2023 (11) TMI 181 - HC - Customs

Classification of imported Gold Coins - classifiable under CTH 7114 1910 as claimed by the petitioner or under CTH 7118 9000 of the Customs Tariff Act, 1975? - HELD THAT - It becomes pertinent to note that in Paras 49 and 50 of KHANDWALA ENTERPRISE PRIVATE LIMITED AND CREDENCE COMMODITIES EXPORTS VERSUS UNION OF INDIA AND ORS. 2019 (11) TMI 740 - DELHI HIGH COURT , the Court firstly noticed the distinction between Sub-Headings 7114 and 7118 with the former pertaining to articles of gold while the latter being in respect of coins . CTH 7118 1000 and 7118 9000 were correctly recognised to subserve the requirement of segregating coins made of gold and those made of other precious metals. It was while seeking to explain the distinction between CTH 7118 1000 and 7118 9000 that the Court observed that gold coins would fall within the ambit of the latter. Paras 49 and 50 of decision cannot be justifiably interpreted as purporting to hold that all articles that may be ordinarily or loosely referred to as gold coins are liable to be classified as falling under CTH 7118 9000. To put it differently, when the Division Bench in Khandwala Enterprise observed that gold coins are liable to be classified under CTH 7118 9000, it did not mean or intend to hold that all articles of gold are liable to be classified as falling in that entry of the CTH merely because they happen to be in the shape of a coin or are colloquially referred to as such. CTH 7114 deals with articles of goldsmiths, silversmiths, wares and parts thereof. The aforesaid entry, namely, CTH 7114 1910 specifically speaks of articles of gold. It also brings within its ambit articles of silver and other precious metals. Both CTH 7118 1000 and CTH 7118 9000, on the other hand, are placed under the generic heading of Coins . While CTH 7118 1000 deals with coins excluding those made of gold and not being legal tender, CTH 7118 9000 is the residuary entry and encompasses all other coins. CTH 7118 9000 being the remanent receptacle would thus include within its ambit, even gold coins. Accordingly, while 7118 1000 relates to coins (not made of gold) which have ceased to be legal tender, CTH 7118 9000 would extend to all coins whether they be of gold or any other precious material. While explaining CTH 7118 1000, the explanatory note provides that the aforesaid entry seeks to bring within its ambit coins which were legal tender but have since been withdrawn as well as coins which may be struck in one country to be placed in circulation in another as also those which are yet to obtain the character of legal tender. The phrase not being legal tender as appearing in CTH 7118 1000 is thus liable to be construed accordingly. In Khandwala Enterprise, the Court clearly appears to have referred to gold coins as falling in CTH 7118 9000 proceeding on the premise that they were articles which were or are proposed to be used as legal tender. This Court is thus of the firm opinion that the observations as appearing in Paras 49 and 50 have been clearly misinterpreted by the respondents as the Court having held or purporting to hold that all articles of gold which may be colloquially referred to as coins would be liable to be placed under CTH 7118 9000. The observation of gold coins not being classifiable under CTH 7114 1910 was clearly misunderstood and wrongly interpreted by the Principal Commissioner. That observation was liable to be appreciated in the context and backdrop in which the same came to be rendered. As explained above, the said recital was entered primarily to underscore the distinction between CTH 7114 1910 on one end of the spectrum and CTH 7118 1000 and 7118 9000 on the other. While the former is concerned with articles of gold and other precious metals generally, the latter set of entries extends to currency and legal tender. The Principal Commissioner has clearly committed a manifest error while viewing the judgment rendered in Khandwala Enterprise and proceeding on the assumption that the contentions raised by the petitioner already stood conclusively answered by the Court. The aforesaid premise is clearly based on an incorrect reading of that decision. The Principal Commissioner has also clearly erred in failing to appreciate the import of the explanatory notes which stand placed along with CTH 7118 9000 and ignoring the binding character of those notes. Impugned order set aside - petition allowed.

Summary

Issues Involved:
1. Validity of the impugned orders dated 04 September 2020 and 07 September 2020.
2. Classification of imported gold coins under CTH 7114 1910 or CTH 7118 9000.
3. Applicability of the Indo-Korean CEPA exemption.
4. Impact of the previous judgment in Khandwala Enterprise Private Limited vs. Union of India and Ors.

Summary:

1. Validity of the Impugned Orders:
The petitioner challenged the validity of the orders dated 04 September 2020 and 07 September 2020 passed by the Principal Commissioner of Customs, which rejected the classification of imported gold coins under CTH 7114 1910 and classified them under CTH 7118 9000.

2. Classification of Imported Gold Coins:
The Principal Commissioner, while finalizing the SCNs, concluded that the goods declared as gold coins, not being legal tender, are to be classified under CTH 7118 9000. The Commissioner relied on the General Rules for Interpretation (GIR) and explanatory notes to the Harmonized System of Nomenclature (HSN), which state that heading 7118 covers coins of any metal issued under government control for use as legal tender.

3. Applicability of the Indo-Korean CEPA Exemption:
The petitioner claimed exemption from customs duties based on the Indo-Korean CEPA, which extends the benefit of Nil Basic Customs Duty (BCD) to goods falling under CTH 711021 to 711890. The Principal Commissioner, however, held that the classification under CTH 7118 9000 did not entitle the petitioner to the claimed exemption.

4. Impact of the Previous Judgment in Khandwala Enterprise Private Limited vs. Union of India and Ors:
The petitioner argued that the Principal Commissioner misconstrued the judgment in Khandwala Enterprise, which did not conclusively determine the classification issue. The Court in the present case clarified that the previous judgment should not be interpreted to mean that all articles colloquially referred to as gold coins fall under CTH 7118 9000. The Court emphasized that only coins issued under government control for use as legal tender fall under CTH 7118 9000, and the Principal Commissioner erred in assuming the issue was settled by the previous judgment.

Conclusion:
The Court set aside the impugned orders and remitted the matter to the Principal Commissioner for fresh adjudication, directing the authority to reconsider the classification issue in light of the observations made, particularly the binding nature of the explanatory notes and the specific context in which the term "gold coins" should be understood.