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TMI Blog2024 (9) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... ltative letter was issued under sub-section (1) of section 28 because such waiver is provided in sub-section (2) of section 28 only in respect of proceedings under sub-section (1). The short-levy was computed at Rs. 1,14,03,577/- in this document. Although the petitioner replied thereto on 11.05.2022 and asserted that the classification was valid for reasons set out therein, such reply and the subsequent letter dated 06.03.2023 were not taken into account while issuing the impugned show cause notice under sub-section (4) of section 28. This aspect assumes significance while examining the validity of the impugned show cause notice. Section 28 of the Customs Act enables recovery inter alia of duty not levied or not paid or short-levied or short-paid. As per subsection (1), recovery proceedings may be initiated by issuing a show cause notice within two years from the relevant date. Sub-section (4) empowers the proper officer to initiate recovery proceedings within five years from the relevant date where inter alia non-levy, nonpayment, short-levy or short payment is on account of collusion, any wilful mis-statement or suppression of facts. The petitioner has imported light green float ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -. Such communication was responded to by the petitioner on 11.05.2022 by asserting that the goods are non-wired and have an absorbent layer of tin on one side, which is fluorescent under UV illumination, and also have a microscopically thin non-reflecting layer of zinc sulphate coating on the surface of the glass. Test reports were annexed in support of the assertions. Consequently, it was stated that the classification in CTH 70051010 was in order. A subsequent detailed letter dated 06.03.2023 was also issued by the petitioner. 2. According to the petitioner, on the erroneous basis that the petitioner had not responded to the audit consultative letter, the first respondent issued a show cause notice dated 07.08.2023, whereby the extended period of limitation was invoked, and the petitioner was called upon to show cause as to why the light green tinted float glass imported under the bills of entry detailed in Annexure-I thereto (the Relevant Goods) should not be classified under CTH 70052110. The amount payable by the petitioner towards short-levy was computed at Rs. 11,78,27,642 in this show cause notice. The present writ petitions were filed upon receipt of the aforesaid show ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... j), (k) (l) are relevant. He also submitted that these features establish that the petitioner's classification is correct. 5. With regard to earlier imports of light green tinted float glass, learned senior counsel submitted that an audit consultative letter dated 27.03.2019 was issued by the Assistant Commissioner, Circle-II, Customs Audit Commissionerate, ICD, Patparganj, Gazipur, Delhi-96. After examining relevant material, he pointed out that the Commissioner, Customs Audit Commissionerate, by communication dated 12.04.2021, informed the Commissioner of Customs, ICD Patparganj Other ICDs, New Delhi, that the office is accepting the view of the Assistant Commissioner (SIIB), ICD Patparganj, and that the audit proceedings were being closed by accepting the classification of the goods under CTH 700510, as declared by the importer. 6. In spite of the above communication, he submitted that an order dated 04.09.2021 was issued by the Deputy Commissioner of Customs, ICD Rewari, rejecting the petitioner's self-classification under CTH 70052110 in respect of 315 bills of entry and reclassifying such goods under CTH 70052110. As against the order dated 04.09.2021 and subsequent o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed upon for the same proposition. 8. The next contention of learned senior counsel was that the reply dated 20.05.2022 to the consultative letter and subsequent letter dated 06.03.2023 were disregarded while issuing the impugned show cause notice. After pointing out that the consultative letter was in respect of only 35 bills of entry and that the short-levy was confined to Rs. 1,14,03,577/-, he submitted that sub-section (4) of Section 28 of the Customs Act, 1962 (the Customs Act), was unlawfully invoked in relation to a classification dispute and that the short levy was computed in a sum of Rs. 11,78,27,642 in the impugned show cause notice. By pointing out that sub-section (4) may be invoked only in cases where there is fraud, collusion or wilful mis-statement, learned senior counsel submitted that the said provision cannot be invoked in cases wherein there is reasonable basis to classify the goods under a particular tariff heading (such as CTH 70051010 here), especially if the goods were classified and cleared for more than a decade under such classification. In this regard, learned senior counsel submitted that the Customs Department does not allege that the petitioner importe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain whether the characteristics necessary for classification under CTH 70051010 are present. Consequently, he contended that the self-classification by the petitioner cannot be accepted merely because such classification was accepted in respect of goods imported under earlier bills of entry. Put differently, his contention is that the examination should be on goods-specific basis. He relied on the judgment of the Calcutta High Court in Stores Supply (India) Agency v. Assistant Collector of Customs, 1985 0 Supreme (Cal) 55, for the proposition that jurisdiction to decide on the validity of classification is vested in the competent customs authorities and, consequently, the court would not interfere unless there is an apparent mistake. He also contended that the judgment of the Hon'ble Supreme Court in Vicco Laboratories is distinguishable because the issue of classification had been conclusively decided earlier therein. 11. Since the challenge is to a show cause notice, learned senior standing counsel also submitted that interference is not warranted unless the show cause notice was issued without jurisdiction or further proceedings would not be justified even assuming without a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and that therefore it is an abuse of process of law. The High Court after referring to the history of litigation rightly concluded that the matter stood concluded by judgments of this Court and the High Court in respondent's case. 33 . In the earlier judgment this Court had given liberty to the Department in the following terms: (Vicco Laboratories case, pp.20-21, paras 9-11) 9. Although the adjudicating authority had found in the course of the hearing that the market survey indicated that the product in question was known as a cosmetic, we do not go into the question as this was not the ground on which the show-cause notice was issued. 10. The show-cause notices having proceeded on a misapprehension of the tests laid down in Shree Baidyanath's case, the same cannot be sustained. 11. The appeals are accordingly dismissed without any order as to costs. It will be open to the Department to take such test if otherwise so entitled in respect of the products for the purpose of classifying the products under the appropriate tariff heading as they may be advised. However, as rightly observed by the High Court the impugned show cause notice was nothing but a repetition of the ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No reflecting or non-reflecting layer . (emphasis added) 15. By relying on the above test results, the first respondent recorded the prima facie conclusion that the Relevant Goods do not have an absorbent layer, other than the tin layer observed in the above extracted test results. This tin layer was, however, construed in the show cause as inherent to the production of float glass and, consequently, not a valid basis for the classification. As regards the zinc sulphate layer, it was prima facie recorded that it is a protective layer and, therefore, not an absorbent, reflecting or non-reflecting layer. As a corollary to the above interpretation of the test results, the prima facie finding that the Relevant Goods were wrongly classified under CTH 70051010 was recorded. On the basis of the prima facie conclusion that the Relevant Goods are non-wired glasses not having an absorbent, reflecting or non-reflecting layer and coloured throughout the body, it was recorded that the Relevant Goods are prima facie classifiable under CTH 70052110. A more recent report bearing reference No.GC/TCC/TR-3448/2022-23 dated 11.04.2023 from CSIR-CGCRI, Kolkata, in respect of bill of entry No.8261250 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne side of the glass which is fluorescent under UV illumination . j) The glass is found to be coated with ZnSO4 film on opposite to tin side as protective layer . (emphasis added) 17. On comparison of these test results, especially the three extracted in this order, the characteristics of the imported light green float glass, as reported therein, are substantially identical, except for one observation. The test report dated 30.04.2021 pertaining to bill of entry No.7094656 contains an observation that no absorbent layer is observed other than tin layer on one side of the glass. Even as regards this observation, it is noticeable that an absorbent tin layer was noticed. It bears reiteration that this absorbent tin layer was, however, construed in the impugned show cause notice as prima facie inherent to the production of float glass. Since such interpretation appears to be the primary basis of the show cause notice, it is instructive to examine whether and, if so, how such test results were previously interpreted. 18. From the paper book of the petitioner, it follows that a final assessment was made by the Assistant Commissioner, Noida Customs Commissionerate, and the classification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e letter and in other two orders. None of the impugned orders mention or counter the said letter at all. The Adjudicating Authority, despite being subordinate to the Commissioner proceeded to overrule the findings of Audit, without countering or mentioning the same. I find this action to be of gross insubordination. If the Adjudicating Authority had any disagreement with the Audit Commissioner, the same should have been clearly brought out. I also note that Adjudicating Authority even did not elaborate as to what was recommendation or findings of the SIIB in their letter dated 17.06.2021. 5. Now coming to merits of issue, the contesting entries viz. 70051010 (as declared by the appellant) and 70052110 (as per the Assessing Authority) from the Customs Tariff are reproduced below:- Upto 31.12.2019 7005 Float glass and surface ground or polished glass, in sheets, whether or not having an absorbent, reflecting or non-reflecting layer, but not otherwise worked 700510 -Non-wired glass, having an absorbent, reflecting or non-reflecting layer: 70051010 ---Tinted 70051090 ---Other - Other non-wired glass: 700521 -- Coloured throughout the mass (body tinted) opacified, flashed or merely surf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) is observed ion one side of the glass which is fluorescent under UV illumination . j) The glass is found to be coated with ZnSO4 film on opposite to tin side as protective layer . The Test Reports have clearly established that impugned goods were having absorbent layer (Tin) on one side. This fact is not disputed. Accordingly, I find absolutely no reason to exclude these goods from 700510 classify them under 700521. Rather, the said goods viz. Light Green Float Glass/Coloured Float Glass with absorbent Layer of Tin on one side would merit classification under Sub-heading 7005 and more precisely under CTH 7001010. (emphasis added) .... 5.6 The classification issue in the favour of the appellant is further supported by the stand of other Assessing Authorities for the similar goods imported by the Appellant. For instance, they have submitted a copy of letter C.No.VIII(30)Cus/ICD DD/Gr-3/Asahi/106/2020 dated 25.03.2021 issued by the Assistant Commissioner (Gr.-3), Noida Customs, wherein it has been decided that the goods in question are liable to be classified under CTH 700510. A scanned copy of said letter is pasted below:- 5.7 As the declared classification of the appellant has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the requirement that a subordinate authority should act in accordance with the conclusions of an appellate authority unless the order of such appellate authority is successfully challenged by approaching the Tribunal or High Court. This is the ratio of the decision in Kamalakshi Finance. 21. As held in Vicco Laboratories , a show cause notice is not ordinarily interfered with in exercise of discretionary jurisdiction under Article 226. Nonetheless, such general rule is not without exception. One of the exceptions recognized in Vicco Laboratories is when a settled issue is sought to be resurrected. Moreover, in Ashwani Pharmacy, the Supreme Court held that a change in classification is not justified where the characteristics and composition of the product remain unchanged. In the case at hand, there has been no change in the characteristics or composition of the Relevant Goods or in the customs tariff headings. The classification of light green tinted float glass under CTH 70051010 was accepted by the appellate authority in the appeals referred to above. Without challenging such appellate orders in accordance with law, the same issue is sought to be resurrected in respect of the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been paid, part-paid or erroneously refunded, by reason of, - (a) collusion; or (b)any wilful mis-statement; or (c) suppression of facts by the importer or the exported or the agent or employee of the importer or exporter, the proper officer shall, within five years from the relevant date, serve notice on the person chargeable with duty or interest which has not been so levied or not paid pr which has been so short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice. Explanation 1: For the purposes of this section, relevant date means,- (a) in a case where duty is not levied or not paid or short-levied or short-paid or interest is not charged, the date on which the proper officer makes an order for the clearance of goods; 24. The show cause contains the following reasons for invoking section 28(4) of the Customs Act: 26....The Customs department can scrutinize the documents after the clearance of goods for any short levy/non-levy as per section 28 of Customs Act, 1962 and take appropriate action to safeguard the revenue. It appears that the importer in this case had wilfully mis- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, invoking the enlarged period of limitation is erroneous and qualifies as an additional reason to interfere with the show cause notice. 26. In W.P.No.28462 of 2023, a direction is prayed for to clear light green float glass (tinted non-wired type) under CTH 70051010. Subject to the customs authorities being satisfied that the products sought to be imported are light green float glass (tinted non-wired type), clearance thereof should be permitted under CTH 70051010 unless the earlier classification by the customs appellate authority is reversed in further appeal. In W.P.No.28465 of 2023, the petitioner seeks a declaration that the classification adopted by it is correct. Such declaration would not ordinarily be granted in proceedings under Article 226 because it would entail detailed examination of the characteristics of the goods, including by subjecting such goods to testing, and other factual issues. Since the review undertaken in this jurisdiction is confined to the decision making process, this request cannot be countenanced merely on the basis of decisions made in other fora on the classification of light green float glass. 27. In the result: (i) W.P.No.28456 of 2023 is all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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