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TMI Blog2024 (2) TMI 1509X X X X Extracts X X X X X X X X Extracts X X X X ..... t to be raised before it even if it was not taken up during the initial stage, is a discretionary one. But the question here is that when the appellant deliberately acquiesced or forewent his right to rebut the charge for proper classification of the goods during three stages of the dispute resolution mechanism, can he be allowed to raise it at the Appellate stage. The Tribunal has an inherent power to prevent the right of appeal being abused by an appellant who keeps back till the stage of appeal, points of law or fact which he could have raised before the lower authority, without showing any reason and thus places the other side at a disadvantage. Persons with good causes of action should pursue the remedy with reasonable diligence at every available opportunity. In a literal sense, the term acquiescence means silent assent, tacit consent, concurrence, or acceptance, which denotes conduct that is evidence of an intention of a party to abandon a right and also to denote conduct from which another party will be justified in inferring such an intention - Due to the initial stand taken by the Appellant, including the paying of duty, a complete or effectual adjudication of the proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession has been defined in the enactment then it must be understood in the sense in which it is defined but in the absence of any definition being given in the enactment the meaning of the term in common parlance or commercial parlance has to be adopted". Since PCBA's were not defined for the purpose of Sl no 6A, the commercial parlance test has to be resorted to without going for their scientific and technical meaning. General description must yield to those of a special one - HELD THAT:- The presumption in law is that the legislature does not intend to enact a law which is contradictory in nature. The burden to prove contra is on the Appellant. The provisions of the notifications are required to be examined carefully to find whether it is purported to have that effect. The issue of the valid prevalence of two contradictory positions in the same notification would fail even if the test for reasonability is that of the "prudent man". One way to resolve the issue is by expanding on the Latin maxim generalia specialibus non derogant which means that general law shall not derrogate from specific law or the provisions of a general statute must yield to those of a specia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notification No. 57/2017-Cus. dated 30.06.2017, being part of a cellular mobile phone specifically mentioned under Sl. No. 18 and are also excluded from Sl. No. 6A of the said Notification. The insertion made by Notification No.22/2018-Cus only clarifies this position and would be effective retrospectively. Onus of proof of fulfilment of condition subject to which an exemption may be admissible lies on the assessee - HELD THAT:- The Learned Adjudicating Authority has stated in the impugned order that microphones are distinct commodities as known in trade parlance and are treated so in various extant notifications. Implicit in that reasoning is the fact that microphones are not part of PCBA's and are distinct. Further as held by a Constitutional Bench Apex Court in M/s Dilip Kumar and Company [2018 (7) TMI 1826 - SUPREME COURT (LB)], the onus of proof of fulfilment of condition subject to which an exemption may be admissible lies on the assessee or upon a party claiming benefit under the Notification. There is no murmur by the Appellant of having followed the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 as applicable to the goods impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under S. No. 6A of Notification No. 57/2017-Cus. dated 30.06.2017 nor under S. No. 427 of Notification No. 50/2017-Cus. dated 30.06.2017. However, it is settled law that the extended period cannot be invoked when the case involves a genuine interpretative issue, which is not merely an excuse given by an Appellant when confronted for non-payment of duty. In such a situation the Appellant is not involved in a blame worthy act and no fine can be levied and penalty imposed. No mis-declaration or suppression of facts can be alleged in such a situation. The demand will have to be confined to the normal period with applicable interest. This view has also been held by the Apex Court in Northern Plastic Ltd. v. Collector of Customs & Central Excise [1998 (7) TMI 91 - SUPREME COURT]. Whether redemption fine can be imposed when goods are not available? - HELD THAT:- In any case the Appellant has not been found committing a blame worthy act and the demand has been restricted to the normal period. Hence the appeal filed by Revenue is rejected. Classification of 'Battery Cover, Back Cover, Camera Lens, and Front Cover' and their eligibility for concessional duty - HELD THAT:- There is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has not been able to prove its charge of classifying the impugned goods under CTH 3920 9999 and hence the classification of the same under CTH 8517 7090 as done by the Appellant holds good. Since notification no 50/2017 (Sl no 499) as amended is applicable to parts of cellular phones falling under CTH 851770, the impugned goods are eligible for the same.
Appeal disposed off. X X X X Extracts X X X X X X X X Extracts X X X X ..... Original No. 804/2019-AIR dated 9.12.2019) 3.2 M/s. Flextronics Technologies Pvt. Ltd. filed Bills of Entry for clearance of the imported goods declared as 'Microphone' and classified them under CTH 85177090, 8518100 and 85183000. They claimed the benefit of Customs Notification No. 57/2017 (S. No. 6A) during the period from June 2018 to December 2018. Department was of the opinion that Customs Notification No. 57/2017 excludes 'Microphone' from the purview of notification benefit and that Microphone being a complete unit and a part of mobile phone is classifiable under CTH 85181000 which attracts BCD at tariff rate. After due process of law, the Adjudicating Authority vide the impugned order rejected the benefit of Notification No. 57/2017 dated 30.6.2017 and classified the goods under CTH 85181000 and demanded differential duty amount of Rs.3,01,28,441/- along with interest and imposed a penalty of Rs.10 lakhs under sec. 112(a) of the Customs Act, 1962. Aggrieved by the demand of differential duty and imposition of penalty, the importer has filed Appeal No. C/40184/2020. Department is aggrieved by the impugned order for non-imposition of redemption fine and has filed Appeal No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... now on merits. Upsetting an accepted legal position after a long time is likely to cause confusion and inconvenience and may bring in its train new disputes. He further stated that Government had launched a special Policy scheme known as PMP (Phased Manufacturing Programme) for the phased manufacturing of mobile phones in India. The policy is dealt with from File No.4(8)/2016IPHW Government of India Ministry of Electronics and Information Technology Digital Industry (Hardware) Division, dated 28/04/2017. He gave a copy of the Notification which states as under. NOTIFICATION Subject: Phased Manufacturing Programme (PMP) to promote indigenous manufacturing of Cellular Mobile Handsets, its subassemblies and parts/ sub-parts/ inputs of the sub-assemblies thereof To promote indigenous manufacturing of Cellular mobile handsets, in the Budget 2015-16, a differential Excise Duty dispensation, i.e. Countervailing Duty (CVD) on imports @12.5% and Excise Duty @1% without input tax credit (or 12.5% with input tax credit) was made available to domestic manufacturers of Cellular mobile handsets. Parts, components and accessories for the manufacture of Cellular mobile handsets; Parts/ sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Rubbers like SBR, EPDM, CR, CS, Silicone and all other individual rubbers or combination / combinations of rubbers (HS 40169990) 11.1 PU Case/Sealing Gasket (HS 39269091) - Other articles of Polyurethane foam like sealing gaskets / cases. 11.2 Sealing Gaskets / Cases from PE, PP, EPS, PC and all other individual polymers or combination / combinations of polymers (39269099) 12. SIM Socket / Other Mechanical items (Metal) (HS 73269099) 13. SIM Socket / Other Mechanical items (Plastic) (HS 39269099) 14. Back Cover (HS 39209999) B. Die Cut Parts 1. Conductive Cloth (HS 3926 2. Heat Dissipation Sticker Battery Covery (HS 39199090) 3. Sticker-Battery Slot (HS 39199090) 4. Protective Film for Main Lens (HS 39199090) 5. Mylar for LCD PFC (HS 39199090) 6. LCD Conductive Foam (HS 39269099) 7. Film-Front Flash (HS 39199090) 8. LCD Foam (HS 39269099) 9. BT Form (HS 39269099) He stated that the programme had a phased roadmap keeping in view the state of play of the design/ manufacturing ecosystem in the country. Appropriate fiscal and financial incentives which include Customs duty exemptions, were planned to help indigenous manufacturing of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der 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 these SCNs, the policy of MeITY as a ground cannot, therefore, be sustained. ***** ***** ***** 51. Goods must be classified under the Schedule to the Customs Tariff Act, 1975. For this purpose, the Rules of Interpretation have been provided of which Rule 1 reads as follows: "1. The titles of Sections, Chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions." This Rule is followed by Rules of Interpretation 2 to 6 none of which provide for class ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... la and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the legislature. The court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved. Nowhere has this admonition been more felicitously expressed than in Morey v. Doud [351 US 457 : 1 L Ed 2d 1485 (1957)] where Frankfurter, J., said in his inimitable style: "In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to legislative judgment. The legislature after all has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the judges have been overruled by events -- self-limitation can be seen to be the path to judicial wisdom and institutional prestige and stability." (emph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thin the scope of an exemption notification, at times leads to a dispute due to their intricate nature, necessitating inquiry and debate. This has led to the emergence of principles for interpretation of fiscal exemptions, from no less than a Constitutional Bench consisting of five judges of the Hon'ble Supreme Court in Commissioner of Customs (Import) Vs M/s Dilip Kumar and Company & Ors. [Civil Appeal No. 3327 of 2007 / AIR 2018 SUPREME COURT 3606 / AIRONLINE 2018 SC 73] 6.2 In the said judgment in Dilip Kumar and Company the Hon'ble Court has overruled its earlier verdict in Sun Export Corporation, Bombay Vs Collector of Customs, Bombay [2002-TIOL-118-SC-CX-LB] and held that benefit of any ambiguity in notification related to tax exemptions must be interpreted in favour of the State. The Hon'ble Court examined the question as to what is the interpretative rule to be applied while interpreting a tax exemption provision/ notification when there is an ambiguity as to its applicability with reference to the entitlement of the assessee or the rate of tax to be applied? It held: "52. To sum up, we answer the reference holding as under (1) Exemption notification should be interpr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine of heading 8479 or 8543) are to be classified with the machines of that kind or in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate. However, parts which are equally suitable for use principally with the goods of heading 8517 and 8525 to 8528 are to be classified in heading 8517; (c) 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. (emphasis added) 7. We may now examine the classification and eligibility of the impugned goods for exemption, product wise. I RECEIVERS 8.0 The buildup to this case is that, during Post Clearence Audit of the Appellant's Bills of Entry it was felt that the 'Receivers' imported by them which had been self-assessed and classified under CTH 85177090 was correctly classifiable under CTH 85181000. An Audit Consultative letter dated 13/02/2019 was issued to them by the Custom House. No reply was received from the Appellant. Then a Pre-Show Cause Notice Consultation letter dated 16/07/2019 was issued to the Appellant. Again, no reply was received from the Appellants end. Accordingly, the Appellant was issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right to rebut the charge for proper classification of the goods during three stages of the dispute resolution mechanism, can he be allowed to raise it at the Appellate stage. The Tribunal has an inherent power to prevent the right of appeal being abused by an appellant who keeps back till the stage of appeal, points of law or fact which he could have raised before the lower authority, without showing any reason and thus places the other side at a disadvantage. Persons with good causes of action should pursue the remedy with reasonable diligence at every available opportunity. In a literal sense, the term acquiescence means silent assent, tacit consent, concurrence, or acceptance, which denotes conduct that is evidence of an intention of a party to abandon a right and also to denote conduct from which another party will be justified in inferring such an intention. The normal rule is that in any litigation the rights and obligations of the parties are adjudicated upon as they obtain at the commencement of the lis. However, we find that the Appellant has filed an appeal within time, whereby the acceptance or acquiescence at the pre order stage has not become final and the rights of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e principle of harmonious construction. d) The specific exclusion of microphones from S. No. 6A brought in by Notification No. 24/2019-Cus. dated 06.07.2019 is to make the exclusion clear. e) PMP Notification issued from File No.4(8)/2016-IPHW dated 28/04/2017 and D.O letter of TRU No 334/4/2018-TRU dated 01/02/2018 (??) [Circular DOF No. 334/3/2019-TRU dated 05/07/2019] issued at the time of introduction of the Finance Bill, 2009 and subsequent tariff changes bring out the intention and object of the legislative change. f) The benefit under S. No. 427 of Notification No. 50/2017-Cus. dated 30.06.2017 is not applicable to microphones as it is a general provision which is applicable to all goods as opposed to Notification No. 57/2017-Cus. which applies to electronic items with specific entries pertaining to mobile phone parts like microphones, receivers, etc. The entry at Sl. No. 4 in List No. 20 "Microphones, Microphone cartridges" deals with microphones per se (standalone and not mobile parts). Appellant's Averments 9.1 The following pleadings have been made by the Appellant: (i) All microphones, irrespective of whether they are used in cellular mobile phones or oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following parts of cellular mobile phones, namely:- (i) Microphone (ii) Wired Headset (iii) Receiver 10 % 9.4 Whether microphones are inputs or parts for use in manufacture of PCBA The question which arises is whether microphones are inputs or parts for use in manufacture of Printed Circuit Board Assembly (PCBA) of cellular mobile phones. Revenue has taken us through a diagrammatic representation of the PCBA, it is their contention that microphone does not form the basic construction input or part of a PCBA. They are only soldered onto a PCBA circuitry and are a distinct product and are not inputs or parts for use in manufacture of PCBA's. The test of understanding, according to Revenue, is as to what is meant by inputs or parts for use in manufacture of a PCBA in the commercial sense. We find that PCBA's are electronic boards which incorporate fundamental electronic components like resistor, SMD capacitor, processors, diode, ICs etc. to create a functional circuit. It provides for a MIC interphase. PCBA is a part of the cellular phone just as a microphone, camera, LCD etc are. All these items, mentioned are at some stage of manufacture of cellular phones soldered onto the PCB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or expression has been defined in the enactment then it must be understood in the sense in which it is defined but in the absence of any definition being given in the enactment the meaning of the term in common parlance or commercial parlance has to be adopted". Since PCBA's were not defined for the purpose of Sl no 6A, the commercial parlance test has to be resorted to without going for their scientific and technical meaning. In Plasmac Machine Manufacturing Co. Pvt. Ltd. v. Collector of Central Excise, Bombay [1991 (51) E.L.T. 161 (SC) = 1991 Suppl (1) S.C.C. 57], it was held by the Apex Court : "It is an accepted principle of classification that the goods should be classified according to their popular meaning or as they are understood in their commercial sense and not as per the scientific or technical meaning. Indo International Industries v. CST [1981 (2) SCC 528] and Dunlop India Ltd. v. Union of India [1976 (2) SCC 241] have settled this proposition. How is the product identified by the class or section of people dealing with or using the product is also a test when the statute itself does not contain any definition and commercial parlance would assume importance whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construed not in any technical sense nor from the botanical point of view but as understood in common parlance. It has not been defined in the Act and being a word of everyday use it must be construed in its popular sense meaning `that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it'. It is to be construed as understood in common language." Hence the learned Adjudicating Authority stated position that microphone are known in the trade parlance as distinct commodities and are treated so in the various extant notification cannot be faulted. 9.6 General description must yield to those of a special one. The presumption in law is that the legislature does not intend to enact a law which is contradictory in nature. The burden to prove contra is on the Appellant. The provisions of the notifications are required to be examined carefully to find whether it is purported to have that effect. The issue of the valid prevalence of two contradictory positions in the same notification would fail even if the test for reasonability is that of the "prudent man". One way to resolve the issue is by expanding on the Latin maxim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fast exclusion, whereby no other meaning can be assigned to the goods in dispute, is clarificatory in nature and will be effective from the inception of the notification. In Commissioner of Income Tax, Bombay & Ors. v. Podar Cement Pvt. Ltd. & Ors. [AIR 1997 SUPREME COURT 2523 / (1997) 5 SCC 482] it was held that a clarificatory statute would be retrospective in nature. If two views on an existing provision were not prevailing or possible, in such a situation the amendment would not be held to be clarificatory. In Commissioner of Income Tax-I, Ahmedabad v. Gold Coin Health Foods Pvt. Ltd. [(2008) 11 SCALE 497], a three Judge Bench of the Apex Court held : "As noted by this Court in Commissioner of Income Tax, Bombay & Ors. v. Podar Cement Pvt. Ltd. & Ors. [(1997) 5 SCC 482 = 2002-TIOL445- SC-IT] the circumstances under which the amendment was brought in existence and the consequences of the amendment will have to be taken care of while deciding the issue as to whether the amendment was clarificatory or substantive in nature and, whether it will have retrospective effect or it was not so." Since Notification No. 24/2019 Cus. dated 06.07.2019 amending Sl. No 6A of Notificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Concessional Rate of Duty) Rules, 2017 as applicable to the goods imported and claiming exemption as per Sl. No. 6A of Notification No. 57/2017-Cus. dated 30.06.2017. By choosing not to lead evidence on the classification heading of PCBA's under the Customs Tariff, whether under an independent tariff line/ heading or as a part of cellular phones, the classification of microphones as a part of PCBA or that of a cellular phone is left in doubt. 9.10 Boards circulars and the doctrine of contemporanea expositio Boards circulars are not binding on the Tribunal however the doctrine of contemporanea expositio is from time to time evoked by courts to cull out the intendment of the legislature and for removing ambiguity in its understanding of the statute. In Desh Bandhu Gupta and Ors v. Delhi Stock Exchange [[1979] 3 SCR 373] the Apex Court held that this principle can be invoked, though the same will not always be decisive on the question of construction. But the contemporaneous construction placed by administrative or executive officers charged with executing the statute, although not controlling, is nevertheless entitled to considerable weight as highly persuasive. TRU DOF No. 334/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on giving a general description of microphones. Exemption notification should be interpreted strictly. It is noted that both notifications i.e. 50/2017-Cus. and 57/2017-Cus. were issued on the same date. Hence there is some degree of ambiguity in the language used as there could not be an intention to tax the same goods differently on the same day and the notifications should be interpreted in favour of Revenue. Furter in this situation as discussed above, general description in notification 50/2017-Cus. must yield to those of a specific description in 57/2017-Cus. 9.12 In the situation, it cannot be said that the dispute was one where two equally applicable exemptions were involved and the assessee was eligible to the benefit of that exemption notification which gives him greater relief. As discussed, the impugned goods are not eligible for concessional duty under either of the notifications. 9.13 Whether intention of Notification to be understood through declared Government Policy The matter can be looked at from another angle. Language is an imperfect vehicle of thought and the ability of written language to precisely convey technical information and description of products ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . dated 30.06.2017 nor under S. No. 427 of Notification No. 50/2017-Cus. dated 30.06.2017. However, it is settled law that the extended period cannot be invoked when the case involves a genuine interpretative issue, which is not merely an excuse given by an Appellant when confronted for non-payment of duty. In such a situation the Appellant is not involved in a blame worthy act and no fine can be levied and penalty imposed. No mis-declaration or suppression of facts can be alleged in such a situation. The demand will have to be confined to the normal period with applicable interest. This view has also been held by the Apex Court in Northern Plastic Ltd. v. Collector of Customs & Central Excise [1998 (101) E.L.T. 549 (S.C.)]. We hold accordingly in this case too. 9.16 Whether redemption fine can be imposed when goods are not available. As regards the Department's appeal against the impugned order for nonimposition of redemption fine, the Hon'ble Supreme Court in Asstt. Collector v. Bussa Overseas and Properties Pvt. Ltd. [2004 (163) E.L.T. A160 (S.C.)], dismissed the SLP against the judgment and order dated 04/08/1992 of the Bombay High Court in Bussa Overseas and Properties Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfined to exemption for cellular microphones under Notification No. 57/2017-Cus. dated 30.06.2017. The discussions were limited to microphones being part of a PCBA and hence being eligible for exemption as per sl no 6A of the said notification. In the case of Notification No. 50/2017-Cus. dated 30.06.2017, the matter was discussed in the context of the eligibility of the appellant claiming the exemption at the Appellate stage. The Sennheiser Electronics India (supra) the judgment of a Coordinate Bench lacks a detailed discussion on the issue which deprives it of precedential value. The onus of proof, for being eligible for the exemption, being on the appellant, they should have led the discussion on the accepted principles of law in this regard and shown that they satisfied the same. We find that when faced with ambiguity, the judgments have not examined the conflict in two sl nos of the same notification or between two notifications issued on the same date with regard to the impugned goods that are a subject matter of a specific policy formulation of the government and try to resolve it by considering the law as per the statute and also as declared by the Apex Court in a number o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that a Constitutional Bench of the Apex Court held that the burden of proof would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. [Commissioner of Customs (Import) Vs M/s Dilip Kumar and Company & Ors. [AIR 2018 SUPREME COURT 3606 / AIRONLINE 2018 SC 73]] (vii) again, it was held that when there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/ assessee and it must be interpreted in favour of the revenue. [Commissioner of Customs (Import) Vs M/s Dilip Kumar and Company & Ors. [AIR 2018 SUPREME COURT 3606 / AIRONLINE 2018 SC 73]] (viii) that laws relating to economic activities must be viewed with greater latitude and deference when compared to laws relating to civil rights such as freedom of speech. This to our mind gains even greater importance where persons including industry are guided to arrange their affairs on the basis of the legal position as obtaining in Government policy that is cemented through appropriate fiscal exemptions, a few of which have become a matter of interpretational disputes as in the impu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I 8517 7090. (iii) classification must be made as per the terms of Headings, Section Notes and Chapter Notes in the Customs Tariff. Classification of parts can be done in terms of Note 2(b) or 2(c) to Section XVI only if classification of such part cannot be made as per Note 2(a) to Section XVI. Thus, Clauses (a), (b) and (c) of Note 2 are to be applied in a sequential manner. (iv) since the subject goods are manufactured solely to be used with a mobile phone and are not specifically covered elsewhere by nomenclature under Chapter 84 or 85, they are correctly classifiable under CTI 8517 7090 by virtue of Section Note 2(b) to Section XVI. (v) S. No. 499 of Notification No. 50/2017 - Cus. dated 30.06.2017 provides for exemption to parts of mobile phones falling under CSTH 851770. Therefore, the subject goods are eligible to the benefit available under the said serial number. (vi) It is also submitted that Note 2(s) to Chapter 39 specifically excludes Articles of Section XVI. In the present case, the subject goods which are used in the manufacture of Mobile Phones, become parts of mobile phones classifiable under CTI 8517 7090. Therefore, the said article are specifically covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustries [2002 (139) E.L.T. 3 (S.C.)], felt that the judgment was being misunderstood and that a circular which is contrary to the statutory provisions has really no existence in law. The same position was restated in a recent judgment of the Supreme Court in Commissioner v. Merino Panel Product Ltd. [2023 (383) E.L.T. 129 (S.C.)] which held that; "27. Based on our reliance on Ratan Melting (supra) and Ahmedabad Urban Development (supra) we have no reason to doubt that if a circular has been issued contrary to statutory provisions or in defiance of the interpretation of such provisions by a judicial forum, the circular in question would be stripped of any binding force." 10.4 We have earlier noted with approval the question answered by a Coordinate Bench of this Tribunal in Vivo Mobile India - II dated 09/02/2024 (supra) to the question, can a scheme notified by the MeiTY determine the classification of the goods?. We have agreed that goods cannot be reclassified based on the exemption notification issued under Section 25 of the Customs Act 1962 or based on any policy of any Ministry. We however observed in our discussions that in a case of ambiguity in understanding a statuto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principally with a particular kind of machine, or with a number of machines of the same heading are to be classified with the machines of that kind. The learned counsel for the Appellant has stated that Note 10 to Chapter 39 excludes goods which are further worked upon from Chapter 39. Relevant portion is extracted below for ease of reference: "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 articles ready for use)." 10.6 The reasoning given in the impugned order to classify the goods under chapter 39 is rather thin. Goods which are not disputed as being parts of cellular phones and which are made specifically to fit the design and measurements of a particular model of phone cannot be held to be articles of plastic in the nature of other plates, sheets, films, foil, strips of plastic and blocks of regular geometric shape. 10.7 We find that the matter has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by with other materials". According to the appellants, the middle covers also have a layer of zinc to help dissipate the heat. The fifth step of thermoforming changes the shape of the article from a plain sheet of plastic to one with the required shape and dimensions including the rounded edges. Thermoforming is a common industrial process which involves heating of a plain plastic sheet and moulding it into articles -such as inner panels of a refrigerators, panels in a car or disposable food trays. In our considered view, this is a process beyond mere cutting and surface working and this process also takes it out of the purview of chapter note 2(s) to Chapter 39. The sixth and the last process is CNC milling to cut holes in these covers to install various components. CNC or Computerised numerically controlled machines, as is well known, are modern, automated versions of lathe machines which are used to cutting, grinding, etc. to work on a piece of material to convert it into desired articles. In our considered view, CNC milling also goes beyond mere cutting and surface processing of the sheet. 67. Thus, applying the first Rule of Interpretation, they cannot be classified under C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said goods under CTH 8517 7090 as done by the Appellant holds good. We have not examined the alternate classification of the goods under any other specific tariff head. This is because the burden of proof regarding classification is on Revenue, if they fail the classification as adopted by the assessee succeeds. In this we also follow the judgment of a Coordinate Bench of this Tribunal in Sunrise Traders v. Commissioner of Customs, Mundra [2022 (381) E.L.T. 393 (Tribunal)] which has held as under: "2.5 Without prejudice to above findings, it is a settled legal position that if the goods are not classifiable under the chapter heading proposed by the revenue thereafter even the goods is classified under the chapter heading claimed by the assessee is correct or not, the case of the department will fail. This gets support from the following judgments : • Pepsico Holdings Pvt. Ltd. - 2019 (25) G.S.T.L. 271 (Tri. - Mum.) "8. In the light of the above, we cannot decide on a classification that has not been pleaded before us. Once the classification proposed by Revenue is found to be inappropriate, that claimed, while clearing the goods, will sustain even if it may app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... novo adjudication with all issues left open. The matter may be reexamined by the Adjudicating Authority on merits and a speaking order passed, after affording the Appellant a reasonable opportunity to submit their written submissions if they so desire and after hearing them afresh within ninety days of receipt of this order. The appellant should also cooperate with the Adjudicating Authority in completing the process expeditiously. (II) MICROPHONES - (Appeal No.C/40184/2020 filed by the assessee and Appeal No. C/40295/2021 filed by the department against Order in Original No.804/2019-AIR dated 9.12.2019) We have found that microphones were not eligible for exemption under S. No. 6A of Notification No. 57/2017-Cus. dated 30.06.2017 nor under S. No. 427 of Notification No. 50/2017-Cus. dated 30.06.2017. However, it is settled law that the extended period cannot be invoked when the case involves a genuine interpretative issue, which is not merely an excuse given by an Appellant when confronted for non-payment of duty. In such a situation the Appellant is not involved in a blame worthy act and no fine can be levied and penalty imposed. No mis-declaration or suppression of facts can ..... X X X X Extracts X X X X X X X X Extracts X X X X
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