2023 (12) TMI 1441 - AT - Customs

Classification of imported goods - Platinum Metal or Platinum Sponge - classifiable under Customs Tariff Item (CTI) 7110 11 10 as platinum in unwrought form or under CTI 7110 11 20 as platinum in powder form - eligibility for exemption from payment of whole of additional duty of customs (CVD) under Sl. No.25 of N/N. 05/06-C.E. dated 01.03.2006 / Sr. No.193 of N/N. 12/2012-C.E. dated 17.03.2012 - HELD THAT - Plain reading of the tariff items covered under the First Schedule of the Customs Tariff reveal that platinum is covered under sub- heading 7110 11 and depending upon whether such platinum is in unwrought form or in power form it is classifiable under tariff item 7110 1110 or 7110 1120 respectively. Further plain reading of sub-heading note 1 to Chapter 71 specifically provide that if platinum product in whatever unfinished or semi-finished form it is presented when such product passes through a sieve having a mesh aperture of 0.5mm. to the extent of 90% or more then such platinum product is treated as platinum power or platinum in powder form . As there is no other definition or chapter note heading or sub-heading notes other than the above for the legal purpose of classification of goods in terms of Rule 1 of the General Interpretative Rules (GIR) to classification in order to determine whether the imported platinum product is (i) in power form or (ii) in unwrought form the only valid test as per the Customs and Central Excise Tariff is to prove the permissibility of 90% or more of the platinum product as per sub-heading note 1 discussed above. On plain reading of the exemption entries under Notifications No.05/06-C.E. dated 01.03.2006 (Sl. No.25) and No. 12/2012-C.E. dated 17.03.2012 (Sr. No.193) it clearly transpires that platinum in any unfinished or semi-finished form including ingots bars blocks slabs billets shots pellets rods sheets foils and wires are eligible for exemption benefit. In view of the evidential facts for substantiating the case of denial of exemption benefit to the appellants and for the failure to establish the basic fact of fulfilling the requirements of sub-heading note 1 of chapter 71 as discussed above the impugned order classifying the impugned goods as platinum in powder form and for denying the exemption benefit is not legally sustainable. Further exemption benefit under Notifications No.05/06-C.E. dated 01.03.2006 (Sl. No.25) and No. 12/2012-C.E. dated 17.03.2012 (Sr. No.193) has been extended inter alia to platinum product in any unfinished or semi-finished form including ingots bars blocks slabs billets shots pellets rods sheets foils and wires. Even though powder form is not mentioned in the said exemption entry either for granting or for denial of such exemption by reading it strictly as per the phrase used therein the scope of coverage of goods under the exemption entry has been clearly spelt out in exhaustive manner viz. all unfished or semi- finished from of the platinum by use of specific wordings viz. any unfinished or semi-finished form including such forms which are specified therein - in order to deny the above exemption what is required to be proved is that the imported platinum is not in the unfinished or semi-finished form. In other words it is only those goods which are in finished form of platinum which alone are kept outside the scope of the aforesaid exemption. Inasmuch as the impugned order neither proves that the imported platinum is in finished form nor it demonstrates that the imported platinum does not fall under the semi-finished form or unfinished form such exemption benefits available under the aforesaid notifications cannot be denied to the appellants. Conclusion - The impugned goods Platinum Metal or Platinum Sponge under consideration imported by the appellants are correctly classifiable under tariff item 7110 11 10 as platinum in unwrought form and are eligible for full exemption from Additional Duty of Customs (CVD) under Notifications No.05/06-C.E. dated 01.03.2006 (Sl. No.25) and No. 12/2012-C.E. dated 17.03.2012 (Sr. No.193) as amended. The impugned order dated 02.03.2016 is set aside - Appeal allowed.

Summary

The core legal issues considered by the Tribunal in this appeal are:

(i) Whether the imported goods described as 'Platinum Metal or Platinum Sponge' are classifiable under Customs Tariff Item (CTI) 7110 11 10 as platinum in 'unwrought form' and thereby eligible for exemption from payment of the whole additional duty of customs (Countervailing Duty or CVD) under Sl. No. 25 of Notification No. 05/06-C.E. dated 01.03.2006 and Sr. No. 193 of Notification No. 12/2012-C.E. dated 17.03.2012;

(ii) Alternatively, whether the imported goods fall under CTI 7110 11 20 as platinum in 'powder form' and consequently are not eligible for the exemption benefit.

Issue-wise detailed analysis:

Classification of imported platinum sponge under CTI 7110 11 10 (unwrought form) or 7110 11 20 (powder form) and eligibility for exemption:

Relevant legal framework and precedents: The classification is governed by the Customs Tariff Act, 1975, and the Customs Act, 1962, particularly Sections 12 and 25 of the Customs Act, which empower levy of duties and grant exemptions. The First Schedule to the Customs Tariff specifies tariff items and their descriptions. The General Rules for Interpretation (GIR) of the tariff, including Rule 1 and Rule 3, guide classification. Sub-Heading Note 1 to Chapter 71 defines 'powder' or 'in powder form' as products of which 90% or more by weight passes through a sieve with 0.5 mm mesh aperture. Notifications No. 05/06-C.E. (Sl. No. 25) and No. 12/2012-C.E. (Sr. No. 193) grant exemption from CVD to platinum in its primary forms, described as any unfinished or semi-finished form including ingots, bars, blocks, slabs, billets, shots, pellets, rods, sheets, foils, and wires.

Precedents include the Tribunal's decision in Additional Director General (Adjudication) Vs. Johnson Matthey India Pvt. Ltd., where the exemption was upheld for imported platinum sponge. The Supreme Court judgment in Ratan Wire and Melting (2005) was also relied upon regarding the binding nature of Board circulars on revenue authorities.

Court's interpretation and reasoning: The Tribunal examined the nature of the imported platinum sponge, which is obtained by chemical refining or secondary refining of recycled materials, resulting in a porous, open-structured form called 'sponge'. The appellants argued that this 'sponge' is not a powder as per the tariff definition and is the first form of platinum metal obtained chemically, thus 'unwrought'. The Tribunal noted that the only legal test for powder form is the sieve test under Sub-Heading Note 1, which the department failed to prove had been met. No samples or analysis were conducted to establish that the sponge met the powder definition.

The Tribunal rejected the department's reliance on Rule 3C of GIR for classification, observing that the dispute was limited to two tariff items within the same sub-heading and that these items are clearly distinguishable by the form of the metal. Therefore, Rule 3C, which applies when goods are classifiable under multiple headings without clear distinction, was inapplicable.

The Tribunal further reasoned that the exemption notifications explicitly cover platinum in any unfinished or semi-finished form, listing illustrative examples but not limiting the forms covered. Since 'sponge' is the primary form of platinum obtained in refining, it logically falls within the category of unfinished or semi-finished forms eligible for exemption. The use of the word 'any' in the exemption notifications was interpreted as inclusive of all such forms, including sponge.

Key evidence and findings: The appellants' submissions were supported by reference to international explanatory notes, dictionary definitions distinguishing 'wrought' (mechanically shaped) from 'unwrought', and the absence of any contrary evidence from the department. The department's case relied on statements from appellants' officials during investigation acknowledging the goods as sponge, but no technical or scientific evidence was produced to establish that the sponge was powder as per tariff definition.

Application of law to facts: Applying the tariff provisions and interpretative rules, the Tribunal held that classification under CTI 7110 11 10 as 'unwrought' platinum was correct. The department failed to establish that the goods met the sieve test for powder. Consequently, the imported platinum sponge qualified for exemption under the notifications.

Treatment of competing arguments: The department contended that platinum sponge is not eligible for exemption as it falls under powder form, which is excluded. They relied on statements made during investigation and Rule 3C of GIR. The Tribunal found these arguments unpersuasive due to lack of evidentiary support, misapplication of Rule 3C, and failure to disprove the appellants' classification. The appellants' reliance on CBEC Circular dated 19.11.1998, which clarified that platinum sponge is exempt under the relevant notifications, was given significant weight. The Tribunal also noted that the department had not challenged the Tribunal's earlier decision in the Johnson Matthey case, which was directly on point.

Legal effect of CBEC Circular dated 19.11.1998 and subsequent notifications:

Relevant legal framework and precedents: The CBEC Circular clarified that exemption from excise duty under the relevant notifications applies to precious metals including platinum in forms such as catalysts, ingots, powder, and sponge, even when re-made, re-conditioned, or recovered from old articles. This circular is binding on revenue authorities and guides uniform implementation under Sections 37B of the Central Excise Act and 151A of the Customs Act.

Court's interpretation and reasoning: The Tribunal emphasized that the circular's clarification has been consistently followed in notifications issued from 1994 onwards, with no subsequent amendment or judicial pronouncement overruling it. The circular confirms that platinum sponge is included in the category of exempted goods. The Tribunal referenced the Supreme Court's ruling in Ratan Wire and Melting, which holds that Board circulars are binding on revenue authorities unless contradicted by judicial decisions, which was not the case here.

Key evidence and findings: The circular explicitly states that exemption shall not be denied to goods such as platinum sponge, even when obtained from recycled materials. The appellants relied on this to assert their entitlement to exemption. The department did not produce any contrary circular or judicial ruling.

Application of law to facts: Given the circular's binding nature and consistent application in successive notifications, the Tribunal held that the exemption benefit must be granted to the appellants' imported platinum sponge.

Treatment of competing arguments: The department's contrary stance was found unsupported by any binding authority or amendment to the notifications. The Tribunal noted that the department's denial of exemption was contrary to the circular and established practice.

Significant holdings:

"Plain reading of the above tariff items covered under the First Schedule of the Customs Tariff reveal that 'platinum' is covered under sub-heading 7110 11 and depending upon whether such platinum is in 'unwrought form' or in 'powder form', it is classifiable under tariff item 7110 11 10 or 7110 11 20, respectively. Further, plain reading of sub-heading note 1 to Chapter 71 specifically provide that if platinum product passes through a sieve having a mesh aperture of 0.5 mm to the extent of 90% or more, then such product is treated as 'platinum powder' or 'in powder form'. As there is no other definition or chapter note for classification, the only valid test is the sieve test."

"In view of the evidential facts for substantiating the case of denial of exemption to the appellants and for the failure to establish the basic fact of fulfilling the requirements of sub-heading note 1 of chapter 71, the impugned order classifying the impugned goods as platinum in powder form and denying exemption is not legally sustainable."

"Rule 3C of the General Interpretative Rules does not apply in the present case as the dispute in classification is limited to two tariff items within a single sub-heading, which are specifically identifiable by form."

"Exemption benefit under Notifications No. 05/06-C.E. and No. 12/2012-C.E. has been extended to platinum product in any unfinished or semi-finished form including ingots, bars, blocks, slabs, billets, shots, pellets, rods, sheets, foils and wires. The scope of coverage is exhaustive and includes all unfinished or semi-finished forms. The impugned order neither proves that the imported platinum is in finished form nor that it does not fall under semi-finished or unfinished form, hence exemption cannot be denied."

"The CBEC Circular dated 19.11.1998 clarifies that exemption from excise duty shall not be denied to goods of precious metals such as catalysts, ingots, powder and sponge falling under Chapter 71 when re-made, re-conditioned, re-fabricated or recovered from used articles. This circular is binding on revenue authorities and must be followed for uniform implementation."

"In the absence of any subsequent change in the notification wording or judicial pronouncement contrary to the circular, the exemption benefit must be granted."

"The impugned goods 'Platinum Metal or Platinum Sponge' are correctly classifiable under tariff item 7110 11 10 as platinum in 'unwrought form' and are eligible for full exemption from Additional Duty of Customs (CVD) under Notifications No. 05/06-C.E. and No. 12/2012-C.E."

Final determinations:

The Tribunal set aside the impugned order passed by the Principal Commissioner of Customs (Import), which had denied exemption and classified the goods under powder form. The appeal was allowed in favor of the appellants, holding that the imported platinum sponge is in unwrought form and eligible for exemption from CVD under the relevant notifications and circulars.