2024 (7) TMI 1530 - AT - Customs

Maintainability of appeal before the Commissioner (Appeals) - time barred - goods as imported under the brand name Martech DHA by the respondent are DHA (docosahexaenoic acid) classifiable under CTH 29161590 (respondent) or include other ingredients giving the goods the characteristic of food preparation under CTH 21069099 (revenue). Time limitation - HELD THAT - It is found that the revenue has averred that the passing of review order within three months of the date of communication of the OIO by the Committee of Commissioners under section 129(D)(3) is an internal procedural matter and the substantive condition is to file the appeal within one month of the passing of the review order as per section 129(D)(4) of the Customs Act and within the overall time frame of four months - the appeal filed by revenue before the Commissioner (Appeals) was not time barred and that the matter related to classification needs to be examined and disposed of on merits. Rule 23 of the Customs Excise Service Tax Appellate Tribunal (Procedure) Rules, 1982 states that the parties to the appeal shall not be entitled to produce any additional evidence, either oral or documentary, before the Tribunal. Thus, the general principle is that the appellate court should not travel outside the record of the Original Authority, unless the Tribunal itself feels the need to do so. No application was filed and prayer made by the Appellant to produce additional evidence. Had it been done it would have given the respondent a chance to file additional grounds / evidence as a rebuttal and to test whether the evidence was of an unimpeachable character. The power to allow additional evidence at the Tribunal level, whether on fact or law, oral or documentary is discretionary in nature. The parties are not entitled, as of right, to the admission of such evidence. The classification of goods is a matter relating to chargeability and the burden of proof is squarely upon the Revenue. If the Department intends to classify the imported goods under a particular category different from that claimed by the assessee, the Department has to adduce proper evidence and discharge the burden of proof. The revenue itself has alleged that the impugned goods are used in a host of industries like food, beverage, dietary supplement, pharmaceutical and allied industries. However, it has not been shown as to why Martech DHA has acquired the characteristics of food preparation alone and is not for example an ingredient of the pharma or allied industry when the goods are supplied to the said industries. The problem of trying to classify goods as per their perceived end use without first examining that the other ingredients present are permissible or not as per the chapter notes and whether they alter the nature of the product, is a fatal flaw in the arguments set out by Revenue. Further the Assistant Commissioner and the Commissioner (Appeals) have held, based on customer declarations produced before them, that DHA, which contains impurities and added stabilizers, is known in trade parlance as DHA . Revenue has not challenged this finding or produced contrary evidence. Thus, it has been possible to finalize the classification within the parameters of the Customs Tariff with assistance from the HSN and reference to extrinsic sources was not required. In any case all the references made by revenue deal with situations where the product in question is not pure DHA with impurities and stabilisers alone. They refer to DHA not as a standalone product that has been imported in bulk but rather to the product used, post their import, in the manufacture of infant formula, dietary supplements and various food products or manufactured and sold as dietary supplement or food ingredient/ food supplement in various food etc. The problem of end use-based classification of a multi-use product has been discussed above and found unsuitable. While revenue has not been able to prove its case, the respondent has demonstrated that the correct classification of Martech DHA a derivative of linolenic acid, which is a separate chemically defined organic compound (DHA), is under Tariff Heading 2916 1590 of the Customs Tariff. There are no hesitation in partially rejecting the appeal by upholding the impugned order with regard to classification of the impugned goods while setting aside the portion relating to time bar - appeal disposed off.

Summary

Issues Involved:
1. Whether the appeal before the Commissioner (Appeals) is time-barred.
2. Whether the goods imported under the brand name "Martech DHA" are classifiable under CTH 29161590 (respondent) or CTH 21069099 (revenue).

Detailed Analysis:

Issue 1: Whether the appeal before the Commissioner (Appeals) is time-barred.
The revenue argued that the appeal was not time-barred as the review order was filed within four months of the passing of the Order in Original (OIO) dated 5/5/2017. They cited the Larger Bench decision in Commissioner of C. Ex, Raipur Vs Monnet Ispat & Energy Ltd, which was upheld by the Supreme Court in Commissioner Central Delhi Vs Kap Cones, supporting their stand that the substantive condition is to file the appeal within one month of the review order and within an overall time frame of four months. The Tribunal agreed with this interpretation, stating that the appeal was not time-barred and must be examined on merits.

Issue 2: Classification of "Martech DHA"
Revenue's Argument:
- The product, containing 10-17% DHA, is not a defined chemical compound and does not merit classification under Chapter 29.
- It is used in food supplements and has acquired the characteristics of a food preparation, thus classifiable under CTH 2106.
- The product literature and website of the supplier, Martek Biosciences, USA, describe DHA Algal oil as a novel food ingredient/food supplement.
- The product is marketed as useful in the food, beverage, dietary supplement, pharmaceutical, and allied industries.

Respondent's Argument:
- DHA is an unsaturated acyclic monocarboxylic acid, defined by the molecular formula C22H32O2, and is a derivative of linolenic acid.
- The product contains impurities and stabilizers necessary for preservation and transport, permissible under Note 1(a) and 1(f) of Chapter 29.
- The goods are imported in bulk and known in trade as DHA, used in various industries, not solely as a food preparation.
- The classification under Chapter 29 has been accepted by the Original Authority, Commissioner (Appeals), and Commissioner of Customs, Mumbai.

Tribunal's Findings:
- The classification should be based on the condition of the goods at the time of import.
- The product is a separate chemically defined organic compound, containing permissible impurities and stabilizers.
- The goods are used in multiple industries, and their classification should not change based on end-use alone.
- The burden of proof lies with the revenue to show that the product has acquired the characteristics of a food preparation, which they failed to do.
- The product is rightly classifiable under CTH 29161590 as a derivative of linolenic acid, a separate chemically defined organic compound.

Conclusion:
The Tribunal partially rejected the appeal, upholding the classification of the goods under CTH 29161590 and setting aside the portion of the impugned order relating to time-bar. The respondent is eligible for consequential relief as per law.