2018 (11) TMI 1101 - AT - Customs

Classification of imported goods - one unit of cutter suction dredger with suction/discharge pipe dia 850 mm (named as DHARTI XII) with spare parts, pipeline and accessories - whether the two sets of self-floating pipes of 650 mm dia have to be classified under CTH 400942000 or under CTH 8905.10.00? - benefit of exemption under Notification No. 21/2002-CUS? - confiscation - penalty - demand of differential duty. Held that - In the case in hand, the excerpts of the statements of the Executive Director and perusal of the documents filed along with bill of entry indicates that 650 mm and 850 mm dia self floating pipes were for exclusive use with the imported cutter suction dredger. If that be so, the question of classifying these self-floating pipes under Chapter No 4009 4200 would not arise and the said pipes have to be considered as parts of dredger and benefit of Notification No 21/02-Cus needs to be extended. The adjudicating authority has erred in not extending the benefit of Notification No. 21/02 to the pipes of 650 mm dia and 850 mm dia in question - impugned order not sustainable. Confiscation - penalty - Held that - Since on merits it is held that self-floating pipes are eligible for exemption under Notification No 21/02, the confiscation of the said pipes as ordered by the adjudicating authority is unsustainable and liable to be set aside - confiscation redemption fine as well as penalty set aside. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Classification of imported self-floating pipes.
2. Eligibility for exemption under Notification No. 21/02-Cus.
3. Allegation of mis-declaration and manipulation of documents.
4. Confiscation of goods and imposition of penalties.

Detailed Analysis:

1. Classification of Imported Self-Floating Pipes:
The primary issue was whether the self-floating pipes of 650 mm and 850 mm diameter should be classified under Chapter Heading No. 400942000 (as rubber products) or under Chapter Heading No. 8905.10.00 (as parts of dredgers). The main appellant argued that these pipes were integral parts of the cutter suction dredger and thus should be classified under Chapter 8905. The adjudicating authority, however, classified them under Chapter 40, denying the benefit of exemption under Notification No. 21/02-Cus.

2. Eligibility for Exemption under Notification No. 21/02-Cus:
The appellant claimed exemption under Notification No. 21/02-Cus, which provides a 'NIL' rate of duty for goods classified under Chapter Heading No. 8905.10.00. The adjudicating authority denied this exemption, arguing that the pipes were not integral parts of the dredger. However, the Tribunal found that the self-floating pipes were essential for the operation of the cutter suction dredger, as they are used for the disposal of dredged material, making them integral parts of the dredger. This conclusion was supported by previous Tribunal decisions and the Apex Court's dismissal of a related appeal, which established that such pipes should be classified under Chapter 8905.

3. Allegation of Mis-Declaration and Manipulation of Documents:
The Revenue alleged that the main appellant mis-declared the pipes as integral parts of the dredger to avail ineligible exemption and attempted to remove the pipes from the Customs Area without proper declaration. The Tribunal found that the appellant had consistently maintained that the pipes were for use with the dredger and that the documents submitted supported this claim. The Tribunal noted that the adjudicating authority's findings on manipulation were incorrect, as the statements from the appellant's Executive Director clarified the purpose and use of the pipes.

4. Confiscation of Goods and Imposition of Penalties:
The adjudicating authority had ordered the confiscation of the self-floating pipes and imposed penalties on the appellants. Given the Tribunal's finding that the pipes were correctly classified under Chapter 8905 and eligible for the exemption under Notification No. 21/02-Cus, the confiscation and penalties were deemed unsustainable. The Tribunal set aside the confiscation order and the associated redemption fine, and allowed the appeals of the main appellant and other appellants, thereby nullifying the penalties.

Conclusion:
The Tribunal concluded that the self-floating pipes were integral parts of the cutter suction dredger and should be classified under Chapter Heading No. 8905.10.00, making them eligible for exemption under Notification No. 21/02-Cus. The allegations of mis-declaration and manipulation were found to be unsupported by evidence. Consequently, the confiscation of the pipes and the imposition of penalties were set aside, and the appeals were allowed. The Tribunal's decision was consistent with prior rulings and the Apex Court's stance on similar issues, reinforcing the classification of such pipes as parts of dredgers.

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