2023 (6) TMI 1094 - AT - Customs

Classification of imported goods - Parts of tricycle (E-Rickshaw) not in CKD condition - to be classified under CTH 87089900 of the First schedule of the Customs Tariff Act, 1975 or under CTH 87038040? - penalty u/s 114A /114AA of CA - Confiscation - redemption fine - dropping of the demand on the value enhancement. HELD THAT - The Appellants have not imported many vital parts of the Tricycle. In the impugned order the adjudicating authority concluded that some parts which were not imported by either of the Appellants were minor parts . From the description of the parts not imported mentioned above, we observe that they are essential parts without which a fully finished Tricycle will nor come into existence. The adjudicating authority has not provided any evidence in the impugned order that the goods imported by the appellants together has the essential characteristic of e-rickshaw - The goods imported by the appellants together if assembled will not provide the basic function of propulsion as required for the classification under CTH 870 3.So, without the battery, the Tricycle cannot be operated and hence it is one of the essential parts. Similarly, the other parts not imported are also essential to make a fully finished Tricycle. Hence, the findings of the adjudicating authority that the goods imported by the appellants together has the essential characteristic of erickshaw/ Tricycle, cannot be agreed upon. The goods as imported by the Appellants together are not in complete nature and require a manufacturing process in order to obtain a fully finished vehicle. As per the definition of the vehicle, any imported components cannot be said to be fully functional unless they achieve the basic characteristic of the said appliance/instrument. Since, the Appellants together has not imported the complete kit required for a fully finished Tricycle falling under CTH 8703, it is held that the imported spare parts together cannot be classified under 8703. Accordingly duty cannot be demanded @ 30% by applying Sl.No.526(1)(b) of Notification 50.2017. The Notice proposes to adopt the value of Rs 33,000 per Tricycle as per the assessable value available for fully finished tricycle in NIDB data. There is no evidence available to establish that the goods for which value is available in NIDB and the impugned goods imported by the Appellants together are similar goods. Hence, the adjudicating authority has rightly rejected the value of 33,000 proposed in the Notice. Accordingly, the department s appeal for value enhancement is liable for rejection. The goods imported by both the Appellants cannot be clubbed for classification purpose. The goods imported by the appellants were not in CKD condition and therefore goods cannot be classified under Customs Tariff Heading 87038040. The goods are rightly classsifiable under CTH 87089900 - Regarding penalty imposed in the impugened order, we hold that Notice was not issued under Section 28(4) of the Customs Act and therefore penalty under Section 114A and under Section 114 AA are not applicable.provisionally assessed bill of entry could not be covered under Section 28 and 114 A of the Customs Act, 1962 and therefore imposition of penalty of Rs.18,91,596/- was erroneous inasmuch as 114A was not liable in the subject case - goods were not liable for confiscation under Section 111(m) and 111(o) of the Customs Act and the order of confiscation not sustainable.order of imposition of redemption fine of Rs.2 Lac not sustainable and is liable to be set aside - departments appeal for value enhancement is rejected. Appeal allowed.

Summary

Issues Involved:
1. Classification of the goods.
2. Imposition of penalties under sections 114A/114AA.
3. Confiscation of the goods and imposition of redemption fine.
4. Dropping of the demand on value enhancement by the adjudicating authority.

Summary:

1. Classification of the Goods:
The main issue was whether the imported goods should be classified under CTH 87089900 as parts of Tricycles (E-Rickshaw) or under CTH 8703840 as fully finished Tricycles. The adjudicating authority had reclassified the goods under CTH 87038040, but the Appellants argued that the goods were parts and lacked essential components to form a complete Tricycle in CKD condition. The Tribunal observed that the goods imported by the Appellants did not include several vital components necessary for a fully finished Tricycle. Therefore, the Tribunal held that the goods imported by the Appellants could not be classified under CTH 87038040 and were rightly classifiable under CTH 87089900.

2. Imposition of Penalties:
The Tribunal found that the Show Cause Notice was not issued under Section 28 of the Customs Act, and the bills of entry were provisionally assessed. Therefore, penalties under Sections 114A and 114AA were not applicable. The Tribunal held that the imposition of penalties was erroneous and not sustainable.

3. Confiscation and Redemption Fine:
The Tribunal observed that the goods were not liable for confiscation under Sections 111(m) and 111(o) of the Customs Act. The adjudicating authority's order of confiscation and imposition of redemption fine was not sustainable and was set aside.

4. Value Enhancement:
The department's appeal against the dropping of the demand on value enhancement was rejected. The Tribunal held that there was no evidence to substantiate that the goods imported by the Appellants were similar to those for which the value was available in the NIDB data. The adjudicating authority had rightly rejected the proposed value of Rs. 33,000 per Tricycle.

Conclusion:
The Tribunal allowed the appeals filed by the Appellants and rejected the appeal filed by the department. The goods imported by the Appellants were classified under CTH 87089900, and the penalties, confiscation, and redemption fine imposed by the adjudicating authority were set aside. The demand for value enhancement was also rejected.