2023 (5) TMI 398 - AT - Customs

Classification of imported goods - Howaru probiotic culture - Recovery of differential duty - denial of benefit of the concessional rate of duty - imported goods are probiotics or not - HELD THAT - It is seen from the show cause notices that there is no allegation that the impugned goods are not probiotic cultures as claimed in the bills of entry. Nor is there any technical ascertainment that could lend support to any suggestion that the goods are not in accordance with the declaration. The notices have alleged misdeclaration of the goods which, having been permitted clearance, without the intervention that places onus on customs authorities to alter the classification in accordance with section 17 of Customs Act, 1962, owing to special status assigned to the importer, should also be properly classified in the bill of entry to pass muster even if the particulars relating to the goods are not, of itself, misdeclared. The purport of the proceedings initiated by the two notices leading to the impugned orders are clear re-determination of classification. Though the adjudication orders appear to have suggested that the imported goods are not the final product for human consumption and, yet, as intermediary for manufacture of food supplements to be treated as food preparations, there is no finding that the goods are not probiotic cultures or that, being cultures and not probiotics per se, are disentitled to the benefit of concessional rate of duty sought in the bills of entry. The issue of whether the goods are probiotics or not is, thus, not relevant to the proceedings. In the normal course, such deficiency in adjudication proceedings would be remedied by remand for fresh determination. That, however, would be mere academic exercise, in circumstances of the claim that impugned goods are probotic cultures , for not having been disputed in the show cause notices and the appropriate tariff item within which probiotic falls having been established by the exemption notification issued under Customs Act, 1962 - Though Learned Authorized Representative did try to fill the gaps by conjecturing upon the description in the invoice and by relying upon technical material to urge that the impugned goods do not conform to probiotics , acceptance of such argument would be tantamount to re-investigation and issue of fresh notice with new grounds, allegations and proposals which cannot be countenanced at the appellate stage. The impugned order is beyond remedy and must be set aside - Appeal allowed.

Summary

Issues Involved:
1. Classification of imported goods.
2. Denial of concessional duty rate.
3. Burden of proof on classification.
4. Validity of reclassification by customs authorities.

Summary:

1. Classification of Imported Goods:
The appeals challenge the re-assessment of imported 'probiotic culture' by substituting the declared classification under tariff item 3002 9030 with tariff item 2106 9099, leading to denial of the benefit of notification no. 12/2012-Cus and notification no. 50/2017-Cus. The appellant contends that the classification adopted by the adjudication authority is inappropriate as the goods do not match the description corresponding to tariff item 2106 9099.

2. Denial of Concessional Duty Rate:
The customs authorities' denial of the concessional duty rate is based on the finding that the imported goods are 'food preparations' rather than 'probiotics'. The adjudicating authority concluded that the goods are not 'probiotics' and thus do not qualify for the concessional rate under the relevant notifications.

3. Burden of Proof on Classification:
The appellant cited the Supreme Court decision in HPL Chemicals Ltd. v. Commissioner of Central Excise, emphasizing that the burden of proof in classification matters lies with the Revenue. The court held that the customs authorities failed to discharge this burden by not providing sufficient evidence to support the reclassification.

4. Validity of Reclassification by Customs Authorities:
The Tribunal found that the show cause notices did not allege that the goods were not 'probiotic cultures' as declared. The reclassification by customs authorities, based on the assumption that the goods are 'food preparations,' was not substantiated by technical evidence. The Tribunal concluded that the adjudicating authority's reliance on chapter notes and the General Rules for Interpretation was misplaced.

Conclusion:
The Tribunal set aside the impugned orders, stating that the deficiency in the adjudication proceedings could not be remedied by remand. The appeals were allowed, and the original classification and concessional duty rate were reinstated.