2023 (8) TMI 804 - HC - Customs

Duty drawback - Classification of goods exported - sanitary ware - classifiable under Chapter heading 8481 of the CTA or not - rejection of claim of duty drawback under a different category - HELD THAT - A careful perusal of the clause in Rule 1(d) of Chapter 84 manifests that there is specific exclusion of the category of goods dealt with under original heading of 7321 or 7321 or similar articles of other base material in chapter 74 to 76 or 78 to 81. Reverting back to the instant matter, the consignment was duly inspected vide panchanama dated 12 September 2011, and the same was verified to be sanitary wares . The stand of the respondent that the details of the item brochures/catalogues, which were submitted by the petitioner at the earliest point of time, belies common sense and logic. There is no gainsaying that sanitary wares or fixtures are those equipments, which in isolation or combined with other objects or appliances may be used to achieve a high standard of cleanliness from germs and bacteria - The use of brass in sanitary wares for taps or knobs is by all means a well known phenomena in context of the business of kitchen and bathroom wares since such wares invariably come in contact with moisture or water, which has a high erosive value and brass is thus used in order to prevent rusting of the wares or fixtures for longer lasting durability and use. There is no denial of the fact that the consignment of goods that was exported was containing sanitary wares albeit few parts made of brass elements but nonetheless not in any manner pertaining to use or application in nuclear reactors, boilers, machineries and appliances . The respondent has clearly overlooked even the brochures pertaining to the items that amply demonstrates the essential features of the sanitary wares and use of brass so as to make the articles more elegant and durable for the use of end consumers. It is apparent that the respondent in a mindless manner has failed to even consider the common parlance and manner in which the articles are known, bought and sold in the marketing world. In the cited case of O.K. Play (India) Pvt. Ltd. 2005 (2) TMI 114 - SUPREME COURT , the assessee was engaged in the manufacture of toys and he cleared certain items viz., Activity Desks and Chairs, Fun Fliers, Play Table, Play Pool, Rockers, Slides and Swings without payment of duty claiming exemption from payment of excise duty under chapter Heading 95.03. The claim of the petitioner that the duty drawback should be classified vide heading No. 741903A ( A signifies a matter where CENVAT has not been claimed), as claimed in the prayer clause, is also misconceived since a bare perusal of the aforesaid tabulated tariff details would show that item No. 741902 in Chapter 74 pertains to artware/handicraft - Ultimately, it is the end use of the product that is decisive and in the instant case, the items are meant for use in the kitchen, toilets or bathroom and although it may portray some art work in its designs, it is not artwork or handicraft item. Therefore, duty drawback could only be claimed in category of goods falling Chapter 74 vide item No. 741802. The impugned order dated 08 July 2022 passed by the Revisionary Authority thereby approving the order-in-original No. 101/2013 dated 10 April 2013 by the by the ACC(E) cannot be sustained in law - the respondent shall consider the claim for duty drawback of the subject goods in terms of classification vide item No. 741802 as per tariff applicable for the year 2011-12. The instant Writ Petition is allowed.

Summary

Issues Involved:

1. Classification of exported goods.
2. Entitlement to duty drawback.
3. Validity of the impugned order dated 08 July 2022.

Summary:

1. Classification of Exported Goods:
The petitioner, a regular exporter of CP Sanitary Bathroom Fitting in brass, classified the goods under drawback heading No. 741902 of the Customs Tariff Act (CTA), claiming a higher duty drawback rate. The Department contended that the goods should be classified under subheading 848180 of the CTA, attracting a lower drawback rate. The Department alleged that the petitioner deliberately misclassified the goods to avail extra drawback, contravening Section 75 of the Customs Act and related rules.

2. Entitlement to Duty Drawback:
The Additional Commissioner of Customs issued a Show Cause Notice, proposing to classify the goods under Chapter heading 84818020 and confiscate them for misclassification. The petitioner's objections were rejected, and the ACC(E) confirmed the recovery of Rs. 19,36,809/- as drawback, besides imposing a redemption fee and penalty. The petitioner's appeals to the Commissioner (Appeals) and the Revisionary Authority were dismissed, with the latter upholding the classification under heading 8481 of the CTA based on Section Note 1(f) of Section XV and Rule 3(a) of the General Rules for Interpretation.

3. Validity of the Impugned Order Dated 08 July 2022:
The Court found that the impugned order by the Revisionary Authority was unsustainable. Chapter 74 of the CTA specifically deals with bathroom sanitary wares, and the exported goods were verified as 'sanitary wares'. The use of brass in sanitary wares is common to prevent rusting. The respondent failed to consider the common parlance and marketing context of the goods. The Court cited the case of O.K. Play (India) Pvt. Ltd., emphasizing the importance of functional utility, design, shape, and predominant usage in classification.

The Court concluded that the goods were not 'artware/handicraft' under item No. 741902 but should be classified under item No. 741802. The impugned order dated 08 July 2022 was quashed, and the respondent was directed to consider the duty drawback claim under item No. 741802 for the year 2011-12. The petition was disposed of accordingly.