2024 (8) TMI 331 - AT - Customs

Classification of imported goods - medical grade monitor - to be classified within heading 8529 of First Schedule to Customs Tariff Act, 1975 or heading 9018 of First Schedule to Customs Tariff Act, 1975? - benefit of concessional rate of duty under N/N. 50/2017-Cus dated 30th June 2017 - Penalty u/s 114A of Customs Act, 1962 - HELD THAT - The show cause notice proposed that the description corresponding to tariff item 8528 5900 of First Schedule to Customs Tariff Act, 1975 was more apt and to be adopted as mandated in terms of rule 3(a) of General Rules for Interpretation of the Import Tariff appended to Customs Tariff Act, 1975. Notwithstanding the limited scope of the notice, the adjudicating authority has proceeded to classify the goods with reference to rule 1 of General Rules for Interpretation of the Import Tariff appended to Customs Tariff Act, 1975 besides touching upon rule 2 as well as rule 3A. There can be no doubt that monitors of every kind are covered under heading 8528 of First Schedule to Customs Tariff Act, 1975 and comprises four tariff lines of which two pertain to cathode-ray tube monitors while the other covers every other type of monitors including the impugned goods. It is not that the cathode-ray tube monitors were further divided as that connecting to, and designed for use with, automatic data processing machines and others. With the lack of distinction between monitors used with automated data processing machines and others being so palpable, it is not conceivable that the adopted heading was residual - In the light of the comprehensiveness of the adopted heading to discredit, summarily enough, the claim of the appellant that residuary entry within a heading intended for instruments and appliances is more specific, there are no reason to disturb the classification proposed in the show cause notice and confirmed in the impugned order. The impugned order has traversed beyond the show cause notice in attempting to classify the goods exclusively by resort to rule 1 of General Rules for Interpretation of the Import Tariff appended to Customs Tariff Act, 1975. Probably conscious of the sequence, the adjudicating authority did, nonetheless, go on to test the applicability of other rules which, in the light of the proposal in the show cause notice was unnecessary as the proceedings did not have to go beyond examining the validity of the proposal in the show cause notice - The affirmation of rule 3 of General Rules for Interpretation of the Import Tariff appended to Customs Tariff Act, 1975 does not permit such a finding as the classification declared by the importer was not inapt but only loses out in comparison by the degree of specificity. Penalty u/s 114A of Customs Act, 1962 - HELD THAT - There is no finding on the manner in which there has been a misdeclaration or willful misstatement with intention to evade payment of duty. It would, therefore, be appropriate for the original authority to apply its mind to a specific finding on a manner in which section 114A of Customs Act, 1962 could have been invoked for imposition of penalty in the light of the proposal in the show cause notice. Thus, while upholding the classification confirmed in the impugned order, the dispute is remanded back to the original authority for this limited purpose.

Summary

Issues:
Classification of imported goods under Customs Tariff Act, 1975 based on intended use as medical grade monitors.

Analysis:
1. The appeal challenged the classification of 'medical grade monitors' imported by M/s Akarui Solution LLP under heading 8529 of the Customs Tariff Act, 1975, instead of heading 9018 claimed by the importer for being used in the medical field. The dispute centered around the specific description in the tariff for duty rate determination.

2. The importer imported the goods under a concessional rate of duty but faced a show cause notice proposing recovery of differential duty. The adjudicating authority classified the goods as monitors under heading 8529, despite their medical use, based on the General Rules for Interpretation of the Import Tariff. The authority emphasized luminance stability and reproducibility in medical displays but rejected classification under heading 9018.

3. The appellant contended that the imported goods, used in medical settings, should not be considered ordinary monitors and should be classified under heading 9018. Reference was made to legal precedents emphasizing the relevance of section notes and chapter notes in classification disputes.

4. The appellant further relied on Supreme Court decisions highlighting the importance of Explanatory Notes to the Harmonized System of Nomenclature and the common parlance test in classification disputes. The Tribunal's decisions regarding the coverage of instruments under specific headings were also cited in support of the appellant's argument.

5. The Authorized Representative argued that all types of monitors fall under heading 8528 of the Customs Tariff Act, 1975, and not under heading 9018, emphasizing the broad coverage of the heading for monitors.

6. The Tribunal, upon review, found that the show cause notice proposed the classification under heading 8528, contrary to the adjudicating authority's classification under rule 1 of the General Rules for Interpretation. The Tribunal noted that the authority's deviation from the notice's scope was improper, especially concerning the application of section 114A of the Customs Act, 1962.

7. The Tribunal affirmed that monitors fall under heading 8528, including those used for medical purposes, and rejected the appellant's claim for classification under heading 9018. The decision emphasized the specificity of the adopted heading and the lack of distinction between monitors used with automated data processing machines and others.

8. While upholding the classification under heading 8528, the Tribunal found that the authority exceeded the show cause notice's scope by solely applying rule 1 for classification. The Tribunal highlighted the unnecessary examination of other rules and the lack of findings on misdeclaration or willful misstatement for invoking section 114A of the Customs Act, 1962.

9. Consequently, the dispute was remanded to the original authority for a specific determination on the misdeclaration issue and the potential imposition of penalties under section 114A, despite upholding the classification under heading 8528 for the imported goods.