2023 (6) TMI 74 - AT - Customs

Classification of imported goods - Renadyl bulk probiotic dietary supplement capsules - to be classified under tariff item 3002 90 30 of First Schedule to Customs Tariff Act, 1975 or not - applicability of concessional rate of duties of customs, extended by notification no. 50/2017-Cus dated 30th June 2017 - extended period of limitation - penalty u/s 112 of CA - HELD THAT - The concessional rate of duties of customs, extended by notification no. 50/2017-Cus dated 30th June 2017, is available to imported probiotics corresponding to tariff item specified therein; probiotics that are cultures of micro-organisms (excluding yeast) , corresponding to heading 3002 of First Schedule to Customs Tariff Act, 1975, are, doubtlessly, eligible to the benefit thereof which, being the default classification and as set out by the Hon ble Supreme Court in re Hindustan Ferodo Ltd 1996 (12) TMI 49 - SUPREME COURT and in re HPL Chemicals Limited 2006 (4) TMI 1 - SUPREME COURT , may be controverted only by proposing alternative classification established as adhering to the General Rules for Interpretation of Schedule in Customs Tariff Act, 1975. Of itself, mere enumeration in the exemption notification does not render all probiotics , or compounds containing probiotics, to be classifiable within heading 3002 of First Schedule to Customs Tariff Act, 1975. The General Rules for Interpretation of Schedule in Customs Tariff Act, 1975 require that classification should proceed from the heading to the sub-heading and tariff item and that the description in the first of these is critical for proceeding to the next two levels, notwithstanding the conformity, even having all the appearances of being unquestionably so, of an impugned article with description corresponding to a tariff item. It is apparent that probiotics may have been, as seen from the referred notification, legislatively intended to be counted as pharmaceutical product and, as cultures of microrganisms , would not be excluded. In the rulings of United States Customs, the significance of not being amenable to further manufacture has ruled the probiotic products impugned therein to certain inclusion as food supplement of some sort. In the absence of any domestic decisions that are contrary, or distinguishable on the given set of facts, foreign rulings offer sufficient guide insofar as customs assessment, endeavouring for universal uniformity, is concerned - there are no hesitation in holding that the classification adopted in the impugned order does not merit to be interfered with. Consequently, the appropriate rate, corresponding to the said description, in the notification for levy of integrated goods and services tax (IGST) applies. The concessional rate of duty sought for by the appellant in the bills of entry cannot be extended to them. Extended period of limitation - HELD THAT - All that remains for consideration at this stage is exclusion from recovery under section 28 of Customs Act, 1962 owing to bar on invoking the extended period - there is no evidence of misdeclaration or suppression in the bills of entry filed by the appellant. It is also abundantly clear from our exposition leading to the outcome of upholding the classification sought to be fastened by the customs authorities that this was not so evident as even to speculate, let alone conclude, that the ingredients essential to invoking the extended period of limitation did exist. The demand is, thus, restricted to the normal period of limitation intended by section 28 of Customs Act, 1962 which, with effect from 14th May 2016, is two years from the relevant date. Penalty u/s 112 of Customs Act, 1962 - HELD THAT - Penalty has been imposed on the appellant under section 112 of Customs Act, 1962 and appears to have been a consequence of the finding that the goods are liable for confiscation under one or the other provision of section 111 of Customs Act, 1962. Of the several elements therein, the sole breach that needs to be considered for evaluation is section 111(m) of Customs Act, 1962 - there are no material particular had been withheld in connection with clearance of the goods for home consumption. Hence, the goods are not liable for confiscation and, consequently, liability for penalty will not arise. Appeal allowed to the extent of setting aside the liability to confiscation and the penalty imposed - the recovery of differential duty is upheld - appeal disposed off.

Summary

Issues Involved:
1. Classification of imported goods.
2. Applicability of concessional rate of customs duty.
3. Invocation of extended period for recovery under section 28 of Customs Act, 1962.
4. Imposition of penalty under section 112 of Customs Act, 1962.

Summary:

1. Classification of Imported Goods:
The appellant, M/s Centaur Pharmaceuticals Pvt Ltd, disputed the classification of 'Renadyl bulk probiotic dietary supplement capsules' imported from the USA. The customs authorities classified the goods under tariff item 2106 90 99 as 'miscellaneous edible preparations,' while the appellant claimed classification under tariff item 3002 90 30 as 'cultures of micro-organisms (excluding yeast)' within chapter 30 of the First Schedule to Customs Tariff Act, 1975. The Tribunal noted that the goods, described as food supplements and marked 'not for medicinal use,' did not meet the criteria for pharmaceutical products and upheld the classification under heading 2106, citing the Explanatory Notes of the Harmonized System of Nomenclature (HSN) and international rulings.

2. Applicability of Concessional Rate of Customs Duty:
The appellant sought a concessional rate of basic customs duty (BCD) at 5% and integrated goods and services tax (IGST) at 12% under notifications no. 50/2017-Cus and no. 01/2017 respectively. The Tribunal held that the classification adopted by the customs authorities, which imposed a BCD of 50% and IGST of 18%, was correct. The Tribunal emphasized that the mere enumeration in the exemption notification does not render all 'probiotics' classifiable within heading 3002.

3. Invocation of Extended Period for Recovery:
The Tribunal found no evidence of misdeclaration or suppression in the bills of entry filed by the appellant. It concluded that the ingredients essential to invoking the extended period of limitation under section 28 of Customs Act, 1962 did not exist. Therefore, the demand for differential duty was restricted to the normal period of limitation, which is two years from the relevant date.

4. Imposition of Penalty:
The Tribunal set aside the penalty imposed under section 112 of Customs Act, 1962, as it found no material particular withheld in connection with the clearance of goods for home consumption. Consequently, the goods were not liable for confiscation, and the penalty did not arise.

Conclusion:
The appeal was allowed to the extent of setting aside the liability to confiscation and the penalty imposed. The recovery of differential duty was upheld. The appeal was disposed of accordingly.