2022 (8) TMI 1164 - AT - Customs

Rate of customs duty on import of power tillers - Concessional rate of 2.5% in terms of Notification No. 12/2012-Customs dated March 17, 2012 Sl. No. 399(X) - to be classified under CTH 8432 or not - HELD THAT - CTH 8432 classifies agricultural, horticultural or forestry machinery for soil preparation or cultivation, lawn or sports ground rollers. CTH 8432 8020 refers to rotary tiller under the sub-heading other machinery (8432 80). There is no separate tariff sub-heading for power tiller in the Customs Tariff - the power tillers are also to be classified under CTH 84.32. It has also been made clear that Circular No. 45/2001 dated August 7, 2001 had been withdrawn. Circular No. 45/2001-Customs dated August 7, 2001, which has been relied upon on behalf of the Revenue, had clarified that pedestrian tractors / power tillers were classifiable under CTH 87.01, whereas rotary tillers were classifiable under CTH 84.32. In view of the clarification this circular no longer survives. Further, the coordinate Bench of the Tribunal (South Zonal Bench of the Tribunal, Bangalore), in the case of VST TILLERS TRACTORS LTD. VERSUS COMMR. OF C. EX., BANGALORE 2005 (5) TMI 537 - CESTAT, BANGALORE has also held that Power Tillers are classifiable under CTH 84.32 of the Central Excise Tariff (which is pari materia to CTH 84.32 of the Customs Tariff). From the product literature of various manufacturers of power tillers/rotary tillers sold internationally under various brands, submitted by BTL, it is also evident that rotary tillers and power tillers are self same goods. To similar effect is the declaration dated December 16, 2019 of the Chinese manufacturer of the power tillers imported by BTL. The said declaration clarifies that the primary function of a power tiller is nothing but a modified rotary tiller, inbuilt with an engine as source of power. The contention that power tillers are different from rotary tillers are based on erroneous premises and thus unsustainable. Power Tillers imported by the importers herein are therefore entitled to the benefit of concessional rate of basic customs duty of 2.5% in terms of the said notification, as per Sl. No. 399(x) of the Table thereof. Appeal allowed.

Summary

Issues Involved:

1. Classification of Power Tillers under Customs Tariff.
2. Eligibility for concessional customs duty under Notification No. 12/2012-Customs.
3. Confiscation and penalties under the Customs Act, 1962.

Detailed Analysis:

1. Classification of Power Tillers under Customs Tariff:

The primary issue in both appeals was whether power tillers qualify as rotary tillers under Customs Tariff Heading (CTH) 8432, which would make them eligible for concessional customs duty. The importers argued that power tillers, also known as rotary tillers, are agricultural machines used for soil preparation and should be classified under CTH 8432 8020. They supported this with a clarification from the Ministry of Agriculture and a DGFT notification that equated power tillers with rotary tillers under the same tariff heading. The Tribunal found that power tillers are indeed classifiable under CTH 8432, as clarified by the Finance Bill 2002 and supported by various product literatures and manufacturer declarations.

2. Eligibility for Concessional Customs Duty under Notification No. 12/2012-Customs:

The importers claimed the benefit of a concessional customs duty rate of 2.5% under Sl. No. 399(x) of Notification No. 12/2012-Customs. The Assistant Commissioner of Customs denied this benefit, assessing the goods at a 7.5% duty rate. The Tribunal examined the classification and found that power tillers are indeed rotary tillers and thus eligible for the concessional rate. The Tribunal referred to several clarifications, including the Explanatory Note on Budget Changes 2002-2003 and the DGFT notification, which supported the importers' claim. Consequently, the Tribunal concluded that power tillers imported by the importers are entitled to the concessional duty rate.

3. Confiscation and Penalties under the Customs Act, 1962:

In the case of Chirag Corporation, the Customs authorities had reassessed the goods, denying the benefit of the notification and holding the goods liable for confiscation under Section 111(m) of the Customs Act, 1962. Penalties were also imposed under Sections 112(a) and 114A. However, the Commissioner (Appeals) set aside the confiscation and penalties, a decision which was upheld by the Tribunal. The Tribunal maintained that the goods were classifiable under CTH 8432 and thus eligible for the concessional duty, negating the basis for confiscation and penalties.

Conclusion:

The Tribunal allowed the appeal of BTL, setting aside the Commissioner (Appeals) order dated 11.09.2014, and granted consequential relief to BTL. Conversely, the Tribunal rejected the Revenue's appeal, affirming the Commissioner (Appeals) order dated 18.08.2015, and provided consequential relief to Chirag Corporation. The Tribunal's decision was pronounced in open court on 17 August 2022.