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TMI Blog2021 (12) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... for contentious distinguishment. And so it was until treaty negotiators of the Indo-Japanese Comprehensive Economic Partnership Agreement (CEPA), 2011 excepted paper that had been manufactured from pulp obtained by chemical processing or, when mixed with other pulp, containing no more than a tenth of the fibre content obtained by mechanical or chemi-mechanical process from concessional rate of duty extended to other varieties of 'coated paper' enumerated within heading 4810 of the First Schedule to Customs Tariff Act, 1975. 2. Though the circumstances in which this appeal has surfaced before us, impugning order-in-appeal no. 72 (SM) CUS/JPR/2020 dated 27th November 2020 of Commissioner of Central Excise & CGST (Appeals), Jaipur, is no less significant than the factual matrix narrated therein, it is of no harm to take note of the facts first. Of the consignments of 'coated paper' imported by M/s PLG Impex, a proprietary concern of Shri Giriraj Gupta, against bills of entry no. 6932911/18.02.2020, 7146553/07.03.2020 and 7158311/07.03.2020, the former two, presented in rolls/reels, were detained pursuant to instruction dated 21st November 2019 requiring 'no objection' from Directorat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced by mechanical or chemi-mechanical process in the impugned consignments of paper with consequent denial of preferential duty of 1.8% from April 2019 onwards and of 2.7% during 2018-19 for levy at the standard rate of 10% instead. 5. It would appear that the availing of exemption afforded by notification no. 69/2011-Cus dated 29th July 2011, for implementation of the Comprehensive Economic Partnership Agreement (CEPA) with Japan, alarmed the investigating agency sufficiently for assessing authorities to resort to provisional assessment under section 18 of Customs Act, 1962 on furnishing of appropriate security for the differential duty in several instances of similar imports. The appellant herein, instead of being amenable to such tentative determination of levy, preferred to discharge the duty liability at the standard rate of duty in the tariff. The import of 18.86 tons of 'coated paper gloss', valued at Rs.12,25,792.43 in bill of entry no. 6932911/18.02.2020, was cleared on payment of duty of Rs. 2,98,113 (including basic duty of Rs. 1,22,579) at the standard rate applicable to tariff item 4810 13 90 of the First Schedule to Customs Tariff Act, 1975 even though the goods, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder CEPA under Notification NO. 69/2011 - Customs dated 29.07.2011. The goods imported vide BE No. 6932311 dated 18.02.Z020 and 7146553 dated 07.03.2020 importing from M/s. Mitsubishi Japan, and M/s, Hokeutsu Corp., Japan Through M/s. SAPP trading , UK have been declared as coated paper gloss and coated paper matt in Reels/ rolls and classified under tariff heading 4S109900 & 48102300 and claimed exemption under CEPA under notification No. 69/2011 - Customs dated 29,07.2011, whereas an investigation in respect of import of said goods by the importer M/s. PLG Impex is pending before Directorate of Revenue Intelligence (DRI), Delhi Zonal Unit (DZU), New Delhi regarding mis-declaration and mis-classification of the said goods under Tariff heading 48102900 or 48101390 instead of correct classification 481013S0 under which the importer was earlier classifying, with an intent to evade customs duty by wrongly availing CEPA benefit under Notification No. 69/2011 - Customs dated 29.07.2011, whereas during investigation it has been admitted by the proprietor of M/s. PL.G Impex, that Japanese origin coated paper imported by them was mainly manufactured by two Japan based paper mills namely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er had not been placed on notice that the purported admission was to be used to its detriment and the explanations offered by, and documents tendered on behalf of, the manufacturers appear to have been kept out of consideration in the 'speaking order', mandated by section 17(5) of Customs Act, 1962 upon clearance of goods without the benefit of concessional duty, that was challenged in the first appeal. The lack of success before the Commissioner of Central Excise & CGST (Appeals), Jaipur has brought the impugned order-in-appeal no. 72(SM)CUS/JPR/2020 dated 27th November 2020 before us. 7. In the face of disregard of the specific averments and several documents for controverting the assertion that the impugned goods had been manufactured entirely from chemically extracted wood pulp, of the lack of scrutiny of the rival descriptions in the tariff or of any ascertainment of the composition of the imported 'paper', it fell to the first appellate authority to render the first finding of the 'paper' having been manufactured entirely of pulp obtained by chemical process to justify the classification adopted for derailing the entitlement to concessional rate of duty. It is the deployment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch they were not eligible. It also noted that, while the importer did not appear to be coy about admitting that 'coated paper in sheet form', in which the pulp composition was immaterial to classification, was entirely composed of chemical pulp, similar alacrity was distinguishably absent when it pertained to 'coated paper' in rolls obtained from the same manufacturer in which the proportion of chemical pulp made all the difference between entitlement and non-entitlement to concessional rate of duty. 11. In the course of proceedings before the first appellate authority, it was informed by the importer that the 'article information sheet report' dated 23rd July 2019 detailing the composition of 'coated paper' as inclusive of wood pulp, calcium carbonate, aluminum silicate, starch and latex, the 'letter of declaration' dated 29th November 2019 reporting the classification as 4810 99 in view of use for pouches and flexible packing which would not be 'paper for writing, printing or other graphical purposes', production flowchart dated 30th November 2019 showing the complete manufacturing process and the supplementary copy of 'letter of declaration' dated 6th February 2020 re-iterating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by suppression of the method for determination of pulp content - had been contrived by the first appellate authority to press the denial of the entitlement to concessional duties at the instance of the investigative agency evident in irresponsible procrastination to conceal lack of concrete evidence and informed inquiry for ensuring their unconcealed objective. 14. He further contended that the several documents, submitted to and emanating from the authority nominated under the Agreement for certifying the origin, had categorically placed the goods within the 'six digit level' subheading of the Harmonized Code of Commodity Description System declared in the bill of entry and that the customs authorities, by selective validation of contents to suit their convenience, had eroded their own credibility as administrators of the law. This, he further pointed out, was evident in appropriation, and discarding, of the descriptions at the 'heading' and 'subheading level' for enabling denial of a benefit afforded by a constitutionally sanctified international agreement binding on the Republic. He argued that the imports comprised of 'coated paper' which was to be used for purposes other tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter be remanded to the Tribunal so that the evidence on record may be reappreciated. As we have stated, no evidence was led on behalf of the Revenue. There is, therefore, no good reason to remand the matter.' 15. According to Learned Authorized Representative, the order of assessment could not be faulted for not foreclosing an investigation that was prompted, and justifiably so, by the abrupt departure from the past practice of clearance under a sub-heading that turned out to be the solitary exception among 'coated paper' otherwise entitled to preferential rate of duty in furtherance of the bilateral trade agreement with Japan and for having relied upon the purported admission by the proprietor during investigation that the 'coated paper' imported by them had been manufactured out of pulp extracted entirely from 'chemical processing' of wood. In support of the confirmation of the revision in classification by the first appellate authority, he pointed out that the report of the customs laboratory did indicate that the samples were found to be entirely 'chemical' and that the declaration in the entry under section 46 of Customs Act, 1962 appeared to have been deliberately cursory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n note 5 of chapter 48 of the First Schedule to Customs Tariff Act, 1975 is, for several reasons, not acceptable. To begin with, that line of argument, not even hinted at in the findings of the lower authorities, had not been offered to the appellant at any stage hitherto. To permit that to influence the proceedings at during the second appeal stage is tantamount to acknowledging the propriety of the trend that has marked the progress of this dispute: interpolation of alternative submissions to shore up the denial initiated at the instance of the investigating agency. We are also not convinced that the said Explanatory Note is intended for application of the technical parameters of 'uncoated paper' when it could as well be intended to offer a distinction for grafting a national policy into the tariff by enumeration of items or in assigning of tax rates. Intuitively too, the 'ash content' generated by combustion of 'coated' paper, containing, as it does, the coating material, should be higher than that from 'uncoated' paper and no logical progression to segregation of 'chemically' processed pulp from other pulp is apparent. 17. We concur with Learned Authorized Representative that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he test result thus '18......The test report corroborates the statement given the proprietor of M/s. PLG Impex before the Directorate of Revenue intelligence (DZ) wherein he had admitted that said goods have been manufactured from chemical pulp only. Thus it is quite evidence that the consignments being imported by the appellant under the above referred Bill of Entry are appropriately classifiable under Customs Tariff Heading 481013 and not under 481029 or 481099' even without placing the importer on notice that it was intended to be used to their detriment in the proceedings. The context of the purported admission is, thus, not apparent on record and, with denial opportunity of defence, the extent of corroboration remains undeterminable. Consequently, the test report and the said admission, posited by the first appellate authority as mutually validating the conclusion that pulp was derived from 'chemical processing', stands on unstable ground to weaken the reliability of either. 20. The documents that were made available by the importer to the investigation agency as counter to the purported admission had been discarded thus '14. Further, in the documents submitted by Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chemi-mechanical process which the appellant has failed to prove....', blurring the line separating investigation and appellate jurisdiction, is also contrary to the mandate in HPL Chemicals Ltd and in Hindustan Ferodo Ltd. 21. The certification evincing the origin of the goods, and based on production process intimated by the manufacturer, is the threshold qualification for preferential rate of duty. The rules of origin stipulate ascertainment of the source, and extent, of content in a manufactured. The partial acceptance of origin in the certificate while casting aspersions on the classification therein is not consistent with treaty mandate of presumption of authenticity unless expressly established otherwise. 22. The order of assessment revised the classification without the assistance of the samples and, in the light of our observations on the reliability of the admission statement as well as the aspersions cast by the first appellate authority on the documentation emanating from the manufacturers, this subsequently obtained test report is all that remains in the kitty of customs authorities as evidence of conformity of the impugned goods with the description corresponding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red under Bill of Entry No.7146553 dated 07.03.2020 (Lab No.CL-578 1/24.9.2020) it clearly stated that "The sample in the form of cut piece of white paper. It is composed wholly of chemical pulp and is coated on both sides with inorganic substances (Kaolin and calcium carbonate)"; in respect of sample drawn from the consignment covered under Bill of Entry No.7146553 dated 07.03.2020 (Lab No.CL-579 I/24.9.2020) it clearly stated that " The sample in the form of cut piece of white paper having glossy surface on both sides. It is composed wholly of chemical pulp and is coated on both sides with inorganic substances (Kaolin- and calcium carbonate)"; and in respect of sample drawn from the consignment covered under Bill of Entry No.7146553 dated 07,03.2020 (Lab No.CL-580 I/24.9.2020) it clearly stated that "The sample in the form of cut piece of white paper having glossy surface on both sides. It is composed wholly of chemical pulp and is coated on both sides with inorganic substances (Kaolin and calcium carbonate)". The complete test reports dated 15.10.2020 issued by CRCL New Delhi pertaining to the samples drawn from the above Bill of Entry are shown hereunder for reference:' indic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainable. Had it been otherwise, that would have been the priority in any investigation and the passing of time since November 2019 does not appear to have sufficed for this fundamental ascertainment. The unqualified, and unexplained, inclusion of 'chemical' in the test report does not find acceptance as indicative of 'lignin', or its absence, in the paper imported by the appellant. 25. Yet, the universal customs classification code did segregate paper produced from pulp of 'chemical' or, substantially of 'chemical processing', and paper produced from pulp of 'mechanical or chemi-mechanical processing' and the possibility of distinguishing the two is implicit thereby. It was, probably, owing to the uniformity of rates of duty for the articles covered within heading 4810 of the First Schedule to Customs Tariff Act, 1975 that such disputation did not arise to bring the mechanism for distinguishing to the fore. The distinction between the two is now manifest in the rates of duty applicable to imports from Japan and, to the extent that the preferential rate is linked to the origin which itself is to be accepted on the basis of prescribed certification, the classification too would have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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