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TMI Blog2025 (1) TMI 1383X X X X Extracts X X X X X X X X Extracts X X X X ..... 10/ CTI 9028 90 90 as parts of electricity meters / gas meters. Consequently, he held that the importer was ineligible for exemption Notification No. 24/2005-Cus. dated 01.03.2005 (till 30.6.2017) and Notification No. 57/2017-Cus. (S. No. 5) (from 01.07.2017). He confirmed demand of differential Customs duty of Rs. 45,83,88,872/- under section 28 of the Customs Act, 1962 [Customs Act] invoking extended period of limitation along with interest under section 28AA of the Customs Act. He imposed an amount equal to the duty as penalty under section 114A of the Customs Act but refrained from imposing penalties under sections 112 and 114AA of the Customs Act. 3. The importer is aggrieved by the demand of duty with interest and penalty under section 114A. Revenue is aggrieved that the Commissioner refrained from imposing penalty under section 114AA. Hence, these two cross appeals. 4. We have heard Shri V. Lakshmikumaran, learned counsel for the appellant and Shri Mihir Ranjan, learned Special Counsel for the Revenue and perused the records. 5. The importer manufactures smart electricity and gas meters which not only measure the consumption of electricity or gas but also communicate the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le under CTI 8517 62 90 by virtue of Note 2(a) to Section XVI of the Customs Tariff. Section Note 2(b) would apply only if note 2(a) would not apply. Reliance is listed on the following decisions: (a) Secure Meters versus Commissioner of Customs, New Delhi [2015 (319) E.L.T. 565 (S.C.)] (b) Collector of Central Excise versus Delton Cables Ltd. [2005 (181) E.L.T. 373 (S.C.)] (c) Modern Communications and Broadcasting Systems P. Ltd. Versus Commissioner of Customs, Ahmedabad [2019 (366) E.L.T. 1061 (Tri. - Ahmd.)] (d) Vodafone Idea Limited versus Principal Commissioner of Customs in Customs Appeal No. 51167 of 2020 vide Final Order No. 55948 of 2024 affirmed by the Supreme Court in Civil Appeal No. 14419 of 2024 (e) Reliance Jio Infocomm Ltd. Versus Commissioner of Customs (Air Cargo) in Customs Appeal No. 51734 of 2019 vide Final Order No. 40074 of 2022 affirmed by the Supreme Court [2024 (387) E.L.T. 646 (S.C.)] (f) Commissioner of Central Excise, Aurangabad versus Videocon Industries Ltd. [2023 (384) E.L.T. 628 (S.C.)] (iv) The department does not dispute the classification of communication hubs under CTH 8517 and the appellant had exported them classifying under thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (iii) Accordingly, a show cause notice was issued proposing the recovery of differential duty invoking extended period of limitation under section 28 (4) of the Customs Act, 1962 along with interest under section 28AA. It was also proposed to impose penalties under section 112 or 114A and section 114AA on Shri Sridhar Radhakrishnan, Vice President (Operations) and Shri Rajesh Golechha, Manager Indirect Taxation of the importer. (iv) In the impugned order, the Principal Commissioner confirmed the classification and demand of duty and interest as proposed and also imposed penalty under section 114A but did not impose penalties under section 112 and section 114AA. (v) The communication hub is a part of the electricity meter and the communication module, in turn, is its part. Therefore, communication module is also a part of the electricity meter. As per notes 3 and 4 to section XVI of the Customs Tariff and Chapter Note 3 of Chapter 90, these parts have to be classified along with the machine which performs the principal function, viz., the smart meter. The Principal Commissioner correctly classified the goods and confirmed the demand of duty and imposed penalty. (vi) The Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art relates/creates a charge, tax becomes payable. The second part relates to adjudication or computation and is procedural in nature. Adjudicatory machinery qualifies the amount of duty payable as per the charging section but the assessment does not create the charge. The charge is created by the statute, i.e., charging section. The third part relates to recovery of the tax or duty. (emphasis supplied) 14. The demand of duty under section 28 is a modification of the assessment if some tax escaped assessment. Therefore, it is necessary to examine the charging section and the provisions related to assessment. 15. Section 12 of the Customs Act - the charging section- reads as follows: 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. 16. As far a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption notification which, if fulfilled, will entitle the goods to exemption and not otherwise. The conditions of the exemption notification do not alter the charge of duty. "Exemption" from tax comes later to levy for "exemption" can only operate when there is a valid levy; if there was no levy at all, there would be nothing to exempt [Principles of Statutory Interpretation (15th edition), Justice G P Singh citing Peekay Re-rolling Mills (Pvt.) Ltd. vs Assistant Commissioner (2007) 4 SCC 30 (para 45)]. Since the charge of duty of customs is only on the goods imported, duty should be assessed on the goods imported, i.e., in the form in which they are imported. If one claims the benefit of an end-use based exemption notification, the conditions therein with respect to installation, use, etc. of the imported goods have to be met; otherwise, the goods will not be entitled to the exemption. 20. The dispute in these two cross appeals is about the classification of the imported goods. Classification of goods under the Customs Tariff is a part of the assessment under the Customs Act. Section 2(2) of the Customs Act defines 'assessment' as follows: (2) 'assessment' means determination o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. A car, for instance, has several parts, components and accessories when it is cleared from the factory but is cleared as a car and must be classified as such. The car manufacturer imports or procures domestically several parts. For example, he will have to procure four or five tyres without which the car is not complete. In the Bills of Entry the car tyres would have to be classified as car tyres (articles of rubber under Chapter 40); similarly, a domestic manufacturer of tyres would also classify them as car tyres - articles of rubber and pay central excise duty accordingly. Once they are fitted in the car and the car is cleared from the factory of the car manufacturer, although the tyres are clearly visible and they can be even physically separated from the car, they will not be independent goods but will be part of the car. They cannot be classified separately. 23. Similarly, rubber mats, carpets, upholstery, entertainment system, etc. in the car cannot be classified separately and individually because they become parts of the car. However, when these very parts are separately imported and cleared, they will have their own identity and they must be classified as such. 24. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty or gas is its primary function. 27. According to the Revenue, the communication modules which were imported, being parts of the communication hub, which is a part of the smart meter, should be classified as parts of the smart meters. According to the importer, since they were imported as communication modules which are parts of communication hubs, they should be classified as parts of the communication hubs. 28. We find that classification of goods is a part of assessment and assessment is the determination of the amount of duty payable as per the charging section and other provisions. As discussed above, the charge of duty of customs under section 12 is only on the goods imported into India and there is no charge on what the goods may become after their import. 29. Once cleared for home consumption, the goods cease to be imported goods and hence there also cannot be any assessment of duty or their classification for assessment. 30. In these two appeals, the dispute is about classification of the goods, which process, being a part of assessment, should be done in the form in which the goods are imported. After they are cleared for home consumption, the goods may take any oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding 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 headings 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. Note 3 : Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function. Chapter notes to Chapter 90 Chapter 90 : Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; parts and accessories thereof Note 2 : Subject to Note 1, parts and accessories for machines, apparatus, instruments or articles of this Chapter are to be classified according to the following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... machines consisting of two or more machines fitted together to form a whole and other machines designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting of only of that component or as being that machine which performs the principal function." Since the function of the communication modules is only as a part of the smart meters, according to the learned special counsel for the Revenue, they should be classified under CTI 9028 90 90. 35. The submissions of the learned counsel for the importer deserve to be accepted. Chapter note 2(b) lays down classification of 'other parts and accessories..'. The question is "other than" what and the answer to that lies in reading Chapter note 2 as a whole. It states that 'Subject to Note 1 above, parts and accessories are to be classified according to the following rules: (a) parts and accessories which are goods included in any of the headings of this Chapter or of Chapter 84,85 or 91(other than heading 8487, 8458 or 9033) are in all cases to be classified in their respective headings; (b) other parts and accessories, if suitable for use solely or principally with a par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided. A copy of this letter has been enclosed in pages 1172 and 1173 of the Paper book. Despite all these facts, it has been alleged in the SCN that the importer had 'wilfully and deliberately suppressed facts from the Customs to evade payment of duty' and that it had misclassified the goods with an intention to mislead the department and availing undue customs duty benefits. Learned counsel submitted that there was no basis to make any of the allegations when all facts were known to the department. 40. Learned special counsel for the department supported the impugned order on the question of invoking extended period of limitation. 41. Although we have decided the classification on merits in favour of the importer, we also find the demand invoking extended period of limitation under section 28(4) could have been raised only if the non-payment or short payment of duty is due to collusion or any wilful mis-statement or suppression of facts. Similarly, penalty equal to the amount of duty under section 114A can be imposed only if the non-payment or short payment of duty is due to collusion or any wilful mis-statement or suppression of facts. 42. The dispute in this case is of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cient to have a reasonable belief that there was short levy or duty on the impugned goods." 46. In other words, according to the Commissioner, the importer was guilty of not anticipating that DRI would one day investigate and come up with a new classification of the goods and file Bills of Entry conforming to such future anticipated views of DRI. 47. We cannot accept the logic of the Commissioner. Just as it would have been humanly impossible for the Commissioner to anticipate if the importer would appeal against his order and if so, what order this Tribunal would pass, it was equally humanly impossible for the importer to anticipate if DRI would one day take up an investigation and if so, if it would dispute the classification and if so, what classification DRI would find correct.The Commissioner completely misunderstood the concept of self-assessment. It only means that the importer has to assess the duty as per its understanding and it has no obligation whatsoever to anticipate what classification the assessing officer would find correct and further, even if the assessing officer finds the classification correct if DRI would one day come up with a different view and file bill ..... X X X X Extracts X X X X X X X X Extracts X X X X
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