2024 (9) TMI 416 - AT - Customs

Chargeability to integrated tax on imported goods - authority vested by section 3(7) of Customs Tariff Act, 1975 - expression personal use employed in the rate notification - HELD THAT - Bearing in mind the limitations set out in re Hansoli Devi 2002 (9) TMI 799 - SUPREME COURT , there are no competent to interpret personal use , in the rate notification intended for inter-state sales that was extended also to cover imported goods, as the impugned order has and arrogate a jurisdiction that may be in conflict with interpretation in an inter-state supply transaction. Such an exercise on our part would not only be futile but also has potential for chaos in the mechanism for levy and collection of goods and service tax (GST). The adjudicating authority did venture upon such an exercise through a show cause notice that should, in accord with the General Rules for Interpretation of the Tariff, have set out the justification for resort to Schedule IV of the rate notification instead of attempting to establish that the declaration of the importer was incorrect. Unlike the valuation mechanism which has offerings of alternatives upon discard of declarations, classification may offer several alternatives of which only one must be determined first with full certainty as apt before comparison of aptness. Thus, onus not being discharged in the show cause notice issued to the appellant owing to which the confirmation of duty liability and other detriment failed to meet the tests of law as set out by the General Rules for Interpretation of the Tariff - appeal allowed.

Issues Involved:
1. Chargeability to 'integrated tax' on imported goods.
2. Applicability of 'compensation cess' on imported goods.
3. Determination of the rate of duty under Customs Tariff Act, 1975.
4. Classification of imported helicopters for tax purposes.
5. Interpretation of 'personal use' in the context of tax rate notifications.
6. Jurisdictional competence of customs authorities in determining tax rates.
7. Applicability of interest and penalties under the Customs Act, 1962.

Issue-wise Detailed Analysis:

1. Chargeability to 'Integrated Tax' on Imported Goods:
The core issue is whether the Customs Tariff Act, 1975 empowers the determination of the 'rate of duty' on imported goods, which should align with the rates prescribed for domestic supply under the Integrated Goods and Services Tax (IGST) Act, 2017. The Tribunal noted that the 'integrated tax' combines the state goods and service tax (SGST) and central goods and service tax (CGST) on inter-state supply, aiming to keep the tax chain unbroken and ensure the incidence falls on the ultimate consumer.

2. Applicability of 'Compensation Cess' on Imported Goods:
The appellant contested the applicability of the 'compensation cess' under section 3(9) of the Customs Tariff Act, 1975. The Tribunal observed that the rate notification for compensation cess is structured differently from the Central Excise Tariff Act, 1985, and the Customs Tariff Act, 1975, which raised questions about jurisdictional competence for re-determining the rate of duty.

3. Determination of the Rate of Duty under Customs Tariff Act, 1975:
The appellant imported helicopters and discharged tax at 5% as per Schedule I of notification no. 1/2017-Integrated Tax (Rate). The customs authorities re-determined the rate at 28%, arguing that the helicopters were for 'personal use' rather than 'other aircraft other than those for personal use.' The Tribunal noted that the adjudicating authority should have provided a clear justification for re-classification under the General Rules for Interpretation of the Tariff.

4. Classification of Imported Helicopters for Tax Purposes:
The appellant argued that the helicopters were for commercial use by company employees, not 'personal use.' The Tribunal found that the adjudicating authority's classification was erroneous and did not reflect judicial decisions on interpretative excursions. The Tribunal emphasized that the burden of proof for classification lies with the Revenue, which was not discharged in this case.

5. Interpretation of 'Personal Use' in the Context of Tax Rate Notifications:
The Tribunal noted that 'personal use' was not defined in the rate notification or the IGST Act, 2017. The Tribunal relied on the principle that words in a taxing statute must be construed in their commonly accepted meaning in trade. The Tribunal found that the customs authorities' interpretation of 'personal use' based on regulatory registration as 'private aircraft' was speculative and not supported by any clarification or circular.

6. Jurisdictional Competence of Customs Authorities in Determining Tax Rates:
The Tribunal highlighted that the customs authorities lacked jurisdiction to determine the rate of integrated tax, which falls under the purview of central tax officers. The Tribunal cited previous decisions emphasizing that the customs authorities should not intrude into the rate determination under laws outside their jurisdictional competence.

7. Applicability of Interest and Penalties under the Customs Act, 1962:
The Tribunal referred to the decision of the Hon'ble High Court of Bombay in Mahindra & Mahindra Ltd v. Union of India, which held that delays in duty discharge under the Customs Tariff Act, 1975 should not attract additional penalties under another law. The Tribunal found that the customs authorities had not discharged the onus of proof required to impose penalties and interest under sections 28 and 28AA of the Customs Act, 1962.

Conclusion:
The Tribunal allowed the appeal, concluding that the customs authorities' re-determination of the rate of duty and classification of the helicopters as 'personal use' was erroneous and beyond their jurisdiction. The Tribunal emphasized the need for clear justification and adherence to judicially established rules for classification and rate determination. The appeal was allowed, and the order pronounced in the open court on 28/08/2024.

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