not the function of the Tribunal to enter into the arena and make suppositions that are tantamount to the evidence that a party before it has failed to lead. Other than supposition, there is no material on record that suggests that a small scale or medium scale manufacturer of brake linings and clutch facings "would be interested in buying" the said rings or that they are marketable at all. As to the brittleness of the said rings, it was for the Revenue to demonstrate that the appellants' averment in this behalf was incorrect and not for the Tribunal to assess their brittleness for itself. Articles in question in an appeal are shown to the Tribunal to enable the Tribunal to comprehend what it is that it is dealing with. It is not an invitation to the Tribunal to give its opinion thereon, brushing aside the evidence before it. The technical knowledge of members of the Tribunal makes for better appreciation of the record, but not its substitution. ....
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....tion of duty. That conceptual commotion has pervaded the impugned order to not only confound logical structuring of adjudication but continued to influence the arguments and submissions of both sides. 24. Learned Consultant for M/s GMMCO Ltd engaged our attention in elaborate submissions on the packing lists accompanying the goods to demonstrate that these were 'completely knocked down (CKD)' kits and that the assemblage thereto was to be strictly according to the accompanying manual of instructions. Likewise, Learned Special Consultant for respondent-Commissioner drew attention to several portions of the impugned order, and, in particular, to the colored pictures so vividly embedded therein, to demonstrate that essential components of a 'motor vehicle' were evidently the first stage of assembly and, upon which the lower rates in the exemption notification would cease to be available. At all events and for the purposes of revisiting the assessment, the technical details of the import are not relevant. The argument, in support of the impugned order, that the 'transmission system' is identifiable as is the 'engine' and that the appendant pieces are only for interconnecting as larg....
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....ect is not to be taxed, unless the words of the statute unambiguously impose a tax on him, that one has to look merely at the words clearly stated and that there is no room for any intendment nor presumption as to tax. It is only the letter of the law and not the spirit of the law to guide the interpreter to decide the liability to tax ignoring any amount of hardship and eschewing equity in taxation. Thus, we may emphatically reiterate that if in the event of ambiguity in a taxation liability statute, the benefit should go to the subject/assessee. But, in a situation where the tax exemption has to be interpreted, the benefit of doubt should go in favour of the revenue, the aforesaid conclusions are expounded only as a prelude to better understand jurisprudential basis for our conclusion. We may now consider the decisions which support our view. xxxx 47. We do not find any strong and compelling reasons to differ, taking a contra view, from this. We respectfully record our concurrence to this view which has been subsequently, elaborated by the Constitution Bench in Hari Chand Case (supra).' and that alone should have been the guiderail of the impugned proceedings....
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....ation of the order was stayed by the order [dated 4th July 2019] of the Hon'ble Supreme Court and as the order was insufficient precedent, constrained as it was within a decision of the competent advance ruling authority which binds both sides, by its factual matrix. 30. Learned Special Counsel found no reason for cavil that the adjudicating authority had had to fall back on the rules of classification and, in particular to rule 2(a) of General Rules for Interpretation of the Import Tariff appended to Customs Tariff Act, 1975 for concluding that 'engine' and 'transmission system' were 'pre-assembled' and that 'engine system' to be assembled or other parts imported therewith constituted a larger set as he relied upon the decision of the Hon'ble Supreme Court in Collector of Customs, Bangalore v. Maestro Motors Ltd [2004 (174) ELT 289 (SC)] holding that ' 19....In our view, CEGAT has erred in holding that the Interpretative Rule 2(a) does not apply to a Notification. When a Notification exempts goods falling within the First Schedule to the Customs Tariff Act, 1975, then the goods must be classified in the same manner both for the purposes of payment of customs duty as we....
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....kits are exempted...' as imperative for applying the General Rules for Interpretation of the Import Tariff appended to Customs Tariff Act, 1975 independently for exemption. In the present dispute, the exemption is extended to 'completely knocked down (CKD)' kits of particular heading subject to prescribed qualification and not to any component or part thereof which has been referred to only for purposes of eligibility of 'completely knocked down (CKD)' kits as whole. This ruling is no authority to undertake separate classification of 'engine', 'transmission system' or 'gear box' for ascertaining compliance with qualification. There is no convergence of statutory objective and, absent such convergence, appropriation of uncontemplated liberty to foray into rules of classification does not survive the test of statutory authority. 31. The decision of the Tribunal, in BMW India Pvt Ltd v. Commissioner of Customs, Chennai-V [2018 (9) TMI 1151 - CESTAT CHENNAI], has been extensively relied upon by the adjudicating authority. Needless to say, the concessional rate under dispute therein is attributed to notification no. 21/2011-Customs dated 24th March 2011 and denial thereof, of bene....
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....ion in preassembled form and mounted on a chassis/ body assembly but also will not include such sub-assembly engine and/or gearbox and/or transmission mechanism if they are mated to each other. 19. It is also pertinent to note that if the imported automobile CKD kit has the engine or gearbox or transmission in preassembled condition, the entire kit will not get the benefit of 10% BCD under entry 344(1)(a) but will have to suffer 30% BCD under 344(1)(b).' to divine circumstances in which the full rate of duty and intermediate rate would be applicable, i.e., by 'mating' and 'separate but pre-assembled' respectively. Thus expressions were insinuated into the literal description to assign intent. 33. On the contrary, according to Learned Consultant for M/s GMMCO, the Hon'ble Supreme Court in United Offset Process (P) Ltd v. Asst Collector of Customs, Bombay and others [(1989) 74 STC 81] emphasized common parlance to undefined expressions thus '4...the legislature did not suppose our merchants to be naturalists, or geologists or botanists.. 5....There is no technical definition of the expressions used. In that view of the matter, in our opinion, the true....
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....influence let alone as binding precedent. 34. The adjudicating authority has resorted to the highest rate, at 40%, among the classes delineated in the impugned notification to fasten duty liability that is cause of grievance to the appellants. That would have been in order upon reasoning being in conformity with the test, presumably applied by the competent review authority in accordance with section 129D of Customs Act, 1962, to allow the adjudication to stand and also passing muster for discard of the appeals. Per contra, failure in the test of the twin parameters - being legal and being proper - on the impugned order merits setting aside of the impugned order. 35. For the sake of form, we also note that the impugned order re-evaluated the goods as approximating to be '(2) other than (1) above' of, inter alia, 'Motor vehicles' corresponding to heading 8704 of First Schedule to Customs Tariff Act, 1975 in the impugned notification from lack of conformity with '(1) as a Completely Knocked Down (CKD) kit containing all the necessary components, parts or sub-assemblies for assembling a complete vehicle, with, -' '(a) engine, gearbox and....