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TMI Blog2023 (12) TMI 1155X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 Bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iddle covers of the cellular phones, which were classified by the appellant under CTH 85177090 deserve to be classified under CTH 39209999 instead and accordingly the differential duty needs to be paid by the appellant. Audit issued a consultative letter dated 01.02.2020 but the issue could not be resolved through consultations. Thereafter, a show cause notice [SCN] dated 19.02.2020 was issued by the Principal Commissioner of Customs, Air Cargo Complex, New Delhi proposing to reclassify the front covers, middle covers and back covers of the cellular phones under 39209999 and recover the differential duty along with interest. It was also proposed to confiscate the goods under Section 111 (m) of the Customs Act, 1962 and impose penalty under Section 112 (a) (ii) of the Customs Act, 1962. 2. The three grounds on which the SCN proposed to reclassify the goods are as follows :- (i) the goods 'Battery cover, Front cover, Middle cover, Back Cover and Camera Lens' (which are part/sub-part or accessories of cellular mobile phones) are classifiable under CTH 39209999 and attract BCD @ 15% in terms of S. No. 10 of notification No. 57/2017-Cus dated 30.06.2017, as amended ; (ii) Chapter n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thousand Eight Hundred and fifty Eight only) on the impugned goods imported by M/s Samsung India Electronics Pvt. Ltd. against the Bills of Entry as mentioned in Annexure - A to D to the SCN under Section 28 (1) of the Customs Act, 1962. (iii) I drop the demand of Rs. 24,15,22,593/- (Rs. Twenty Four Crore Fifteen Lakhs Twenty Two Thousand five Ninety Three only) in terms of the findings at para 11.10 and 11.11.1 above. (iv) I hold that interest under Section 28AA of the Customs Act, 1962 is payable in this case by M/s Samsung India Electronics Pvt. Ltd. on the demand as confirmed at (ii) above from the due date till the duty is paid in accordance with law. (v) I hold that the goods imported and already cleared by M/s Samsung India Electronics Pvt. Ltd. against the Bills of Entry as listed in Annexure - A, C & D to the show cause notice totally valued at Rs. 367,31,62,198/- (Rs. Three Hundred Sixty Seven Crore Thirty One Lakh Sixty Two Thousand One Hundred and Ninety Eight only) are liable for confiscation under Section 111 (m) of the Customs Act, 1962. However, as the goods have already been cleared for home consumption and not available for confiscation, I refrain from impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over a solid mold to obtain desired shape. This gives grooves and ground edges to the uncut phone cover to enable such a cover to be clipped to the specific phone for which it is made so that the phone is protected from dust and moisture. g. CNC Milling: In this step, specific cuts, speaker grills, and other compartments, are milled in the cover, thereby giving it final shape. (iii) These three covers have been correctly classified under CTH 85177090 as these are parts of mobile phones and not merely articles of plastic. Hence, there was no misclassification at all as held in the impugned order. CTH 3920 covers "other plates, sheets, film, foil and strip of plastics, not cellular and not re-imposed, laminated, supported a similarly by with other materials". Chapter note 10 to Chapter 39 reads as follows :- "10. In headings 3920 and 3921, the expression "plates, sheets, film foil and strips" applies only to plates, sheets, film, foil and strip (other than those of Chapter 54) and to blocks of regular geometric shape, whether or not printed or otherwise surface-worked, uncut or cut into rectangles (including squares) but not further worked (even if when so cut they become arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 -- Populated, loaded or stuffed printed circuit boards 8517 70 90 -- Others (vii) Reliance is also placed on WCO Harmony System Company Session May 2022 which classified cover glass for the manufacture of a mobile phone, touch screen under 8517.70. Although WCS classification is not binding but it has highly persuasive value and may be considered. (viii) Since, the Department has proposed to reclassified the goods the burden is on it to prove that the goods not fall under CTH 8517 and fall under CTH 39209999 and this burden has not been discharged by the Department. 7. The appellant has been importing these products for a long time and has been classifying them under 85177090 and the Department has been accepting this classification. In the case of Bhagwati Products, the Principal Commissioner of Customs, Chennai accepted the classification of similar products under 85177090. The only difference between the case of Bhagwati Products they were described as front housing, back housing, etc. and in this case the appellant called them front cover, back cover etc., but they are essentially the same. This order of Principal Commissioner of Customs, Chennai in Bhagwati Prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort), JNCH, Nhava Sheva [2019 (368) E.L.T. 705 (Tri. - Mumbai)] Atul Kaushik versus Commissioner of Customs (Export), New Delhi [2015 (330) E.L.T. 417 (Tri. - Del.)] Towa Ribbons Pvt. Ltd. versus Collector of Customs [1993 (66) E.L.T. 320 (Tri. - Del.)] Speedway Rubber Co. versus Commissioner of Central Excise, Chandigarh [2002 (143) E.L.T. 8 (S.C.)] (ii) Each part of a machine does not merit being classified along with the machine or as its part under Chapter 85. As has been held in the above cases some parts or machine can also be classified under Chapter 39. (iii) On the question of whether the specific entry should prevail over the general entry, since the impugned goods do not merit classification under 8517 at all and, therefore, the question of general or specific entry does not arise. (iv) The products in this case and in of Bhagwati Products Ltd, in which the Principal Commissioner of Customs, Chennai held that the front housing and part housing of a mobile phone deserve to be classified under CTH 85177090 are different. In this case, the appellant itself has declared them as front cover, middle cover and back cover not as housing and, therefore, the ratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 112 imposed correctly? 11. Before examining the question of classification, we examine the above questions (b) to (f) above. For this purpose, it is necessary to examine the nature of the Customs duty and the legal provisions to determine and charge it, the role of classification and who can decide the classification. The charging section, i.e., the section which empowers the Government to levy and collect duties of customs is Section 12 which reads as follows: Section 12. Dutiable goods. - (1) Except as otherwise provided in this Act, or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, on goods imported into, or exported from, India. (2) The provisions of sub-section (1) shall apply in respect of all goods belonging to Government as they apply in respect of goods not belonging to Government. 12. Thus, the taxable event, i.e., that event which triggers levy of customs duty is the act of importation (bringing into India from a place outside India) or exportation (taking to a place outside India from India) of goods. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 46, or an exporter entering any export goods under Section 50, shall, save as otherwise provided in Section 85, self-assess the duty, if any, leviable on such goods. (2) The proper officer may verify the entries made under Section 46 or Section 50 and the self-assessment of goods referred to in sub-section (1) and for this purpose, examine or test any imported goods or export goods or such part thereof as may be necessary. Provided that the selection of cases for verification shall primarily be on the basis of risk evaluation through appropriate selection criteria. (3) For the purposes of verification under sub-section (2), the proper officer may require the importer, exporter or any other person to produce any document or information, whereby the duty leviable on the imported goods or export goods, as the case may be, can be ascertained and thereupon, the importer, exporter or such other person shall produce such document or furnish such information. (4) Where it is found on verification, examination or testing of the goods or otherwise that the self- assessment is not done correctly, the proper officer may, without prejudice to any other action which may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owner, beneficial owner or any person holding himself out to be the importer; 18. This process of self-assessment by the importer and re-assessment by the proper officer comes to an end once an order permitting the clearance of goods for home consumption is issued under Section 46. Thereafter, the goods cease to be imported goods or dutiable goods and no duty can be assessed. The only exception is when the goods are cleared for home consumption on provisional assessment in which case the assessment concludes after the assessment is finalized and an order is passed by the officer. Provisional assessment is not relevant to this appeal. 19. 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 [CPC]. Section 2 (2) of CPC defines decree as "It means the formal expression of an adjudication which conclusively determines the rights of the parties with regard to all or any of the matters in controversy in the suit." Assessment differs from decree inasmuch as the determination of what is due as Revenue by the importer is not made by a Court of law but is determined through a quasi-judi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cause is shown, at any stage of hearing of an appeal, grant time, from time to time, to the parties or any of them and adjourn the hearing of the appeal for reasons to be recorded in writing : Provided that no such adjournment shall be granted more than three times to a party during hearing of the appeal.] (2) Every appeal under this section shall be in such form and shall be verified in such manner as may be specified by rules made in this behalf." 43. As the order of self-assessment is nonetheless an assessment order passed under the Act, obviously it would be appealable by any person aggrieved thereby. The expression 'Any person' is of wider amplitude. The revenue, as well as assessee, can also prefer an appeal aggrieved by an order of assessment. It is not only the order of re-assessment which is appealable but the provisions of Section 128 make appealable any decision or order under the Act including that of self-assessment. The order of self-assessment is an order of assessment as per Section 2(2), as such, it is appealable in case any person is aggrieved by it. There is a specific provision made in Section 17 to pass a reasoned/speaking order in the situation in case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed or erroneously refunded. 23. To sum up, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dard rate as specified in the corresponding entry in column (4) of the said Table subject to any of the conditions, as specified in the Annexure to this notification, the condition number of which is mentioned in the corresponding entry in column (5) of the said Table. TABLE S. No. Chapter or Heading or Sub-heading or tariff item Description of goods Standard rate Condition No. (1) (2) (3) (4) (5) 10. 3920 99 99 All goods other than the following parts or sub-parts or accessories of cellular mobile phones, namely: (i) Battery cover (ii) Front cover (iii) Front cover (with Zinc Casting) (iv) Middle cover (v) Back Cover (vi) Main Lens (vii) Camera Lens 10% - 26. As can be seen, only such goods which match the description in column 3 and which also fall under the Tariff heading at column no. 2 are exempted. If the goods do not match the description in column 3 and/or the tariff heading does not match column 2, the goods will not be exempted. Clearly, the notification does not say that the goods of the description in column 3 shall be classified in the heading in column 2. Evidently, goods of the description in column 3 may fall in the heading in column 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 112 29. The impugned order held that the imported goods were liable for confiscation under Section 111(m) and consequently, imposed penalty on the appellant under Section 112. Section 111(m) and Section 112 read as follows: Section 111. Confiscation of improperly imported goods, etc. - The following goods brought from a place outside India shall be liable to confiscation: - (m) any goods which do not correspond in respect of value or in any other particular with the entry made under this Act or in the case of baggage with the declaration made under Section 77in respect thereof, or in the case of goods under trans-shipment, with the declaration for trans-shipment referred to in the proviso to sub-section (1) of Section 54; SECTION 112. Penalty for improper importation of goods, etc.- Any person, - (a) who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under Section 111, or abets the doing or omission of such an act, or ………… shall be liable, - (i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be correctly declared and elements which are in the nature of the opinion of the importer such as classification of the goods, exemption notifications which apply, etc. While the facts are verifiable as correct or incorrect, opinions can differ. The importer may find that the goods are classifiable under one CTH while the officer re-assessing the goods may classify them under a different CTH. If appealed against, different views can be taken at different levels of judicial hierarchy from Commissioner (Appeals) all the way up to the Supreme Court. Similar will be the case with the availability of the benefit of exemption notifications. 32. Insofar as the value is concerned, it could be partly factual and partly based on the opinions. The transaction value of the goods, whether there was any other consideration for sale and if the buyer and seller were related are matters of fact and the importer is bound to truthfully declare these and assess duty accordingly. However, the proper officer is empowered to reject the transaction value under Rule 12 of the Customs Valuation Rules and re-determine the value of the imported goods based on the value of the contemporaneous imports of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation 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). 35. Consequently, 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. Classification of the goods 36. We now examine the question of classification of the goods, viz., front cover, mid cover and back cover of mobile phones. Of the three grounds on which these goods were re-classified in the impugned order, we have already found two grounds cannot determine the classification; these are the exemption notification issued by the Central Government and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erm use and presented with the articles for which they are intended, shall be classified with such articles when of a kind normally sold therewith. This rule does not, however, apply to containers which give the whole its essential character; (b) Subject to the provisions of (a) above, packing materials and packing containers presented with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provisions does not apply when such packing materials or packing containers are clearly suitable for repetitive use. 6. For legal purposes, the classification of goods in the sub-headings of a heading shall be determined according to the terms of those sub headings and any related sub headings Notes and, mutatis mutandis, to the above rules, on the understanding that only sub headings at the same level are comparable. For the purposes of this rule the relative Section and Chapter Notes also apply, unless the context otherwise requires. The two competing entries in the Tariff are CTH 85177090 (as claimed by the appellant) and CTH 39209999(as held in the impugned order). The relevant chapter notes are as follows: Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he lamination and CNC milling, according to the appellant clearly take the goods out of the ambit of note 10 of Chapter 39. Further, according to the appellant, the middle cover is laminated with zinc to dissipate heat and the laminations add strength to the plastic. Since these do not fall under section note 10, they fall under chapter 85 and therefore, by virtue of note 2(s) are clearly excluded from Chapter 39. 39. Learned special counsel for the Revenue did not dispute the process of manufacture of the front cover, mid-cover and back cover described by the learned counsel for the appellant. He submitted that they are made of plastic and the sub-components are embedded at proper places in the front cover and back cover. The purpose of the back cover is to reduce the amount of dust on battery terminals and it is also made of plastic. The middle cover fixes the inner components and protects the battery from moisture and dust and it is also made of plastic, therefore, the impugned order was correct in holding that they are classifiable under CTH 39209999. According to him, these three covers do not contribute to the functionality of the mobile per-se and, therefore, do not deserve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant is not disputed by the Revenue and therefore, considering this manufacturing process, we proceed to decide if the front cover, middle cover and back cover fall under 3920 by virtue of Chapter note 2(s). 42. We find that CTH 3920 covers "other plates, sheets, film, foil and strip of plastics, not cellular and not re-imposed, laminated, supported a similarly by with other materials". The first step of manufacture - extrusion, involves pressing together two sheets of plastic- Polymethyl Methacrylate (PMM) and Polycarbonate (PC) into a single sheet of plastic. What emerges after this process is still a sheet of plastic. The second and fourth steps are printing which also make no difference and Chapter note 2(s) would still apply. The third step vapor deposition, is a process of depositing a thin layer of material to give the covers the glossy finish. According to the appellant, this is similar to lamination. Lamination takes the goods out of the scope of CTH 3920 because it covers only such goods which are "….not re-imposed, laminated, supported similarly by with other materials". According to the appellant, the middle cover also has a layer of zinc to help dissipat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee and it was binding on the Revenue. Therefore, the classification was decided in favour of the assessee by the Tribunal and this decision was upheld by the Supreme Court. Relevant portion of the Tribunal's order is as follows: 5. …..The learned Advocate has placed heavy reliance on Board's Circular No. 6/86-CX 4, dated 25-9-1986, and in our view rightly, wherein the Board has considered the classification of the parts and accessories of refrigerating and air-conditioning machinery and appliances. It has been clarified therein that the parts and accessories of refrigerators for the treatment of materials by a process involving a change of temperature, as mentioned in Annexure "A" to the Circulars, are to be classified under Heading 84.15, 84.18 or 84.19 of the Tariff. It is not the case of the Revenue that the impugned goods find mention in the said Annexure "A". In the Circular, a very large number of parts and accessories of refrigerators etc. have been mentioned in "Annexure B" but these are to be classified in their respective Headings of the Tariff and not under Heading 84.15, 84.18 or 84.19 of the Tariff. It was observed by the Tribunal in the case of P.R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 as asserted by the Revenue. 49. In Speedway, the question before the Supreme Court was the classification of procured treads manufactured by the appellant. Finding that the note 9 of Chapter 40 made a distinction between 'surface working' and 'further working', and that specific entry should prevail over general entry, it was held that the impugned goods in that case would be classified under sub-heading 4008.21 and not under sub-heading 4016.99 as claimed by the Department. 50. For all these reasons, we find that 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. 51. To sum up: a) Classification of the goods is a part of assessment and the importer, the proper officer and appellate authorities alone are competent to decide it. b) The policy of the MeiTY, which is in the nature of an executive policy decision of that Ministry cannot determine the classification of goods under the Customs Act firstly because the authority making the policy is not empowered under Section 17 and second ..... X X X X Extracts X X X X X X X X Extracts X X X X
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