2015 (2) TMI 338 - AT - Customs

Classification of goods - import of Forged Penion - Classification under CTH 84839010 or 84831099 - whether the goods in question i.e. Forged Pinion imported by the Appellant is correctly classifiable under CTH 84831099 as Cranks and Transmission Shafts or 8439010 as Part of Sugar manufacturing machinery - Held that - Transmission Shaft (Forged Pinion) has a place under specific tariff entry under Chapter heading 8483 and Forged Pinion covered under the entry others , therefore it will fall under CTH 8483 10 99. Though the said Forged Pinion is undisputedly for use in Sugar manufacturing machinery, but, since it has specific tariff entry under CTH - 8483 10 99, by virtue of Note 2 (a) of Section XVI of first schedule to Custom Tariff Act, the goods will merit classification under the said specific entry, irrespective of it s application for use. More or less similar issue came up earlier before this Tribunal in the case of Larsen & Tourbro 1997 (11) TMI 204 - CEGAT, NEW DELHI , the division bench of Tribunal at Delhi applying the provision of Note 2 (a) of Section XVI held that the Torsion Shaft merits classification under Heading 84.83. In view of this settled legal position, in our considered view, we hold that the Forged Pinion is correctly and legally classified under 8483 10 99 as others under the main tariff entry of Transmission Shaft. - Even though a goods is a part of any machinery but if it is specifically covered in a heading, in all cases of chapter 84 & 85, it shall be classified in that respective heading. Only those parts will classify as parts of any machinery in the heading of that machinery, which is not specified independently in any other heading. Therefore the goods in question though it is part of sugar machinery but since there is an independent entry for Cranks and Transmission Shaft provided in the schedule to the custom tariff, it will merit classification under CTH of Transmission Shaft as others i.e. 84831099. - Decided against the assessee. As regards the confiscation of the goods and imposition of redemption fine of ₹ 5 lakhs on the appellant, the fact that the goods confiscated by the ld. Adjudicating authority has never been seized nor provisionally released, as the goods were not available for seizure. As of now it is settled legal position that if the goods is not available nor the same is released provisionally, redemption fine could not have been imposed. As regards the imposition of penalty of ₹ 5,76,193/- on the appellant under section 114(A) of Customs Act, 1962, we have observed that the appellant while filing the bill of entry correctly declared the description of the goods, as was mentioned in the invoices and also rate of duty was mentioned without claiming any concession. However, due to wrong mention of custom tariff the relevant notification was automatically applied and duty was calculated on concessional rate. This has occurred due to online processing of bill of entry. This fact shows bonafide of the appellant. It is also to be noted that on pointing out the mistake, the appellant has suo moto paid differential duty before the issuance of show cause notice. The issue involved is of classification dispute of the goods imported by the appellant. It is settled law that in case where the issue is related to interpretation of classification of the goods, penalty should not be imposed in such cases. - Decided in favour of assessee.

Summary

Issues Involved:
1. Classification of imported goods.
2. Confiscation and redemption fine.
3. Imposition of penalty under Section 114A of the Customs Act, 1962.

Detailed Analysis:

1. Classification of Imported Goods:
The primary issue was whether the imported "Forged Pinion" should be classified under CTH 84831099 as 'Cranks and Transmission Shafts' or under CTH 84389010 as 'Parts of Sugar manufacturing machinery'. The Appellant initially classified the goods under CTH 84831010, which was incorrect. The Appellant later claimed the correct classification should be under CTH 84831099, while the Revenue classified it under CTH 84389010. The tribunal referred to the General Rules for the Interpretation of Customs Tariff and Section XVI notes, concluding that the goods should be classified under CTH 84831099 as 'Transmission Shafts and Cranks' since it has a specific tariff entry, even though it is used in sugar manufacturing machinery. This decision was supported by precedents such as the judgment in Larsen & Toubro Ltd. vs. Collector of Central Excise, Bombay.

2. Confiscation and Redemption Fine:
The adjudicating authority confiscated the goods and imposed a redemption fine of Rs. 5,00,000 under Section 125 of the Customs Act, 1962. The tribunal noted that the goods were neither seized nor provisionally released, and according to settled legal positions, if goods are not available for confiscation, redemption fine cannot be imposed. This principle was upheld by the larger bench of the tribunal in Shiv Kripa Ispat Pvt. Ltd. and supported by judgments from the Hon'ble Punjab and Haryana High Court and the Hon'ble Supreme Court. Consequently, the tribunal dropped the redemption fine.

3. Imposition of Penalty under Section 114A of the Customs Act, 1962:
The tribunal examined whether the penalty of Rs. 5,76,193 imposed on the Appellant was justified. It was observed that the Appellant correctly declared the description and rate of duty in the Bill of Entry without claiming any concession, and the error in classification was due to the automated system applying an unconditional exemption notification. The Appellant paid the differential duty suo moto before the issuance of the show cause notice. The tribunal found no malafide intention to evade duty, noting that the issue was a classification dispute. It is a settled law that penalties should not be imposed in cases involving interpretation of classification. The tribunal cited various judgments supporting this principle and concluded that the Appellant was not liable for the penalty under Section 114A.

Conclusion:
The tribunal ordered the following:
(a) Redemption fine of Rs. 5,00,000 and penalty of Rs. 5,76,193 were dropped.
(b) The confirmation of the differential duty demand of Rs. 5,76,193 along with interest of Rs. 8525, which was already paid by the Appellant, was maintained.

Operative part of the order pronounced in the court.