2017 (9) TMI 538 - AT - Customs

Classification of imported item - Sterile Absorbable Haemostatic Material - whether classifiable under CTH 30061020 or otherwise? - N/N. 21/2002-Cus dated 1.3.2002 Sl.No.83 A List-4 - appellant claim that goods are correctly classifiable as Sterile Absorbable Haemostatic Material-life saving bandage - Revenue entertained a view that imported products are basically Collagen Preparation and are not Absorbable Haemostatic material for Control of Surgical Bleeding Vessels . Held that - It would appear that the impugned goods are regularly used in the surgical dressing in the Surgery Department. Such usage is claimed to have supported the contention of the appellant for the product to be called as Absorbable Haemostatic Material for control of Surgical Vessel Bleeding . The wound management is primary purpose of the impugned goods - They may not fall under the general category of Life Saving Drug or Medicine or Diagnostic Test Kit as specified in List 4 of N/N. 21/2002-Cus. - the Original Authority is correct in his conclusion for denying the exemption claimed by the main appellant. Extended period of limitation - Penalty - Held that - the whole issue is involving interpretation of the application or usage of the products in question - It is not correct or legally sustainable for the Revenue to invoke extended period when revising the assessment based on certain inquiries - the imposition of penalty on the main appellant and the second appellant is also not legally sustainable. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
Classification of imported products under Customs Tariff Heading, eligibility for exemption under Notification no.21/2002-Cus, imposition of penalties under Customs Act.

Classification of Imported Products:
The main issue revolved around the classification of the imported products, specifically whether they qualified as "Sterile Absorbable Haemostatic Material for Control of Surgical Vessel Bleeding" for exemption under Notification no.21/2002-Cus. The Commissioner determined that the imported products were Collagen Preparation and not life-saving drugs or medicines, thus denying the exemption claimed by the main appellant. The Commissioner also confirmed a differential duty demand for the past 5 years and imposed penalties under the Customs Act.

Eligibility for Exemption under Notification no.21/2002-Cus:
The appellants contended that the imported products were correctly classifiable as "Sterile Absorbable Haemostatic Material - life-saving bandage" and thus eligible for the exemption under Notification no.21/2002-Cus. They argued that the products were used for controlling surgical vessel bleeding and had been licensed as "Absorbable Haemostat for Control of Surgical Vessel Bleeding" after clinical evaluation. The appellants presented opinions from medical professionals and highlighted the usage of Collagen for stopping bleeding and promoting wound healing as evidence of their eligibility for the exemption.

Imposition of Penalties under Customs Act:
The appellants strongly contested the duty demand for the extended period and the imposition of penalties, asserting that there was no evidence of misrepresentation or willful evasion of duty. They argued that they had imported the products since 2001 after consulting medical experts and had filed bills of entry in compliance with the law. The appellants claimed that the demand for the extended period and the penalties were unjustifiable, given the interpretation differences between the Revenue and themselves, and the lack of malafide intent to evade duty.

Judgment Analysis:
The Appellate Tribunal reviewed the expert opinions, product literature, and information available in the public domain to determine the eligibility of the appellants for the exemption under Notification no.21/2002-Cus. The Tribunal concluded that the imported products were essentially Collagen Preparation primarily used in wound management, and while they may have applications in controlling surgical vessel bleeding, their predominant usage as Absorbable Haemostatic material was not conclusively established. The Tribunal found that the Original Authority's decision to deny the exemption was correct based on the evidence presented.

Regarding the question of limitation and the imposition of penalties, the Tribunal noted the varying expert opinions and studies conducted on the application of the products in controlling Surgical Vessel Bleeding. The Tribunal held that there was no case for invoking the extended period for duty demand, considering the interpretation differences and the appellants' compliance history since 2001. Consequently, the Tribunal found the demand for the extended period and the imposition of penalties on the appellants to be legally unsustainable, thereby partially allowing the appeals.

In conclusion, the Tribunal upheld the denial of exemption under Notification no.21/2002-Cus but deemed the demand for the extended period and the penalties as not legally sustainable, resulting in a partial allowance of the appeals.