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2023 (12) TMI 1155 - AT - CustomsClassification of imported goods - various parts and sub-parts or accessories of cellular mobile phones - to be classified under CTH 85177090 or under CTH 39209999? - demand of differential duty alongwith interest and penalty. Can an exemption notification issued by the Government under Section 25 of the Customs Act determine the classification of the goods? - Can a scheme notified by the MeiTY determine the classification of the goods? - Is the differential duty recoverable from the appellant? - Is interest recoverable from the appellant? - Were the imported goods liable to confiscation under Section 111(m) (although they were not actually confiscated) because the classification of the imported goods in the Bill of Entry is, according to the Revenue, incorrect? Consequently, was the penalty under Section 112 imposed correctly? - HELD THAT - As per Section 17 the importer or exporter has to self-assess duty and the proper officer can re-assess the duty. Both the self-assessment by the importer (or, as the case may be, the exporter) and the re-assessment by the proper officer fall under the definition of assessment as per Section 2(2). If the proper officer re-assesses the goods, unless the importer accepts the re-assessment in writing, he has to give a speaking order. Thus, the importer (or exporter) and the proper officer are competent to classify the goods and assess the duty payable on them - After the duty is assessed on the imported goods and the duty is paid, the proper officer clears the goods for home consumption under Section 46. Once this action is completed, they cease to be imported goods, they cease to be dutiable goods and the importer ceases to be the importer. Assessment concludes the determination of the liability of the importer to pay duty and is similar to a decree under the Civil Procedure Code, 1908 - The Commissioner (Appeals) does not assess but either affirms, modifies or annuls the assessment order. In this process, the Commissioner (Appeals) may also decide the issue of classification of the goods. A question which arises is if a Bill of Entry which is only self-assessed by the importer without any re-assessment can it also be appealed against to the Commissioner (Appeals) under Section 128. The larger bench of the Supreme Court held in ITC LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA -IV 2019 (9) TMI 802 - SUPREME COURT in the affirmative. Demands under Section 28 - HELD THAT - The power to assess duty lies with the importer and the proper officer. Classification, valuation and applying an exemption notification, are all part of the process of this assessment. Hence, the power to decide the classification lies with the importer during self- assessment, with the proper officer during re-assessment and while issuing an SCN under Section 28 and while adjudicating, with the Adjudicating Authority and with any appellate authority in the judicial hierarchy who deals with the appeals. Classification cannot be decided by anybody else (such as a MeITY in this case) for two reasons. First, they do not have the authority to assess under Section 17 nor have any appellate powers to modify the assessment. Second, their orders, letters, notifications, etc. are executive actions performed at the discretion of the government and are not quasi-judicial or appealable decisions. Therefore, any HSN code indicated against any goods in any policy of MeITY or any other Ministry cannot determine the classification of the goods under the Customs Tariff. Of the three grounds on which the classification is proposed to be changed in the SCN, the policy of MeITY as a ground cannot, therefore, be sustained. Exemption notifications - HELD THAT - The goods cannot be reclassified based on the exemption notification issued under Section 25 or on the basis of any policy of the Ministry. Notifications or policies can be issued, modified or withdrawn but the classification of the goods under the tariff will remain the same. Only if the tariff itself is amended can the classification change. Confiscation of goods under Section 111(m) and consequent penalty under Section 112 - HELD THAT - The case of the Revenue in this appeal is that the classification of the goods by the importer was not correct. Even if the classification is not correct, it does not render them liable to confiscation under Section 111(m). Similarly, there could be cases where, according to the Revenue, the exemption notification claimed during self assessment will not be available to the imported goods. The importer self-assessing the goods must apply his mind when classifying the goods. Classification of the goods by the importer, even if it is not in conformity with the re-assessment by the proper officer or even if it is held to be not correct in any appellate proceedings does not render the goods liable to confiscation under Section 111(m) - no penalty can be imposed under Section 112 on the appellant for the alleged wrong classification. The appellant cannot be penalized for holding a different view than the proper officer. Are the front cover, middle cover and back cover of cellular mobile phones imported by the appellant classifiable under CTH 85177090 (as claimed by the appellant) or under CTH 39209999(as held in the impugned order)? - HELD THAT - Applying the first Rule of Interpretation, the front cover, middle cover and back cover cannot be classified under CTH 3920- the vapor deposition (lamination) takes it out of the description of CTH 3920 and thermoforming and CNC milling, being processes beyond printing and surface working take them out of the scope of chapter note 2(s). It is also found that a specific entry (parts of mobile phones) prevails over a general entry (articles of plastic) as per Rule 3(a) of Interpretation and the later entry (Chapter 85) in the tariff prevails over the earlier entry (Chapter 39) as per Rule 3(c). However, it is well settled legal principle that the Interpretative Rules must be applied sequentially. Once Rule 1 decides the classification, it is not necessary to go through the other Rules of Interpretation such as Rule 3(a) and 3(c). The case of PR. PACKAGINGS PVT. LTD. VERSUS COMMISSIONER OF C. EX., NEW DELHI-II 2001 (10) TMI 142 - CEGAT, COURT NO. II, NEW DELHI was based on Trade Notice No. 67/86 dated 30-9-1986 issued by the Bombay Collectorate which was in favour of the assessee and was binding on the officers. The question in HARIRAM GOVINDRAM VERSUS COLLECTOR OF CENTRAL EXCISE, BOMBAY 1997 (6) TMI 98 - CEGAT, NEW DELHI was related to classification of the covers of the outer covers of the cassettes. Relying on Board s order dated 29-7-1994 issued under Section 37B of the then Central Excises and Salt Act, 1944, the classification was decided in favour of the assessee. Thus, the rejection of the appellant s classification of the front cover, middle cover and back cover of mobile phones under CTH 85177090 in the impugned order and their re-classification under CTH 39209999 cannot be sustained and needs to be set aside. The impugned order is set aside - appeal allowed.
Issues Involved:
1. Classification of imported goods. 2. Determination of classification based on exemption notifications. 3. Determination of classification based on policies. 4. Recovery of differential duty. 5. Recovery of interest. 6. Liability of goods for confiscation and imposition of penalty. Summary: 1. Classification of Imported Goods: The primary issue was whether the front cover, middle cover, and back cover of cellular mobile phones imported by the appellant should be classified under CTH 85177090 (as claimed by the appellant) or under CTH 39209999 (as held by the Principal Commissioner). The Tribunal found that the manufacturing processes, including vapor deposition (lamination), thermoforming, and CNC milling, take the goods out of the purview of CTH 3920 and Chapter note 2(s) to Chapter 39. Consequently, the goods should be classified under CTH 85177090 as parts of mobile phones. 2. Determination of Classification Based on Exemption Notifications: The Tribunal held that exemption notifications issued by the Government under Section 25 of the Customs Act cannot determine the classification of goods. The notifications only provide exemptions if the goods match both the description and the tariff heading specified. The classification must be determined first, and then the applicability of the exemption notification should be considered. 3. Determination of Classification Based on Policies: The Tribunal ruled that the policy notified by the Ministry of Electronics and Information Technology (MeITY) cannot determine the classification of goods under the Customs Act. The authority making the policy is not empowered under Section 17, and the policy is not a quasi-judicial, appealable decision but an executive policy decision. 4. Recovery of Differential Duty: The Tribunal found that the differential duty demand of Rs. 62,44,28,858/- confirmed by the Principal Commissioner was based on an incorrect classification of goods. Since the classification was determined in favor of the appellant, the demand for differential duty was set aside. 5. Recovery of Interest: Interest under Section 28AA of the Customs Act was also set aside as it was contingent on the incorrect classification and the resulting differential duty demand. 6. Liability of Goods for Confiscation and Imposition of Penalty: The Tribunal held that incorrect classification by the importer, even if found incorrect during re-assessment, does not render the goods liable for confiscation under Section 111(m) or the consequential penalty under Section 112. The appellant cannot be penalized for holding a different view on classification than the proper officer. Conclusion: The appeal was allowed, and the impugned order was set aside with consequential benefits to the appellant. The Tribunal emphasized that classification of goods is a part of assessment and should be decided by the importer, the proper officer, and appellate authorities alone.
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