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2022 (7) TMI 246 - AT - CustomsClassification of imported goods - Magnetic Iron Centre Copper/Centre Core Assembly - to be classifiable under 85119000 or not - eligible for benefit of concessional rate of duty under Sl. No. 1319 of Notification No. 46/2011-CUS - prohibited goods or not - self-assessment of bill of entry by the appellant is an appealable order or not - recovery of the basic customs duty along with social welfare surcharge and IGST - levy of penalty u/s 112(a) (ii) and Section 117 of the Customs Act, 1962. Was Revenue correct in issuing a show cause notice under Section 28 demanding differential duty without first appealing against the Bills of Entry which were self assessed? - HELD THAT - As far as the cases where duty was short levied or short paid or not levied or not paid or erroneously refunded is concerned, unlike the provisions of refund under Section 27 (which is a mere mechanical process), a quasi-judicial process has been laid down in Section 28 of the Act. The question which arises is if the assessment is complete and there is a procedure for appeal against all assessments, including self-assessment, what is the nature of this power under Section 28. This has been clarified by the Supreme Court in COMMISSIONER OF CUSTOMS VERSUS SAYED ALI 2011 (2) TMI 5 - SUPREME COURT and M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS 2021 (3) TMI 384 - SUPREME COURT has a power to reopen an assessment already made. Such a power is not inherent in any officer and is available only when it is specifically conferred by law. It is for this reason that Section 28 has a system of issuing notice and passing of adjudication orders. There is no force in the argument of the learned Consultant of the appellant that the demand under Section 28 cannot be issued without challenging the self-assessment by the appellant before Commissioner (Appeals). Reliance on the judgment of Supreme Court in ITC LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA -IV 2019 (9) TMI 802 - SUPREME COURT by the appellant is completely mis-conceived as this is not a case of refund, but is a case of demand of duty under Section 28, which is fully permissible. Learned Consultant also submitted that the Commissioner (Audit) of the Customs Audit Commissionerate is not the proper officer to issue show cause notice under Section 28 of the Customs Act, 1962. There are no force in this submission - The vires of this sub-section was under challenge before the High Court of Delhi in the case of Mangali Impex Ltd. versus Union of India 2016 (5) TMI 225 - DELHI HIGH COURT The High Court upheld its validity except to the extent of its retrospective application. The present case pertains to the period after the introduction of this sub-section and therefore, the Commissioner (Audit) is the proper officer to issue a notice under section 28. Is the Commissioner of Customs, Audit Commissionerate, New Customs House, IGI Airport, New Delhi competent to issue the show cause notice? - HELD THAT - It has been laid down by the Supreme Court in M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS 2021 (3) TMI 384 - SUPREME COURT that a notice under section 28 can be issued by not any proper officer but the proper officer , i.e., the one who has assessed the Bill of Entry in the first place. The processes before the issue of show cause notice are consultative processes to resolve the issues which are akin to the discussions which the assessing officer or others assisting him such as the examining officers have during assessment by the officer under section 17(5). If the issues do not get resolved at that stage, the assessment is under section 17(5) by the proper officer and a speaking order is issued which will be the first quasi-judicial process. In such a case, if a show cause notice under section 28 is subsequently to be issued, it can be issued only by the proper officer who has done the assessment. In the present case and in similar cases of clearances based on self assessment, the audit, preventive or other officers who look into the assessment post clearance and who issues the show cause notice under Section 28 will be the proper officer and there is no the proper officer before that. Hence, the Commissioner (Audit) was fully competent to issue the show cause notice in this case. If the goods are liable to be classified under 85059000 as held by the Revenue, is the appellant entitled to the benefit of under Sl. No. 1335 of Notification No. 46/2011-CUS dated 01.06.2011? - HELD THAT - Electro-magnets are classifiable under 8505 11 and therefore, the disputed goods being their parts, should be classified under 8505 90 00. There are no Chapter Notes relevant to the dispute but Section note 2(a) of the relevant section states that parts which are goods included in any of the headings of Chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings - In this case, the disputed goods magnetic core are not goods in themselves under any of the headings. In fact, both the appellant and the Revenue classify them as parts only but under different headings. Section note 2(b) states that other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of heading 8479 or 8543) are to be classified with the machines of that kind or in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate. In this case, the disputed goods are child parts of the spark plugs and in our considered view, applying this rule, they should be correctly classified along with the spark plugs under 8511 which has a sub-heading for parts, viz., 85119000. Although it is found that Rule 1 of Interpretation read with Section Note 2 itself resolves the classification dispute, also some other Rules of interpretation are examined to see if they would require a different view to be taken. Rule 2(a) is not relevant to this case as the imported goods are not an unfinished article but only a part. Rule 2(b) is also not relevant because the disputed goods are not mixture - Rule 3(a) states that specific entry should be preferred over a more general entry. Rule 3(b) deals with mixtures or composite articles which is not relevant to this case. Rule 3(c) states that if the classification cannot be done using either Rule 3(a) or 3(b), then the last entry in the tariff is the correct entry. Applying Rule 3 (a), it is found that the disputed goods, being child part of spark plugs are a more specific description of part of electro-magnets. Further, applying Rule 3(c), the last of the competing entries would be the correct entry. Thus, viewing from any angle, it is found that the disputed goods have been correctly classified in the impugned order under 8511 90 00 as parts of spark plugs. Applicability of alternative exemption under Notification No. 46/2011- Cus dated 1 June 2011 as amended by notification 82/2018-Cus dated 31 December 2018 (entry number 1335) - HELD THAT - The exemption notification no. 46/2011 to goods imported from ASEAN has been amended from time to time. It needs to be examined with respect to each Bill of Entry if the exemption under this or any other entry was available to the disputed goods falling under 85119000. This exercise can be carried out best by the original authority and for this limited purpose, it is deemed necessary to remand the matter to the original authority. The appeal is partly rejected by upholding the classification of the imported goods and partly allowed by allowing the benefit of notification no. 46/2011-cus (S.No. 1335) - The impugned order is modified accordingly and matter is remanded to the original authority for re-determining the duty liability accordingly.
Issues Involved:
1. Validity of issuing a show cause notice under Section 28 without appealing against self-assessed Bills of Entry. 2. Proposal of change in classification in the show cause notice. 3. Competence of the Commissioner (Audit) to issue the show cause notice. 4. Correct classification of the imported goods. 5. Entitlement to the benefit of Notification No. 46/2011-CUS (Sl. No. 1335). Issue-wise Detailed Analysis: 1. Validity of Issuing Show Cause Notice under Section 28: The appellant argued that no demand under Section 28 can be raised without first appealing against the self-assessment of the Bill of Entry. The Tribunal examined the provisions of Section 17 and Section 28 of the Customs Act, along with relevant case law, including the Supreme Court's judgment in ITC Ltd. vs. CCE, Calcutta IV. It was concluded that the demand under Section 28 is permissible without challenging the self-assessment, as Section 28 provides a quasi-judicial process to recover duties short paid or not paid, which is distinct from the refund mechanism under Section 27. Thus, the Tribunal found no force in the appellant's argument. 2. Proposal of Change in Classification in the Show Cause Notice: The appellant contended that the show cause notice did not propose an amendment to the classification of the goods. The Tribunal found this contrary to the facts, noting that the classification issue was discussed extensively in the show cause notice. The appellant was made aware of the alternate classification proposed by the Revenue, and adequate opportunities were provided for the appellant to present its case. Therefore, the Tribunal rejected this submission. 3. Competence of the Commissioner (Audit) to Issue the Show Cause Notice: The appellant argued that the Commissioner (Audit) was not the proper officer to issue the show cause notice. The Tribunal referred to Section 28(11) of the Customs Act and relevant case law, concluding that the Commissioner (Audit) is deemed to have the power of assessment and is the proper officer to issue the notice. The Tribunal also distinguished the present case from Canon India, explaining that in cases of self-assessment, the officer who audits the self-assessed bills of entry is the proper officer to issue a notice under Section 28. 4. Correct Classification of the Imported Goods: The Tribunal examined the classification dispute between headings 85059000 and 85119000. It referred to the Rules of Interpretation of the Tariff and Section Note 2 of Section XVI. The Tribunal concluded that the imported goods, being child parts of spark plugs, are more specifically classified under 85119000 as parts of spark plugs, rather than under 85059000 as parts of electro-magnets. Thus, the classification under 85119000 as held in the impugned order was upheld. 5. Entitlement to the Benefit of Notification No. 46/2011-CUS (Sl. No. 1335): The appellant claimed the benefit of Notification No. 46/2011-CUS (Sl. No. 1335) for goods classified under 85119000. The Tribunal found that the exemption is available to all goods under 85119000 imported from ASEAN countries, including Thailand. However, considering the period of import and potential amendments to the notification, the Tribunal remanded the matter to the original authority to determine the extent of the exemption applicable to each Bill of Entry. Conclusion: The appeal was partly rejected by upholding the classification of the imported goods under 85119000 and partly allowed by recognizing the potential benefit of Notification No. 46/2011-CUS (S.No. 1335). The matter was remanded to the original authority for re-determination of duty liability in light of the applicable exemptions.
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