1996 (10) TMI 270 - AT - Customs

Issues Involved:
1. Classification of imported goods.
2. Validity of the import licence.
3. Applicability of Notification No. 230/83-Cus.
4. Customs duty and countervailing duty (CVD) assessment.
5. Compliance with Import Policy AM-85.

Issue-Wise Detailed Analysis:

1. Classification of Imported Goods:
The primary issue was whether the imported polyester films coated with ferric oxide should be classified under Item 39.01/06 ICT or under Item 92.01/13 read with Item 68 CET. The appellants argued that the goods were plain plastic films and should be classified under Chapter 39, while the Customs Authorities contended that the goods were prepared media for sound recording and should fall under Chapter 92.

The Tribunal observed that the imported item was a polyester film coated with ferric oxide, making it magnetic in nature. However, it was not yet prepared as media for sound recording, as it needed further processing. The Tribunal referred to Chapter Note 3(d) and explanatory notes under CCCN and HSN, which exclude articles intended for use as media for recording sound but not yet prepared as such. Consequently, the Tribunal concluded that the imported item should be classified under Chapter 39 as it had not reached the stage of a finished product for sound recording.

2. Validity of the Import Licence:
The appellants produced an additional licence endorsed under Para 186 of Import Policy AM-85 for the import of the goods. The Customs Authorities argued that the goods were not covered by the licence as they were classified under Chapter 92, which required a specific import licence.

The Tribunal found that the licence referred to Para 186 of AM-85 Policy, which allowed the import of items appearing in Appendix 4 but excluding those in Appendix 13. Since the imported goods were classified under Chapter 39, they were covered by Entry 290 of Appendix 4, which includes polyester films. Thus, the Tribunal held that the import licence was valid for the imported goods.

3. Applicability of Notification No. 230/83-Cus:
The appellants claimed a lower assessment of customs duty under Notification No. 230/83-Cus, which provided exemptions for polyester films used for manufacturing magnetic tapes. The Customs Authorities denied this benefit, arguing that the goods were prepared media for sound recording and did not qualify for the exemption.

The Tribunal determined that the imported goods were not yet prepared media for sound recording and were still in the form of raw material. Therefore, the goods were eligible for the benefit under Notification No. 230/83-Cus, subject to the fulfilment of other conditions mentioned in the notification.

4. Customs Duty and Countervailing Duty (CVD) Assessment:
The Customs Authorities assessed the goods under Item 92.01/13 for customs duty and under Heading 68 of CET for CVD. The appellants contended that the goods should be assessed under Item 39.01/06 ICT and under Item 15A for CVD.

The Tribunal held that since the goods were classified under Chapter 39, they should be assessed under Item 39.01/06 ICT for customs duty. Consequently, for CVD purposes, the goods should be considered as articles of plastic under Item 15A, not under the residuary Item 68.

5. Compliance with Import Policy AM-85:
The Customs Authorities issued a show cause notice alleging that the importation was unauthorized and demanded additional duty. The appellants argued that the goods were cleared provisionally and that the show cause notice should not have been issued.

The Tribunal noted that the Assistant Collector had accepted the licence and allowed the provisional release of the goods. Since the imported goods were classified under Chapter 39 and covered by the licence, the importation was authorized. The Tribunal found no basis for the show cause notice and upheld the provisional assessment.

Conclusion:
The Tribunal concluded that the imported polyester films coated with ferric oxide were not yet prepared media for sound recording and should be classified under Chapter 39. The import licence produced was valid, and the goods were eligible for the benefit under Notification No. 230/83-Cus. The assessment for customs duty should be under Item 39.01/06 ICT, and for CVD under Item 15A. The appeal was accepted, and the show cause notice was set aside.

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