2024 (8) TMI 409 - AT - Customs

Classification of imported goods - spare parts for injection moulding machine - classifiable under Customs Tariff Heading 84779000 or under heading 84771000 - allegations in the notice were that in terms of Notification 09/2016-(ADD) dated 15.03.2016 Horizonal Injection Moulding Machine imported from Chinese Taipei attract anti dumping duty at the rate of 27.98% of the landed value - HELD THAT - Note (IV) of the Section XVI relates to unassembled machines i.e. an assembly of parts so far advanced that it already has the main essential features of the complete machine. In the instant case, there is no allegation that what has been imported is partly assembled. A perusal of the Chartered Engineer Report also indicate that it does not indicate that the goods are either partly assembled or have the essential feature of the complete machine - The report of the Chartered Engineer does not indicate that the goods imported are in partly assembled condition or if they have any essential feature of the finished goods. In view of above Note (IV) of the Section XVI of HSN cannot be applied to the instant case. Rule 2(a) would apply only when the imported articles presented in unassembled or disassembled can be put together by means of simple fixing device or by riveting or welding. In the instant case, there is no evidence that the parts imported by the appellants can be assembled into machines by simple procedures. The report of Chartered Engineer is silent on this aspect. Whereas the appellants have claimed that the individual parts need processes like polishing, grinding, drilling, tapping, T slotting, scraping, wiring, painting or some parts like T slot in platens, scraping of base for partial adjustment and all these processes were required to be completed with the help of some mechanical/ electrical machines. The said argument that these processes are necessary for assembly of the finished Horizontal Moulding Machines has not been contested by the adjudicating authority. Thus, the goods cannot be treated as complete or incomplete machines. A perusal of the description of material found in the black coloured folder, it is apparent that it runs into more than 60 pages. It not only contains the details of assembly but also details of a lot of sub-systems of the machines. The page 65 contains hydraulic system parts list printed on the bottom left side. From the list of parts annexed to the report of Chartered Engineer, it is found there is no mention of any hydraulic system or hydraulic manifold distribution in the list of parts imported. From the above, it is also apparent that the details of the parts necessary for manufacture of the complete machine was available however, the Engineer has not made any attempt to compare the said list with the actual imports to identify the parts which were missing. There are no merit in the order changing the classification and demanding duty. The impugned order is therefore, set aside and appeals of M/s Huarong Plastic Machinery India Limited, Jitesh Virendra Kumar Papaiyawala and Shri Yao Hui Hsiao are allowed - appeal of revenue seeking imposition of penalty under section 114A is dismissed.

Issues Involved:
1. Classification of imported goods.
2. Reassessment of bills of entry and demand for Anti-Dumping Duty.
3. Confiscation of goods and imposition of redemption fine.
4. Imposition of penalties under various sections of the Customs Act.
5. Enforcement of bond and bank guarantee for provisional release of seized goods.

Detailed Analysis:

1. Classification of Imported Goods:
The core issue was whether the goods imported by M/s Huarong Plastic Machinery India Pvt Ltd (HPMIPL) should be classified under heading 84779000 (parts) or 84771000 (complete machines). The Customs authority argued that the imported goods were incomplete or unassembled machines, thus classifiable under 84771000. However, the Tribunal found no evidence that the imported parts could be assembled into machines by simple procedures, as required by Rule 2(a) of the Rules of Interpretation of Tariff. The Chartered Engineer's report did not indicate that the goods were partly assembled or had the essential features of complete machines. Consequently, the Tribunal concluded that the goods should be classified under 84779000.

2. Reassessment of Bills of Entry and Demand for Anti-Dumping Duty:
The Customs authority demanded Anti-Dumping Duty (ADD) under Notification 09/2016-(ADD) dated 15.03.2016, applicable to horizontal injection moulding machines from Chinese Taipei. The Tribunal observed that the show cause notice did not propose to change the classification of goods from 84779000 to 84771000. Since the goods were not reclassified, the demand for ADD was not justified. The Tribunal emphasized that the notification should be interpreted strictly, and no ADD could be imposed on goods classified under 84779000.

3. Confiscation of Goods and Imposition of Redemption Fine:
The impugned order had ordered the confiscation of the imported goods and imposed a redemption fine. However, since the Tribunal found that the goods were correctly classified under 84779000 and not subject to ADD, the basis for confiscation was invalid. Consequently, the order for confiscation and the associated redemption fine were set aside.

4. Imposition of Penalties Under Various Sections of the Customs Act:
Penalties were imposed under Sections 112(a)(ii), 114A, and 114AA of the Customs Act on HPMIPL and its directors. The Tribunal noted that the penalties under Section 114A were set aside by the Commissioner on the grounds that penalties had already been imposed under Section 112(a). The Tribunal upheld this decision, referencing the Supreme Court's decision in Dharmendra Textile & Processors, which established that penalties under similar provisions in the Central Excise Act should be interpreted similarly. Since the goods were not misclassified or subject to ADD, the penalties under Sections 112(a)(ii) and 114AA were also set aside.

5. Enforcement of Bond and Bank Guarantee for Provisional Release of Seized Goods:
The impugned order enforced a bond and bank guarantee furnished by HPMIPL for the provisional release of seized goods. Given the Tribunal's findings that the goods were correctly classified and not subject to ADD, the enforcement of the bond and bank guarantee was unnecessary. The Tribunal ordered the release of the bond and bank guarantee.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeals of M/s Huarong Plastic Machinery India Pvt Ltd, Jitesh Virendra Kumar Papaiyawala, and Yao Hui Hsiao. The appeal by the Revenue seeking the imposition of penalty under Section 114A was dismissed. The Tribunal emphasized the importance of strict interpretation of notifications and the necessity of clear evidence for reclassification and imposition of duties and penalties.

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