2025 (5) TMI 1767 - AT - Customs

Demand of differential duty along with interest and penalty - Classification of imported subject goods (Ink jet Printers) under CTSH 844332 or CTSH 844339 - Misdeclaration - intention to evade payment of customs duty - Applicability of Circular No. 11/2008-Cus dated 01.07.2008 - HELD THAT - It is not in dispute as evident from the product literature investigation findings and statements recorded under Section 108 that the impugned machines are intended for industrial printing applications on hard substrates such as ceramic tiles possess in-built processing units and execute printing operations without the necessity of an external ADP machine. By applying Rule 3(a) the specific description of Inkjet Printing Machines under CTI 8443 3910 must necessarily be preferred over the more generic category of Inkjet Printers under CTI 8443 3250. Even if there remained any ambiguity in classification between the two headings Rule 3(c) enjoins that classification be made under the heading which occurs last in numerical order among those which equally merit consideration. Thus by both application of specificity and sequential preference the impugned goods correctly fall under CTI 8443 3910. At this juncture we also take note of the fact that the appellant had prior to these consignments imported similar machines under Bill of Entry No. 2409364 dated 08.12.2010 and classified them under CTI 8443 3990 as Digital Printing Machine for Ceramic Industry . We are of the opinion that this earlier classification under an eight-digit tariff heading covering Other printing machinery is a tacit admission by the appellant of the character of the impugned goods as printing machinery distinct from conventional ADP-connected printers. The appellant s subsequent attempt to classify functionally identical machines as Inkjet Printers under CTI 8443 3250 was motivated in order to avail of the ITA exemption. In the instant case as demonstrated by the product manuals technical literature and investigation findings both the Creta Compat 700 x 4 Inkjet Printer and Durst Gamma 75 HDS 2-5 C Inkjet Printer possess advanced internal computer systems touchscreen interfaces and in-built proprietary print management software systems enabling autonomous operation. The presence of USB ports or LAN interfaces does not by itself satisfy the requirements of CTI 8443 3250 since these are ancillary provisions for optional data transfer and not primary conduits for operational command from an external ADP machine. The critical determinant is whether the machine requires such an external device for its essential operation which in the present case it does not. The extended period of limitation invoked under Section 28(4) is also fully justified. The suppression of material facts deliberate misdeclaration of classification despite prior knowledge from past import experience and conscious omission of product literature disclosing true functionality all evidence intent to evade duty. The statements of Shri Gyan Prakash Nirmal and Shri Lalit Chandra Sharma recorded under Section 108 which have not been retracted corroborate that the impugned machines were described in invoices as printers for the avowed purpose of classifying them under a duty-exempt heading. The plea of bona fide error is untenable in light of such clear evidence of knowledge and intent. Accordingly the confiscation of the impugned goods under Section 111(m) is legally sustainable. The option for redemption on payment of fine in lieu of confiscation granted by the adjudicating authority is a reasonable exercise of discretion and not subject to interference. Having regard to the material on record including the product literature inspection reports statements recorded and the applicable interpretative rules under the Customs Tariff Act we have no hesitation in affirming the finding of the Commissioner that the impugned goods are correctly classifiable under CTI 8443 3910 as Inkjet Printing Machines and not under CTI 8443 3250/3290 as claimed by the appellant. Similarly the penalty imposed under Section 114A being statutorily equal to the duty evaded is mandated by law upon establishment of deliberate misdeclaration with intent to evade duty which is undeniably present in this case. The discharge of 25% of the penalty within the prescribed period as noted by the adjudicating authority entitles the appellant to the reduced penalty benefit to that extent alone with the balance remaining payable. We note that the penalty has been imposed upon Shri Gyan Prakash Nirmal under Section 112(a). Thus we are of the opinion that the penalty is liable to be reduced. Thus we hold as follows (i) The classification of the impugned consignments under CTI 8443 3910 is upheld. (ii) The demand of differential customs duty along with interest under Section 28AA of the Customs Act 1962 stands confirmed. (iii) The penalty imposed under Section 114A on the appellant company is upheld. (iv) The penalty under Section 112(a) of the Customs Act 1962 is reduced to Rs.2, 50, 000/-. Accordingly the impugned order is modified to the extent above. The Custom Appeal No.55672 of 2013 filed is allowed to the extent indicated above. The Customs Appeal No.55671 of 2013 stands dismissed.

Summary

The present appeals revolve around the classification of imported inkjet printers and the consequent demand of differential customs duty, imposition of penalties, and confiscation. The core legal issues considered by the Tribunal are:

• Whether the imported goods are correctly classifiable under Customs Tariff Item (CTI) 8443 3250 (inkjet printers capable of connecting to an Automatic Data Processing (ADP) machine or network) or under CTI 8443 3910 (inkjet printing machines with independent processing capability);
• Whether the appellant deliberately misdeclared the classification of goods with intent to evade customs duty;
• Whether the penalties and confiscation imposed by the Commissioner are sustainable under the Customs Act, 1962.

Issue 1: Correct Classification of the Imported Goods

Legal Framework and Precedents: The classification dispute centers on the interpretation of Customs Tariff Sub-Headings (CTSH) 8443 32 and 8443 39 under the Customs Tariff Act, 1975, read with the Harmonized System of Nomenclature (HSN) Explanatory Notes and Circular No. 11/2008-Cus dated 01.07.2008. The Circular and HSN Notes clarify that printers under CTSH 8443 31 and 8443 32 must be capable of connecting to an ADP machine or network, meaning the apparatus must have all components necessary for connection effected simply by attaching a cable. Mere capability to accept an additional component or the presence of inaccessible connection points is insufficient. Conversely, machines under CTSH 8443 39 are those not connectable to an ADP machine or network.

Previous Tribunal decisions, such as Monotech Systems Ltd. and Aztec Fluids and Machinery Pvt. Ltd., were cited by the appellant to support classification under CTSH 8443 32, relying on connectivity to ADP machines as the determinative criterion.

Court's Interpretation and Reasoning: The Tribunal carefully examined the technical specifications, product brochures, and operational manuals of the impugned goods - specifically the 'Creta Compat 700 x 4' and 'Durst Gamma 75 HDS 2-5 C' models. These documents revealed that the machines possess integrated Windows-based computer control platforms, touchscreen user interfaces, in-built design processing and print file generation software, and do not require an external ADP machine for operation. Optional USB or LAN interfaces are available only for data transfer but do not serve as primary conduits for operational command.

The Tribunal emphasized the functional independence of these machines, which execute print job management, image processing, print head control, and substrate alignment internally. This autonomy distinguishes them from conventional printers under CTSH 8443 32, which depend on external ADP machines for command and control.

Applying the General Rules for Interpretation of the First Schedule to the Customs Tariff Act, particularly Rule 3(a), the Tribunal held that classification must favor the heading providing the most specific description. CTI 8443 3910 specifically covers 'Inkjet Printing Machines' with independent processing capability, whereas CTI 8443 3250 covers 'Inkjet Printers' connectable to ADP machines. Given the impugned goods' industrial application and autonomous functionality, CTI 8443 3910 is the more specific and appropriate classification.

The Tribunal also noted the appellant's prior import of similar machines classified under CTI 8443 3990 as 'Digital Printing Machine for Ceramic Industry' with full customs duty paid, which constitutes tacit admission of the goods' character as independent printing machinery. The subsequent reclassification under CTSH 8443 32 was viewed as a deliberate attempt to avail duty exemption under the Information Technology Agreement (ITA).

Treatment of Competing Arguments: The appellant's reliance on connectivity via USB or optional LAN for classification under CTSH 8443 32 was rejected, as the HSN Explanatory Notes require the apparatus to be inherently capable of connection to an ADP machine/network for operational command, not merely for data transfer. The Tribunal distinguished the present case from precedents like Aztec Fluids and Monotech Systems by highlighting factual differences in machine specifications and operational dependencies.

Issue 2: Intentional Misdeclaration and Evasion of Duty

Legal Framework and Evidence: Under Section 28(4) of the Customs Act, extended limitation applies where there is suppression of facts or misdeclaration with intent to evade duty. The statements recorded under Section 108 of the Customs Act from company officials confirmed knowledge of the machines' true nature and prior classification history. The impugned invoices described the goods as 'printers' to avail exemption, despite the machines' industrial printing functionality.

Court's Reasoning: The Tribunal found clear evidence of deliberate misclassification motivated by duty evasion. The appellant's prior import experience and payment of full duty on similar machines negated any claim of bona fide error. Suppression of product literature and technical specifications further evidenced intent.

Issue 3: Sustainability of Penalties and Confiscation

Legal Framework: Penalties under Section 114A of the Customs Act are mandatory and equal to the amount of duty evaded upon proof of deliberate misdeclaration. Section 112(a) penalties apply to responsible individuals. Confiscation under Section 111(m) is sustainable where goods are misdeclared with intent to evade duty. The adjudicating authority's discretion to allow redemption of confiscated goods on payment of fine is recognized.

Court's Reasoning and Findings: The Tribunal upheld the demand of differential customs duty of Rs. 50,36,786/- along with interest under Section 28AA. The penalty under Section 114A equal to the duty amount was confirmed as statutorily mandated. The penalty on the individual appellant was reduced from the original imposition, considering circumstances. Confiscation of the goods was deemed legally sustainable given the deliberate misdeclaration and suppression of facts. The option for redemption on payment of fine was held to be a reasonable exercise of discretion.

Significant Holdings:

"The criterion 'capable of connecting to an automatic data processing machine or to a network' denotes that the apparatus comprises all the components necessary for its connection to a network or an automatic data processing machine to be effected simply by attaching a cable. The capability to accept the addition of a component (e.g., a 'card') that would then allow the connection of a cable is not sufficient to meet the terms of these sub-headings."

"The impugned machines are industrial digital printing systems with in-built processing modules executing complex print jobs autonomously, thus precluding classification under CTSH 8443 32."

"By applying Rule 3(a) of the General Rules for Interpretation, the specific description of 'Inkjet Printing Machines' under CTI 8443 3910 must necessarily be preferred over the more generic category of 'Inkjet Printers' under CTI 8443 3250."

"The imposition of penalty under Section 114A being statutorily equal to the duty evaded is mandated by law upon establishment of deliberate misdeclaration with intent to evade payment of duty."

"The appellant's prior import of similar machines under CTI 8443 3990 with full payment of customs duty establishes prior awareness of the true nature and appropriate classification of such machines."

Final Determinations:

• The impugned consignments are correctly classifiable under CTI 8443 3910 as 'Inkjet Printing Machines' with independent processing capability, not under CTI 8443 3250 as 'Inkjet Printers' connectable to ADP machines;
• The appellant deliberately misdeclared the classification with intent to evade customs duty, justifying invocation of extended limitation under Section 28(4);
• The demand of differential customs duty of Rs. 50,36,786/- along with interest is upheld;
• The penalty under Section 114A on the appellant company is confirmed as statutorily mandatory;
• The penalty on the individual appellant under Section 112(a) is reduced to Rs. 2,50,000/-;
• The confiscation of goods under Section 111(m) is sustainable, and the option for redemption on payment of fine is a reasonable exercise of discretion.