2012 (12) TMI 151 - AT - Customs

Classification appellants imported 594 MT of Bakery Shortening and classified the goods under Chapter heading 1516209, claiming exemption from additional duty of excise under Notification No. 4/2005 - department reclassified the goods under CTH 15.17 and also denied the benefit of exemption Held that - Classifying the goods under Chapter heading 1517, it would be necessary to show that the same had been further prepared by a processes like emulsification, churning, texturation etc., to change the basic character of the same from being a product classifiable under Chapter heading 1516 to that of Chapter heading 1517 - when the goods were removed no samples were taken nor any tests were conducted to ascertain the chemical nature or character of the goods imported - Revenue could not produce any such evidence in support of their case - classifying the goods under Chapter Heading 15162091, allowing exemptions from additional duty of excise under Notification No. 4/2005 - Appeal is allowed

Summary

Issues:
Classification of imported goods under Chapter headings 1516 and 1517, Burden of proof on department in cases of reclassification, Interpretation of Harmonized System Nomenclature (HSN) notes, Lack of evidence in reclassification process, Application of legal guidelines in similar situations.

Analysis:
The appeal involved the classification of imported goods by M/s. Adani Wilmar Limited under Chapter headings 1516 and 1517. The appellants imported Bakery Shortening and initially classified the goods under Chapter heading 1516209, seeking exemption from additional duty of excise under Notification No. 4/2005. However, the department reclassified the goods under CTH 15.17 and denied the exemption, a decision upheld by the Commissioner (Appeals).

The main grounds of appeal by the appellant were that there was insufficient evidence to justify the reclassification from CTH 1516 to CTH 1517. They argued that the burden of proof in reclassification cases lies with the department, which failed to produce supporting evidence. The appellant contended that Bakery Shortening and Vanaspati are identical products based on specifications from the Prevention of Food Adulteration Act, 1954. They highlighted that goods were classified under tariff item 1516 in previous years, equivalent to the Customs Tariff item No. 1516.

The Revenue's argument was that the imported goods, termed "shortening," fall under heading 15.17 as per the HSN notes, specifically including shortening under this heading. They emphasized that reliance on the PFA Act for classification was misplaced, as the Act does not determine customs classification. The original adjudicating authority supported this view, stating that Bakery Shortening falls under 1517 due to further preparation for texturation, distinct from 1516.

The Tribunal analyzed the HSN notes for Chapter 15.16, which cover hydrogenated fats and oils not further prepared. It was noted that wholly and partly hydrogenated oils under 15.16 are used in the preparation of edible fats falling under 15.17. The Tribunal concluded that the goods in question merited classification under 15.16 and did not require classification under 15.17, as the latter involves further preparation processes like emulsification or texturation.

Additionally, the Tribunal highlighted the lack of evidence in the reclassification process, as no samples were taken or tests conducted on the imported goods. Citing legal guidelines from a Supreme Court case, the Tribunal emphasized the burden of proof on taxing authorities to justify their classification claims, especially when the appellant's claims are supported by trade inquiries and affidavits.

Ultimately, the Tribunal found the Revenue's stand unsustainable and allowed the appeal by M/s. Adani Wilmar Limited, classifying the goods under Chapter Heading 15162091 and granting exemptions from additional duty of excise under Notification No. 4/2005. Consequential relief, if any, was also granted to the appellant based on the findings.

In conclusion, the Tribunal's decision was based on a detailed analysis of classification principles, burden of proof, interpretation of HSN notes, and legal precedents, ultimately leading to the allowance of the appeal in favor of the appellant.