2023 (4) TMI 1033 - AT - Customs

Classification of imported goods - Papad (Topioca) (imported from China) - to be classified under CTH 19030000 or under the heading 19059040? - demand of differential duty with interest - extended period of limitation - penalties - HELD THAT - The settled principle for considering the issue of classification as laid down in catena of judgments is principle of common parlance, how the product is known in the commercial world. The term 'Tapioca' in Hindi is commonly known as 'Sabudana' and is available in the market in granulated form by the name of Sabudana. If a common man asks for Sabudana (Tapioca) he will not be given Papad (Tapioca) or vice-a-versa. So the basic test to determine the classification is how the product is known in the market. After referring to series of judgements, i.e Ramavatar Budhaiprasad Vs. Asstt. Sales Tax Officer 1961 (3) TMI 55 - SUPREME COURT and Commissioner of Sales Tax, MP, Indore Vs. M/s Jaswant Singh Charan Singh 1967 (2) TMI 65 - SUPREME COURT , on the principle that while interpreting items in the taxing statues resort should be not to the scientific or technical meaning of such terms but to their popular meaning, attached to them in their commercial sense, the Apex Court in DUNLOP INDIA LTD. MADRAS RUBBER FACTORY LTD. VERSUS UNION OF INDIA AND OTHERS 1975 (10) TMI 94 - SUPREME COURT has observed that It is clear that meanings given to articles in a fiscal statute must be as people in trade and commerce, conversant with the subject, generally treat and understand them in the usual course. But once an article is classified and put under a distinct entry, the basis of the classification is not open to question. Technical and scientific tests offer guidance only within limits. Once the articles are in circulation and come to be described and known in common parlance, we then see no difficulty for statutory classification under a particular entry. Similarly, the Apex Court in COLLECTOR OF CENTRAL EXCISE, KANPUR VERSUS KRISHNA CARBON PAPER CO. 1988 (9) TMI 50 - SUPREME COURT emphasized that when no definition is provided in the statute the correct guide is the trade meaning and when trade meaning is not available ordinary meaning is to be preferred over the scientific or technical meaning unless contrary intention is clearly expressed by the Legislature. The authorised representative for the revenue has relied on Rule 3(a) of General Rules of Interpretation to say that heading which provides most specific description shall be preferred to heading providing a more general description. There is no doubt about the provisions of Rule 3(a), however the applicability of the same needs to be examined in the facts of the present case. Section 2 of the Central Excise Tariff Act,1985 provides the rates at which duties of Excise shall be levied under the Central Excise Act 1944 are specified in the First Schedule and the Second Schedule - recourse can be taken to Rule 3(c), i.e. when goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. In the present case, in terms of Rule 3(a) the goods in question cannot be classified under CTH 1903 and Rule 3(b) has no application and so on the principle of Rule 3(c), the term Papad under CTH 19059040 occurs last in numerical order and it equally merits consideration therein. It is a settle principal of law that classification of goods is a matter relating to chargeability and the burden to prove is squarely on the revenue. If the department intends to classify the goods under a particular heading or sub-heading different from that claimed by the assessee, the department is required to adduce proper evidence and thereby discharge the burden of proof. In the present case the said burden has not been discharge at all by the revenue. Extended period of limitation - penalties - HELD THAT - Since the issue of classification of the product Papad (Tapioca) is decided in favour of the assessee, the question of extended period of limitation or of penalties do not survive. Appeal allowed.

Summary

Issues Involved:
1. Classification of the product 'Papad' (Tapioca).
2. Applicability of differential duty.
3. Invocation of the extended period of limitation.
4. Imposition of interest and penalties.

Summary:

1. Classification of the Product 'Papad' (Tapioca):
The primary issue revolves around whether the imported 'Papad' (Tapioca) should be classified under CTH 19030000 or CTH 19059040. The appellant argued that their product, 'Papad' (Tapioca), merits classification under CTH 19059040, which is specific for 'Papad', whereas the Revenue classified it under CTH 19030000, which pertains to preparations of tapioca starch in forms like flakes, grains, and pearls. The Tribunal noted that the manufacturing process and the final form of 'Papad' (Tapioca) differ significantly from the products covered under CTH 19030000. The product 'Papad' (Tapioca) has a distinct identity in the commercial world and does not fit the description of products under CTH 19030000. The Tribunal concluded that 'Papad' (Tapioca) should be classified under CTH 19059040, aligning with the specific mention of 'Papad' in this heading.

2. Applicability of Differential Duty:
Given the Tribunal's decision on classification, the differential duty demand based on the classification under CTH 19030000 does not hold. The goods should be classified under CTH 19059040, which does not attract the higher duties imposed under CTH 19030000.

3. Invocation of the Extended Period of Limitation:
The Department invoked the extended period of limitation under Section 128(4) of the Customs Act, 1962, for demanding differential duty. However, since the Tribunal ruled in favor of the appellant on the classification issue, the question of invoking the extended period of limitation becomes irrelevant.

4. Imposition of Interest and Penalties:
The Tribunal noted that the burden of proof for classification lies with the Revenue. Since the Revenue failed to substantiate their classification under CTH 19030000, the imposition of interest and penalties under Sections 114A and 114AA of the Customs Act, 1962, does not survive.

Conclusion:
The Tribunal set aside the impugned order of the Commissioner (Appeals), ruling that the product 'Papad' (Tapioca) should be classified under CTH 19059040. Consequently, both appeals were allowed, and the differential duty, interest, and penalties imposed by the Revenue were annulled.