2024 (1) TMI 1170 - AT - Customs

Classification of imported goods - Sensor Bag Assembly - to be classified under CTI 90328910 or under CTI 87089500? - HELD THAT - The original authority after considering the submissions of the respondent came to the conclusion that the subject goods did not merit classification under CTH 9032 as claimed by the respondent because in order merit classification under Heading 9032, the instrument or automatic regulator must maintain a factor at a desired value by measuring it constantly or periodically. No such function is performed in the present case. Rather, the original authority held that the subject goods would merit classification under Heading 8537. It is found that the appellate authority has also upheld the Order-in-Original classifying the said goods under Heading 8537. Further, it is found that the subject goods are not classifiable under CTI 87089500 as Safety airbags with inflator system; parts thereof because there is an exclusion in HSN Explanatory Notes to Heading 8708 where electronic controllers are excluded from Heading 8708. In view of the settled position of law as held in various decisions, the subject goods are not classifiable under CTI 87089500 as Safety airbags with inflator system; parts thereof , as claimed by the Department. Further, it is settled position of law that the burden of proving the correct classification is on the Department as held in various cases relied upon by the respondent. It is a settled law that when the classification proposed by the department cannot be sustained, then irrespective of the fact as to whether or not the classification of the assessee is proper, the same would prevail. The Hon ble Apex Court in the case of Warner Hindustan Ltd. 1999 (8) TMI 75 - SUPREME COURT has held The Tribunal also noted that both sides have not adduced any detailed arguments as to why these tablets can be considered as confectionery item or otherwise although a plea is there from the Collector in the grounds of appeal that the goods are assessable under Tariff 17.04 . In our opinion, the Tribunal was quite wrong in these circumstances in allowing the appeal of the Excise authorities and classifying the mint tablets as items of confectionery under Heading 17.04. The correct course for the Tribunal to have followed was to have dismissed the appeal of the Excise authorities making it clear that it was open to the Excise authorities to issue a fresh show cause notice to the appellant on the basis that the tablets were classifiable under Heading 17.04 as items of confectionery. There is no infirmity in the impugned order - Appeal of Revenue dismissed.

Summary

Issues Involved:
1. Classification of 'Sensor Bag Assembly' under the appropriate Customs Tariff Item (CTI).
2. Reliance on Harmonised System of Nomenclature (HSN) Explanatory Notes for classification.
3. Burden of proof for correct classification.

Summary:

1. Classification of 'Sensor Bag Assembly':
The primary issue is whether the 'Sensor Bag Assembly' should be classified under CTI 87089500 as "Safety airbags with inflator system; parts thereof" as claimed by the Department, or under CTI 90328910 as claimed by the respondent. The original authority and the Commissioner (Appeals) both concluded that the subject goods did not merit classification under CTH 9032 since they do not perform the function of maintaining a factor at a desired value by measuring it constantly or periodically. Instead, they classified the goods under Heading 8537.

2. Reliance on HSN Explanatory Notes:
The Revenue argued that the HSN Explanatory Notes should not be relied upon for classification. However, the Tribunal noted that the HSN Explanatory Notes are a recognized guide for interpreting the Customs Tariff Act, 1975, as upheld by the Hon'ble Supreme Court in cases such as Commissioner of Customs Vs Wood Craft Products Ltd. and Commissioner of Central Excise, Delhi-III Vs UNI Products India Ltd. The Explanatory Notes to Heading 8708 specifically exclude remote sensors or electronic controllers from being classified under this heading.

3. Burden of Proof for Correct Classification:
The Tribunal emphasized that the burden of proving the correct classification rests with the Department. Citing various decisions, including H.P.L Chemicals vs. Commissioner of Central Excise and Warner Hindustan Ltd. Vs CCE, it was reiterated that if the Department fails to sustain its proposed classification, the classification adopted by the assessee should prevail.

Conclusion:
After considering the submissions and evidence, the Tribunal upheld the findings of the lower authorities that the 'Sensor Bag Assembly' is not classifiable under CTI 87089500. The appeal filed by the Revenue was dismissed, affirming the classification under Heading 8537. The Tribunal reiterated the importance of HSN Explanatory Notes and the burden of proof in classification disputes. The decision was pronounced in court on 25.01.2024.