TaxTMI 
TaxTMI 
2026 (2) TMI 975
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....tor General, DRI to decide the proposals in the show cause notice [SCN] dated 18.7.2018 issued by the ADG, DRI to five noticees. The SCN called upon the noticees to show cause to the Principal Commissioner of Customs, Air Cargo Complex (Import), New Custom House, New Delhi and to the Principal Commissioner of Customs, Air Cargo Complex (Import), Mumbai in respect of the goods imported through the two Custom houses. Thereafter, DG, DRI appointed ADG (Adjudication) DRI as the common adjudicating authority to decide the proposals in the SCN in pursuance of which the impugned order was passed. 2. Customs Appeal No. 51007 of 2020 filed by M/s. Videocon D2H Limited [Videocon] assails the confirmation of demand of duty of Rs. 56,47,17,639/- under section 28(4) of the Customs Act, 1962 [the Act] and imposition of an equal amount as penalty under section 114A of the Act. Although the SCN also proposed penalty under section 114AA of the Act, in the impugned order, no penalty was imposed under this section. 3. Customs Appeal No. 50912 of 2020 filed by Principal Commissioner of Customs, ACC Import, New Delhi assails the impugned order to the extent it did not impose any penalty under sec....
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....ared by the Customs officers posted at the two Air Cargo Complexes. Learned counsel for the appellant submits that in 63 of the 144 Bills of Entry, goods were cleared after examination by the customs officers. As an illustration, he showed us the printout from the Indian Customs Electronic Data Interchange System [ICES] in respect of Bill of Entry no. 5459766 dated 12.5.2014 at page 254 of Customs Appeal No.51007 of 2020 which shows that the goods were examined by the officer. 11. Thereafter, DRI, Bangalore Zonal Unit 'gathered intelligence' that Videocon was importing "Satellite/Viewing Cards' used exclusively with their Set Top Boxes but was misclassifying them under CTI 8523 52 90 and was also mis-declaring them as 'Videocon/IRDETO U SIM Smart Cards' and clearing them wrongly claiming the benefit of Notification No. 24/2005-Cus dated 1.3.2005 (as amended) for basic customs duty and Notification No. 2/2011-CE dated 1.3.2011 for Additional Duty of Customs. DRI searched the Office of Videocon in Mumbai, its Depot in Aurangabad and the premises of Trends Electronics in Aurangabad and seized some Satellite Viewing Cards. It also recorded statements of various persons under section....
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....Bills of Entry. Of the 24 RUDs, 7 were statements (RUDs 5,6,7,8,9,10 & 11), 3 were Mahazars or Panchnamas (RUDs 2,3 & 4), 4 were copies of summons issued to various persons and their replies (RUDs 15,16,17 & 18), 2 were agreements (RUD 19 & 20) and the rest were copies of a Bill of Entry (RUD 12), Invoice (RUD 13), Purchase Order (RUD 14), TR-6 challan of the duty paid by Videocon (RUD 22), order of NCLT of merger of Videocon with Dish TV (RUD 23), takeover documents (RUD 21) and a letter of Dish TV (RUD 24). Submissions on behalf of M/s. Videocon, Shri Dhoot, Shri Kanthalia and Shri Mathur 14. Learned counsels made the following submissions: (i) The main issue to be decided is if the Viewing Cards/Smart Cards imported by Videocon deserve to be classified under CTI 8523 52 90 which is a specific heading for Smart Cards or as parts of Set Top Boxes under CTI 8529 90 90; (ii) Videocon procured Set Top Boxes from local manufacturers which were classified under 8528 71 00 and it imported only the smart cards; (iii) The SCN invoked extended period of limitation on the ground that the Smart Cards were to be used along with the Set Top Boxes, that the size....
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....mported by Videocon were classifiable under a specific heading, Note 2(b) meant for other parts will not apply. (viii) The smart card is intended to provide conditional access to the subscriber allowing him to view channels as per his subscription only and the Set top Box only unscrambles those channels allowing the subscriber to view. (ix) The classification of the imported smart cards/viewer cards under CTI 8523 52 90 may be upheld and the impugned order may be dismissed. (x) Goods must be classified as they are imported and not based on how they will be used after their import. The mere fact that the imported viewing cards/smart card will, after import, be used with the Set Top Boxes is immaterial. Reliance is placed on Vareli Weaves Pvt. Ltd. versus Union of India [1996 (83) E.L.T. 255 (S.C.)] and Shakti Tools versus CCE [2002 (143) E.L.T. 211 (Tri.-Del.)] decided by this Tribunal and upheld by the Supreme Court [2003 (157) E.L.T. A42 (S.C.)] (xi) CTI 8523 52 90 is specific and it will prevail over CTI 8529 90 90 under which the cards have been classified in the impugned order. (xii) Personalization of the smart cards/SIM cards will ....
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.... (iv) Once the seized goods have been found liable to confiscation, redemption fine in lieu of confiscation should have been imposed on the goods which were seized and which were provisionally released. Reliance is placed on Weston Components Ltd. versus Commissioner of Customs, New Delhi [2000 (115) E.L.T. 278 (S.C.)] Commissioner of Customs, Chennai versus Madras Petrochem Ltd. [2020 (372) E.L.T. 652 (Mad.)] and T. Elavasaran versus Commissioner of Customs (Airport) Chennai [2011(266) E.L.T. 167 (Mad.)]. (v) The appeals filed by Videocon, Dhoot, Kanthalia and Mathur may be dismissed and the impugned order may be modified by imposing penalties under section 114AA of the Act and imposition of redemption fine under section 125 of the Act Findings 16. We have considered the submissions advanced by both sides and perused the records. The impugned order was passed in pursuance of the SCN which proposed reclassification of the smart card/viewing cards imported by Videocon based on, (a) the analysis and interpretation of the Customs Tariff by DRI (which was different from the classification of the goods in the Bills of Entry); and (b) based on 24 RUDs. ....
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....decided by us are: a. Are the imported viewing cards/smart cards classifiable under CTI 8523 52 90 as was done in the Bills of Entry or under CTI 8529 90 90 as held in the impugned order? b. Can the demand of duty invoking extended period of limitation under section 28(4) be sustained? c. Can the demand of interest under section 28AA be sustained? d. Can the confiscation of the goods under section 111 or holding the goods liable to confiscation be sustained? e. Can the penalty under section 114A imposed on Videocon be sustained? f. Can the penalty under section 112 imposed on Dhoot, Kanthalia and Mathur be sustained? g. Did the ADG (Adj), DRI err in not imposing penalties on Videocon, Dhoot, Kanthalia and Mathur under section 114AA? h. Did the ADG (Adj.) DRI err in not imposing redemption fine under section 125 of the Act? 23. Before examining these questions, it would be relevant to discuss how imported goods are cleared through Customs to put the entire case in perspective. 24. To clear the imported goods the importer or his customs broker files a Bill of Entry online in the ICES giving details of the g....
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....nt or other specifics of such goods; (e) the origin of such goods determined in accordance with the provisions of the Customs Tariff Act or the rules made thereunder, if the amount of duty, tax, cess or any other sum is affected by the origin of such goods; (f) any other specific factor which affects the duty, tax, cess or any other sum payable on such goods, and includes provisional assessment, self-assessment, re-assessment and any assessment in which the duty assessed is nil; (4) 'bill of entry' means a bill of entry referred to in section 46; (14) 'dutiable goods' means any goods which are chargeable to duty and on which duty has not been paid; (15) 'duty' means a duty of customs leviable under this Act; (17) 'examination', in relation to any goods, includes measurement and weighment thereof; (23) 'import', with its grammatical variations and cognate expressions, means bringing into India from a place outside India; (25) 'imported goods' means any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption; (26) 'importer', in relation....
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....o be governed by the provisions of section 17 as it stood immediately before the date on which such assent is received. Section 46. Entry of goods on importation. - (1) The importer of any goods, other than goods intended for transit or transhipment, shall make entry thereof by presenting electronically on the customs automated system to the proper officer a bill of entry for home consumption or warehousing in such form and manner as may be prescribed: ***** Section 47. Clearance of goods for home consumption. - (1) Where the proper officer is satisfied that any goods entered for home consumption are not prohibited goods and the importer has paid the import duty, if any, assessed thereon and any charges payable under this Act in respect of the same, the proper officer may make an order permitting clearance of the goods for home consumption: *** 28. Once the goods are cleared for home consumption, the process of assessment comes to an end because the goods cease to be imported goods and there cannot be any further assessment. 29. However, the assessment already made in the Bill of Entry, can be modified through one of the five ways ....
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....ods were examined (in many Bills of Entry) and cleared by the proper officer of customs for home consumption. The ADG, DRI who issued the SCN and the ADG(Adj), DRI who passed the impugned order, classified the goods under CTI 8529 90 90 (under section 28). Thus, there are two different views regarding classification of the imported goods - one of Videocon (which has not been changed or modified by the proper officer under section 17) and another of the ADG DRI who issued the SCN and the ADG(Adj.) who passed the impugned order. This is not a case where the classification of the goods was already decided in previous Bills of Entry under one CTI by the proper officer re-assessing duty or in an appeal by the Commissioner (Appeals) or this Tribunal or by any Court and thereafter, Videocon filed Bills of Entry with another CTI thereafter to evade duty. 33. Therefore, the 'mis-classification of the goods to evade' by the Videocon alleged in the SCN and affirmed in the impugned order is not correct. Videocon classified the goods in the Bills of Entry as per it's understanding and view and the proper officer also cleared the goods accordingly and in many cases after the goods were examin....
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....e inserted. They were imported separately and not along with the STB. The mere fact that they are used with the STBs and have no other use will not, according to Videocon, make them parts of the STBs. Even the fact that the viewing cards/smart cards are customized to Videocon and that they cannot be used with the STBs of other D2H service providers, will not, according to Videocon, make them parts of the STBs. 39. According to the Revenue, as held in the impugned order, the viewing cards/smart cards are parts of the STBs and should be classified accordingly as held in the impugned order. 40. According to Videocon, even if the smart cards/ viewing cards are treated as parts of STBs, their classification would not change. 41. We now proceed to examine the relevant entries in the Customs Tariff and the relevant Chapter/Section Notes. SECTION XVI MACHINERY AND MECHANICAL APPLIANCES; ELECTRICAL EQUIPMENT; PARTS THEREOF; SOUND RECORDERS AND REPRODUCERS, TELEVISION IMAGE AND SOUND RECORDERS AND REPRODUCERS, AND PARTS AND ACCESSORIES OF SUCH ARTICLES Section Note: 1. This Section does not cover : (a) transmission or conveyor belts or be....
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.... (other than headings 8409, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings; (b) other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of heading 8479 or 8543) are to be classified with the machines of that kind or in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate. However, parts which are equally suitable for use principally with the goods of headings 8517 and 8525 to 8528 are to be classified in heading 8517; (c) all other parts are to be classified in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate or, failing that, in heading 8487 or 8548. CHAPTER 85 Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles NOTES : 1. This Chapter does not cover : (a) electrically warmed blankets, bed pads, foot-muffs or the like; electrically warmed clothing, footwear....
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....divided into sections and each section is further divided into Chapters. Some sections have only one chapter and some have more. 43. Section XVI under Chapter 85 is relevant for the purpose. Section Note 2 to this section explains how parts of the goods should be classified. This Section Note, however, is subject to Section Note 1 and Chapter Note 1 to Chapter 85. Section Note 1 and Chapter Note 1 to Chapter 85 exclude certain types of goods from the scope of the section and chapter respectively which are not relevant for this case because it is nobody's case that the goods are not covered by this section or chapter. 44. Learned counsel for Videocon relied on Chapter Note 5(b) to Chapter 85 to assert that the imported cards were 'smart cards'. According to this Chapter Note, the term "smart cards" means cards which have embedded in them one or more electronic integrated circuits (a microprocessor, random access memory (RAM) or read only memory (ROM)) in the form of chips. These cards may contain contacts, a magnetic strip or an embedded antenna but do not contain any other active or passive circuit elements. 45. According to Videocon, the cards imported by it squarely meet....
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....roceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, - (a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the court considers unreasonable; or (b) when the person who made the statement is examined as a witness in the case before the court and the court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice. (2) The provisions of sub-section (1) shall, so far as may be, apply in relation to any proceeding under this Act, other than a proceeding before a court, as they apply in relation to a proceeding before a court." A Division Bench of this Court has, speaking through A.K. Sikri, J. (as he then was) held, in J & K Cigarettes Ltd. v. Collector of Central Excise [2009 (242) E.L.T. 189 (Del.)] that, by virtue of sub-section (2), Sectio....
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.... (i) after the person whose statement has already been recorded before a Gazetted Central Excise Officer is examined as a witness before the adjudicating authority, and (ii) the adjudicating authority arrives at a conclusion, for reasons to be recorded in writing, that the statement deserves to be admitted in evidence, that the question of offering the witness to the assessee, for cross-examination, can arise." (Emphasis Supplied) We express our respectful concurrence with the above elucidation of the law which, in our view, directly flows from Section 138B(1) of the Act - or, for that matter, Section 9D of the Central Excise Act, 1944. 77. The framers of the law having, thus, subjected statements, recorded under Section 108 of the Act, to such a searching and detailed procedure, before they are treated as relevant in adjudication proceedings, we are of the firm view that such statements, which are yet to suffer such processual filtering, cannot be used, straightaway, to oppose a request for provisional release of seized goods. The reliance, in the appeal before us, on various statements recorded during the course of investigation in the present c....
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....se to do so. In case any such request is made by the assessee, it would be incumbent on the adjudicating authority, i.e., on Respondent No. 2 to allow the said request, as it is trite and well-settled position in law that statements recorded behind the back of an assessee cannot be relied upon, in adjudication proceedings, without allowing the assessee an opportunity to test the said evidence by cross-examining the makers of the said statements. If at all authority is required for this proposition, reference may be made to the decisions of the Hon'ble Supreme Court in Arya AbhushanBhandar v. U.O.I., 2002 (143) E.L.T. 25 (S.C.) and Swadeshi Polytex v. Collector, 2000 (122) E.L.T. 641 (S.C.). 26. With the above directions, the writ petition stands disposed of. 49. It is now a settled legal position that the statements made under section 108 of the Customs Act cannot be relied upon unless the procedure prescribed under section 138B was followed and they are admitted as evidence and this has not been done with respect to any of the statements in this case. 50. As far as the expert opinion of Shri Ribeiro is concerned, the ADG (Adj.) clearly erred in refusing to consider ....
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....re considered as parts of STB, as per (a) above, they deserve to be classified under this CTI. 53. The ADG (Adj.), on the other hand, held that they are not goods falling under CTI 8523 52 90 and therefore, classified them as per Section Note 2(b) as parts of Set top boxes under CTI 8529 90 90. 54. We find that since the DRI proposed to change the classification of the goods in the SCN and changed the classification in the impugned order, it is for the DRI to establish the change in the classification. This, as discussed, was done in the impugned order, by relying on the statement of Shri Vikash Wadhera (RUD-11) but it has to be ignored because it was not admitted as per section 138B. The classification by Videocon under CTI 8523 52 90, therefore, needs to be accepted on this ground alone. 55. Further, even if the statement of Shri Wadhera, succinctly summarized in paragraphs 5.4.3 (a) and (b) of the impugned order is considered, it only says that the cards have both ROM and RAM and also some passive and active electrical circuits for connection with the Set top box and some algorithms and personalized software. As per Chapter Note 5(b) smart cards can have RAM or Rom in o....
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.... in the card. In some goods, such as DVDs and CDs the entire information is on the disc itself. In smart cards such as Metro cards, debit cards, credit cards, etc. some of which come with only a magnetic strip while others come with a chip, the card only contains the basic information about the holder and his account details. Further details, such as credit or debit balance, etc. are dynamically retrieved from the server once the card is inserted into the machine or swiped. These will not make the cards part of some other machine. 60. Clearly, the viewing card/smart card inserted into the set top box of DTH service provider is a good in itself and is not a part of the set top box. 61. The re-classification of the goods in the impugned order from CTI 8523 52 90 to CTI85299090 cannot be sustained and deserves to be set aside. Can the demand of duty invoking extended period of limitation under section 28(4) be sustained? 62. Since we have found that the re-classification of the goods under CTI 8529 90 90 cannot be sustained, neither can the consequential demand of duty be sustained. 63. We also find that extended period of limitation can be invoked under section 28(4) i....
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.... the Act. The expression 'making an entry' in Customs Act means filing some papers to get the goods cleared by the Customs. In case of imports, the entry is made by filing a Bill of Entry. If the goods do not correspond in respect of value or in any other particular the entry made, i.e., the Bill of Entry, they will be liable to confiscation under section 111(m). However, it must be remembered that the importer also has an obligation to self-assess duty under section 17(1) of the Act. There is no separate mechanism to self-assess duty. When filing the Bill of Entry, the importer has to enter not only the description of the goods, quantity, etc. but also the classification, exemption notifications, value, etc. Thus, there are elements in the Bill of Entry which are matters of fact-nature of goods, quantity, etc. and there are matters of opinion such as the classification, exemption notification, etc. While matters of fact can be determined conclusively as correct or not, the classification, exemption notification, etc. are matters of opinion. Videocon classified the goods as per its understanding. Merely because the classification in the Bill of Entry does not conform to the view of....
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....ntionally makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document which is false or incorrect in any material particular, in the transaction of any business for the purposes of this Act, shall be liable to a penalty not exceeding five times the value of goods. 75. Since we have found that there were no mis-declaration or mis-classification of goods in the impugned order, we cannot impose any penalties under section 114AA. The submission of the Revenue that this section would apply not only to exports but also to imports is correct as is evident from the text of the section itself and also from the decisions in Ilishan Biotech (P.) Ltd, CELEBI Delhi Cargo Terminal Management India Pvt. Ltd. and Sunil Aidasani. However, this legal position will make no difference in the facts of the case because we have found against the Revenue on the questions of demand of duty on merits as well as limitation and also against the Revenue on the question of holding the goods liable to confiscation under section 111. Did the ADG (Adj.) DRI err in not imposing redemption fine under section 125 of the Act? 76. Revenue has asserted in the appeal filed ....
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....y the proper officer re-assessing it or by anyone modifying the assessment under any of the five methods indicated above. (e) Classification is a matter of opinion of the person. There is no obligation under the law on the importer to either to anticipate what view DRI or any Customs officer may take in hindsight about the classification of the goods which were already cleared or to file bills of entry conforming to such anticipated classification. However, if the classification was already settled earlier through re-assessment or in any appeal, the importer has to follow judicial discipline and file Bills of Entry accordingly. Likewise, if the classification is decided by the Commissioner (Appeals), this Tribunal or any court against the Revenue, the proper officer re-assessing the goods or any adjudicating authority or appellate authority passing orders has to follow the decision of the higher judicial authority. (f) None of the statements recorded under section 108 of the Act and relied upon in the SCN are relevant to this case because the ADG (Adj.) did not admit them as evidence after following the procedure prescribed under section 138B. (g) The vie....