2023 (8) TMI 415 - AT - Customs

Levy of Safeguard Duty - Classification of imported goods - various capital goods from overseas, to be used in the manufacture of Solar Cells, from Diffused / Undiffused Silicon Wafers / Blue Wafers. Diffused / Undiffused Silicon Wafer / Blue Wafer is claimed to be the basic input / raw material required for the manufacture of Solar Cells - to be classifiable under Customs Tariff Item No. 8541 4011 as solar cells or under CTH 3818? - product under import and the Product Under Consideration (PUC) are one and the same - Confiscation - Enforcement of bank guarantee - levy of penalty and fine. HELD THAT - Admittedly, the description of the product specified in the Notification has to be understood based on the text of the Notification vis- -vis the findings of the competent / Designated Authority - Reference made to the order of CESTAT, Mumbai in the case of PHILIPS INDIA LTD. VERSUS COMMISSIONER OF CUSTOMS, MUMBAI 2004 (1) TMI 127 - CESTAT, MUMBAI wherein the levy of Anti-Dumping Duty was involved, on the imported Compact Fluorescent Lamp (CFL) with choke or without choke. At the time of import, the product under import was in a semi-finished form and post importation, a few items were procured from the domestic market and subsequently, CFL was manufactured in India. It was the contention of the Revenue that the imported item had attained the essential characteristics of a Compact Fluorescent Lamp and hence, had sought to collect Anti-Dumping Duty in terms of Notification No. 128/2001 dated 21.12.2001. It was inter alia held Since the notification imposes ADD only on CFL, one will have to see whether what is imported is CFL at all. It has been brought out that the importers in addition to the imported parts procured local components up to a certain value to manufacture CFLs. The proposition, therefore, which emerges from the above is that a semi-finished or intermediate product could not be subjected to Anti-Dumping Duty or safeguard duty in a case where a specific complete / finished product is the subject matter of investigation by the Designated Authority and the same is defined as the Product Under Consideration - the appellant has established its factory in India, installed capital goods and is undertaking substantial manufacturing process and on this fact, there are no disputes by either of the parties. In the case on hand, admittedly, what is imported is Diffused Silicon Wafer / Blue Wafer, which is claimed to be a semi-finished / intermediate processed product and not a finished product. If it is to be assumed to be the final product, then it has to be sold as such in the open market. The burden is on the person who claims that it is a solar cell, to discharge the same by establishing that fact. But the revenue having alleged that what was imported was solar cell, has not discharged their initial burden to establish that the same could be sold as such in the open market and could be used as such, by the end user. The question now is whether that Blue Silicon Wafer, which according to the Commissioner, exhibits photovoltaic effect, and therefore, is a Solar Cell, is sufficient to be called a Solar Cell in the market parlance - it is needed to see the practical uses in the sense whether the same is sufficient to be marketed as it is / the market recognizes as such and could it be used as it is. This is most relevant since the application before the authority was by the manufacturers of the product named solar cells . On consideration of definition of Product Under Consideration (PUC) as defined at various places like the Notice of Initiation of Safeguard Investigation dated 19.12.2017 and the review order of the competent authority, what emerges is that the photovoltaic cells which converts sunlight into electricity are connected so that purported object could be achieved. That means to say the Solar Cell, which has achieved or exhibited the photovoltaic effect, alone is not sufficient, the same should be able to give the desired result for which electrical connections are made. So, it should not just be exhibiting photovoltaic effect, but the same should be capable of carrying into electrical connections with transmitting the electricity so produced in order to achieve the desired object - thus, it could be understood that the PUC, which was the subject matter of investigation by the competent authority, was finished Solar Cell in all respects and known and recognized in the market parlance as such. Whether the product which was imported by the assessee is a Solar Cell in all respects, and hence, the product is the same as under investigation before the competent authority? - HELD THAT - The silicon in the form of diffused wafers, discs or chips, with or without molybdenum discs, classifiable under Chapter 38/85 are always permitted for import and clearance with concessional rate of duty for the purpose of manufacture of the finished product namely, hybrid micro-circuits or semiconductor devices. Solar Cells, which are otherwise called photovoltaic cells, are one of the semiconductor devices and for the manufacturing of semiconductor devices, silicon in the form of Diffused Wafers/Undiffused Wafers has been recognized by the Government as one of the inputs. The clarity available in the form of notifications continued until the last of such notifications by the Government, dated 30.06.2017 - It is now equally relevant to analyse reports of experts in the field which are placed on record. Admittedly, report of IIT, Madras has alone been considered by the Commissioner in the impugned order whereas, the appellant has relied on the report of NISE. A harmonious reading of the available test reports and the standards adopted by each of the experts while testing the samples, clearly indicate that Blue Silicon Wafer is just an input and an intermediate product, which could not be compared with or called as Solar Cells . The Solar Cells in market parlance would emerge only after the formation of busbars and fingers through the process of screen printing and sintering. Hence, the Diffused Silicon Wafer and the Solar Cells are different products altogether. In the context of the above, we are tempted to understand that in scientific parameters and so also in terms of marketability / market parlance, the imported Diffused Silicon Wafer is an incomplete, intermediate product which cannot be sold as a Solar Cell in the market and as such, it has no use. The Revenue is trying to put the cart before the horse, in the sense that they are trying to fit in the case of the present importer into the Notification, whereas, they should have analysed in detail the case of the importer and the product imported, and then check if the product satisfies the definition as per the said Notification. Determination of classification - HELD THAT - There is no doubt that the imported item is a Diffused Silicon Wafer / Blue Wafer and will fall outside the ambit of CTH 3818. Those items which are more extensively worked by way of selective diffusion will fall in Heading 8541 as semi-conductors, and as per the facts available on record, through the diffusion process and doping which have taken place on the Wafer, the imported item is appropriately classifiable under CTH 8541. It is also noteworthy here that CTH 8541 9000 deals with Parts of Semi-conductor devices. As per the scheme of arrangement of various Headings and Sub-Headings of CTH 8541, it is found that CTH 8541 deals with finished goods and also parts of semiconductor devices and covered under CTH 8541 90. There is no specific entry for an incomplete or an intermediate product. Though in a conventional sense, the imported Diffused Silicon Wafer is not a part of Solar Cell, for the purpose of classification, it has to be dealt as a product other than a finished Solar Cell. The imported item cannot be equated with a finished Solar Cell. A Solar Cell is manufactured from diffused Silicon Wafer and hence, the imported item is only a raw material or a base material or can be considered as a part or intermediate product for manufacture of Solar Cell. Considering the arrangement of Tariff, intermediate / semi-finished product is equated as parts of semi-conductor devices and thus, the contention of the appellant that the same is classifiable under CTH 8541 9000 is acceptable. Thus, the product imported was clearly different and distinct from the Product Under Consideration and therefore, the same did not attract safeguard duty. Hence, the demand of safeguard duty as confirmed in the impugned order and the reclassification of the product imported is unsustainable, for which reason the impugned order is set aside. On the date of import, admittedly, the classification was sought under CTH 3818 and the appellant also availed the benefit of exemption from payment of Basic Customs Duty in terms of Sl. No. 1 of Notification No. 24/2005 (Customs) dated 01.03.2005, as amended. It is also significant to note that the said Notification, as amended, vide Sl. No. 23, also grants exemption from Basic Customs Duty to goods classifiable under CTH 8541. Therefore, on the date of import, the goods classifiable under both CTH 3818 and CTH 8541 were exempt from payment of Basic Customs Duty and as such, no motive is found on the part of the appellant to avail any undue benefit or to cause any revenue loss. Moreover, it is also ascertained that as on the date of import, the goods classifiable under CTH 3818 attracted 12% I.G.S.T. whereas, the goods classifiable under CTH 8541 attracted 5% I.G.S.T. It is the settled position of law that in cases where classification of goods is involved, confiscation by re-classifying the same is not possible, that too alleging mala fide intention, since, the same amounts to a different view adopted by the authorities. Hence, it becomes necessary for the Revenue to establish mala fide intention on the part of an importer for classifying the goods under import and in the absence of any proof, there will be no scope to suspect the bona fides of an importer - Support found from the decision of the Hon ble Supreme Court in the case of UNION OF INDIA VERSUS GARWARE NYLONS LTD. 1996 (9) TMI 123 - SUPREME COURT wherein, at paragraph 15, it has been categorically held When an article has, by all standards, a reasonable claim to be classified under an enumerated item in the Tariff Schedule, it will be against the very principle of classification to deny it the parentage and consign it to an orphanage of the residuary clause. The imposition of penalty under Section 112 and/or fine, as confirmed in the impugned order, does not stand and consequently, the same is set aside. Appeal allowed.

Summary

Legal Judgment Summary: Appellate Tribunal CESTAT Chennai

Issues Involved:
1. Classification of imported goods.
2. Applicability of safeguard duty.
3. Confiscation and penalties.

Issue 1: Classification of Imported Goods
The appellant sought classification of imported Diffused Silicon Wafers/Blue Wafers under CTH 3818, while the Revenue reclassified them under CTH 8541 as Solar Cells. The adjudicating authority concluded that the imported goods were extensively worked and doped, thus falling under CTH 8541. However, the Tribunal found that the imported items lacked essential characteristics of finished Solar Cells, such as gridlines and busbars, and thus, were intermediate products. Consequently, they should be classified under CTH 8541 9000 as parts of semiconductor devices.

Issue 2: Applicability of Safeguard Duty
The Tribunal analyzed the Product Under Consideration (PUC) as defined in various notifications and reports by the Directorate General of Trade Remedies (DGTR). The PUC was defined as "Solar Cells whether or not assembled in modules or panels," which are finished products capable of performing essential functions. The Tribunal found that the imported Diffused Silicon Wafers were intermediate products and not finished Solar Cells, thus not attracting safeguard duty under Notification No. 01/2018.

Issue 3: Confiscation and Penalties
The Tribunal noted that on the date of import, both CTH 3818 and CTH 8541 were exempt from Basic Customs Duty, negating any motive for misclassification. The Tribunal held that the mere reclassification of goods does not warrant confiscation or penalties unless mala fide intention is proven. The Revenue failed to establish any such intention. Consequently, the Tribunal set aside the confiscation, redemption fine, and penalties imposed under Section 112 of the Customs Act, 1962.

Conclusion
The Tribunal set aside the impugned order dated 09.12.2022, allowing the appeal with consequential relief, if any, as per law.