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TMI Blog2022 (1) TMI 1403X X X X Extracts X X X X X X X X Extracts X X X X ..... esigns, explanation as to where each of the parts is used, an expert opinion that the goods were specifically designed for use in the plant and were not goods of general use, a Chartered Engineer s certificate to the same effect. The appellant has not produced any alternative drawings or designs or any evidence to show that the parts in question were only parts of general use and not ones designed for the plant. In the absence of any evidence in the appeal, it is not possible to fault the Commissioner for considering the reply to the consultative letter, the drawings and designs and the clarifications provided by the supplier to conclude that the parts in question were parts designed for the plant and were not ordinary articles of iron and steel. The Commissioner has given her findings relying on Rule 1 (NOT RULE 2) of the General Rules of Interpretation, which states that classification shall be based on terms of the Tariff Headings and Section Notes and Chapter Notes and the titles of Sections and Chapters are for ease of reference only. She also referred to Section Note 1(f) to Section XV (under which Chapter 73 falls) which states that articles of Section XVI (machinery, mechan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rix which lead to the dispute is as follows. 3. The assessee was awarded an Engineering, Procurement and Construction [EPC] contract by M/s. Reliance Power Ltd [Reliance Power], Mumbai to set up a 2,400 MW Gas Power Project at Samalkot, East Godavari district, Andhra Pradesh. The assessee, in turn, entered into an "Offshore Equipment Supply" contract dated 7.8.2010 with M/s. Reliance Infra Projects International Ltd [Reliance Infra Projects]., British Virgin islands for supply of various material and equipment to execute the EPC project. It also placed a Purchase Order dated 29.7.2011 with M/s Zhejiang Hangxiao Steel Structure CO. Ltd. [Zheijang] Hangzhou, China for supply of some material and equipment. 4. The assessee imported various equipment from Reliance Infra Projects and Zhejiang and cleared them by filing 36 Bills of Entry between June 2011 and February 2012 with the Customs at Kakinada. Bills of Entry filed in the Customs EDI system are either marked to an officer for assessment or marked for examination of goods or both or may be cleared without either assessment by the officer or examination of the goods by the Customs Risk Management System [RMS] These 36 Bills of En ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CN were that the assessee was called upon to explain as to why: "(i) The goods imported under Bills of Entry No. 5051226/31.10.2011, 5218089/17.11.2011, 6011406 /15.02.2012, 4789656/29.09.2011, 521873/ 17.11.2011 and 6070324/22.02.2012 as mentioned in the Annexure should not be classified under customs tariff item 73089090 of the Customs Tariff Act, 1975; (ii) The duty amount of Rs. 9,39,30,711(Rupees Nine crores thirty nine lakhs thirty thousand seven hundred and eleven only) being the differential duty of customs as a result of incorrect classification of the goods imported with an intention to evade payment of duty should not be recovered from them under section 28(4) of the Customs Act, 1962; (iii) The interest under section 28AA of the Customs Act, 1962 should not be recovered from them on the amount mentioned at (ii) above; (iv) A penalty should not be imposed on them under section 114A of the Customs Act, 1962 as detailed above; and (v) A penalty should not be imposed on them under section 114AA of the Customs Act, 1962 as detailed above. 6. After considering the submissions made in defence by the assessee, the Commissioner passed the impugned order giving finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods as articles of Iron and Steel. After considering the assessee's submissions and examining the detailed drawings and designs, the expert opinion and the certificate by the Chartered Engineer, the Commissioner concluded in the impugned order that the goods which were imported were not general articles of Iron and Steel but were specifically designed for the power plant and hence were correctly classifiable under 8406. Learned counsel submits that there is no dispute to the factual findings recorded by the Commissioner in the Department's appeal. He also submitted that the HSN mentioned by the supplier is beyond the assessee's control and even if wrong HSN is mentioned by the supplier it does not change the classification of the goods under the Customs Tariff. He, therefore, prays that the department's appeal may be rejected. 9. Before considering the grounds of this appeal, we proceed to examine the scope of the HSN code and other details mentioned in the documents of the overseas supplier in determining the classification of goods under the Customs Tariff. Since the Customs Tariff is based on HSN, it is a well settled principle that while determining the classification of goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surement or other specifics of such goods; (e) the origin of such goods determined in accordance with the provisions of the Customs Tariff Act or the rules made thereunder, if the amount of duty, tax, cess or any other sum is affected by the origin of such goods; (f) any other specific factor which affects the duty, tax, cess or any other sum payable on such goods, and includes provisional assessment, self-assessment, re-assessment and any assessment in which the duty assessed is nil 11. It is explicit from the definition after 2018 and it was implicit before that date that classification of goods under the Customs Tariff is a part of assessment. This power of assessment is conferred under Section 17 of the Customs Act. Prior to 2011, the assessment had to be done by "the proper officer" under section 12. After 2011, the importer of exporter has to self assess the duty under section 17(1) and the officer could re-assess the duty under section 17(4). This section, as it stood during the relevant period, was follows. Section 17. Assessment of duty. - (1) An importer entering any imported goods under section 46, or an exporter entering any export goods under section 50, sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 17 as it stood immediately before the date on which such assent is received. 13. Thus, the power of assessment of duty under the Customs Act, which includes the power to classify the goods under the Customs tariff, lies with the importer and "the proper officer". In case of a demand of duty under section 28, this power of classification and determining the duty extends to the adjudicating officer and to those higher in the chain of appeals. In classifying goods they may refer to the description of the goods, literature, the HSN declared by the supplier, etc. but the HSN indicated by the supplier cannot bind either the importer or the proper officer or the adjudicating authority or the appellate authority in classifying the goods- a process which must be done on merits. 14. The supplier has no locus standi in the classification of the goods or assessing the duty. If the HSN indicated in the documents by the supplier is held to bind the importer or the proper officer in assessing the goods, it can result in absurd results with disastrous consequences. Any unscrupulous importer can simply find an equally unscrupulous supplier and ask him to indicate so and so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee requesting it to pay the differential duty and in its reply, the assessee declined stating that the goods imported by them under three Bills of Entry from Zhejiang were components of OT crane system which they imported in different consignments since they were very large. With respect to the goods imported under the other three Bills of Entry, they explained that they were part of the HRSG system for heat recovery. Thus, their stand was that the goods were declared correctly and appropriate amount of duty was paid. 18. The Commissioner asked the Deputy Commissioner for a report on the imported goods and he replied that the goods were no longer in the Customs area. The Commissioner had then formed a team of officers of the Special Intelligence and Investigation branch (SIIB) of the Commissionerate to examine the goods. They visited the assessee's premises and after inspection, reported that all the goods were actually installed in the plant. The assessee also submitted its defence in response to the SCN and also appeared personally before the Commissioner. The assessee submitted detailed designs and drawings of the OT Crane System and the HRSG system of its power pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot supplied general purpose articles and that they had using their normal formats, applied for the Certificate of origin and prepared the invoices, etc. mentioning the HS code for general articles of iron and steel; and f) The detailed designs and drawings and explanation by the assessee as to where each of the parts fit into the systems. 24. After considering all the above, the Commissioner observed that there were six Bills of Entry as follows: S.No. Bill of Entry Date Description of goods Classification claimed by the assessee Classification proposed in the SCN 1 5051226 31.10.2011 Steel structures/PPBS 84068200 73089090 2 5218089 17.11.2011 Steel structures/PPBS 84068200 73089090 3 6011406 15.02.2011 Steel structures/PPBS 84068200 73089090 4 4789656 29.09.2011 Structural steel casings and gas ducks, stack 84068200 73089090 5 5218734 17.11.2011 Tube bundles, lifting steel with slings and shackles 84068200 73089090 6 6070324 22.02.2012 Structural steel casings and gas ducks, stack, auxiliary steel walkways, seismic bumpers 84068200 73089090 25. Of the above, S.No.1 to 3 were explained by the assessee to be parts of OT crane systems an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) All other parts are to be classified in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate or, failing that, in heading 8487 or 8548. 28. Based on her finding that the goods were indeed parts of the OT Crane System and the HRSGS and were designed for the purpose and considering the above Rules of Interpretation and Section Notes, she held that since the imported goods were parts of the OT Crane System and the HRSGS which were part of the entire power plant, classified the imported goods under Chapter Heading 8406 as parts of the power plant. However, she made an exception to the goods described as "structural steel, casing (gas ducts), stack, tube bundles, lifting steel with slings and shackles, auxiliary steel walkways, seismic bumpers", which she found were structural items to make structures to support the boilers and not parts of the machinery and hence, she classified them under 73089090 of the Customs Tariff (as proposed in the SCN) and ordered recovery of differential duty along with interest and also imposed appropriate penalties. 29. Revenue's appeal is that the Commissioner should have classified all the goods and demanded duty as proposed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding nature of the contracts binds the parties and not the adjudicating authority who has to decide classification based on merits. If the Revenue's proposition is accepted and if it is held that the HS Code mentioned in the contracts and other documents by the overseas suppliers binds the assessing officer or an adjudicating authority, it will open a Pandora's Box with disastrous consequences for the Revenue. By managing a pliant overseas supplier, any importer can change the classification of the goods which he imported to misclassify and evade duty. Further, identical goods imported by different importers will have to be classified differently depending on how their contracts and invoices classify them. The discretion of the adjudicating authority cannot be exercised by the overseas supplier nor can it be circumscribed by anything mentioned in the documents from such supplier. 33. In sub-paragraph (vi), it has been submitted that in the three Bills of Entry viz., 5051226 dated 31.10.2011, 5218089 dated 17.11.2011 and 6011406 dated 15.2.2012 the product was described in the Purchase Order as Pre-Engineered Power House Building Structures(PPBS) and the HS Code mentioned in the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riginal equipment supplier in Thailand to assert what were imported were individual articles of iron and steel. 34. We agree that the goods should be classified as they were imported and not based on what use they are put to after import. A screw, for instance, will be a screw and will not become a component of a chair if it is subsequently used in making a chair. The submission of the department is that the supplier is, according to its website, engaged in supplying pre-engineering building structures and that the purchase order was for PPBS and that the certificate of origin, invoice and other documents mention HSN Heading meant for articles of iron and steel and therefore, the Commissioner should not have classified the goods as part of OT crane at all and what use the parts are put to after import is irrelevant. We find that the Commissioner has, in paragraphs 15 and 16 of the impugned order given reasons for holding what were imported were parts of an OT crane system. She examined the technical literature and drawings submitted by the assessee and gave a finding that each part that was imported was specifically designed, engineered and made to order for assembly of the OT cra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvoice and in the Bill of Entry is not permissible. Joshi Steel Industries [2004 (177) ELT 522 (Tri- Del)] was relied upon to argue that while goods are to be classified according to the real nature of the goods, if the assessee seeks to dispute the description and classification in the documents, the burden is on the assessee to prove it. It has been submitted (sub-paragraph xxiii) that the classification claimed by the importer and upheld by the Commissioner is 8406 8200 while the classification under the HSN indicated by the supplier Zhejiang was 73089000. In the next sub- paragraph xxiv, a contrary submission has been made that the Commissioner has held the goods to be classifiable under 8406 but has not given the sub-heading in the Customs Tariff. 36. We have considered these submissions. It cannot be disputed that the goods should be classified as per their nature and as they are imported and that they cannot be clubbed with some other goods imported under other Bills of Entry to determine the classification. It also cannot be disputed that if the invoices describe or classify the goods differently, the assessee has to explain. In this case, the assessee discharged this bur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner has wrongly classified the Heat Recovery Steam Generator System (HRSG) which in turn, forms an essential part of the vapour turbine systems under 8406. It has further been argued (sub-paragraph xxx) that the goods were imported individually and not as a part of Project Import and hence they should have been classified individually based on their nature and not as a part of the system. 38. We have considered these submissions. It is undisputed that the goods were imported individually and not as a Project Import. Goods required for completion of a project can, at the option of the importer, be imported as per the Project Import Regulations. If this option is chosen, all the goods imported under the project are classified under a common Customs Tariff Heading 98.01 and are assessed to a common rate of duty regardless of where each of the individual goods merit classification. The Commissioner has also not classified the imported goods under 98.01. Further, the submission of the Revenue is that the parts imported under each Bill of Entry must be classified wherever they merit classification and the parts cannot be seen as a part of the system and classified especially when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parts in question were parts designed for the plant and were not ordinary articles of iron and steel. 40. It has been submitted (sub-paragraph xxx) that the goods were not described as parts of vapour turbines and were not imported as Project imports to claim single classification. It has again been repeated (sub-paragraph xxxi) that the imported goods fall under 7308 90 as per HSN notes. It was submitted (sub-paragraph xxxii) that in LML Ltd. [2010 (258) ELT 321 (SC)] Supreme Court held that the Explanatory Notes to HSN are a dependable guide to interpret Customs Tariff. Reliance was also placed on Jagson International Ltd. [2006 (199) ELT 553 (Tri- Del)], (sub-paragraph xxxiii) to assert that HSN can be referred to while classifying the goods. 41. We have considered these submissions. We do not find either that the assessee claimed classification under the Project Imports or has the Commissioner classified the goods under 98.01 and so Project import is irrelevant to decide this appeal. It is undisputed that HSN can be referred to while deciding the classification of the goods under the Customs Tariff because it is based on the HSN. But the HSN mentioned in the documents by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are designed for a particular end use, they should be classified accordingly. If nails are to be classified, what use they are put to after import is irrelevant. However, if one imports engines of automobiles (which are mainly made of iron and steel) and declares them as articles of iron and steel, they are not put to use as engines before clearance from the customs, but they will be so used in due course after clearance. They should be classified as parts of automobiles although they will be used as such parts much after the clearance and not as articles of iron and steel. What is important is to examine what are the imported goods intended to be. If they are articles of general use, they should be classified as such. If they are intended to be used in a particular way, they should be classified as such. If one imports a pillow and uses it to smother someone to death, it will be a murder weapon in the case under the Indian Penal Code but can still not be classified as a weapon under the Customs Tariff. It continues to be an article of bedding because it is intended to be used as an article of bedding and not as a weapon. What is relevant to classification whether the goods are go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther has the assessee claimed it nor has the Commissioner classified the goods under project imports. i) Revenue was correct in its submission that the imported goods should be classified as they are imported and not based on what use they were put to after import. If the imported goods were parts of machinery, they should be classified as such and if they are parts of general use, they should be classified likewise. j) After examining all the evidence on both sides, the Commissioner has found that structural steel items were items of general use and other goods were specifically designed for the power plant and classified them accordingly and confirmed part of the demand. Revenue has not produced any evidence to prove the contrary. Hence, the Commissioner was correct in her classification of the goods. k) Classification of imported goods is a part of assessment which power and responsibility is with importer, the proper officer or the adjudicating authority and not with the overseas supplier. l) The fact that a particular HSN was mentioned by the overseas supplier in the import documents is certainly a relevant factor in examining the case but the HSN mentioned by such sup ..... X X X X Extracts X X X X X X X X Extracts X X X X
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