2018 (11) TMI 1700 - AT - Customs

Re-classification of imported goods - washing machines - goods which were declared as classifiable under heading 8450 9010 of First Schedule to Customs Tariff Act, 1975 was re-classified by the original authority under heading 8450 1200 - HELD THAT - HELD THAT - It is seen that the impugned order has directed classification of the goods as finished products even thought, admittedly, the machines had not been imported in its complete form. Nevertheless, the provisions of rule 2(a) of General Interpretative Rules for the Schedule in the Customs Tariff Act, 1975 itself deem that the classification of the goods shall be governed by the principles from which, it would appear even though the goods are not presented in the final form for the purpose, rate of duty as finished goods should be applied. It is also not the case of the customs authorities that there has been a mis-declaration of the finished products. The obligation of the importer is fulfilled by declaration of the goods as imported. It is plainly an application of the Interpretation Rules that has altered the classification and rate of duty. In the absence of any evidence of mis-declaration of goods, the confiscation as a consequence of re-classification will not sustain. There is no justification for detriments visited upon the appellants - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of imported goods as finished products for the purpose of duty liability under Customs Tariff Act, 1975.

Analysis:
The appeal involved the import of washing machines and the subsequent re-classification of the goods by the customs authorities. The appellant's goods were classified as 'parts of twin tub washing machines' lacking 'operating knobs,' leading to a re-classification under a different heading with increased duty liability. The goods were confiscated but allowed redemption upon payment of fines and penalties under the Customs Act, 1962.

The proceedings were initiated based on the classification of goods as final products, relying on rule 2(a) of the General Rules for Interpretation. The appellant argued that while re-classification can alter the rate of duty, no further duty liability should arise beyond that. Citing a previous Supreme Court decision, the appellant contended that mis-declaration did not occur, and the obligation of the importer was met through accurate declaration.

The impugned order directed the classification of goods as finished products despite not being imported in their complete form. The General Interpretative Rules for the Customs Tariff Act, 1975 deem that classification should be based on the essential character of the complete article. The absence of mis-declaration and the application of Interpretation Rules led to the conclusion that the confiscation as a consequence of re-classification was not justified.

The Customs Act, 1962, outlines the concept of transaction value, with declared value as the basis for assessment unless it does not meet specific criteria. The re-determination of value must follow prescribed rules, considering factors like quantity, source, and timing. The mere adoption of the bill of entry as a benchmark is insufficient without proper valuation determination. The judgment highlighted the distinction between classification and valuation, emphasizing the importance of correct assessment and duty payment.

In conclusion, the appellate tribunal found no justification for the detriments imposed on the appellants. The impugned order was set aside, and the appeal was allowed, emphasizing the importance of accurate classification and valuation in determining duty liability under the Customs Act.