2009 (8) TMI 470 - AT - Customs

Tobacco sorting machine- classification- valuation- the dispute involved in this case relates to the issue of classification of the impugned goods as well as valuation of the same. The impugned goods were imported temporarily for testing purpose and subsequently the same has been sent back to Belgium. As regards the issue of classification, the department has classified the impugned machinery under sub-heading 8478.10 as tobacco processing machine while the appellants have claimed classification of the impugned import under Heading 84.33 as sorting machine as the same does not do any processing but sorting. Held that- we find that the impugned machinery is a sorting machine and appellant is correct. As regards the valuation, the ld. Advocate shows from the invoice copy that the invoiced terms were DDP Guntur, and hence the adjudicating Commissioner is wrong in assuming the same to be FOB price and adding ocean freight and ocean insurance to the declared value. Held that- In fact, the appellants would have been within their right to claim assessment at a lower price since deriving the CIF price from the invoice value on DDP basis would require deductions towards cost incurred in India subsequent to import. However, since no such claim for deduction has been made by the appellants, we accept the claim of the appellants for assessment at the declared price. Thus, set aside the impugned order and allow the appeal with consequential relief to the appellants.

Summary

Issues: Classification of imported goods and valuation of the same.

Classification Issue Analysis:
The dispute in this case revolves around the classification of the imported machinery. The department classified it as a tobacco processing machine under sub-heading 8478.10, while the appellants claimed it should be classified under Heading 84.33 as a sorting machine since it does not process but sorts. The advocate for the appellants supported this claim with relevant literature and Explanatory Notes to HSN Headings. The Tribunal found that the impugned machinery is indeed a sorting machine used in a tobacco processing plant for sorting tobacco and non-tobacco material based on various characteristics, including biological ones invisible to the human eye. They concluded that the machinery should be classified under Heading 84.33 as it does not fall under the residuary heading 84.78, which covers machinery for preparing tobacco but not sorting machines.

Valuation Issue Analysis:
Regarding the valuation issue, the advocate for the appellants pointed out that the invoiced terms were DDP Guntur, not FOB price as assumed by the adjudicating Commissioner, who added ocean freight and insurance costs to the declared value. The Tribunal clarified that DDP terms include expenses incurred within India after customs clearance in Guntur, making it incorrect to consider it as FOB price. They highlighted that the appellants could have claimed assessment at a lower price by deducting costs incurred in India post-import, but since no such claim was made, they accepted the assessment at the declared price. The Tribunal emphasized the importance of customs officials being familiar with INCOTERMS like FOB, CIF, and DDP to avoid valuation errors.

Conclusion:
After analyzing both the classification and valuation issues, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellants. They determined that the imported machinery should be classified under Heading 84.33 as a sorting machine and accepted the valuation at the declared price based on the DDP terms specified in the invoice.