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2022 (4) TMI 1370 - AT - CustomsClassification of imported goods - gold coins (round) (other than legal tender) - to be classified under CTI 7114 19 10 or under CTI 7114 19 10? - rejection of exemption under notification dated 31.12.2009, as amended by notification dated 31.12.2016 - recovery of differential duty with interest - HELD THAT - The central excise tariff is broadly based on the system of classification derived from the International Convention called The Brussels Convention on the Harmonised Commodity Description and Coding System (HSN) with necessary modifications. In this connection, it will useful to reproduce the Statement of Objects and Reasons of the Central Excise Tariff Bill, 1985 which led to the enactment of the Central Excise Tariff Act, 1985. A perusal of CTH 7114 and heading 71.14 of HSN clearly shows that they are identical. Likewise, CTH 7114 19 is identical to sub-heading 7114.19 of HSN. It is also seen that CTH 7118 is identical to heading 71.18 of HSN and CTH 7118 10 and CTH 7118 90 are identical to sub-headings 7118.10 and 7118 90 of HSN. It is clear that sub-headings 7118.10 and 7118.90 of HSN will cover only that sub-category of COINS which fulfill the aforesaid conditions and the sub-headings cannot be read in a manner so to over ride or travel beyond the Explanatory Notes provided for the main heading. Thus, coins of heading 7118 of HSN would be those made by stamping sheet and struck with appropriate dies of officially prescribed weight and design and issued under government control for use as legal tender. Sub-heading 7118.10 of HSN would cover coins which are no longer legal tender or intended to be legal tender, while sub- heading 7118.90 of HSN would cover coins which are legal tender in the country of issue - when HSN is a safe guide for tariff classification under the Tariff Act, CTH 7118 under which the description of goods is coin would apply to coins of any metal of officially prescribed weight and design issued under government control for use as legal tender. CTI 7118 10 00 and CTI 7118 90 00 would cover only that category of coins which fulfill the aforesaid conditions. For the reasons stated while examining sub-heading 7118.90 of HSN, CTI 7118 90 00 would cover coins which are legal tender in the country of issue. Whether the appellant is justified in classifying the goods under CTH 7114? - HELD THAT - If the classification under CTH 7114 is correct there is no prescription under the Foreign Trade Policy regarding restriction on the goods. Even if the goods are held to be classifiable under CTH 7118, Regulations have not been issued by the RBI in this context. Regulations can be issued by the RBI only under section 58 of the Reserve Bank of India Act, 1934 or section 47 of the Foreign Exchange Management Act, 1999 FEMA . Section 58 of RBI Act requires such Regulations to be issued only by way of a notification with the previous sanction of the Central Government. Section 48 of FEMA requires Regulations issued under section 47 FEMA to be presented before the parliament Such Regulations have not been placed by the Department and only a reference has been made to a letter issued by the RBI dated 13.09.2017 or the DGFT Memorandum. These cannot be termed as Regulations issued by RBI or under FEMA. The power of RBI to issue directions under section 11 of FEMA extends only to authorized person with regards to making payment for foreign exchange or foreign security and RBI cannot regulate imports which are in the exclusive domain of DGFT. Appeal allowed.
Issues Involved:
1. Classification of imported goods under Customs Tariff Items (CTI) 7114 19 10 or CTI 7118 90 00. 2. Entitlement to exemption under the notification dated 31.12.2009 as amended by notification dated 31.12.2016. 3. Liability for differential duty and interest. 4. Confiscation of goods and imposition of redemption fine and penalty under sections 111(d) and 112 of the Customs Act, 1962. 5. Applicability of RBI Guidelines and DGFT regulations on the import of gold coins. Detailed Analysis: 1. Classification of Imported Goods: The appellants claimed classification of imported goods as "articles of gold" under CTI 7114 19 10, asserting that the imported articles were round in shape, with images of gods, saints, temples, or historical sites, and were more akin to medals or medallions rather than legal tender coins. The Department, however, reclassified the goods under CTI 7118 90 00, arguing that the goods were gold coins, even if not legal tender, and thus fell under the broader category of "other coins" in CTI 7118 90 00. The Principal Commissioner concluded that: - The goods, being coins, are covered under CTH 7118, and the entry in CTH 7114 is for residuary items. - CTI 7118 10 00 covers coin (other than gold coin not being legal tender), while CTI 7118 90 00 covers coin other than coin of CTI 7118 10 00, thus including gold coins not being legal tender. - The HSN Explanatory Notes do not explicitly exclude gold coins not being legal tender from CTH 7118. - The Delhi High Court in Khandwala Enterprise Pvt. Ltd. vs. Union of India clarified that all gold coins are classifiable under CTI 7118 90 00. However, the Tribunal found that: - The Explanatory Notes to HSN for heading 71.18 specify that coins must be of officially prescribed weight and design, issued under government control for use as legal tender, or no longer legal tender. - The goods imported by the appellants, described as "gold coin (other than legal tender)," do not meet these criteria and thus do not fall under CTI 7118 90 00. - The goods are more appropriately classified under CTI 7114 19 10 as articles of gold, similar to medals or medallions. 2. Entitlement to Exemption: The appellants claimed exemption from customs duty under the notification dated 31.12.2009, as amended by notification dated 31.12.2016, which extended the benefit of NIL Basic Customs Duty (BCD) to goods falling under CTH 71021 to 711890 on production of a Country of Origin Certificate. The Tribunal held that: - The goods were correctly classified under CTI 7114 19 10 and thus eligible for the exemption. - The Country of Origin Certificates issued by the Republic of Korea confirmed the classification under CTH 7114. 3. Liability for Differential Duty and Interest: The Principal Commissioner ordered the recovery of differential duty with interest, based on the reclassification of the goods under CTI 7118 90 00. The Tribunal found that: - The reclassification by the Principal Commissioner was incorrect, and thus the demand for differential duty and interest was not sustainable. 4. Confiscation and Imposition of Redemption Fine and Penalty: The Principal Commissioner held that the goods were liable to confiscation under section 111(d) of the Customs Act, 1962, and imposed redemption fine and penalty under section 112. The Tribunal concluded that: - The confiscation and penalties were based on the incorrect reclassification of the goods. - As the goods were correctly classified under CTI 7114 19 10, the confiscation and penalties were not justified. 5. Applicability of RBI Guidelines and DGFT Regulations: The Principal Commissioner held that the import of gold coins was subject to RBI guidelines, and since the appellants were not authorized banks or nominated agencies, the import was contrary to the prohibition imposed by DGFT. The Tribunal observed that: - The RBI and DGFT guidelines referred to by the Principal Commissioner did not constitute formal regulations under the Reserve Bank of India Act, 1934, or the Foreign Exchange Management Act, 1999. - The Karnataka High Court in Commissioner of Customs, Bangalore vs. Sri Exports held that in the absence of specific notifications, there was no restriction on the import of gold medallions. Conclusion: The Tribunal set aside the orders passed by the Principal Commissioner, holding that the goods were correctly classified under CTI 7114 19 10, and thus eligible for the exemption from customs duty. The demands for differential duty, interest, confiscation, and penalties were not sustainable. The appeals were allowed, and the orders of the Principal Commissioner were reversed.
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