2023 (9) TMI 727 - AAR - Customs

Classification of goods intended to be imported from China - Foil Balloons - classifiable under heading CTH 9505 9090 under the heading other or under CTH 95030090? - HELD THAT - Foil Balloons are used for party decoration and for entertainment purposes. These balloons ordinarily have shiny reflective surfaces and are often printed with colour pictures and patterns for gifts and parties. Foil Balloons are used for decoration for various events such as birthday, marriage, new-year eve celebration and many other joyous programmes and they are available in various shapes such as alphabets, numbers, heart, star etc. The said foil balloons are not used as toys but are only used for decoration and entertainment purposes. Foil Balloons are very fragile and non-durable goods which are not purchased in the market for the purpose of play by children and they are used like festoons also as explained in the application and also shown in the pictures attached thereto. They are decorated on the wall on various joyous occasions. The rejoinder of the applicant agreed upon that the contention of the Department ('Jurisdictional Commissioner of Customs') that Foil Balloons are identified as toys in the common parlance is clearly misconceived and without any evidence; said Analytics Report of NCTC, Mumbai docs not take into account the common parlance test as indicated above as well as the HSN explanatory notes to the heading 9505 - if the subject goods i.e. Foil Balloons are classified under the heading 9503 as per the paragraph (D)(vii) of the Explanatory Notes thereto, it would be similar to completely disregarding the fact Foil Balloons are purchased in the market for the purpose of decoration or entertainment. The subject goods i.e Foil Balloons are made of Nylon/HDPE not of Latex/Rubber and imported for the purpose of party decoration or entertainment, merit classification under the heading 9505 and specifically under subheading 9505 9090 of the First Scheduler the Customs Tariff Act, 1975.

Summary

Issues Involved:
1. Classification of 'Foil Balloons'.
2. Applicability of Indian Standards for toys.
3. Common parlance and end-use test for classification.
4. Legal precedents and explanatory notes for tariff headings.

Summary:

1. Classification of 'Foil Balloons':
The applicant, M/s. Bharat Balloon House, sought an advance ruling on the classification of 'Foil Balloons' intended for import from China. The applicant argued that these balloons, used for party decorations and entertainment, should be classified under heading CTH 9505 9090, which covers festive, carnival, and other entertainment articles. The applicant emphasized that the foil balloons are not toys and are used exclusively for decorative purposes.

2. Applicability of Indian Standards for Toys:
The applicant referenced the Indian Standard IS 9873 (Part 1):2019, which excludes holiday decorations intended for ornamental purposes from the scope of toys. They argued that foil balloons, being fragile and not intended for play by children, do not fall under the category of toy balloons, which are typically made of latex/rubber.

3. Common Parlance and End-Use Test for Classification:
The applicant cited various legal precedents, including the Supreme Court rulings in Collector of Customs Vs. Kumudam Publications and Commissioner of Central Excise Vs. Wockhardt Life Sciences Ltd, to support the argument that the end-use and common parlance understanding of the product are crucial for classification. They contended that foil balloons are not sold as toys but as decorative items in the market.

4. Legal Precedents and Explanatory Notes for Tariff Headings:
The 'Jurisdictional Commissioner of Customs' argued that foil balloons should be classified under heading 9503, which includes toy balloons. However, the applicant rebutted this by highlighting the HSN Explanatory Notes to heading 9505, which include decorative articles made of foil. The applicant also referenced a CESTAT, Kolkata order, which clarified that decoration foil balloons do not fall under the purview of BIS and are not considered toys.

Ruling:
After considering the submissions, the Customs Authority for Advance Rulings (CAAR), Mumbai, ruled that 'Foil Balloons' made of Nylon/HDPE, intended for party decoration or entertainment, should be classified under heading 9505 9090. The CAAR agreed with the applicant's view that these balloons are not toys and are used exclusively for decorative purposes. The ruling also noted that the NCTC report was inconclusive and did not consider the common parlance test or the HSN explanatory notes.