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2023 (11) TMI 320 - AT - CustomsClassification of imported goods - Steel Balls - to be classified under Chapter Heading 84829900 or under CTH 8714 9990? - recovery of differential duty and imposition of penalty on the company and two Directors - HELD THAT - As per Chapter Note 6 to Chapter 84 in HSN Heading 8482 applies, inter alia, to polished steel balls, the maximum and minimum diameters of which do not differ from the nominal diameter by more than 1 per cent, or by more than 0.05mm, whichever is less. Other steel balls are to be classified in heading 7326. Section Note 2(a) to Section XVII says that parts which are goods included in any of the headings of Chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective heading. A cumulative reading gives an understanding that Steel Balls if polished fall under CTH 8482 and if not polished under CTH 7326 and no way under Chapter 87 - the report given by the said Chartered Engineer mentions that 5/16 and 7/32 size is rarely used in some special hub applications in bicycles as per the information collected in the survey; sizes 5/8 , 9/16 and 18.6mm are not generally used in bicycles; if they are to be used in bicycles, they should be polished. On going through the certificate issued by the Chartered Engineer, it is found that the certificate does not specify whether the impugned Steel Balls are polished and gives an impression that the same is issued on the basis of a survey rather than on technical testing and examination. Hon ble Supreme Court in the case of KRISHNA STEEL INDUSTRIES VERSUS COLLECTOR OF CENTRAL EXCISE, PATNA 2004 (9) TMI 107 - SUPREME COURT held that with the incorporation of Chapter 6, the item now has to be classified either under Chapter 84 or under Chapter 73 and that an item has to be classified in accordance with Chapter notes. Tribunal in the case of Pratap Engineering Works (supra) held that in view of Note 6 to Chapter 84, Steel Balls of sizes 3/16 , 5/32 and 1/8 with the variation, of both maximum and minimum diameter from the nominal diameter in accordance with the permissible limits, merits classification under heading CTH 8482. Thus, the impugned goods can only be classified under CTH 8482 which is a specific heading; moreover, other Notes of Section XVI or Chapter 84 do not exclude the classification of Steel Balls under CTH 8482 - the classification of any goods should be per se as per the descriptions in the individual headings, related Section/ Chapter notes and under no circumstances on the end use of the product. The impugned order has completely ignored the submission of the appellants that the steel balls are also usable in other industries. Moreover, the Chartered Engineer, on whose certificate Revenue places reliance only makes and averment that the impugned goods are generally used by bicycle manufacturers. It is not the case of the Department that they are solely used by the bicycle manufacturers. Thus, the classification cannot be based on end use. The appellants cannot be forced to continue the classification they adopted in the past even though it was incorrect. The appellants are free to correct the classification of the imported products. If the classification, so claimed, was wrong, it was incumbent upon the Department to rectify the same by taking legal recourse. For that reason, it cannot be held that the classification adopted by them previously is only correct. Penalty on Directors - HELD THAT - When the classification and duty demanded in the show-cause notice are set aside, there is no way that the penalty on the appellant s company and their directors can survive. The classification adopted by the appellants under CTH 8482.9900 upheld - the impugned order is not sustainable - appeal allowed.
Issues Involved:
1. Classification of imported "Steel Balls" under the correct Customs Tariff Heading (CTH). 2. Validity of the reliance on Chartered Engineer's certificate. 3. Applicability of penalties and extended period for duty recovery. Summary: 1. Classification of Imported "Steel Balls": The primary issue was whether the imported "Steel Balls" should be classified under CTH 8482 9900, as claimed by the appellant, or under CTH 8714 9990, as argued by the Revenue. The appellant contended that CTH 8482 9900 is a specific entry for "Steel Balls," supported by General Rule 3(a) of the General Rules for Interpretation, which states that a specific entry should be preferred over a general one. They also cited Chapter Note 6 to Chapter 84, which specifies that polished steel balls fall under CTH 8482. The Department, however, relied on statements from bicycle manufacturers and a Chartered Engineer's certificate to argue for classification under CTH 8714 9990, which covers parts and accessories of motor vehicles. 2. Validity of the Reliance on Chartered Engineer's Certificate: The appellant challenged the validity of the Chartered Engineer's certificate issued by Shri Rajesh John, arguing that it was based on a market survey rather than technical expertise and did not conclusively determine the use of the steel balls. The appellant's request for cross-examination of the Chartered Engineer was denied, which was considered a violation of natural justice. The Tribunal found that the certificate did not specify whether the steel balls were polished and was not based on technical testing and examination. 3. Applicability of Penalties and Extended Period for Duty Recovery: The appellant argued that the issue was purely one of classification and that there was no suppression with intent to evade duty, making the invocation of the extended period and imposition of penalties inappropriate. The Tribunal noted that the appellants had previously classified the goods under CTH 8714 9990 but were not bound to continue with an incorrect classification. The Tribunal also emphasized that classification should be based on the descriptions in the tariff headings and not on the end use of the product. Conclusion: The Tribunal concluded that the imported steel balls should be classified under CTH 8482 9900, as it is a specific heading for polished steel balls. The impugned order was found to be unsustainable, and the appeals were allowed. The penalties imposed on the appellant's company and its directors were also set aside. The Tribunal stressed the importance of maintaining uniformity in classification across different Customs stations to reduce unnecessary litigation.
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