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2014 (3) TMI 209 - AT - CustomsClassification of Magensia Spinel Bricks - Import of goods - exemption notification No.90/2004-Cus - classification under CTH 69021090 , as other bricks or under CTH 69021010 - Held that - The mother of all Harmonised tariffs in international trade is the Harmonized Description and Coding System commonly known as HSN Explanatory Notes . - As per the international standards refractory bricks containing by weight, singly or together, more than 50% of Magnesium has to be considered as Magnesite Refractory Bricks. - In the case of appellants, the content of MgO is more than 50% and will thus be a category of Magnesite Refractory Bricks. These categories of bricks have been allowed to be imported only for those who are using this quality of bricks as per SION A-1050. In the case of the appellant also the entire quantity imported has been used in the manufacture of goods for which export obligation has already been fulfilled. There is no evidence or argument on behalf of the Revenue that the Refractory bricks imported by the appellant have been diverted or sold to others. The interpretation to be made under SION is not subordinate to the sub-headings made under CTH 69.02 of the Customs Tariff Act 1989. Both Customs Tariff interpretation and SION interpretation cater to different situations, especially when the Tariff sub-headings are different under CTH 69.02 and HSN Explanatory Notes/SION norms. It has thus been correctly argued by the appellant that action if any under SION and DIFA/DFRC violations has to be taken by the appropriate authorities under DGFT and Customs can only bring to the notice of DGFT authorities of any ambiguity in the imports made by the appellant vis- -vis authorizations issued by DGFT. Otherwise also, appellant would have been entitled to drawback on the export product if duty was paid on the refractory bricks at the time of imports. It is thus a case of revenue neutrality as it is a well established policy of the Central Government to have zero-rated exports. Accordingly, on merits it is held that benefit of exemption under Notification No.90/2004-Cus, dt.10.09.2004 and Notification No.40/2006-Cus, dt.02.05.2006 has been correctly availed by the appellant. Extended period of limitation - Revenue neutral situation - Held that - Once appellant has used the entire quantity of imported goods with respect to the manufacture of exported goods, it cannot be said that there could be any intention to evade Customs duty. Alternately, appellant could have also availed incentives like Drawback, rebate, CENVAT Credit etc. at the time of export and accordingly, there cannot be any intention to evade duty attracting extended period in this case, as it is a case of revenue neutrality. Demand set aside on merit as well as on the issue of period of limitation - Decided in favor of assessee.
Issues Involved:
1. Classification of imported Magnesia Spinel Bricks. 2. Eligibility for exemption under Notification No. 90/2004-Cus and Notification No. 40/2006-Cus. 3. Time-barred demand for customs duty. 4. Imposition of penalties under Section 114A and Section 112(a) of the Customs Act, 1962. Detailed Analysis: 1. Classification of Imported Magnesia Spinel Bricks: The primary issue revolves around the classification of Magnesia Spinel Bricks imported by the appellant. The adjudicating authority classified these bricks under CTH 69021090 as "other bricks" rather than CTH 69021010, denying the benefit of the relevant exemption notifications. The appellant argued that the bricks should be classified under CTH 69021010 as "Magnesite Refractory Bricks," which are used in their cement plant for protective lining against high temperatures and chemical reactions. The appellant emphasized that the DGFT had not initiated any action against them for misuse of DFIA/DFRC schemes and that the imported bricks contained more than 50% MgO, qualifying them as Magnesite Refractory Bricks under international standards. 2. Eligibility for Exemption under Notification No. 90/2004-Cus and Notification No. 40/2006-Cus: The appellant contended that they had fulfilled their export obligations under the DFIA/DFRC schemes, which permit the duty-free import of all inputs used in the manufacture of export goods. They argued that the imported bricks were correctly classified and eligible for exemption under the mentioned notifications. The adjudicating authority's reliance on Customs Tariff Headings for determining the validity of DFIA/DFRC certificates was challenged, as the SION norms and HSN Explanatory Notes should govern the interpretation. The tribunal agreed with the appellant, stating that the classification under SION norms is not subordinate to Customs Tariff sub-headings and that the imported bricks fall under the category of Magnesite Refractory Bricks as per SION A-1050 and A-1030. 3. Time-Barred Demand for Customs Duty: The appellant argued that the demand was time-barred, as they had not suppressed any facts or mis-stated information to evade duty. The tribunal noted that the description in the Bills of Entry was accurate and that the Customs authorities had ample opportunity to verify the classification through chemical testing. The tribunal concluded that there was no intention to evade duty, and the demand issued on 31.03.2010 was time-barred, as it was a case of revenue neutrality. 4. Imposition of Penalties under Section 114A and Section 112(a) of the Customs Act, 1962: Given the tribunal's decision in favor of the appellant on the merits of the case, the penalties imposed under Section 114A and Section 112(a) of the Customs Act, 1962, were also set aside. The tribunal held that there was no basis for confiscation of goods or imposition of penalties when the issue was resolved in favor of the appellants. Conclusion: The tribunal allowed the appeals filed by the appellants, concluding that the imported Magnesia Spinel Bricks were correctly classified under CTH 69021010, making them eligible for the exemption under Notification No. 90/2004-Cus and Notification No. 40/2006-Cus. The demand for customs duty was deemed time-barred, and the penalties imposed were set aside. The judgment emphasized the importance of adhering to SION norms and HSN Explanatory Notes for classification and interpretation in such cases.
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