2025 (1) TMI 795 - AT - Customs

Classification of imported Optical Power Ground Wire Fibre Cable (OPGW) and its accessories - to be classified under the Customs Tariff Heading 8544 and the accessories under CTH 853670 respectively or under CTH 9001 and heading 7616 respectively? - applicability of Boards instruction contained in Circular 12/2006-Cus dated 28/02/2006 issued from F No 528/8/2006-Cus(TU) - HELD THAT - The circular states that the optical fibres of Heading 8544 are made of individually sheathed fibres, whereas cables of Heading 9001 are not individually sheathed and specifically excluded products of 8544. This alert was all the more reason to preserve clinching evidence of the product by drawing samples and seeking the opinion of an expert. This critical evidence is missing in the present case. The goods have also been cleared for home consumption and are not available for examination. It is seen that the imports were made against a contract with TNEB. It was very likely that the contract would specify the product description and requirement which could have been used as a reference point. However, the same has also not been relied upon in the impugned order. While seeking to classify a product it was for the departmental authorities to gather the product specification / literature, process of manufacture, compliance to a recogonised standard, contract copy and if required even a test report/ opinion from the appropriate authority and make it a part of the SCN. Classification cannot be made by assumptions and presumptions however so nuanced the order may be, when OPGW available in the market can be both sheathed and unsheathed, as recogonised in the Boards circular above. Moreso when it is this characteristic which is critical for the products classification. Further ultimate usage of a product is not relevant for classification, when the tariff entry refers to no such end use. The rule of best evidence states that, so long as higher or superior evidence could have been produced or may be reached, no inferior proof shall be submitted in relation to it. Hence in this case there can be no substitute for going by the actual physical characteristics and description of the impugned goods. Further it is not even the case of revenue that the goods were shown to be manufactured adhering to a recogonised standard that incorporates the characteristics relevant for the classification. Revenue has hence failed to prove its case on the classification of the goods under Tariff Heading 9001 and the impugned order merits to be set aside. Conclusion - The classification of goods must be based on actual physical characteristics, and authorities must provide conclusive evidence to support their claims. The absence of such evidence undermines the validity of the classification and any consequent denial of exemptions. The classification under Heading 9001 was not justified, and the exemption denial was incorrect. Appeal disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• What is the correct classification of the imported Optical Power Ground Wire Fibre Cable (OPGW) under the Customs Tariff?
• Whether the imported goods qualify for exemption under Notification No. 24/2005-Cus dated 1.3.2005?
• Is the absence of a test report for the samples drawn at the time of import significant in determining the classification?
• Did the authorities err in relying on catalogues available in the public domain instead of physical examination and testing of the goods?

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification of Imported Goods

• Relevant Legal Framework and Precedents: The classification dispute revolves around Customs Tariff Heading 8544 versus 9001. The legal framework includes the Customs Tariff Act and relevant notifications, such as Notification No. 24/2005-Cus. The precedents cited include the Supreme Court decisions in Union of India Vs Garware Nylons Ltd. and Commissioner of Central Excise, Nagpur Vs Vicco Laboratories, emphasizing the burden of proof on the taxing authorities.
• Court's Interpretation and Reasoning: The court noted that the classification depends on whether the fibres are individually sheathed. The tribunal emphasized that the burden of proof lies with the authorities to demonstrate the correct classification.
• Key Evidence and Findings: The absence of a test report for the samples drawn at the time of import was critical. The tribunal found that the authorities failed to provide conclusive evidence regarding the physical characteristics of the imported goods.
• Application of Law to Facts: The tribunal applied the principle that classification should be based on actual physical characteristics, not assumptions or catalogues. The absence of test results weakened the authorities' position.
• Treatment of Competing Arguments: The appellant argued that the goods should be classified under Heading 8544 based on their characteristics, while the authorities claimed Heading 9001 was appropriate. The tribunal found the appellant's arguments more persuasive due to the lack of evidence from the authorities.
• Conclusions: The tribunal concluded that the authorities failed to meet their burden of proof, and the classification under Heading 9001 was not justified.

Issue 2: Exemption under Notification No. 24/2005-Cus

• Relevant Legal Framework and Precedents: The notification provides exemptions for certain classifications under the Customs Tariff.
• Court's Interpretation and Reasoning: The tribunal focused on the classification issue, as the exemption depended on the correct classification of the goods.
• Key Evidence and Findings: The lack of evidence supporting the classification under Heading 9001 meant the exemption denial was not substantiated.
• Application of Law to Facts: Without proper classification under Heading 9001, the denial of exemption under the notification was unfounded.
• Treatment of Competing Arguments: The appellant's entitlement to exemption was contingent on classification under Heading 8544, which the tribunal found plausible.
• Conclusions: The tribunal held that the denial of exemption was incorrect due to the misclassification.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "The burden of proof is on the taxing authorities to show that the particular case or item in question, is taxable in the manner claimed by them."
• Core Principles Established: The classification of goods must be based on actual physical characteristics, and authorities must provide conclusive evidence to support their claims. The absence of such evidence undermines the validity of the classification and any consequent denial of exemptions.
• Final Determinations on Each Issue: The tribunal set aside the impugned order, allowing the appeal with consequential relief. The classification under Heading 9001 was not justified, and the exemption denial was incorrect.