2025 (1) TMI 1459 - AT - Customs

Classification of imported goods - Epoxidised Soya Bean Oil (ESBO) - to be classified under CTH 3812 3990 or under CTH 1518 0039? - benefit of availment of BCD @7.5%vide Sl. No. 262 of N/N. 50/2017 dated 30.6.2017 - SCN issued beyond two years of date of clearance of BoE for home consumption - Abrupt change in classification - mis-declaration of goods - Confiscation and penalties. Classification of imported Epoxidised Soya Bean Oil - HELD THAT - ESBO is a chemically modified vegetable oil. As per the product declaration given by the supplier the composition of the product is 99.8% epoxidized Soyabean oil and 0.2% water. It is not disputed that the production process undertaken to convert the raw material soyabean oil to epoxidised Soya Bean oil include epoxidation vacuum distillation centrifugation and filtration and that it is a secondary plasticiser. As stated in the OIO the product is a bio-based product from the epoxidation of soya bean oil with hydrogen peroxide and either acetic or formic acid obtained by converting the double bonds into epoxy group which is non-toxic and of higher chemically reactivity. As per the Explanatory Notes heading 1518 covers epoxidized oils obtained by treating for example soya bean oil with per acetic acid pre-formed or formed in situ by reaction between hydrogen peroxide and acetic acid in the presence of a catalyst. They are used as plasticisers or stabilisers for e.g. vinyl resins - note 6(c) fits the impugned goods squarely and the impugned goods hence are covered under CTH 1518. While plasticisers are also covered by heading 3812 it pertains to the category of compound plasticisers. The HSN notes makes it clear that ESBO fall under CTH 1518 which is the more specific heading hence as per Rule 3 (a) of RIT the goods have been classified correctly. The classification of goods as per the impugned order is hence upheld. Proper date for calculating time bar of SCN / demand - HELD THAT - As regards the date of supplying all RUDs the appellant has stated that although the SCN mentioned that the relied upon documents were enclosed as Annexure A along with a detailed worksheet as Annexure B these documents were not enclosed as stated. Repeated requests were made for service of the complete show cause notice vide their letters dated 09.08.2022 07.09.2022 03.11.2022 and 24.11.2022. It was only on 04.01.2023 that the missing annexures were mailed to the them by the department. The said documents were quintessential to submit a reply showing cause to the claims made in the notice - the principles of natural justice and procedural fairness require that the time limit for the purpose of calculating time bar be reckoned from the date when the documents and worksheet was made available to the appellant enabling him to commence making a proper defence of his case which was on 04.01.2023. Abrupt change in classification as held in the impugned order without any change in facts or law is improper - HELD THAT - A healthy balance needs to be maintained between the need for uniformity in assessment of similar goods belonging to different assessee correcting any deviation when necessary and the need to maintain certainty and predictability of taxes over a long period of time against frivolous allegations as per the doctrine of consistency or the precedential value of the earlier pronouncement. No blanket principle is possible and the judgements cited by the appellant are peculiar to the facts of the individual cases - In this case the department had investigated the matter by a specialized investigative agency (DRI). Such an enquiry is generally able to unearth facts and obtain statements of those involved which gives a more complete picture of the goods involved and the declaratory practices adopted which is not possible to be obtained by the normal assessing officer. In WARNER HINDUSTAN LTD. VERSUS COLLECTOR OF CENTRAL EXCISE HYDERABAD 1999 (8) TMI 75 - SUPREME COURT the Hon ble Supreme Court opinioned that the correct course for making a change of an approved classification was to issue a fresh show cause notice to the appellant on the basis of the fresh details gathered. This would have given the appellant the opportunity to place on record such material as was available to it to establish the contrary. This requirement has been met in the present case. Hence there are no infirmity and their plea is rejected. Classification based on appellants belief cannot be said to be a misdeclaration - HELD THAT - The non-adoption of the classification as stated in the COO certificate was evident to the departmental officers in the two cases examined by them. The appellant had provided the product literature letter describing the captive use of the product and the material safety data sheet when called for by the department officer. This was followed by the department accepting the classification in one case. Further the impugned goods which are plasticisers are also covered by heading 3812 although it may not have been the more specific heading and had to yield to heading 1518. The importer cannot be held responsible for taking an alternate view when he has submitted all the necessary documents that have helped the department to now come to a different view. The plea of the appellant hence succeeds on this issue. The department has failed to make out a case of suppression or misdeclaration etc. Confiscation and penalties are liable to be set aside since there is no suppression of facts etc. - HELD THAT - No case of suppression mis-decleration etc. has been made out. This being so the demand has to be limited to the normal period and the question of confiscation and penalties does not arise. However it is seen that interest is necessarily linked to the duty payable such liability arises automatically by operation of law and is payable on any demand due. As per the Hon ble Supreme Court s judgment in COMMISSIONER OF CENTRAL EXCISE PUNE VERSUS M/S SKF INDIA LTD. 2009 (7) TMI 6 - SUPREME COURT interest is leviable on delayed or deferred payment of duty for whatever reasons. Conclusion - i) The classification of ESBO under CTH 1518 upheld. ii) SCN was not time-barred considering the date of providing all RUDs as the starting point for the time limit. iii) Confiscation and penalties were set aside but interest on the duty was upheld. Appeal allowed in part.

Summary

1. ISSUES PRESENTED and CONSIDERED

The Tribunal considered the following core legal issues in the appeal:

A) The correct classification of the imported 'Epoxidised Soya Bean Oil' (ESBO) under the Customs Tariff Heading (CTH) 3812 or CTH 1518.

B) Whether the Show Cause Notice (SCN) dated 26.06.2022 was time-barred, given the dates of supplying all Relied Upon Documents (RUDs) and the corrigendum to the SCN.

C) The propriety of an abrupt change in classification without any change in facts or law, given the finality of assessment of one Bill of Entry (BoE).

D) Whether the classification adopted by the Appellant was a bona fide belief and thus not a misdeclaration.

E) The liability for confiscation and penalties, considering the absence of collusion, willful misstatement, or suppression of facts.

2. ISSUE-WISE DETAILED ANALYSIS

Classification of imported 'Epoxidised Soya Bean Oil'

The Tribunal analyzed the classification issue by examining the relevant tariff headings and the Harmonized System of Nomenclature (HSN) Explanatory Notes. The appellant classified ESBO under CTH 3812, arguing it to be an industrial product, while the revenue classified it under CTH 1518, which covers chemically modified vegetable oils. The Tribunal found that ESBO, being a chemically modified vegetable oil, fits under CTH 1518 based on the HSN Explanatory Notes, which specifically mention epoxidized oils like ESBO. The Tribunal upheld the classification under CTH 1518 as it provides a more specific description than CTH 3812.

The proper date for calculating time bar of SCN / demand

The appellant contended that the SCN was time-barred, arguing that the date should be considered from when all RUDs were provided. The Tribunal agreed with the appellant, noting that the complete set of RUDs was essential for the appellant to prepare a defense. The Tribunal held that the time limit for calculating the time bar should be reckoned from 04.01.2023, the date when the RUDs were made available.

Abrupt change in classification

The Tribunal examined whether the change in classification was justified. It noted that self-assessment under the Customs Act, 1962, is subject to verification and reassessment by customs officers. The Tribunal found that the department's change in classification was based on a comprehensive investigation by the Directorate of Revenue Intelligence (DRI), which revealed facts not apparent during initial assessments. The Tribunal held that the change was justified and in public interest, rejecting the appellant's plea.

Classification based on appellant's belief

The Tribunal considered whether the appellant's classification was a bona fide belief and not a misdeclaration. It found no evidence of dishonesty or willful misstatement by the appellant. The Tribunal noted that the appellant had provided all necessary documents during assessments and that the classification under CTH 3812 was not entirely implausible. The Tribunal concluded that the department failed to establish suppression or misdeclaration, thus favoring the appellant on this issue.

Confiscation and penalties

Given the absence of suppression or misdeclaration, the Tribunal set aside the confiscation and penalties imposed. It noted that while the duty demand was limited to the normal period, interest on delayed payment was still applicable as per law.

3. SIGNIFICANT HOLDINGS

The Tribunal upheld the classification of ESBO under CTH 1518, agreeing with the revenue's interpretation based on the HSN Explanatory Notes. It concluded that the SCN was not time-barred, considering the date of providing all RUDs as the starting point for the time limit. The Tribunal rejected the appellant's arguments regarding the abrupt change in classification and found no evidence of misdeclaration. Consequently, confiscation and penalties were set aside, but interest on the duty was upheld. The appeal was partly allowed, granting the appellant consequential relief as per law.