2024 (9) TMI 1554 - AT - Customs

Demand of differential duty - levy of personal penalty - wrongful classification of goods - sawn New Zealand pine logs - to be classified under CTH 4403 or under CTH 4407? - burden to prove on Department - department failed to discharge the burden of reclassification - HELD THAT - To classify the goods under CTH 44.07, department has to show that goods were found cut in standard length with extremely accurate dimensions. Burden of proof is on the department, as it has sought to re-classify the product. The photographs taken in presence of panchas that are scanned and reproduced on page 25 to 27 of impugned order reveal that the goods are having dimensions of cuboids but it cannot be considered to be of extremely accurate dimensions, as is the requirement of the note. The terms used by Panchnama of goods being were not found to be squared logs, but were found to be of standard cut lengths with extremely accurate dimensions are as per H.S.N. Panchnama also indicates that 10% logs showed presence of bark traces. It was indicated that dimensions were not extremely accurate. Further the photos on records, as under also do not reveal extremely accurate dimensions. Further, logs with traces of bark, in any case cannot be considered as having extremely accurate dimensions. Department has also not shown that process of chipping was used to obtain better surface than sawing. Benefit of conflicting and in complete statements of panchas, C.H.A and A.R of the appellants in the absence of any expert opinion by the department as chipping having been involved also has to be construed in favour of the appellant, as burden of proof in classification matters is on the department. There are merit in the submissions made that the impugned goods deserve classification under 44.03 and not under T.H. 4407. Reliance in this regard also is placed on the decision of Hon ble Tribunal in the case BHAIRAMAL GOPIRAM VERSUS COMMISSIONER OF CUSTOMS, CALCUTTA 2000 (6) TMI 474 - CEGAT, KOLKATA , wherein, it was held that ' It is well settled that the burden in such cases is upon the Revenue to show that the goods fell under 4407.' The department has failed to discharge the burden of reclassification. There are no merit in holding impugned goods as classifiable under T.H. 44.07. It is found that same have been correctly classified under T.H. 4403.99. Since classification dispute is at the core of the controversy and same has been decided is in favour of the party, other issues for decision are relegated to redundancy. Appeal allowed.

Summary

Issues Involved:
1. Classification of goods under CTH 4403 vs. CTH 4407.
2. Accuracy of dimensions of the imported logs.
3. Requirement of further machining or planing.
4. Burden of proof for reclassification.
5. Reliance on previous judicial decisions.

Issue-wise Detailed Analysis:

1. Classification of Goods under CTH 4403 vs. CTH 4407:
The core issue revolves around whether the imported sawn New Zealand pine logs should be classified under Chapter heading 4403 or 4407. The department argued that the goods were perfect cuboids with standard cut lengths and extremely accurate dimensions, thus meriting classification under CTH 4407. However, the appellant contended that the goods were roughly squared logs requiring further sawing and should be classified under CTH 4403.

2. Accuracy of Dimensions of the Imported Logs:
The department's panchanama dated 13.04.2016 indicated that the goods were not roughly squared logs but had extremely accurate dimensions. Conversely, the appellant's representative, Shri Bhupendra Chaturvedi, stated that the logs were roughly squared, needed further sawing, and were not of standard dimensions. The Tribunal found no expert opinion on record to confirm the accuracy of the dimensions and noted that 10% of the logs had bark traces, indicating they were not of extremely accurate dimensions.

3. Requirement of Further Machining or Planing:
The Tribunal highlighted that for classification under CTH 4407, the goods must be chipped to extremely accurate dimensions, rendering subsequent planing unnecessary. The lower authorities did not establish that the logs could be used without further machining or planing. The photographs and statements on record did not support the claim that the logs had surfaces better than those obtained by sawing, which is a requirement for classification under CTH 4407.

4. Burden of Proof for Reclassification:
The burden of proof for reclassification lies with the department. The Tribunal emphasized that the department failed to provide sufficient evidence to support the reclassification of the goods under CTH 4407. The conflicting statements and lack of expert opinion further weakened the department's case.

5. Reliance on Previous Judicial Decisions:
The Tribunal referred to previous decisions, such as Atul Timber Ltd. v/s Commissioner of Customs, Nagpur, and Bhairamal Gopiram v/s Commissioner of Customs, Calcutta, which supported the appellant's classification under CTH 4403. In these cases, it was established that goods requiring further machining or planing should not be classified under CTH 4407.

Conclusion:
The Tribunal concluded that the department failed to discharge the burden of proof for reclassification under CTH 4407. The goods were correctly classified under CTH 4403, as they required further sawing and were not of extremely accurate dimensions. Consequently, the appeals were allowed, and the impugned order was set aside.

Judgment:
The Tribunal allowed the appeals, pronouncing the judgment in favor of the appellant and confirming the classification of the goods under CTH 4403. The decision was pronounced in the open court on 26.09.2024.