The Chennai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that claiming the benefit of customs duty exemption in the Bills of Entry filed under the Customs Act, 1962 does not amount to suppression/mis-declaration.
The bench of Sulekha Beevi C.S. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) has observed that claiming an incorrect classification or the benefit of an ineligible exemption Notification does not amount to making a false or incorrect statement as it is not an incorrect description of the goods or their value but only a claim made by the importer. In the absence of any finding of positive suppression by the Appellant in the order, the allegation of wilful misclassification and intention to evade duty by importer is not at all tenable and misclassification could not be equated with misdeclaration within the meaning of Section 28(4) of the Customs Act, 1962.
Background On Customs Duty Exemption Claim By Importer
The Respondent/importer, M/s. K.B. Autosys India Pvt. Ltd. is in the business of manufacturing of brake pads for automobile sector, have been importing a prepared mixture in powder form comprising various organic and inorganic materials such as aramid fibres, butyl rubber, nitrile rubber, phenolic resin, declaring it as “Binding Material, Parts for Brake, disc brake pads, tool for mould, etc., under CTH 38249090 / 38247900, availing the benefit of Notification No. 152/2009-Cus. dated 31.12.2009 and also Notification No. 50/2017-Cus. dated 30.06.2017 which attracted basic 7.5% Customs duty.
Based on the composition and function/usage of the imports, the Department was of the view that the subject imports were friction materials, classifiable under CTH 6813 8900.
Therefore, a Show Cause Notice was issued proposing to deny the benefit of Notifications and seeking to demand differential duty of Rs.7,53,82,791/- under Section 28(4) along with interest under Section 28AA of the Customs Act, 1962 and confiscation of goods under Section 111(m) besides proposing to impose penalties under Section 112(a)/114A. After the due process of the law, the Adjudicating Authority dropped the proposed proceedings of demand of duty, interest and levy of fine and penalty.
Arguments
The department contended that the imported item is a friction material in powder form which is formed by high level of processing of each individual ingredient including grinding, mixing of ingredients under controlled parameters until the desired homogeneous mixture is formed which is ready to be bonded directly. The imported item qualifies the test of being a material that has the desired properties of a friction material and is ready to be bonded to a metal plate and the lab report also clearly established that the imported item is a combination of mostly mineral materials.
Therefore, the import’s merit classification under CTH 6813 as ‘friction material’ and not under CTH 3824 as the exclusions specified in explanatory notes to Chapter 68 is not applicable to the subject imports as it contained mineral materials. Rule 3 of the interpretative rules also provide for a heading which provides the most specific description rather than the heading which provides a general description.
The importer contended that at the time of import, the goods are not a friction material as understood in terms of the CTH 6813. The classification under CTH 6813 was clearly ruled out as the HSN explanatory notes to the heading 6813 categorically states that friction material of the heading 6813 to be in the form of sheets, roles, strips, disks, rings, washers, pads or cut to any other shape. Therefore, the friction material, as understood from HSN explanatory notes, are in a specific shape or form and it is an admitted position that the goods in the present case are in a powder form, as presented at the time of assessment.
Conclusion
The tribunal held that appropriate classification of the imported product is not under CTH 3824 9090/3824 7900 as classified by the importer respondent.
The tribunal held that the importer’s classification of the impugned goods under Chapter Heading 3824 9090/3824 7900 is rejected and the department’s classification under CTH 6813 8900 is upheld. Consequently, the appellant is not eligible for the benefit of the Notification No. 50/2017- Cus. dated 30.06.2017 and Notification no.152/2009-Cus dated 31.12.2009. However, the demand for the normal period along with interest is only upheld and the demand for the extended period is decided in favour of the Respondent importer.
Case Title: Commissioner of Customs Versus M/s. K.B. Autosys India Pvt. Ltd.
Case No.: Customs Appeal No. 41689 of 2019
Date: 10.09.2024
Counsel For Appellant: O.M. Reena
Counsel For Respondent: Hari Radhakrishnan
