2024 (10) TMI 320 - AT - Customs

100% EOU - classification of coin blanks of copper alloys/ strips of copper/ coils of zinc nickel - to be classified under CETH 74094000 as copper plates, sheets and strips of thickness exceeding 0.15mm of copper nickel base alloys or under 7419? - whether copper strips and coin blanks constitute similar goods in order to avail benefit under Para 6.8(a) of Foreign Trade Policy, 2009-14? - demand of Education Cess - Whether penalty can be imposed under Rule 25 of the Central Excise Rules? Whether the classification of the impugned coin blanks should be under Tariff Heading 74094000 as claimed by the appellant or 7419 as alleged by the Department? - HELD THAT - By no stretch of imagination, the coin blanks cannot be classified along with plates and strips of copper as they have distinctive shape, size, character and use; whereas the plates and strips are in the nature of raw material, the coin blanks are near total manufactured item i.e. coins, except for the embossing or printing of the logo and value etc. on the coin blanks - the cases relied upon by the appellants are of no use as the facts are different; the case of P. Chottalal Manufacturers Exporters 2022 (3) TMI 1489 - CESTAT MUMBAI is about the classification of aluminum plates remaining after punching; dispute in the cases of Colts Auto Pvt. Ltd. 1998 (9) TMI 229 - CEGAT, NEW DELHI and Neelmetal Products 2017 (3) TMI 1505 - CESTAT CHANDIGARH is about whether the aluminum circles arising out of punching would merit classification as parts of automobiles; as the facts are different, the ratio of the cases is not applicable - the coin blanks manufactured by the appellants as per orders of the mint have attained the characteristics of articles of copper and therefore, the appropriate classification would be under CETH 7419 as held by the impugned order. Whether copper strips and coin blanks constitute similar goods in order to avail benefit under Para 6.8(a) of Foreign Trade Policy, 2009-14? - HELD THAT - It is found that though for the purpose of classification under the Tariff, coin blanks and copper strips have been classified separately, they do not cease to be similar goods for the purpose of Para 6.8 of the Foreign Trade Policy. The entitlement claimed by the appellants is in order. Demand of Education Cess - HELD THAT - The contention of the appellants that once Education Cess is added to the Customs duties to arrive at the aggregate value in terms of proviso to Section 3(1) of the Excise Act, 1944, the question of charging Education Cess once again does not arise, agreed upon. Whether penalty can be imposed under Rule 25 of the Central Excise Rules? - HELD THAT - The issue is about interpretation of the legal provisions and looking into the fact that a couple of advance rulings of U.S Customs are in favour of the appellants on the issue of classification and the fact that the Adjudicating Authority himself held the main issue to be about legal interpretation, thus no case is made by the Department to impose penalty. Therefore, the penalty imposed is liable to be set aside. Appeal allowed in part.

Summary

Issues Involved:

1. Classification of coin blanks under the appropriate tariff heading.
2. Eligibility of copper strips and coin blanks as similar goods for concessional duty under the Foreign Trade Policy.
3. Applicability of the extended period for demand due to limitation.

Issue-wise Detailed Analysis:

1. Classification of Coin Blanks:

The primary issue was whether the coin blanks manufactured by the appellants should be classified under Tariff Heading 74094000 as claimed by the appellant or under 7419 as alleged by the Department. The appellants argued that the coin blanks, being geometrically cylindrical with a rectangular cross-section, should be classified under Heading 7409, which pertains to copper plates, sheets, and strips. They contended that the blanks did not assume the character of any other articles or products of other headings, as they required further processing to become finished coins. The Department, however, argued that the coin blanks had assumed the character of articles due to their specific size and use, thus classifying them under Heading 7419, which is for other articles of copper. The Tribunal found that the coin blanks had attained the essential character of a coin, having undergone various processes and being manufactured to specific orders from the mint. Consequently, the classification under Heading 7419 was upheld, as the coin blanks were considered distinct articles of copper.

2. Eligibility for Concessional Duty:

The second issue concerned whether copper strips and coin blanks could be considered similar goods under Para 6.8(a) of the Foreign Trade Policy, 2009-14, for concessional duty entitlement. The appellants argued that both products were part of a similar production process and shared physical characteristics, thus qualifying as similar products. The Department contended that the two items were distinct and not commercially interchangeable, hence not eligible for the same concessional duty treatment. The Tribunal referred to previous rulings, including a case involving the appellants, which supported the view that similar products need not be identical and that the entitlement should be based on the value of specific products exported. The Tribunal concluded that the appellants' entitlement to clear goods in the Domestic Tariff Area (DTA) was in order, as the products were deemed similar under the policy.

3. Limitation and Demand:

The third issue was whether the demand was barred by limitation. The appellants contended that the extended period was not invocable as the issue involved interpretation of law, with no evidence of suppression or intent to evade duty. The Tribunal agreed with the appellants, noting that the main issue was legal interpretation and that no positive act of suppression was demonstrated by the Department. Consequently, the demand beyond the normal period was deemed unsustainable, and the penalty imposed under Rule 25 of the Central Excise Rules was set aside.

Conclusion:

The Tribunal's decision resulted in a partial allowance of the appeal. The classification of coin blanks under Chapter 7419 was upheld, along with the confirmation of duty demand of Rs.1,71,72,404/- with interest. However, the demand of Rs.83,23,000/- on DTA clearances and the Cess amounting to Rs.39,74,825/- were set aside. Additionally, the penalty of Rs.50,00,000/- imposed under Rule 25(1) of the Central Excise Rules was also set aside.