2022 (11) TMI 706 - AT - Customs

Demand of differential duty - classification of imported goods - fire sprinklers - to be classified under Customs Tariff Heading 84249000 or not - applicable rate of IGST, 12% or 18% - applicability of Serial No. 325 of Schedule III to the Notification dated 28.06.2017 or Serial. No. 195B of Schedule-II of the said notification dated 28.06.2017? - HELD THAT - Sprinklers have not been included in the description of goods contained at Serial No. 325 of the notification dated 28.06.2017 and in fact they seek to exclude what is contained at Serial No. 195B of the said notification. It is also clear that Serial No. 195B of the notification does not restrict the sprinklers to any category. Reliance placed by the learned authorized representative on the Circular dated 31.12.2018 is misconceived. The said Circular is in connection with the doubts that had arisen in certain cases wherein a view had been taken that entry at Serial No. 195B would not cover laterals or sprinklers and sprinklers irrigation system and it is in this connection that it was stated that the term sprinklers in the said entry 195B would cover sprinkler irrigation system also. It cannot be concluded from the aforesaid Circular that fire sprinklers are excluded from sprinklers. In fact sprinklers and drip irrigation system including laterals are separated by a semi colon. The conclusion drawn by the Commissioner (Appeals) is, therefore based on a correct interpretation of the Circular and the relevant entries of the notification dated 28.06.2017 - Appeal dismissed.

Summary

Issues:
1. Classification of imported goods under Customs Tariff Heading.
2. Correct application of Integrated Goods and Service Tax (IGST) rate.
3. Interpretation of the relevant entries in the notification dated 28.06.2017.

Issue 1 - Classification of imported goods under Customs Tariff Heading:
The appeal challenged the order confirming a demand of differential duty raised against the respondent for the import of 'fire sprinklers' classified under Customs Tariff Heading 84249000. The dispute arose when the Customs Audit Commissionerate objected to the IGST rate applied by the respondent, leading to a show cause notice proposing a demand of Rs. 2,82,524 due to the incorrect application of the IGST rate.

Issue 2 - Correct application of Integrated Goods and Service Tax (IGST) rate:
The primary issue was whether the imported sprinklers should be classified under entry at Serial No. 195B or Serial No. 325 of the notification dated 28.06.2017, which had different IGST rates of 12% and 18% respectively. The Deputy Commissioner held that the goods fell under Serial No. 325, attracting the higher IGST rate, based on the description of the goods and the Circular dated 31.12.2018. However, the Commissioner (Appeals) overturned this decision, emphasizing that the Circular did not exclude fire sprinklers from the term 'sprinklers' under Serial No. 195B, supporting a lower IGST rate application.

Issue 3 - Interpretation of the relevant entries in the notification dated 28.06.2017:
The crux of the matter was the interpretation of the entries in the notification to determine the correct classification for the imported sprinklers. The Commissioner (Appeals) concluded that the Circular did not exclude fire sprinklers from the term 'sprinklers' under Serial No. 195B, and the description of goods at Serial No. 325 aimed to exclude what was contained in Serial No. 195B. This interpretation led to the rejection of the appeal and the stay application, affirming that the order did not suffer from any illegality.

In summary, the judgment addressed the classification of imported goods, the correct application of the IGST rate, and the interpretation of relevant entries in the notification to determine the appropriate classification for the imported fire sprinklers. The Commissioner (Appeals) decision was upheld, emphasizing that the Circular did not exclude fire sprinklers from the term 'sprinklers' under Serial No. 195B, supporting a lower IGST rate application.