2019 (12) TMI 737 - AT - Customs

Classification of imported goods - dairy machinery including the packing machine - whether classified under CTH 84342000 or under CTH 84223000? - HELD THAT - It is rather an unusual situation where the same bill of entry was assessed by the Revenue under 8422 3000 against the assessee s classification under 8434 2000 and the matter has been adjudicated and the appeal was decided by the first appellate authority and further appeal was pending before this Bench. Meanwhile, another arm of the Department i.e. DRI came to a different conclusion that the machinery is classifiable under 8419 and accordingly issued a show cause notice challenging the classification while the appeal is pending before this Tribunal - The second show cause notice was also decided by the Commissioner who has also recorded that the earlier assessment of the bill of entry as well as the order of the Commissioner (Appeals) and that the matter is pending before this Bench on the same issue against the same bill of entry. Thereafter, he proceeded to decide the show cause notice issued by DRI against the same bill of entry and the same machinery proposing a third classification. The findings of the Commissioner is also agreed upon that the machinery in question is an integrated plant and is to be classified as Dairy Product in view of the Section Notes 3, 4 and 5 for the Section XVI of Custom Tariff. Appeal dismissed - decided against Revenue.

Issues Involved:
1. Classification of imported dairy machinery, including a packing machine, under the correct Customs Tariff Heading (CTH).
2. Applicability of General Rules of Interpretation for tariff classification.
3. Consideration of Section Notes and Explanatory Notes under Chapter 84 of the Customs Tariff.
4. Finality of the issue based on previous adjudications and orders.

Detailed Analysis:

1. Classification of Imported Dairy Machinery:
The main issue revolves around whether the imported machinery, including a packing machine, should be classified under CTH 84342000 (Dairy Machinery) or CTH 84223000 (Machinery for filling, closing, sealing, or labeling containers). The appellant classified the entire machinery under 84342000, while the Asst. Commissioner assessed the packing machine under 84223000. The first appellate authority accepted the appellant's classification, treating the machinery as an integrated dairy machine for processing, filling, and packing milk.

2. Applicability of General Rules of Interpretation:
The Revenue argued that, according to the General Rules of Interpretation, the packing machine should be classified under 84223000 as it specifically describes machinery for filling, closing, and sealing. They contended that the packing machine's function aligns more closely with heading 84223000 rather than the generic heading 84342000 for dairy machinery.

3. Consideration of Section Notes and Explanatory Notes:
The respondent highlighted that the entire machinery operates as an integrated plant, with the packing machine being an inseparable part of the whole. They referenced Section Notes 3, 4, and 5 of Section XVI of the Customs Tariff, which stipulate that composite machines designed to perform complementary functions should be classified under the heading appropriate to the principal function. The Commissioner of Customs, in a separate adjudication, also concluded that the machinery should be classified under 84342000, considering it as a single integrated unit for dairy processing.

4. Finality of the Issue Based on Previous Adjudications:
The respondent emphasized that the issue had reached finality as the Revenue did not contest the Commissioner of Customs' order, which classified the machinery under 84342000. This order also dropped the demand and penalties proposed in a subsequent show cause notice by the Directorate of Revenue Intelligence (DRI), which suggested an alternative classification under 8419.

Conclusion:
The Tribunal found that the machinery in question is an integrated plant classified under CTH 84342000, as it performs a clearly defined function of dairy processing. The Tribunal upheld the first appellate authority's order and rejected the Revenue's appeal, affirming that the machinery should be classified under 84342000 based on the comprehensive analysis of the machinery's function, the Section Notes, and the finality of previous adjudications. The appeal was dismissed, and the impugned order was upheld.

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