1996 (8) TMI 359 - AT - Customs

Synthetic Rubber Grade TS 430 - Demand - Limitation - Strictures against Collector - Bias of adjudicating authority

Issues Involved:

1. Classification of the imported goods under the Customs Tariff Act.
2. Liability for confiscation and imposition of penalties.
3. Allegations of misdeclaration and suppression of facts.
4. Validity of the test reports and expert opinions.
5. Applicability of the extended period for issuing the show cause notice.
6. Applicability of the Calcutta High Court judgment on similar goods.

Issue-Wise Detailed Analysis:

1. Classification of the imported goods under the Customs Tariff Act:

The appeals arose from an order classifying the goods TOSO CSM 430 under chapter sub-heading 3901.90 of the Customs Tariff Act. The appellants argued that the goods should be classified under heading 40.02 as synthetic rubber. The Department alleged that the goods were Chlorosulphonated Polyethylene, a saturated polymer, and not synthetic rubber. The Hon'ble Calcutta High Court in the case of National Insulated Cables Co. Ltd. held that Hypalon-40, a similar product, was classifiable under Chapter 40. The Tribunal, by majority, concluded that the goods were synthetic rubber of a type classifiable under Heading 40.02, relying on the Calcutta High Court judgment.

2. Liability for confiscation and imposition of penalties:

The Collector imposed a penalty of Rs. 2 crores on the appellants under Section 112(a) of the Customs Act for misdeclaration and suppression of facts. Additional penalties were imposed on individuals involved. The Tribunal, however, found no misdeclaration or suppression of facts, as the Department had tested and classified the goods as synthetic rubber from 1984 onwards. Consequently, the penalties were deemed unjustified and were set aside.

3. Allegations of misdeclaration and suppression of facts:

The Department alleged that the appellants misdeclared the goods as "Synthetic Rubber Grade TS-430" instead of Chlorosulphonated Polyethylene. The Tribunal found that the appellants declared the goods as per the description provided by the Customs Department itself in previous assessments. The Tribunal noted that the Department's change in classification was based on a subsequent test report, which was not conclusive. Therefore, the allegations of misdeclaration and suppression were not substantiated.

4. Validity of the test reports and expert opinions:

The appellants provided test reports from various reputed institutions and experts, which confirmed the goods as synthetic rubber. The Collector rejected these reports, relying on a subsequent test report by the Department. The Tribunal criticized the Collector's approach, stating that the Collector should have sought clarification from the experts or conducted further tests. The Tribunal accepted the expert opinions and test reports provided by the appellants, finding them credible and conclusive.

5. Applicability of the extended period for issuing the show cause notice:

The Department invoked the extended period under the proviso to Section 28(1) of the Customs Act, alleging suppression of facts. The Tribunal found that the appellants had declared the goods as synthetic rubber based on the Department's own test reports and classification from 1984 onwards. The Tribunal held that there was no suppression or misdeclaration by the appellants, and therefore, the extended period was not applicable. The demands were deemed time-barred.

6. Applicability of the Calcutta High Court judgment on similar goods:

The Department's case was based on the premise that the imported goods were similar to Hypalon, which was classified under Chapter 39. The Tribunal noted that the Calcutta High Court had classified Hypalon-40 under Chapter 40, despite it being a saturated polymer. The Tribunal applied the Calcutta High Court judgment to the present case, concluding that the imported goods, being similar to Hypalon, should also be classified under Chapter 40.

Conclusion:

The appeals were accepted, and the orders of the Collector were set aside. The goods were classified under Heading 40.02, and the penalties and demands were annulled. The Tribunal's decision was based on the expert opinions, previous test reports, and the binding precedent set by the Calcutta High Court.

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