2018 (5) TMI 1873 - AT - Customs

Classification of imported goods - Alkyl Ketene Dimer (AKD wax) - whether classified under CTH 38099200 or under CTH 34049090? - invocation of extended time proviso under section 28(4) of the Customs, Act, 1962 - HELD THAT - All the facts regarding importation, description of the product and its classification were in the knowledge of the Department. The Audit which was conducted after the clearance of the import consignment also raised this issue of classification based on the facts which were there before the Department and therefore, in our view, we find that the charges of mis-declaration, fraud, misrepresentation etc. with an intent to evade payment of duty are not present in the present case. The Hon ble Supreme Court in the case of NIZAM SUGAR FACTORY VERSUS COLLECTOR OF CENTRAL EXCISE, AP 2006 (4) TMI 127 - SUPREME COURT has held that as all the relevant facts are in knowledge of Department, when the first show cause notice was issued, the issue of subsequent show cause notice on the same facts could not be taken for invoking the charges of suppression of facts etc., for invoking the extended time proviso, this matter was already in the knowledge of the department since year 2012 itself. Thereafter another show cause notice for normal period have been issued by them on 18 December, 2015 and thereafter issuing the impugned show cause notice again on 29.11.2016 by invoking the extended time proviso, is not legally sustainable. The demand in the show cause notice is barred by limitation and therefore, same is legally not sustainable - the appeal is allowed on the point that extended time proviso under Section 28 of Customs Act, 1962 is not invokable in this case.

Summary

Issues involved:
Classification of imported product under Customs Tariff Heading, Demand of Customs duty under section 28 of the Customs Act, Invocation of extended time proviso, Imposition of penalty under Section 112 A and Section 114 A.

Classification of imported product under Customs Tariff Heading:
The appellant imported Alkyl Ketene Dimer (AKD wax) claiming classification under Customs Tariff Heading 38099200, while the Department contended that the correct classification is under 34049090. The Department argued that heading 3809 is a generic heading for products not elsewhere specified, while heading 3404 covers artificial waxes. The appellant supported their classification with technical reports from recognized laboratories and literature from US Patent Technical Department. The dispute centered on whether AKD wax should be classified as a sizing agent for the paper industry under Chapter 3809 or as artificial wax under Chapter 34. The appellant argued that the end use of AKD wax in the paper industry justified its classification under Chapter 38.

Demand of Customs duty under section 28 of the Customs Act:
A show cause notice was issued demanding Customs duty of ?1,46,64,845 under section 28 of the Customs Act, invoking the extended time proviso. The appellant contested this demand, stating that there was no wilful mis-declaration, and the classification was a matter of interpretation. They argued that the Department lacked concrete evidence or chemical test reports to change the classification to Chapter sub-heading 34049090. The appellant also highlighted that they had previously paid differential duty upon a reclassification request in 2012, indicating the Department's awareness of the classification issue.

Invocation of extended time proviso:
The appellant challenged the invocation of the extended time proviso under section 28(4) of the Customs Act. They argued that the Department was aware of the classification discrepancy since 2012, and subsequent show cause notices were not legally sustainable. The appellant emphasized that the Department had all relevant facts regarding the importation and classification of the product, and the charges of mis-declaration or suppression were unfounded. Citing legal precedents, the appellant contended that the extended time proviso should not apply in their case.

Imposition of penalty under Section 112 A and Section 114 A:
The appellant contested the imposition of penalties under Section 112 A and Section 114 A, claiming they had not engaged in mis-declaration, fraud, or suppression to evade duty payment. They argued that the penalties were unwarranted and legally unsustainable given the absence of intentional wrongdoing. The Tribunal found that the Department's actions did not justify the imposition of penalties, considering the facts known to both parties and the absence of suppression or misrepresentation.

This detailed analysis of the judgment highlights the key issues involved in the case, the arguments presented by the appellant, and the Tribunal's decision regarding the classification, demand of Customs duty, invocation of the extended time proviso, and the imposition of penalties.