2023 (1) TMI 998 - AT - Customs

Classification of goods - 0.1 percent natural brassinolide fertiliser - Nature and scope of SCN under section 28 of Customs Act - power of proper officer to review the assessment under section 28 - Whether SCN under section 28 can be issued after the assessment is finalized (either through self assessment or through assessment by an officer) without first appealing against the assessment? - extended period of limitation - penalties. Scope of remand - HELD THAT - There is nothing in the order of remand to show that the Commissioner was required to examine Chapter Note 1(a) (2) of Chapter heading 3808 partly only to the extent of the submissions by the learned counsel. The submission of the learned counsel that the scope of the Tribunal s order gets circumscribed by the appellant s submissions during the proceedings cannot be accepted. The Commissioner was correct in examining whether the goods were preparations and such an examination was within the scope of the remand order. Retail packages- scope - HELD THAT - Both sides agree that retail packing is not defined in the tariff. Both sides refer to different Rules of the Legal Metrology Rules to interpret the term. According to the learned counsel for the appellant, the goods were not in packings meant for consumer and hence were not retail packings in terms of Rule 2(k) of the Legal Metrology Rules. According to the learned authorised representative for the Revenue, since only packages of more than 25 kg or 25 litres are excluded as per Rule 3 of the Legal Metrology Rules, the packages in question, being of up to 25 kg do qualify as consumer packings - while it is true that all packings over 25 kg are clearly excluded from the Legal Metrology Rules, it does not necessarily mean that all packings up to 25 kg are included from them and further that all such goods get covered by the definition of retail packings. There could be substances of much higher value, such as saffron or spices which will be sold even in wholesale in much smaller packings than 25 kg. Therefore, it needs to be seen if there is sufficient evidence on record to suggest that the goods which were imported were in retail packings - there are no sufficient evidence to hold so, if we exclude the survey on internet and e-commerce websites conducted by the Commissioner after concluding the hearing and before passing the impugned order which we already have found cannot be used against the appellant. It is undisputed that the imported goods were brassinolide. Its strength is only 0.1% and the rest is not made up of impurities but other inert material. It has been stated in the statement of Smt. Rashmi Jain, that it should be mixed in the proportion of 1 gram in 10 litres water and sprayed which makes it clearly a preparation of Brassinolide. Even if the submission of the learned counsel that it is sold to other companies which prepare further preparations is considered, the imported goods will be intermediate preparations which are also squarely covered by CTH 3808 as per the explanatory notes to HSN 3808. The imported good was clearly a preparation of Brassinolide and was not excluded from CTH 3808 by Chapter note 1(a)(2) to Chapter 38. Merits of classification - HELD THAT - The brassinolide imported by the appellant is a plant growth regulator is no longer in dispute. Although it was described as fertilizer in the invoice and documents of the Chinese supplier and also in the Bills of Entry by the appellant, after importing, the appellant sold the goods as plant growth regulator . Evidently, it is understood as plant growth regulator even in the trade. This is consistent with the expert opinion from IARI and the CBEC s Circular based on which the SCN was issued. The appellant had not contested this fact before us or before this Tribunal in the earlier round of appeal. The Chapter Note excludes specially defined chemicals from Chapter 38, except when they are put up in forms described in 3808 viz., as retail packings, as preparations and as articles. Of these, there is no dispute that the imported brassinolide were not articles which leaves with retail packings and preparations. We have already found that the imported brassinolide was a preparation. Since the brassinolide is in the form indicated in CTH 3808 by being preparation, it is not excluded by Chapter Note 1 (a) (2). Therefore, it falls under CTH 3808. Extended period of limitation - HELD THAT - As far as the description of the goods, quantity, etc. are concerned, the importer is bound to state the truth in the Bill of Entry. Thus, simply claiming a wrong classification or an ineligible exemption notification is not a mis-statement. Assessment, including self-assessment is a matter of considered judgment and remedies are available against them. While self-assessment may be modified by through re-assessment by the proper officer, both self-assessment and the assessment by the proper officer can be assailed in an appeal before the Commissioner (Appeals) or reviewed through an SCN under section 28. Therefore, any wrong classification or claim of an ineligible notification or wrong self-assessment of duty by an importer will not amount to mis-statement or suppression. Extended period of limitation can be invoked in case of collusion or any willful mis-statement or suppression of facts. According to the Revenue, the appellant had wrongly declared the imported goods as fertilizers and they were also declared so in the invoices, packing lists, etc. supplied by the Chinese suppliers. The appellants were fully aware that the imported goods were plant growth regulators and were also selling the goods as plant growth regulators. Therefore, according to the Revenue, the appellant has willfully mis-stated the nature of the imported goods in the Bills of Entry as fertilizers and hence extended period of limitation was correctly invoked. It is equally true that the assessing officers were also aware of the nature of the goods and had, on more than one occasion, called for the technical literature on the product which the appellants had provided. After studying the technical literature, the officers cleared the goods as fertilizers. Balancing these two facts on record, we do not find that sufficient grounds exist to invoke extended period of limitation in this case - the extended period of limitation could not have been invoked in the present case. Penalties - HELD THAT - As may be seen the ingredients necessary for imposing a penalty under section 114A are identical to the ingredients necessary to invoke extended period of limitation. The extended period of limitation cannot be invoked in these cases. Logically, the penalty under section 114A imposed on the appellant importers also cannot be sustained for the same reason - As far as the penalty under section 112 is concerned, it is imposable on any person whose acts or omissions render the goods liable to confiscation under section 111 or who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under section 111. In these cases, goods were held liable for confiscation under section 111 (d) and (m) and consequently penalty was imposed under section 112. As far as section 111(d) is concerned, there is nothing on record to show that there was any prohibition on import of the goods and so it does not apply to the present case. As far as 111(m) is concerned, there are no misdeclaration of the goods, although they deserved to be classified under CTH 3808 as plant growth regulators but all the documents including literature was made available to the officer during assessment. It is also found that section 111(m) does not apply. Consequently, penalties under section 112 cannot be sustained - The penalties under sections 114A and 112 imposed on the appellants are not sustainable and need to be set aside. Appeal disposed off.

Summary

Issues Involved:
1. Classification of "0.1% Natural Brassinolide Fertilizer" under the appropriate Customs Tariff Heading (CTH).
2. Validity of Show Cause Notice (SCN) under Section 28 without assailing the assessment.
3. Scope of the remand order.
4. Definition and applicability of "retail packages."
5. Determination if the goods qualify as "preparations."
6. Correct classification of the imported goods.
7. Invocation of the extended period of limitation.
8. Imposition of penalties under Sections 114A and 112 of the Customs Act, 1962.
9. Quantum of penalty calculation considering Additional Duty of Customs and Special Additional Duty (SAD).

Issue-wise Detailed Analysis:

A. Classification of "0.1% Natural Brassinolide Fertilizer":
The appellants classified the goods under CTH 3101 00 99, 3105 10 00, and 3105 90 90, while the Department classified them under CTH 3808 93 40. The Tribunal upheld the classification under CTH 3808, determining the goods as "plant growth regulators" rather than fertilizers, based on expert opinions and CBEC circulars.

B. Validity of SCN under Section 28:
The appellants argued that SCNs under Section 28 were invalid without appealing against the assessments. The Tribunal, referring to Supreme Court judgments (e.g., Priya Blue Industries, ITC Ltd.), held that assessments could be modified through an appeal or an SCN under Section 28, thus validating the SCNs.

C. Scope of Remand:
The remand order required examining whether the goods were excluded from Chapter 38 by Chapter Note 1(a)(2). The Tribunal found that the Commissioner correctly examined if the goods were "preparations" and in "retail packages," as the remand order did not restrict such examination.

D. Definition and Applicability of "Retail Packages":
The Tribunal noted that the Customs Tariff does not define "retail packing." The Commissioner erred in relying on internet surveys for determining retail packages. The Tribunal found insufficient evidence to classify the imported goods as "retail packages" based on the Legal Metrology Rules.

E. Determination if the Goods Qualify as "Preparations":
The Tribunal found that the imported goods, being 0.1% Brassinolide mixed with inert material, qualified as "preparations" under CTH 3808. The goods were ready to use after dilution, fitting the definition of "preparations" as per HSN Explanatory Notes.

F. Correct Classification of the Imported Goods:
The Tribunal upheld the classification under CTH 3808 as "plant growth regulators," rejecting the appellant's claim of classification under Chapter 31. The goods were not excluded by Chapter Note 1(a)(2) as they were "preparations."

G. Invocation of Extended Period of Limitation:
The Tribunal found no sufficient grounds for invoking the extended period of limitation. The appellant provided all necessary literature and information to the assessing officers, who accepted the classification. Thus, the demand for the extended period was set aside, sustaining it only for the normal period.

H. Imposition of Penalties:
The Tribunal set aside penalties under Sections 114A and 112. Since extended limitation was not invoked, penalties under Section 114A were unsustainable. Additionally, no evidence supported the applicability of Section 111(d) and (m) for imposing penalties under Section 112.

I. Quantum of Penalty Calculation:
The Tribunal did not need to address the quantum of penalty calculation, as all penalties were set aside.

Conclusion:
The Tribunal partly allowed and partly rejected the appeals, upholding the classification under CTH 3808 and confirming the demand of differential duty for the normal period with applicable interest. Penalties imposed on the appellants were set aside.