2022 (4) TMI 892 - AT - Customs

Classification of imported goods - two vessels declared as Excursion Boat Monterey 180 FSW/Volvo Penta 3.0 GL; 135 HP - to be classified under tariff item 8901 1030 or under tariff item 8903 9990 of the First Schedule to Customs Tariff Act 1975? - HELD THAT - Assessment, the most basic objective of customs law, is the application of the prescribed rate of duty to the value of imported goods. Unlike valuation, based on a conceptual articulation attended by an exhaustive string of sequential options that may be leveraged to discard value declared by the importer before substitution by an appraised value without compromise to the integrity of statutory intent, most appropriate fitment for classification can be implemented only by the default adoption of acceptable declaration in bill of entry to be disturbed only by independent, and not comparative, fitment of the description corresponding to tariff item canvassed by customs authorities. The impugned order being nothing other than mere endorsement of the finding of the original authority, it is to the latter that we turn to for ascertainment of discharge of onus mandated by the Hon ble Supreme Court. The original authority appears to have relied upon some definition of excursion boats which neither answers as a description of the impugned vessel nor is validated to assist, by revealed provenance, in judicial determination - Furthermore, the contents - pictorial and verbal - of the promotional material appear to have had such undue influence as to gloss over its pertinence to Monterey 180 FSW therein even as it purports to advert only to Monterey 180 FS which may well be the sports version of a glamourless transport vessel. The original authority appears to have indulged in conjecture which responsible discharge of authority to assess does not permit. With the failure to establish the appropriateness of the specific enumerations in heading 8903 of First Schedule to Customs Tariff Act, 1975 or of the enumerated specific descriptions corresponding to tariff items in heading 8903 of First Schedule to Customs Tariff Act, 1975, the description sought by the appellant does not have to be compared with that proposed by customs authorities. The declared classification prevails by default without going into its merit; of course, the capacity of the imported vessels for carrying up to eight passengers and some luggage, implying unsuitability for endurance and speed that are hallmarks of vessels for sports and pleasure, immunizes the declaration in the bills of entry from being discarded. The description and the classification declared in the bill of entry cannot be faulted - appeal allowed.

Summary

Issues Involved:
1. Classification of imported boats under the Customs Tariff Act, 1975.
2. Determination of appropriate tariff item for the imported boats.
3. Onus of proof in classification disputes.
4. Validity of the original authority's reliance on promotional materials and invoices.

Detailed Analysis:

1. Classification of Imported Boats under the Customs Tariff Act, 1975:
The core issue in the appeal was whether the imported boats should be classified under tariff item 8901 1030 as "cruise ships, excursion boats and similar vessels principally designed for the transport of persons" or under tariff item 8903 9990 as "yachts and other vessels for pleasure or sports; rowing boats and canoes." The appellant contended that the boats were "excursion boats" designed for transporting people, while the customs authorities classified them as "sports boats" under the latter tariff item.

2. Determination of Appropriate Tariff Item for the Imported Boats:
The customs authorities relied on manufacturer catalogues and promotional materials, which described the boats as "sports boats," to classify them under tariff item 8903 9990. The tribunal noted that the Harmonised System of Nomenclature (HSN) Explanatory Notes, although useful, were not integral to the Harmonised System and should not override the General Rules for the Interpretation of Import Tariff. The tribunal emphasized that the classification should be based on the most appropriate description at the heading level before considering sub-headings and tariff items.

3. Onus of Proof in Classification Disputes:
The tribunal highlighted the Supreme Court's rulings in HPL Chemicals Ltd v. Commissioner of Central Excise and Hindustan Ferodo Ltd v. Collector of Central Excise, which established that the burden of proof in classification disputes lies with the Revenue. The Revenue must provide proper evidence to support its classification, and the tribunal found that this burden was not discharged by the customs authorities in this case.

4. Validity of the Original Authority's Reliance on Promotional Materials and Invoices:
The tribunal criticized the original authority for relying heavily on promotional materials and the absence of the manufacturer's invoice to classify the boats. It noted that the promotional materials referred to "Monterey 180 FS," which might be a sports version of a transport vessel, and that the original authority's conjecture was not permissible. The tribunal also found that the invalidation of the seller's invoice was based on wrongful authority, as the Customs Valuation Rules were not applicable to this leg of assessment.

Conclusion:
The tribunal concluded that the customs authorities failed to establish the appropriateness of the classification under heading 8903. Consequently, the declared classification under heading 8901 by the appellant prevailed by default. The tribunal set aside the impugned order and allowed the appeal, affirming the classification of the boats as "excursion boats" under tariff item 8901 1030.