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TMI Blog2024 (7) TMI 325X X X X Extracts X X X X X X X X Extracts X X X X ..... the present adjudicating authority. The Chapter Notes and descriptions of the goods would clarify that it is beyond doubt that the goods in question would fall under CTH 0511.99 during the period under dispute - the classification of the impugned goods under CTH 0511.99 upheld. Penalty imposed on the appellant-company under Section 114A of the Act and the penalty of Rs.3,00,000/- imposed on Shri Vickram Jaitha under Section 112(a) of the Act - HELD THAT:- The penalties imposed on the appellant company in terms of Section 114A of the Customs Act, 1962 and on Shri Vickram Jaitha in terms of Section 112(a) of the Act, set aside. Appeal allowed in part. - SHRI R. MURALIDHAR, MEMBER (JUDICIAL) AND SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL) Shri Arnab Chakraborty, Advocate Smt. Shreya Mundhra, Advocate Assisted by Shri Chiranjit Pal, Advocate for the Appellant(s) Shri Faiz Ahmed, Authorized Representative for the Respondent ORDER The present appeals are on an issue which has a chequered history. 2. A Show Cause Notice dated 23.01.2002 was issued for the subject imported goods viz. Artemia Cysts (Brine Shrimp Eggs) , when they were imported during April, 1999. In respect of similar goods, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the relevant period of imports, the appellants declared the said goods under Chapter Heading No. 2309.90, based on an order of the Commissioner (Appeals) in their own case and in respect of the very same said goods, imported at Mumbai. The order of the Commissioner (Appeals) in the appellants case at that time was based on the fact that other importers were also classifying the said products under Chapter Heading No. 23.09. As such, armed with the order of Commissioner (Appeal) in their favour, the appellant s classification of the said products under Chapter Heading No. 23.09 cannot be faulted with, as an act done, with mala fide intention to evade duty. To my mind, anyone would have done the same way. This act of classifying the said products under Chapter Heading 23.09 by the appellants is reflective of their bona fide impressions and cannot by any stretch of imagination, would attract penal provisions of Sections 112(a) and 114A of the Customs Act, 1962. Under the circumstances it cannot be held that there was mis-declaration of the said products on importation on the part of the appellants warranting imposition of penalties on them. 16. Hon ble Tribunal in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 511.99 pertaining to Animal Products Not Elsewhere Specified or Included; Dead Animals of Chapter 1 or 3, Unfit for Human Consumption Other . 4. A Show Cause Notice was issued on 23.01.2002 wherein, after due process, the Department stuck to its classification under CTH 0511.99 and confirmed the demand. Being aggrieved, the appellant filed their appeal before the Tribunal. 4.1. After hearing the issue, there arose a difference of opinion between the Members of the Bench at CESTAT, Kolkata. The Ld. Member (Technical) held the view that the classification adopted by the Revenue under CTH 0511.99 was correct, duty was required to be confirmed against the appellants and penalties were to be reduced. On the other hand, the Ld. Member (Judicial), though in agreement on the issue of classification falling under CTH 0511.99, was of the view that the matter was required to be remanded to the Commissioner so as to consider the applicability of exemption Notification applicable to products falling under Chapter 5 of the Customs Tariff Act. The difference of opinion was resolved by the Ld. Third Member, after which, vide Final Order Nos. A/691-693/KOL/2005 dated 22.09.2005 [2006 (197) E.L.T. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2001 (129) E.L.T. 502 (Tri.-Bombay) decided that the classification of the said products merits classification under Chapter Heading No. 0511.99. An appeal against the said order by the appellant to Hon ble Supreme Court was dismissed. 9. The appellant s dispute on the classification of the said products is now settled i.e. the said goods merits classification under Chapter Heading No. 0511.99. The ld. Member (J) in her separate order sought to remand the matter to the adjudicating authority to consider whether the appellant s said products were eligible for exemption under Notification No. 163/94, dated 2-9-94 and reconsider the imposition of penalties on appellants. 10. I find that the Notification No. 163/94Customs, dated 2-9-94 was rescinded/superceded vide Notification No. 47/96-Cus., dated 23rd July, 1996. The period of dispute in this case is from October 1998 to February, 2001. Since the exemption Notification No. 163/94-Cus., dated 2-994, was not available to the appellants, to my mind remanding the matter back to the adjudicating authority for deciding availability of exemption under Notification 163/94 would serve no purpose. Since it is not clear from the records of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not been levied or has been short-levied or the interest has not been charged or paid or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any wilful misstatement or suppression of facts, the person who is liable to pay the duty or interest, as the case may be , as determined under sub-section (2) of section 28 shall also be liable to pay a penalty equal to the duty or interest so determined Provided.... Provided... Provided.... Provided... Provided... Section 112(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 and act. It is undisputed that the penalty can be imposed under the above sections if the conditions as enumerated are satisfied for imposition of the penalty. 15. In this case, during the relevant period of imports, the appellants declared the said goods under Chapter Heading No. 2309.90, based on an order of the Commissioner (Appeals) in their own case and in respect of the very same said goods, imported at Mumbai. The order of the Commissioner (Appeals) in the appellants case at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approach. Sometimes the description of the goods mentioned in the tariff schedule is plain and simple. If the ordinary meaning of the words of description is taken, the description covers certain goods only. No second interpretation is required if particular goods fulfill or do not fulfill that particular description. But sometimes the description of the goods is such that the purpose of the legislature has to be ascertained. As in the case of statutory interpretation if a plain and ordinary meaning of the words provides complete meaning of a statute or a part of it recourse need not be taken to other aids. Similarly in the case of classification of goods if the plain and simple meaning of the words can classify the goods the goods have to be classified accordingly. But sometimes the classification of the goods permits an investigation into the purpose of the legislature in fixing a duty for particular goods as well the purpose for which the goods are used. In this particular case we are concerned with the interpretation of the words prawn feed. What is to be considered here is the use of the product. One has to see whether it can be used as such product. I do not think it really ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory under the heading 0511 for reasons given by me below. 12. It is the categorical case of the writ petitioner that these goods which were imported by them were fertilised eggs. They contained embryos or little organisms enclosed within the cysts, which upon incubation in controlled temperature and hydration would become larvae which could be used as prawn feed, it is submitted. 13. If there is an embryo within the egg, then there is a living organism within it. Upon such incubation the living organism merely grows, it does not change its nature and character. If there is no embryo within the eggs then there is no living organism and these eggs cannot be used as prawn feed. I am of the opinion that if an embryo is within an egg and it is subsequently incubated in controlled temperature and under hydration, the larvae which are subsequently born do not assume the character of any different product but remain in nature and characteristics the same product or organism which is within the egg. Therefore, if the eggs did contain an embryo they could be classified as feeding materials for prawns and ought to have been so classified. These embryos may not be proper prawn feed at the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , ex-Director). 8. The Ld. Counsel appearing on behalf of the appellant submits that the Hon ble Calcutta High Court had given a specific direction to the adjudicating authority to take up the case on de novo basis and follow the directions given therein while deciding the issue, but the adjudicating authority has not followed the directions given therein and has mechanically issued the impugned order, more or less relying upon the earlier decision of the Mumbai Bench of the CESTAT in the case of the same appellant [ref. 2001 (129) E.L.T. 502 (Tri. Mum.)], which was upheld by the Hon ble Supreme Court [ref. 2002 (144) E.L.T. A204 (S.C.)]. He submits that the Hon ble High Court had observed that if there is an embryo within the egg(s), then it would mean that there is a living organism within it; if there is no embryo within the eggs, then there is no living organism and these eggs cannot be used as prawn feed. It is submitted that the Hon ble High Court had taken the view that: if the eggs did contain an embryo, they could be classified as feeding materials for prawn and ought to have been so classified. These embryos may not be proper prawn feed at the time of importation but coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case relating to our imports at Mumbai against us and the matter is pending before the Hon'ble Supreme Court. All these facts have been specifically confirmed by the Deputy Commissioner in a series of letters including the last letter dated 29.1.2002 as mentioned above. We deny and dispute that on the basis of the statement of Sri Vickram Jaitha it can be alleged in any manner that the goods were not Prawn Feed. In the said statement of Sri Jaitha, it was clearly stated that the goods are Prawn Feed and nothing else and that these are internationally accepted and dealt with as Prawn Feed. In the said statement, details of various evidence in this regard were also mentioned. During the said statement, a question was put to Sri Jaitha as to what happens to the unhatched cysts to which he replied that these are destroyed and thrown away. We submit that absolutely nothing turns on the said part of the statement and it does not in any way show as if the goods imported by us were not Prawn Feed or as if the goods imported by us were converted in India into any new or different product as has been sought to be erroneously and incorrectly alleged in the show cause notice. (Emphasis su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are hatched first and thereafter the hatched Napulii are fed to the Prawn in Prawn Hatchery. From what has been discussed thereinbefore it is evident that Artemin Cysts are necessarily to be hatched first and only hatched Artemia Napulil are fed to Prawn Larvae. The Brine Shrimp Eggs are collected in Cyst form Salinas world-wide, processed and packed for easy transportation. After harvesting, these undergo a lot of process which inactivate their development and only in controlled laboratory condition, the seeds will hatch into live feed for Prawn. These are complete food for Prawn and sufficient in Fatty Acid, Protein, etc. These have got no other use in India except in Hatcheries. It is, therefore, clear that the goods as imported need a lot of careful processing before these are fed to Prawn. Artemia Cysts are, in fact, inactivated eggs imported in dehydrated and dormant condition in sealed can and what are fed to Prawn are active Napulii produced after careful processing of the seeds. From the statement referred to in earlier paragraph it is also clear that the entire quantity Imported will not hatch into Larvae and unhatched portion is destroyed. Coming to the question of clas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench comprising of the Hon ble Mr. Chief Justice S.C. Bharucha, Hon'ble Mr. Justice M. Santosh Hegde and Hon'ble Mr. Justice D.M. Dharmadhikari on April 04, 2002 dismissed the Civil Appeal No. 2889 of 2001 filed by the present importer against the CEGAT Order dated January 10, 2001. While dismissing the appeal the Hon'ble Supreme Court held We have heard Learned Counsel for the appellant. We find no merit in the appeal. The Civil Appeal is dismissed with cost . In view of dismissal of the appeal by the Hon ble Apex Court, the issue of classification of the subject goods under CTH 05.11 has attained finality. On the question of leviability of SAD, the importer explained that the goods were imported for the purpose of sale and these were actually sold from Calcutta where Sales Tax is chargeable on sale or purchase of goods. However, as discussed in the preceding paragraph, the imported items need to undergo a hatching process after importation resulting into a different item which is then fed to the prawn. The item imported is not a prawn feed itself but merely a raw material in preparation of a different item i.e., used as prawn feed. What are being sold by the importer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the submissions made by the appellants before the Kolkata Bench, again, it gets clarified that the appellants never took any stand that the eggs with larvae would be classifiable under a particular heading and that eggs without larvae would be classifiable under a different heading. They were always disputing the classification under CTH 0511.99 as adopted by the Revenue, taking the stand that the same would fall under CTH 2309.90. 13.2. In the Final Order Nos. A/691-693/KOL/2005 dated 22.09.2005, the Kolkata Tribunal has gone through the statements recorded from the directors of the appellant-company and noted the following facts about the Artemia Cysts: - 7. Artemia Cyst are necessarily to be hatched first and only hatched Artemia Nauplii are fed to Prawn Larvae. The Brine Shrimp Eggs are collected in Cyst form Salinas worldwide, processed and packed for easy transportation. After harvesting, these undergo a lot of process which inactivate their development and only in controlled laboratory condition, the seeds will hatch into live feed for Prawn. These are complete food for Prawn and sufficient in Fatty Acid, Protein etc. These have got no other use in India except in Hatcheri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lassification under chapter 23 of the Customs Tariff note under Chapter 23 provides as under : Heading No. 23.09 includes products of a kind used in animal feeding, not elsewhere specified or, included, obtained by processing vegetable or animal materials to such an extent that they have lost the essential characteristics of the original material, other than vegetable waste, vegetable residues and by-products of such processing and the headings read as 23.09 - Preparation of a kind used in animal feeding. 2309.10 Dog or cat goods, put up for retail - sale 2309.90 Other - A perusal of the Chapter above notes would indicate that if it is to be classified as a preparation of a kind used in animal feeding, in the present case, the larvae after processing are used as feed, therefore, the larvae as imported, would be classified under 2309. Since 'larvae' have not been imported and it is only that in egg form imports are effected the classification under 2309, of unprocessed animal materials i.e. eggs in this case, cannot be found by us to be correct, if we read the chapter notes. (e) In view of our findings we do not consider the other submissions and the case law provided and re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of Notification No. 163/94-Cus. dated 02.09.1994 . The ld. Member (Judicial) noted that this Notification in question exempted animal embryos falling under the heading 0511 from the whole of the Customs duty. Since this matter was not argued before the adjudicating authority, she took the view that the matter ought to be remanded to the adjudicating authority to consider extending the benefit of exemption granted under Notification No. 163/94-Cus. dated 02.09.1994, even as she also took the view that the product in question would merit classification under CTH 0511. 13.5. After this, in view of the difference of opinion between the two Members, the matter was referred to a Third Member. During the hearing, it was brought to the notice of the Bench that Notification No. 163/94Cus. dated 02.09.1994 had been rescinded / superseded vide Notification No. 47/96-Cus. dated 23.07.1996 and the period involved in the current litigation being from October 1998 to February 2001, Notification No. 163/94-Cus. has no application. Therefore, the Ld. Third Member held that there was no need for the matter to be remanded to the adjudicating authority. 14. The above detailed notings in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nos. A/294-296/KOL/2006 dated 02.03.2006. The Ld. Third Member has considered the submissions from both the sides and noted that the appellant sought to classify the Artemia Cysts (Brine Shrimp Eggs) under CTH 2309.90 whereas the Department was of the view that the same would be classifiable under CTH 0511.99. The Ld. Third Member also took into consideration that an identical issue had come up before the Tribunal at Mumbai, which had held that the product in question would fall under CTH 0511.99. He also considered the alternate pleading of the exemption sought under Notification No. 163/94Cus. dated 02.09.1994 and after noting that this Notification was rescinded vide Notification No.47/96Cus. dated 23.07.1996, held that the benefit of the same is not applicable for the imports made during the period from October 1998 to February 2001. He has gone through the submissions from both sides on account of imposition of penalties and held that the penalty imposed on the appellants under Section 114A and Section 112(a) of the Customs Act, 1962 were unwarranted and set aside the same. 16.1 Even from the above order of the Tribunal, it is seen that no pleading on account of actual testin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... become larvae which could be used as prawn feed, it is submitted. 13. If there is an embryo within the egg, then there is a living organism within it. Upon such incubation the living organism merely grows, it does not change its nature and character. If there is no embryo within the eggs then there is no living organism and these eggs cannot be used as prawn feed. I am of the opinion that if an embryo is within an egg and it is subsequently incubated in controlled temperature and under hydration, the larvae which are subsequently born do not assume the character of any different product but remain in nature and characteristics the same product or organism which is within the egg. Therefore, if the eggs did contain an embryo they could be classified as feeding materials for prawns and ought to have been so classified. These embryos may not be proper prawn feed at the time of importation but could become so, after incubation. Refusing to classify the product as prawn feed on this basis is not reasonable. In deducing the above principle I have taken a lot of guidance from the case of Commissioner of Incometax. v. Venkateswara Hatcheries (P.) Ltd. reported in (1999) 237 ITR 174 (S.C.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... product in question correctly falls under CTH 0511. 19.2. While several challenges have been made from time to time before the Hon ble High Court and the matter has also been re-visited by the Tribunal on several occasions, this point was never taken up nor argued at any material point of time. 19.3. In fact, from the Final Order dated 02.03.2006 passed by the Tribunal, it can be seen that the appellant has clearly stated that: - the imposition of the penalty is the only question which has been referred back by the Hon ble High Court and he concedes, he does not have a case on merits. He also concedes the fact that the benefit of Notification No. 163/94 is not available to them in this case. He submits that it is a well settled law that the imposition of penalty in this kind of cases is not required. [Ref. paragraph 6 of Final Order Nos. A/294296/KOL/2006 dtd. 02.03.2006 CESTAT, Kolkata] 19.3.1. Thus, even as per the appellants, after the Order of the Hon ble Calcutta High Court in Writ Petition No. 2013 of 2005 dated 12.12.2005, the appellants have accepted that they had no case on merits. This being so, it is not known as to how they have taken an absolutely new stand before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion would fall under CTH 0511.99 during the period under dispute. 22. Therefore, we uphold the classification of the impugned goods under CTH 0511.99. 23. Insofar as the penalty of Rs.98,86,532/- imposed on the appellant-company under Section 114A of the Act and the penalty of Rs.3,00,000/- imposed on Shri Vickram Jaitha under Section 112(a) of the Act are concerned, we observe that vide the Final Order Nos. A/294-296/KOL/2006 dated 02.03.2006, the very specific issue of the penalties imposed under Section 114A on the company and the personal penalty imposed under Section 112(a) against the directors was considered by the Third Member Reference Bench vide Final Order Nos. A/294-296/KOL/2006 dated 02.03.2006 and the same were held as not imposable. 23.1. We do not see any specific reason to differ from this decision of the Three Member Bench. Accordingly, we set aside the penalties imposed on the appellant company in terms of Section 114A of the Customs Act, 1962 and on Shri Vickram Jaitha in terms of Section 112(a) of the Act. 24. Thus, the appeals stand allowed, partly in respect of the appellant-company viz. (M/s. Atherton Engineering Co. Pvt. Ltd.) and fully in respect of the di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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