2023 (6) TMI 317 - AT - Customs

Classification of imported goods - Waxsol series of products such as Waxsol-A, Waxsol 9-11A, Waxsol-911B and Waksol-B etc - to be classified under CTH 27101990 of Customs Act, 1925 or under Customs Tariff Heading No. 34052000? - competence of proper officer for D.R.I. Officers to issue show cause notice for entire bunch - period involved of imports is from June, 2014 to April 2019. HELD THAT - The appellants initially claimed goods under Tariff Heading 2710 as classification of the product in their Bills of Entry, but after being confronted with various evidence during investigation by DRI made alternate submissions for the product to be appropriately classified under Tariff Heading 2712, on the ground that the product cannot be classified under Tariff Heading 3405. We find that TH 3405, pertains to various end products and excludes waxes of heading 3404. Also the product is an Industrial Raw Material for manufacturer of another Industrial Raw Material i.e. Chlorinated Paraffin Wax and cannot be covered under Tariff Heading 3405 and that even explanatory notes to CTH 3405 (2017 edition) as well as the finding of the learned adjudicating authority, in para 45.2 point to the effect that Waksol 911-A, Waksol 911-B, is not exclusively used for Chlorination and can also be used for other purposes like Polishes, cream and similar preparations for the maintenance of wooden furniture, floors for other wooden work. The findings therefore only show the possibility and do not conclusively decide the nature of the product or its classification as the product literature and material on record shows that Waksol products are used in Chlorination and therefore do not appears in the nature of product of Tariff Heading 3045. The department has to conclusively bring on record the predominant usage of the product with evidence to discharge burden of classification. Further, in view of the trite law, learned adjudicating authority should have given his own findings on the classification sought and not relied on one given by the Chemical analyst. To justify classification under 3405 department will need to show that the product imported was not essentially in the nature of intermediate product or raw material and was not, often 'Put up for retail sale' as is the requirement laid down in HSN explanatory notes to CTH 3405 (2017 edition referred). The argument of the appellant that classification under chapter 3404 cannot be justified as the Fisher/Tropsch Technology was used and which excluded its classification under 3404 is a mutually accepted position and needs no discussion. A detailed examination about the nature of product, its usage and its proper classification based upon exclusion clauses of HSN explanatory note is warranted including of consideration of chapter 2712. In view of claim of product being in the nature of Slag wax, same needs elaborate discussion and findings from the authority below - appeal remanded directing the adjudicating authority to determine the exact nature and usage of the product imported. Appeal allowed by way of remand.

Summary

Issues Involved:
1. Proper classification of imported products.
2. Competence of the DRI officers to issue show cause notices.
3. Validity of penalties imposed on importers.

Summary:

1. Proper Classification of Imported Products:
The appellants, various importers, contested the classification of their imported Waxsol products. Initially classified under CTH 27101990, the Department of Revenue Intelligence (DRI) argued for classification under CTH 34052000. The appellants conceded that CTH 2710 was incorrect and proposed CTH 2712 as the correct classification, arguing that their products are Fischer-Tropsch waxes, specifically slack wax, and not end products like polishes or creams covered under CTH 3405. The Tribunal found that the products are industrial raw materials and not end products, thus not fitting under CTH 3405. The Tribunal remanded the case for a detailed examination of the product's nature, usage, and proper classification, including consideration of CTH 2712.

2. Competence of the DRI Officers to Issue Show Cause Notices:
The appellants did not press the point of the competence of DRI officers to issue show cause notices. They made a concession on the point of jurisdiction of the "proper officer" and competence of DRI, focusing instead on the merits of the case.

3. Validity of Penalties Imposed on Importers:
The Tribunal noted that penalties were imposed based on the classification dispute. It was argued that the classification issue is a matter of legal interpretation, not suppression or mis-declaration, making the demand time-barred beyond the normal limitation period. The Tribunal remanded the issue of penalties to be consequent upon the outcome of the classification decision, keeping the question of penalties open for re-evaluation.

Conclusion:
The Tribunal allowed the appeal by remand, directing the adjudicating authority to re-examine the classification of the imported products, considering the nature and usage of the products, and to pass a decision within three months. The issue of penalties was also remanded for reconsideration based on the final classification decision.