TaxTMI 
TaxTMI 
2026 (8) TMI 1540
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....ted goods and declared as "Natural Rubber Latex Balloon / Decorative or Festival Balloon" and classified the same under CTH 40169590 and 95059090, availing concessional rate of duty and exemption under Notification No. 50/2018-Cus dated 30.06.2018. Investigations were initiated by the Directorate of Revenue Intelligence (DRI), Surat, which revealed that the impugned goods were in fact "Toy Balloons made of Natural Rubber Latex", and were correctly classifiable under CTH 95030090, attracting BCD @ 60%. It was found that prior to January 2021, the appellants had been classifying identical goods under CTH 95030090, but had subsequently changed the classification. Statements were recorded under Section 108 of the Customs Act, 1962, wherein the proprietor admitted that toy balloons fall under heading 9503 as per HSN Explanatory Notes and Notification No. 02/2021-Cus dated 01.02.2021. Further, investigations established that the description and classification on the shipping documents were altered at the request of the importer. Thereafter, Show Cause Notice dated 03.02.2023, 13.03.2023 and 27.02.2023 were issued to the appellants proposing re-classification under CTH 95030090, recovery ....
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....or printed design and have diverse use including decoration, packaging, and party events but not "amusement" as the predominant intended use. The appellant's proprietor had confirmed that they were decorative, rather than toy balloons which was supported by product samples. Learned counsel stated that the subject balloons could not be considered toys for the purpose of classifying them in CTH 9503. In support of his submissions, learned counsel relied on the decision of Pleasantime Products. Versus Commissioner of Central Excise, Mumbai-I [2009 (243) ELT 641 (ST)] and Commissioner of Customs, Ludhiana versus Goyal Brothers [(2026) 38 Centax 41 (Tri.- Chan)] wherein the Tribunal held that the Balloons intended to break upon impact would be classifiable under CTH 95059090 and not in CTI 95030020. 3.1 Learned counsel further submitted that the burden of proof lay on Revenue for classification and duty demand as held in Puma Ayurvedic Herbal Ltd. versus Commissioner of Central Excise [(2006) 196 ELT 3] Similarly, in Hindustan Ferodo Ltd. versus Collector of Central Excise, Bombay [1997 (89) E.L.T. 16 (S.C.)] Learned counsel also contended that the Department had failed to provid....
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....ed to be inflated with air or gas and were predominantly plain without special shapes, cartoon figures, mechanical features, or play-oriented designs. Learned counsel stated that this technical composition and pure inflatable character align directly with CTH 4016, which refers to "other articles of vulcanized rubber other than hard rubber," and was further specified in 4016.95 as "other inflatable articles." 3.3 Learned counsel also submitted that the Tariff heading 9503 was specifically reserved for "toys," which, under customs law, are articles manufactured or recognized for children's amusement or play. Natural latex rubber balloons, when plain and primarily used for decoration or celebratory events, do not meet the threshold of toy. Their commercial and functional identity is that of a decorative or utilitarian inflatable, not a toy. He referred to CBIC Notification No. 50/2017-Cus, as amended by No. 02/2021-Cus, which provides that this entry [Chapter 40] does not include toy balloons made of natural rubber latex (toy balloons are classified under Customs tariff heading 9503. The legislative intent is clear that "Toy balloons" with the characteristics and intent are mo....
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....r duty. The change was not based on any change in nature, composition or end-use of goods, but purely with intent to evade customs duty. 4.1 Learned Authorized Representative further submitted that the exemption under Notification No. 50/2018-Cus was wrongly availed by mis-classifying toy balloons under Chapter 40. He stated that CBIC had clarified vide Notification No. 02/2021-Cus that toy balloons made of natural rubber latex are excluded from Chapter 40 and fall under Chapter 95, thereby disentitling the appellant from the exemption. He submitted that mere clearance of goods based on self-assessment does not bar the department from invoking Section 28 of the Customs Act, 1962, especially where mis-classification and suppression of facts are subsequently detected through investigation. The deliberate mis-statement of description, frequent change of classification, and conscious availing of ineligible exemption clearly establish suppression of facts and intent to evade duty, justifying invocation of the extended period under Section 28(4) of the Act. Learned AR contended that the conduct of the appellant squarely attracted penal provisions under Section 114A and Section 112 of ....
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.... 95059010 ... Magical equipment kg 20% - 95059090 ... Other 6.1 The relevant explanatory notes of these CTH is also reproduced hereinafter:- CTH 4016 :This heading covers all articles of vulcanised rubber (other than hard rubber) not covered by the preceding headings of this Chapter or by other Chapters. The heading includes : (1) Articles of cellular rubber. (2) Floor coverings and mats (including bath mats), other than rectangular (including square) mats cut from plates or sheets of rubber and not further worked than surface-worked (see the Explanatory Note to heading 40.08). (3) Erasers. (4) Gaskets, washers and other seals. (5) Boat or dock fenders, whether or not inflatable. (6) Pneumatic mattresses, pillows and cushions and other inflatable articles (other than those of heading 40.14 or 63.06); water-mattresses. (7) Rubber bands: tobacco-pouches; characters for date stamps and the like. (8) Stoppers and rings for bottles. (9) Pump rotors and moulds: rubber liners for milking machines; taps, cocks, valves and similar applia....
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....al Christmas trees, nativity scenes, nativity figures and animals, angels, Christmas crackers, Christmas stockings, imitation yule logs, Father Christmases. (3) Articles of fancy dress, e.g.. masks, false ears and noses, wigs, false beards and moustaches xxxxxx xxxxxxx (4) Throw-balls of paper or cotton-wool, paper streamers (carnival tape), cardboard trumpets, " blow-outs ", confetti, carnival umbrellas, etc. (B) Conjuring tricks and novelty jokes, e.g., packs of cards, tables, screens and containers, specially designed for the performance of conjuring tricks; xxxxx xxxxxx xxxxxx xxxxxx xxxxxx CTH 95030090 95.03 - Tricycles, scooters, pedal cars and similar wheeled toys; dolls' carriages; dolls; other toys; reduced-size ("scale") models and similar recreational models, working or not; puzzles of all kinds. This heading covers : (A) Wheeled toys. xxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxx These toys include : (1) Children's tricycles and the like, but excluding bicycles of heading 87.12. (2) Two- or three-wheeled scooters designed to be ridden by children, as well as youngsters and....
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....nce, these balloons are classifiable under CTH 40169590 as articles of vulcanised rubber. He emphasised that inflatable articles are expressly enumerated at six digit level CTH 401695 - as 'other inflatable articles'. The argument of the learned counsel is that balloons being inflatable rubber articles prima facie are classifiable under this heading. In this context, we note that the HSN explanatory note D(vii) to CTH 9503 specifically mentions that toy balloons are to be retained in this heading. In our opinion, the HSN explanatory notes constitute a safe and internationally accepted guide for interpretation of tariff entries and has consistently been relied upon by Courts and Tribunal, while determining classification disputes. Once toy balloons are specifically covered under CTH 9503, we find that there is no reason to resort to any general or residual entry for its classification. We draw support from the Hon'ble Supreme Court judgment in the case of M/s Thermax Ltd versus Commissioner of Central Excise, Pune [2022 (382) E.L.T. 442 (S.C.)] which has highlighted the persuasive value of the HSN and held as follows:- "6. The definition of a product given in the HSN should....
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....e determined according to the terms of the headings and any relative section or chapter notes and, provided such headings or notes donor otherwise require .............".We note that the said rule treats the heading entry and the Section/chapter notes as a single interpretative unit. The rule provides that classification is to be determined by terms of the headings, and any relative section or chapter notes. It is also noted that where the tariff itself provides an unambiguous, appropriate entry, resorting to the interpretative rules doesn't arise. In this context, we note that the Supreme Court in the case of Commissioner of Central Excise, Nagpur versus Simplex Mills committee Limited [(2005) 3 SCC 239] has held that GRI must be applied sequentially. This was reiterated in its subsequent judgment in Secure Metres, Ltd versus Commissioner of Customs, New Delhi [(2015) 14 SCC 239] wherein it was held as follows: - "13) We may point out at the outset that Rule 3 of the General Rules, which is sought to be invoked by the Department, would be seen and examined if the classification cannot be determined according to the terms of the headings and relevant Section and Chapter No....
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............................." 10. In the instant case, we note that the imported goods are balloons, which find specific mention in the HSN Notes under CTH 9503, and it is correctly classifiable under the said heading. We also note that learned AR has referred to the Advance Ruling by Customs Authority for Advance Rulings [CAAR] Delhi in Jai Shree Krishna Impex which held that the term "Toy Balloons" in para (D)(vii) of the Explanatory Notes to heading 9503 refers to latex/rubber balloons, and that such balloons do not merit classification under heading 9505, since they are purchased as toys for children's play rather than as decorative items. We also take cognisance of the amendment in Notification No. 50/2017- Customs, dated 30-6-2017, which provides for the rate of Customs Duty and IGST on goods of various descriptions for the purpose of import. The following explanation to CTH 40169590 & 40169990 was inserted under entry '284' of Notification No. 50/2017-Customs vide Notification No.02/2021- Customs dated 1-2-2021, which provides that:- 284. 40169590, 40169990 All goods, other than- 10% - - (i) Natural rubber latex made balloons; (ii)....
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....s classification. 14. Learned Counsel has also submitted that they had adopted CTH 9505 following the adjudication order dated 5.4.22 classifying the goods under 9505. In this context, we note from the order that the appellant had declared the goods as 'Decorative/festive items' and had classified the same under CTH 9503. It has been submitted before us that the Department has not appealed against this order and the same has attained finality. However, in this context, we find that material composition of toy balloons could have been the operative fact for deciding classification. We note that foil/nylon/HDPE balloons, has been classified under CTH 9505 by the CAAR, Mumbai in Bharat Balloon House ruling holding that foil balloons are not toys, but decorative items. Since the Explanatory Notes to 9503 clarify that "toy balloons" specifically means rubber/latex balloons sold at beaches/parks for children's play, whereas foil articles are unsuited to such play due to fragility, thus classifying them under heading CTH 95059090 (festive/ carnival/entertainment articles). We find that the importer appellant had declared the item as decorative/festive item and hence the classification ....