2024 (12) TMI 364 - AT - Customs

Classification of goods Innopet Plasmax System20Q machinery - demand of differential duty of customs in respect of the subject B/E u/s 28 (4) the Customs Act, 1962 along with interest - confiscation of impugned goods - imposition of penalties on the appellants under provisions the Customs Act, 1962. Whether, it merits classification under Customs Tariff Item (CTI) 8422 3000as claimed by the appellants; or, is it classifiable under CTI 8479 8999as contended by the Department, for deciding on the appropriate levy of customs duty, and whether the adjudged demands including penalty imposed in the impugned order is sustainable or not? HELD THAT - At the Chapter level i.e., Chapter 84, there is no difference of opinion in classification of goods among the appellants and the department. The dispute in classification lies in the narrow compass of the two Sub-headings i.e., 842230 or 8479 89 and the respective Tariff Items i.e., 842230 00or 8479 89 99 falling there under, in which the impugned goods are correctly classifiable. Now, we may closely examine the scope of the contending Sub-headings and Tariff Items thereof for determining correct classification of the imported goods. In the present case, the appellants had filed the five Bills of Entry (B/Es), by describing the imported goods in terms of specific description based on their function such as blow moulding machine, coating machine, filling machine, labelling machine, bottle dryer machine, shrink packing machine, which form a part of filling up of aerated water. Further, on perusal of the goods covered under each of the sub-heading - single dash, it would follow that dish washing machines of house hold type and other types are specifically covered under sub-heading 842210, in terms of specific tariff entry at 8422 1100 and 8422 1900, respectively. Further, machinery for cleaning or drying bottles/containers are covered under sub-heading 8422 20/tariff entry 8422 2000, with no further sub-classification. Machines having specific function mentioned therein and machinery used for aerating the beverages or aerated water are covered under sub-heading8422 30/tariff entry 8422 3000, with no further sub-classification. Machinery used for packing or wrapping are covered under sub-heading 8422 40/tariff entry 8422 4000, with no further sub-classification. The parts of these machinery are grouped under residual entry at sub-heading 8422 90, with specific tariff entry for the machines of category corresponding with the above-mentioned sub-heading. Revenue s contention is that the imported goods are rightly classifiable under tariff item 8479 89 99, under the category of machines having individual function on the basis of its functionality. Though there is no specific mention of coating function in these group of machines at the six-digit sub-heading level or eight-digit tariff item level in the Customs Tariff, learned Commissioner had come to the conclusion that coating machine, function independently of the blow moulding machine and the filling machine, as detailed in paragraphs 30.1 to 30.2 of the impugned order, for justifying the classification adopted by the department. As the sub-heading 8422 30 specifically cover machines for aerating beverages , and the entry in heading 8479 makes it clear that it covers only those machines which are not specifically included or covered elsewhere in Chapter 84, the aforesaid conclusion arrived at the impugned order is contrary to the legal position contained in the Customs Tariff Act, 1975. On the basis of above analysis about the scope of coverage of goods under contending sub-headings 842230 or 8479 89, in terms of GIR-1, it can be concluded that appropriate classification of the impugned goods as per the terms of headings , is sub-heading 8422 30 inasmuch as it specifically refers the impugned machines by their functions and the industry of aerated beverages; and not sub-heading 8479 89, which is a residuary category, with no specific mention of the function or industry where the impugned goods are used. Thus, upon detailed analysis of the scope of coverage of goods under contending sub-headings in paragraphs 9.1 to 9.5 as above, and on the basis of the Section Notes 3, 4 of Section XVI covering goods of chapter 84, it is opined that the imported machinery Innopet Plasmax System 20Q used for coating of PET bottles for aerating of beverages/ aerated waters are appropriately classifiable under CTI 8422 3000 and its parts thereof under CTI 8422 9090 of the First Schedule to the Customs Tariff Act, 1975. The classification under tariff item 8422 30 00 is appropriate as per GIR 3. Hence, the appropriate classification of the imported goods would be under Customs Tariff Item 8422 30 00. The Co-ordinate Bench of the Tribunal have examined the issue of classification of similar machinery used in aerated water manufacturing industry in the case of HINDUSTAN COCA COLA BEVERAGES PVT. LTD. VERSUS COMMISSIONER OF CUSTOMS (IMPORT) ACC, MUMBAI 2017 (4) TMI 418 - CESTAT MUMBAI and have held that the machines are classifiable under sub-heading 842230. The goods under consideration i.e., Coating machine - Innopet Plasmax System 20Q would be appropriately classifiable under Customs Tariff Item (CTI) 8422 30 00 and not under CTI 8479 89 99, as claimed by Revenue. Further, parts of such coating machine, therefore is appropriately classifiable under CTI 8422 90 90. The impugned order passed by the learned Commissioner of Customs cannot stand the legal scrutiny - the impugned order is set aside and the appeals are allowed in favour of the appellants.

Summary

Issues Involved:

1. Classification of the imported machinery "Innopet Plasmax System 20Q".
2. Appropriate levy of customs duty.
3. Sustainability of adjudged demands including penalties.

Detailed Analysis:

1. Classification of the Imported Machinery:

The primary issue was whether the imported machinery "Innopet Plasmax System 20Q" should be classified under Customs Tariff Item (CTI) 8422 3000 as claimed by the appellants, or under CTI 8479 8999 as contended by the Department. The appellants argued that the machinery is part of a composite bottling plant and should be classified under CTI 8422 3000, which covers "machinery for aerating beverages." They supported their classification by citing Section Notes 3, 4, and 5 of Section XVI of the Customs Tariff Act, 1975, and Rule 3(a) of the General Rules of Interpretation. The Revenue, however, contended that the machinery should be classified under CTI 8479 8999, as it performs an individual function not specified elsewhere in Chapter 84.

Upon analysis, the Tribunal concluded that the machinery is appropriately classifiable under CTI 8422 3000. The Tribunal reasoned that the machinery forms part of a composite system designed for aerating beverages, and its classification should reflect its principal function as part of the aerated water bottling process. The Tribunal relied on Section Notes 3 and 4 of Section XVI, which emphasize the principal function of composite machines for classification purposes. Additionally, the Tribunal referenced the Harmonized Commodity Description and Coding System (HS) Explanatory Notes, which support the classification of machinery used in bottling aerated beverages under heading 8422.

2. Appropriate Levy of Customs Duty:

The classification of the machinery under CTI 8422 3000 affects the applicable customs duty rate. The appellants had initially self-assessed the duty at a concessional rate of 5% under Notification No. 50/2017-Customs. The Tribunal's decision to classify the machinery under CTI 8422 3000 supports the appellants' claim for the concessional duty rate, as this classification aligns with the machinery's function within the aerated water bottling process.

3. Sustainability of Adjudged Demands Including Penalties:

The Tribunal examined whether the adjudged demands, including penalties imposed in the impugned order, were sustainable. Given the Tribunal's conclusion on the correct classification of the machinery, the demands for differential duty and penalties based on the Department's classification under CTI 8479 8999 were found to be unsustainable. The Tribunal set aside the impugned order, thereby allowing the appeals in favor of the appellants.

The Tribunal also referred to previous judicial pronouncements, including cases such as Hindustan Coca Cola Beverages Pvt. Ltd. and KHS Machinery Pvt. Ltd., which supported the classification of similar machinery under CTI 8422 3000. The Tribunal emphasized that classification under a residuary heading to charge a higher duty rate is not justified when the goods can reasonably be classified under a specific enumerated item in the Tariff Schedule.

In conclusion, the Tribunal's judgment favored the appellants, classifying the machinery under CTI 8422 3000 and setting aside the demands and penalties imposed by the Commissioner of Customs. The appeals were allowed, and the impugned order was set aside.