2023 (12) TMI 263 - AT - Customs

Classification of imported goods - LG Watch W7 - classifiable under CTH 91021900 as claimed by the appellant or is classifiable under CTH 85176290 as confirmed vide the Order-in-Original? - eligibility to claim concessional rate of basic customs duty under serial no. 955 of the Notification No. 152/2009 dated 31.12.2009 - Confiscation - penalty. Whether LG Watch W7 as imported by the appellant is classifiable under CTH 91021900 as claimed by the appellant or is classifiable under CTH 85176290 as confirmed vide the Order-in-Original? - HELD THAT - Once admittedly the impugned goods work on internet, it is not acceptable that the essential character of the impugned goods remains that of time keeping only. Thus it is held that section notes and chapter notes of Chapter 85 are most relevant for the purpose of classifying imported G-Watch (Smart Watch), it being a device capable of transferring data and even making or receiving phone calls which have not been the intent of the section notes and chapter notes of Chapter 91. Hence, First point of adjudication stands decided in favour of Revenue holding the right classification for the impugned imported product is 8517 6290. Whether the appellant is eligible to claim concessional rate of basic customs duty under serial no. 955 of the Notification No. 152/2009 dated 31.12.2009? - HELD THAT - The appellant has wrongly classified the goods under 9102 1900. These are held classifiable under Tariff Entry 8517 6290. From the Notification No. 152/2009-Cus. dated 31.12.2009, we observe that the entry at serial no. 955 thereof gives the benefit of exemption from customs duty to the goods falling under Tariff Entry 9102 to 9103 only. As already held above the goods are classifiable under 8157 6290, the benefit of the said notification shall not be available to the appellant. The certificate for origin is not sufficient to extend the benefit of nil rate of duty. As the origination from Korea is not the criteria of the Notification no. 152/2009-Cus. but such goods originating from Korea as are mentioned in the table under the said notification. Apparently and admittedly the goods classifiable under 8517 6290 are not mentioned in the said table. Hence, the benefit of nil rate of duty shall not be available to the appellant - the second point of adjudication is also decided against the appellant. Whether the imported goods are liable for confiscation and the appellant is liable for being penalized? - HELD THAT - The goods have wrongly been classified by the appellant and the benefit of exemption of duty has also been wrongly claimed but we are aware that imposition of penalty is a penal consequence of some intentional mala fide act. The onus was of the department to prove that the wrong classification was an intentional act of the appellant to wrongly claim duty exemption. Mere mention of wrong tariff or claiming benefit of an ineligible exemption notification cannot form the basis for confiscation of goods - In the present case, it is observed that the appellant is convinced of the fact that the product imported has mechanical hands and quartz movements as identical to a wrist watch and that this apparatus is also wearable on wrist. It is a clear case of misunderstanding on part of the appellant. Question of invoking penal provisions does not at all arise in this circumstance. Resultantly, the third point of adjudication decided in favour of the appellant. The product imported is a Smart Watch which is classifiable under 8517 6290. The appellant has wrongly classified it under 9102 1900. Thus the benefit under exemption Notification No. 152/2009-Cus. was not available to products of 8517 tariff entry hence it is held that same has wrongly been claimed. The order under challenge to the extent confirming demand of customs duty is therefore hereby upheld - Appeal allowed in part.

Summary

Issues Involved:
1. Classification of LG Watch W7.
2. Eligibility for concessional rate of basic customs duty under Notification No. 152/2009.
3. Liability for confiscation and penalty.

Summary:

1. Classification of LG Watch W7:
The primary issue was whether the LG Watch W7 should be classified under CTH 91021900 or CTH 85176290. The appellant argued that the watch should fall under Chapter 91 as it has traditional watch features such as physical watch hands and quartz movement. However, the department contended that the watch has multiple functionalities beyond timekeeping, such as data transmission and reception, making it a smart watch. The Tribunal examined the General Rules of Interpretation and relevant chapter notes, concluding that the LG Watch W7 is a smart watch capable of transmitting and receiving data, thus classifying it under CTH 85176290.

2. Eligibility for Concessional Rate of Basic Customs Duty:
The appellant claimed a concessional rate of basic customs duty under serial no. 955 of Notification No. 152/2009, which applies to goods falling under Tariff Entry 9102 to 9103. Since the Tribunal classified the LG Watch W7 under CTH 85176290, it held that the benefit of the said notification is not applicable. The certificate of origin from Korea was deemed insufficient to extend the benefit as the goods did not fall under the specified tariff entries.

3. Liability for Confiscation and Penalty:
The Tribunal noted that while the appellant had wrongly classified the goods and claimed an ineligible exemption, there was no evidence of intentional misdeclaration or mala fide intent. Citing prior judgments, the Tribunal held that mere wrong classification or claiming an ineligible exemption does not constitute grounds for confiscation or penalty. Therefore, the order imposing penalty and confiscating the goods was set aside.

Conclusion:
The Tribunal upheld the classification of LG Watch W7 under CTH 85176290 and confirmed the demand for customs duty. However, it set aside the penalties and confiscation, recognizing the appellant's actions as a misunderstanding rather than intentional misdeclaration. The appeal was partly allowed.