2024 (4) TMI 179 - AT - Customs

Classification - Rate of duty - Goods claimed to be automatic data processing machine in heading 8471 - Bureau of Indian Standards (BIS) - shipping marks, viz., Emotix Miko - re-classified to take advantage of lower rate of duty - differential duty - confiscation - interest - Import goods as plastic toys with motor corresponding to tariff item 9503 0030 - HELD THAT - It is on record that the imported goods consists of components that do not, by a long stretch, find fitment within products of chapter 95 of First Schedule to Customs Tariff Act, 1975. There is no finding in the impugned order that the composition of the impugned goods is not a combination of a central processing unit and units for input and output. We are informed, without rebuttal, the there is some hardware within that processes oral query for response as sound, motion or image and, therefore, not exactly beyond the scope of coverage within the claimed heading. In the absence of such controverting within rule 1 and rule 3 of General Rules for Interpretation of the Import Tariff in Customs Tariff Act, 1975, a finding of conformity of description corresponding to the proposed tariff item that is not followed by resort to rule 3 of General Rules for Interpretation of the Import Tariff in Customs Tariff Act, 1975 places the exercise by the adjudicating authority in serious jeopardy and motivated by intent to deny duty benefits any which way. It is admitted that MIKO 1 was declared as toy but there is no ground to hold fast to the conviction that a subsequent variant, even if conforming to another description, must continue to be classified against an erroneous tariff item. The impugned order has referred to the rejection of application for registration of MIKO 2 under Electronics and Information Technology (Requirements of Compulsory Registration) Order by Bureau of Indian Standards (BIS) owing to expert opinion of Ministry of Electronics and Information Technology (MeitY). It is on record that the registration was subsequently incorporated. It is also contended that MIKO 2 and MIKO 3 are more akin than MIKO 1 is to MIKO 2. None of this alters the onus that devolves on customs authorities in terms of the decisions of the Hon ble Supreme Court in re HPL Chemicals and in re Hindustan Ferodo. The lack thereof places the findings in the impugned order in serious jeopardy. The description of the imported goods is not just toys made of plastic. That it has capabilities endowed by technological development does set it apart from a toy and, even if does conform to toy, it was necessary to show that the goods do not contain the essentials enumerated in tariff item 8471 4190 of First Schedule to Customs Tariff Act, 1975. Such finding is glaringly deficient in the impugned order. The classification adopted in other countries may not be a guide for assessment in India when the dispute has its genesis in perceived evaporation of duty; it is inevitable that identical duty rates marginalizes declaration relevance. Reliance thereto will not suffice for the purpose. We fail to perceive the dearth of complexity that may justify shift of classification from within heading 8471 to heading 9503 of First Schedule to Customs Tariff Act, 1975. The findings are conjectures and assumptions that are not backed by authoritative texts, notes or definitions in law or even logical sequencing. These are not tenable in a classification exercise. The impugned order has not established the primacy of heading 9503 of First Schedule to Customs Tariff Act, 1975 nor the inappropriateness of heading 8472 of First Schedule to Customs Tariff Act, 1975. The rules of engagement enunciated by the Hon ble Supreme Court for altering classification has not been followed by the adjudicating authority. The facts, indelibly clear, does not controvert conformity with the essential requirements set out in note 5(A) in chapter 84 of First Schedule to Customs Tariff Act, 1975 There is no finding that the impugned goods, by incorporating or working in conjunction with automatic data processing (ADP) machines , performs the function of toys which should be the consummation of resort to note 5(E) in chapter 84 of First Schedule to Customs Tariff Act, 1975 and such finding is well-nigh impossible in the absence of any authoritative guidance on toys and its intended functions. A thought process conditioned by one s own childhood or parenting experience is not a tenable substitute. Even if this note comes into play insofar as the impugned goods are concerned, the impossibility of appending toys renders the claimed classification to be the only one remaining in the ring. Consequently, the classification claimed must remain. The impugned order is set aside to allow the appeal.

Summary

Issues Involved:
1. Classification of MIKO II: Whether it should be classified as an 'automatic data processing (ADP) machine' under heading 8471 or as a 'toy' under heading 9503 of the First Schedule to the Customs Tariff Act, 1975.
2. Onus of Proof: Whether the customs authorities discharged their burden of proof in reclassifying the goods.
3. Applicability of Exemptions: Whether the goods qualify for exemption from basic customs duty (BCD) under notification no. 24/2005-Cus dated 1st March 2005.

Summary:

1. Classification of MIKO II:
The appellant argued that MIKO II, a sophisticated electronic device, should be classified under heading 8471 as an 'automatic data processing (ADP) machine,' claiming it meets the criteria of note 5A in chapter 84. The customs authorities, however, classified it as a 'toy' under heading 9503, arguing that MIKO II is similar to MIKO I, previously classified as a toy, and intended for children. The tribunal found that MIKO II's advanced features and technological components set it apart from conventional toys, and the adjudicating authority failed to justify its classification under heading 9503.

2. Onus of Proof:
The tribunal emphasized the onus on customs authorities to establish the correct classification, citing Supreme Court precedents in Hindustan Ferodo Ltd v. Collector of Central Excise and HPL Chemicals Ltd v. Commissioner of Central Excise, Chandigarh. The adjudicating authority's failure to provide sufficient evidence and reliance on assumptions and conjectures led to the tribunal's conclusion that the burden of proof was not met.

3. Applicability of Exemptions:
The appellant claimed that MIKO II should be exempt from basic customs duty (BCD) as per notification no. 24/2005-Cus, applicable to goods under heading 8471. The tribunal noted that the adjudicating authority did not adequately address the technological evolution and distinct features of MIKO II, which align more closely with the claimed classification. Consequently, the tribunal found that the claimed classification under heading 8471 should prevail, allowing the exemption from BCD.

Conclusion:
The tribunal set aside the impugned order, allowing the appeal and confirming the classification of MIKO II under heading 8471 of the First Schedule to the Customs Tariff Act, 1975, thereby qualifying for the claimed exemption from basic customs duty.