2014 (9) TMI 448 - HC - Customs

Waiver of predeposit of duty - Classification of goods - technical grade pesticides for insecticidal use or Boric Acid - Classification under Chapter 29 or Chapter 38 - Held that - perusal of the Bills of Entry filed by the appellants makes it clear that except one commodity, namely, Methyl Parathion, which falls under Heading 29201100, all other commodities imported are claimed under general heading Others - 29420090. Relying on the said circular, the appellants pleaded that they will be able to justify that each one of the imported goods is separate chemically defined compound and, therefore, it will fall under Chapter Heading 29 and not under Heading 3808. However, this circular has not been taken note of by the Commissioner of Customs (Appeals) or by the Tribunal. This Circular has been issued post the Supreme Court decision in Pesticides Manufacturing and Formulations Association of India, referred 2002 (10) TMI 95 - SUPREME COURT OF INDIA , and it is relatable to imports. It is not justified to give a ruling as to whether the goods fall under Heading 38.08 or 29, except to observe that the appellants in this case on the basis of the Circular No.34/2007-Cus, dated 17.9.2007 have made out at least a probable case for consideration as to whether the goods are separate chemically defined compounds falling under Chapter Heading 28 or 29 and not Chapter Heading 38, albeit the decision of the Supreme Court in Pesticides Manufacturing and Formulations Association of India, referred supra, will having a bearing on this case. In the present case, duty at 7.5% has been paid at the time of import. It is the difference of duty that is demanded. Hence, interest of the importer and the department can be taken note of for securing the ends of justice. - amount of pre-deposit order by tribunal modified - Decided partly in favor of assessee.

Summary

Issues Involved:
1. Classification of imported goods under the Customs Tariff Act.
2. Applicability of the Supreme Court judgment in Union of India v. Pesticides Manufacturing and Formulations Association of India.
3. Consideration of undue hardship in pre-deposit orders.

Issue-Wise Detailed Analysis:

1. Classification of Imported Goods:
The appellants, importers of various chemicals, claimed that their goods fell under Chapter Heading 28 and 29 of the Customs Tariff Act, 1975, allowing them to clear the goods at a concessional duty rate of 7.5% under Notification No.21/2002. However, the Customs Audit objected, stating that the goods should be classified under Heading 38.08 at a 10% duty rate, as they were meant for use as pesticides/insecticides/fungicides. The Additional Commissioner of Customs confirmed the demand for the short-levied duty under Section 28(2) of the Customs Act, 1962, with interest.

2. Applicability of the Supreme Court Judgment:
The appellants contended that the Supreme Court's decision in Union of India v. Pesticides Manufacturing and Formulations Association of India, which dealt with the Central Excise Tariff Act, should not apply to their case under the Customs Tariff Act. They argued that separate chemically defined compounds should be classified under Chapter 28 and 29, not under Heading 38.08. They relied on Circular No.34/2007-Cus, which clarified that technical grade pesticides for insecticidal use or Boric Acid put up for retail sale should be classified under Heading 3808, while other chemically defined compounds should fall under Chapter 28.

3. Consideration of Undue Hardship in Pre-Deposit Orders:
The Tribunal, relying on the Supreme Court decision mentioned above, directed the appellants to pre-deposit the entire duty amount. The appellants argued that they had a prima facie case and that the pre-deposit requirement should be waived. The court referred to the Supreme Court's decision in Benara Valves Ltd. v. CCE, which emphasized that interim orders should not cause undue hardship and that the interests of the Revenue should be safeguarded. The court found that the appellants had raised an arguable issue regarding the classification of their goods and that the Circular No.34/2007-Cus provided some relief.

Judgment:
The court modified the Tribunal's order, directing the appellants to make partial pre-deposits: Rs. 5,00,000 for the appellant in C.M.A.No.2442 of 2014 and Rs. 20,00,000 for the appellant in C.M.A.No.2443 of 2014, within eight weeks. Upon such deposits, the balance dues' pre-deposit would be waived, and recovery stayed during the appeals' pendency. The Tribunal was instructed to dispose of the appeals on merits in accordance with the law. The appeals were ordered in these terms, with no costs, and the connected Miscellaneous Petitions were closed.