TaxTMI 
TaxTMI 
2025 (10) TMI 1199
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.... rate of Basic Customs Duty (BCD) under Sl. No. 961 of Notification No. 152/2009-Cus dated 31.12.2009 as amended. The impugned goods are used for both the front seats (driver & co-driver) of a car. On investigation, it appeared to the officers of DRI, Pune Zonal Unit that the importer-appellant mis-declared the goods as parts of seats falling under Tariff Item (CTI) 9401 9000. After due process of law, the Ld. Adjudicating Authority rejected the classification under CTI 9401 9000 adopted by the importer and reclassified the goods under CTI 8708 9900 denying the exemption benefit under Notification No. 152/2009-Cus dated 31.12.2009. The Ld. Commissioner also confirmed the differential duty and confiscated the impugned goods but allowed its redemption on payment of fine. Penalty equal to duty was imposed apart from imposing penalty under sec. 114AA of the Customs Act, 1962 (CA 1962) on the appellant-company and on the managerial persons/employees of the appellant-company under sec. 112(a) and 114A of the CA 1962. Hence these appeals. 3. Shri Hari Radhakrishnan, Ld. Advocate appeared for the appellants and Shri P. Narasimha Rao, Ld. Commissioner (AR) appeared for the respondent. ....
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....of Origin does not specify CTI 8708 9900 for these goods. Additionally, he contended that the appellant altered the descriptions of the goods in the copy of the Certificate of Origin submitted to Customs and omitted the accurate description in the original document. The appellant was fully aware of the purpose and nature of the imported and manufactured goods, as established by the binding decision of the Advance Ruling Authority (AAR). Nevertheless, the Noticee allegedly misclassified the goods deliberately, thereby making them liable for demand, interest under the extended period, and the imposition of penalties. In supplementary submissions dated 10/02/2025, the Learned Commissioner (AR) reiterated the points as outlined previously and in the impugned order, and prayed that the appeal be dismissed. 4. We have heard the rival parties and have carefully gone through the facts of the case, the appeal memorandum along with the submissions made by the parties and the judgments cited by them. We find that two major issues are involved in the appeal: (A) Whether the subject goods are 'parts of Car Seats' falling under CTI 9401 9000 (Appellant) or are 'accessories' of motor ....
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....ements taken from factory officials. While it would not be as accurate as the Company's product literature, the same has to be relied upon to understand the facts in issue. 5.2 The appellant makes about 50 varieties of track assembly including manual track assembly and power track assembly. The impugned order does not distinguish between the different types of track assembly. Description and use of impugned goods as per OIO 6. The relevant portion of the statement dated 24.02.2022 of Shri D. Suresh, Production Manager, DAS reproduced from para 8.2.1 (a) (b) & (c) of the impugned order, which gives a common narration of the use of the impugned goods, is extracted here under; "Further statement dated 24.02.2022 of Shri. D. Suresh, Production Manage:, DAS India, was recorded under Section 108 of the Customs Act, 1962 wherein he inter alia, stated that - a. DAS India is into manufacturing of seat accessories mechanism for Motor Vehicles such as different types of Track Assembly and its components/parts such as Lock Assembly, Cushion Panel, base assembly, etc. They are mainly supplying their products to M/s. Hyundai Transys Lear Automotive India Pvt. Ltd., (HT....
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....e lock bolt squeezing is done in conveyor assembly line and pipe squeezing is done as a separate sub assembly line. Here the process of riveting of link bracket assembly and rail and floor mounting assembly is done. The Sub Assembly process and ED coating (painting) is done correspondingly. Finally, the components are sent to the conveyor assembly belt and are sent to the finished goods store and are ready for dispatch." (emphasis added) The manufacturing process shows that the impugned goods are used in different types of assemblies manufactured by the appellant which are then fitted together. The question is whether the 'Track Assembly', is a part of the car seat or a part / accessory of a motor car. 6.1 The following diagrammatic representations / pictures show the track assembly and view of the car seat, which are a part of the impugned order. It helps give a better understanding of the use of the impugned goods as described in the statement above, on the principle that a part of a part is a part of the whole, whether it be an accessory or a car seat. Para 8.6.1 of the OIO gives the pictorial representation with name of parts, of one of the 'track assembly' manuf....
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....such as - a. Motor Assembly - It is used to move the seat front and back, up and down and tilt the Cushion/link assembly by electric power. b. Blower Assembly - This throws air from the bottom of the seat for comfort of the passenger or driver. c. Gear Assembly - It is fitted inside the rail assembly and driven by motor assembly to control the front back movement of Cushion assembly. d. Slide cable Assembly - It is used to join the Motor Assembly and Gear Assembly. He stated that cushion assembly is a part of cushion frame assembly which is one of the essential sub-assemblies of track assembly. Customs Tariff Heading 7. It would at this stage be profitable to extract the description of the goods as appearing in the competing tariff headings as preferred by the rival parties. Appellant 9401 SEATS (OTHER THAN THOSE OF HEADING 9402), WHETHER OR NOT CONVERTIBLE INTO BEDS, AND PARTS THEREOF 9401 10 00 - Seats of a kind used for aircraft 9401 20 00 - Seats of a kind used for motor vehicles 9401 30 00 - Swivel seats and variable height adjustment 9401 40 00 - Seats other than garden seats o....
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....0-161, [1991] CITT No 43] which listed the following criteria as being relevant in determining whether a product is a part: (1) the product is essential to the operation of another product; (2) the product is a necessary and integral component of the other product; (3) the product is installed in the other product; and (4) common trade usage and practice. 8.1 In Deputy Commissioner Vs Union Carbide India Ltd. [(1976) 38 STC 198 (KER)], the Kerala High Court after referring to some of the leading decisions of the Allahabad High Court held as follows : "The principle which can be drawn from the above decisions appears to be that a thing is a part of the other only if the other is incomplete without it. A thing is an accessory of the other only if the thing is not essential for the other but only adds to its convenience or effectiveness." (emphasis added) 8.2 In M/s. Annapurna Carbon Industries Co. Vs State of Andhra Pradesh, (1976) 2 SCC 273.], wherein the Apex Court held that an accessory would mean an object or a device that is not essential in itself but that adds to the beauty or convenience or effectiveness of something else ....
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....ts under Customs tariff item 94019900. The goods Rail Assembly, Lock assembly, Set bracket, base assembly, cushion panel, link assembly, cross member bracket assembly, pump assembly (also known as height adjuster), spring assembly, cross member bracket assembly etc. used in the manufacture of track assembly have been classified under CTI 94019900 which does not cover accessories of motor vehicles. It is apparent that the crucial facts relating to the functionality of the subassemblies and parts of track assembly having a direct bearing on the Basic Customs duty (BCD) liability of the said goods have been suppressed from Customs in declarations filed by the importer. The claim of the importer about the goods being parts of automobile seats of sub-heading 94019900 appears to be without basis and made with the sole intention of evading the BCD liable on the said products. The mis-declaration, mis-classification and suppression of the relevant facts, on the part of the importer appears to be in violation of the provisions of Section 17 and Section 46 the Customs Act, 1962. 15.3 The goods Rail Assembly, Lock assembly, Set bracket, base assembly, cushion panel, link assembly, cr....
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....nt safety feature of the car. The metal structure is the track assembly in the front seat and on this structure only the foam is constructed. Therefore, without the structure/track assembly, the seat is of no use in a vehicle/car. It was submitted that the Commissioner has admitted in paragraph 31 and 35 of the impugned order that the track-assembly manufactured by the appellant is affixed/bolted in the lower cushion of the seat and is thereafter, fitted on the floor of the motor vehicle. Therefore, the finding of the Commissioner that the track-assembly is an accessory of the motor vehicle is contrary to the above facts. The appellant has also relied upon two specific articles/ papers published in the International Journal of Engineering Research and General Science and in the Engineering Journal which have observed and recorded that track-assembly is an integral part of a car seat. They have also stated that as per the decision of the Hon'ble Supreme Court in Union of India Vs Garware Nylons Ltd. reported in 1996 (87) E.L.T. 12 (S.C.), the burden of proof is on the taxing authorities to show that the particular case or item in question, is taxable in the manner claimed by them. ....
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....bility of existing laws in understanding changes brought about by such improvements. In 'Engineering Journal' (supra) relied upon by the appellant and considered in the impugned order, shows the Car seat structure inclusive of track assembly components as under; For each car seat structure, there are many small part components which can be grouped into 13 parts, shown in Fig. 2. They are (1) bracket headrest holder, (2) upper pipe frame front back, (3) side frame front back, (4) rear pipe frame front cushion, (5) regular lever, (6) side frame front cushion, (7) slide adjuster, (8) adjuster rod, (9) bracket leg, (10) front panel cushion, (11) connecting rod, (12) lower panel frame front back, and (13) top panel frame front back. Figure 3 (para 24 of impugned order) The HSN Explanatory Notes to Chapter 94 states that the heading also covers identifiable parts of chairs or other seats, such as backs, bottoms and arm-rests etc. As seen from Figure 1 at para 6.1, the track assembly is an identifiable part of the front seat bottom frame of the car as depicte....
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....has clarified that the drawback Table is fully aligned with the Customs Tariff Act, 1975 at the four-digit level. [See: Bharat Forge Ltd Vs Commissioner of Customs (Export) - 2012-TIOL-795-CESTAT-MUM]. 12.2 Similarly revenue in the impugned order seeks to apply the ratio of the judgment of the Hon'ble Supreme Court in Insulation Electrical (supra), rendered in a Central Excise classification issue to the present Customs classification. The said lis pertained to a dispute which originated with the classification list for the manufactured goods being filed in 1986, as per the Central Excise Tariff 1985. It is seen that the Central Excise and Customs Tariffs were aligned at the 8-digit level after 28.02.2005 only. However, revenue's contention is that though the said judgment pertains to a 1986 matter it is applicable to the present case since prior to 28.02.2005 both the tariffs (Central Excise and Customs) were aligned at the 4-digit level. The judgment is discussed later in this order; however, revenue cannot blow hot and cold on the same issue. 12.3 Moreover, it is not revenues case that while the goods are classifiable under CTI 8708 for customs purposes, they should be cla....
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....the department and as per the theory of precedent or the precedential value of the earlier pronouncement, a change in classification can be occasioned only by some fresh facts pertaining to the classification come to light. No such differentiation has been made in the impugned order. 13.1 An advance ruling is a private tax decision and is an authority in the setting of its own facts. The Income Tax Appellate Tribunal - Mumbai, in the case of Assistant Director Of Income Tax Vs Green Emirate Shipping And Travels [(2006) 100 ITD 203 (MUM) / [2006] 286 ITR 60 (MUM)], after referring to the Supreme Court's decision in Union Of India And Anr Vs Azadi Bachao Andolan And Anr [AIR 2004 SUPREME COURT 1107], held that the ruling of the Authority for Advance Rulings not being a part of the judicial hierarchy, does not set binding precedents for the revenue, assessees (except the applicant), or appellate authorities. We agree. Therefore, if there is a conflict between an AAR ruling and more so of a subsequent order from a jurisdictional officer, the quasi-judicial order takes precedence over the AAR ruling, which is not part of the judicial hierarchy. 13.2 The impugned order also ref....
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....(4) enables the proper officer, where the importer fails to provide the requisite information for any reason, to cause further verification consistent with the trade agreement. Moreover, in the Rules [CAROTAR], the rule 8 (3) states - "In the event of a conflict between a provision of these rules and a provision of the Rules of Origin, the provision of the Rules of Origin shall prevail to the extent of the conflict." (Sentence underlined to add emphasis. Highlighted words added for clarity) "Preferential tariff treatment" has also been defined under CAROTAR to means allowing preferential rate of duty to goods imported into India in accordance with a trade agreement. 14.2 If an importer provides a valid COO Certificate the CTI mentioned for the imported goods, should be accepted. The exception being if the CTI is shown to be obtained fraudulently. Duty concessions must be granted according to international treaties unless procedures outlined in the 2009 Rules are followed to challenge the CTI. In this case, Revenue has not challenged the CTI 9401 reflected in the COO. Therefore, the goods are correctly classified under CTH 9401, making Revenue's objections unfounded. 15....
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....eat is merely to improve the efficiency and convenience of the seat and does not form part of the seat. That the seat is complete and fully functional without this rail arrangement. With regard to YE-2 rear back lock assembly, it was stated that the function of this item is to fix the position of the rear seat of the car i.e. whether straight or slanting and this is also an accessory for enabling the passenger to fix the seat in the most comfortable and convenient position. It was contended by the assessee that lock assembly does not form a part of the car seat at all and the seat is complete without the lock assembly. The goods were being supplied directly to M/s Maruti Udyog Ltd which manufactures of cars and not seats. The issue originated with the classification list being filed in 1986 as per the Central Excise Tariff 1985, which came into effect from 28.02.1986. Although the Central Excise Tariff 1985 introduced an 8-digit code and was aligned to the Customs Tariff by the Central Excise (Amendment Act), 2004 with effect from 28.02.2005. It is revenues contention, as stated earlier, that even prior to 28.02.2005 both the tariffs for the said goods were aligned at the 4-digit l....
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.... The goods in Insulation Electrical (supra) consisted mainly of 'rail assembly' and its lock assembly. Rail assembly was essentially in the nature of rails made out of iron and steel on which seats can slide back and forth and were supplied directly to M/s Maruti Udyog Ltd which manufacturers cars and not seats. In the impugned case the goods are 'track assembly' which includes rail assembly and cushion panel assembly along with lock assembly, set bracket, base assembly, cushion panel, link assembly, cross member bracket assembly, pump assembly, spring assembly, cross member bracket assembly etc. The goods are more evolved from that of a rail assembly and are not identical to it. Unlike the Central Excise classification dispute in Insulation Electrical (supra), in the present Customs classification dispute, the track assembly manufactured by the Appellant is supplied to car seat manufacturers who affix the cushion and other components of the car seat, keeping the track assembly as the bottom frame. The car seat is then supplied to the car manufacturer as an integral part of the same. In Bhavnagar University Vs Palitana Sugar Mills Pvt. Ltd. [2003 (2) SCC 111], the Apex Court observ....
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.... merits of classification the impugned track assembly under CTH 8708 9900, hence the classification as declared by the appellant merits to be upheld and the part of the impugned order relating to classification needs to be set aside. Penalty 19. Whether the Appellant has classified the goods by fraud and deliberately suppressing facts and hence demand is liable under the extended period; the goods are liable for confiscation and the importer and other appellants are liable to penalty. 19.1 We have in our discussions observed that revenue has not been consistent with its own classification of the impugned goods and spoke in two voices, showing that the dispute involves complex interpretation of legal provisions. That apart the classification of the impugned goods as decided by revenue has been found to be not proved. Hence the question of demand for duty with interest or the question of imposing a fine in lieu of confiscation of the goods itself does not arise. 19.2 However in assessment proceedings, the primary concern is with the assessment of tax as authorised by law i.e. the correct quantification and computation of total tax due as per the provisions of the tax stat....
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....f goods. (emphasis added) 19.5 As per the discussions above the goods have been classified correctly and the appellant has not tampered with the CTI of the goods in the COO Certificate. We have also noted that the goods are not liable to confiscation. This being so section 112(a), cannot be invoked against the above appellants. Similarly, section 114A is imposable in a case where the duty has not been levied or has been short levied etc., which is not the situation here. No duty is to be demanded and hence the said section cannot also be invoked in this case. These penalties hence do not sustain. 19.6 Section 114AA, does not make confiscation a condition for the said penalty. In fact it does not make a reference to goods at all or link it to payment of duty, but concerns itself with a declaration, statement or document which is false or incorrect in the transaction of any business for the purposes of this Act. In the circumstances the tampering with the description of the goods in the COO certificate satisfies the applicability of the said section in this case. The Hon'ble Supreme Court in State Of U.P. & Others Vs Sukhpal Singh Bal [AIR 2005 SUPREME COURT 3324 / 200....
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...., pertaining to interpretation of taxing statutes, which is reproduced hereunder:- "RULES REGARDING THE INTERPRETATION OF TAXING STATUTES 25. Regarding the interpretation of taxation statutes, the parties have relied on several decisions. The law laid down on this aspect is fairly well-settled. The principles governing the interpretation of the taxation statutes can be summarised as follows:- (a) A taxing statute must be read as it is with no additions and no subtractions on the grounds of legislative intendment or otherwise; (b) If the language of a taxing provision is plain, the consequence of giving effect to it may lead to some absurd result is not a factor to be considered when interpreting the provisions. It is for the legislature to step in and remove the absurdity; (c) While dealing with a taxing provision, the principle of strict interpretation should be applied; (d) If two interpretations of a statutory provision are possible, the Court ordinarily would interpret the provision in favour of a taxpayer and against the revenue; (e) In interpreting a taxing statute, equitable considerations are entirely out of pla....
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.... Finance as seen from its Twenty Seventh Report on the Taxation Laws (Amendment) Bill, 2005 on 12.12.2005. At the risk of repetition it has to be stated that the Hon'ble Supreme Court while examining such a plea had in Anandji Haridas & Co. Pvt. Ltd vs Engineering Mazdoor Sangh [(1975) 3 SCC 862 / TS-5002-SC-1975-O], observed as below; "We are afraid what the Finance Minister said in his speech cannot be imported into this case and used for the construction of Clause (e) of Section 7. The language of that provision is manifestly clear and unequivocal. It has to be construed as it stands, according to its plain grammatical sense without addition or deletion of any words. As a general principle of interpretation, where the words of a statute are plain, precise and unambiguous, the intention of the Legislature is to be gathered from the language of the statute itself and no external evidence such as Parliamentary Debates, Reports of the Committees of the Legislature or even the statement made by the Minister on the introduction of a measure or by the framers of the Act is admissible to construe those words. It is only where a statute is not exhaustive or where its language is....
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....by illegal means is a blameworthy conduct which would lead to a penalty. The officials have in their different roles made, used or caused to be made or used tampered documents (COO certificates), which was false or incorrect in material particulars/ description of the goods. The same has not been effectively rebutted and the onus of proof which shifted to the appellants has not been discharged and shifted back to revenue. The burden of proof has hence been discharged by revenue. 21. It is now well settled that the scope of examination of the discretion exercised by the lower authority is limited to see whether it has been exercised in a judicial manner that is regulated according to the known rules of law and whether there is any deficiency in the decision-making process and not in the decision. We hence do not find any reason to interfere with the penalties imposed under section 114AA of the Customs Act 1962. 22. Having regard to the discussions above, we find that; (i) Revenue has failed to prove the charge and discharge its burden against the classification of the goods as declared in the BoE's and hence it does not merit a change. In the circumstances as discusse....