2025 (6) TMI 611 - AT - Customs

Demand of differential duty - assessment at rate of duty corresponding to tariff item 844 3250 of First Schedule to Customs Tariff Act 1975 and substitution with rate corresponding to tariff item 8443 3910 of First Schedule to Customs Tariff Act 1975 - HELD THAT - In the Harmonized System of Nomenclature (HSN) printers intended for computers were by notes in chapter 84 attached to automatic data processing machines as these were solely intended for such use and not elsewhere. Inkjet technology changed all that and such acknowledgment in Harmonized System of Nomenclature (HSN) of 2002 was carried into Harmonized System of Nomenclature (HSN) of 2007 as tariff line for inkjet printing machines ; at the same time the same product used with computers as output or printers was placed in the preceding sub-heading. The wisdom of that placement is best appreciated from note 5 in chapter 84 of First Schedule to Customs Tariff Act 1975 which engages when imported as system and not independently. The placement of inkjet printers in tariff item 8443 3910 of First Schedule to Customs Tariff Act 1975 cannot be faulted. The placement of impugned goods in tariff item 844 3250 of First Schedule to Customs Tariff Act 1975 is also not devoid of merit. This it can safely be said that in the absence of distinction afforded by the Explanatory Notes. In such circumstances the tie breaker of later entry comes into play; accordingly the tariff item declared in the bill of entry must be disfavoured. As the distinction is drawn on the tie breaker of happenstance it cannot be asserted that appellant had misdeclared the goods. Consequently confiscation under section 111 of Customs Act 1962 and penalty under section 112 of Customs Act 1962 does not merit confirmation. Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal are:

- Whether the impugned goods, described as 'OCE Jetstream Printer 1000' and parts, are correctly classifiable under tariff item 8443 3250 (inkjet printers capable of connecting to an automatic data processing (ADP) machine or network) or under tariff item 8443 3910 (ink jet printing machines) of the First Schedule to the Customs Tariff Act, 1975.

- Whether the classification by customs authorities substituting the appellant's declared tariff item with a different tariff item was justified.

- The applicability of section 28 of the Customs Act, 1962 regarding differential duty demand and the consequent imposition of interest under section 28AB.

- The validity of confiscation under section 111(m), imposition of redemption fine under section 125, and penalty under section 112 of the Customs Act, 1962.

- The relevance and applicability of the Central Board of Excise & Customs (CBEC) circular no. 11/2008-Customs dated 1st July 2008 and various precedents including decisions in Monotech Systems Limited, Aztec Fluids, and Hewlett Packard India Sales.

- The interpretative challenge arising from overlapping tariff descriptions and the application of General Rules for Interpretation (GRI) of the Customs Tariff Act, particularly rules 2(a) and 3(c).

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Correct Classification of the Impugned Goods under Customs Tariff

Relevant Legal Framework and Precedents: The classification dispute revolves around tariff items 8443 3250 and 8443 3910 of the First Schedule to the Customs Tariff Act, 1975. The General Rules for Interpretation (GRI) of the Tariff, especially rules 2(a) and 3(c), guide classification. The CBEC circular no. 11/2008-Customs and various Tribunal decisions (Monotech Systems Ltd, Aztec Fluids, Hewlett Packard India Sales) provide interpretative context.

Court's Interpretation and Reasoning: The original authority and appellate commissioner found that the impugned goods constitute a printing machine rather than a printer. This conclusion was based on the presence of an inbuilt automatic data processing (ADP) system (SRA MP Controller with PRISMA software), printing speed measured in meters per minute (typical of printing machines), and integrated pre- and post-production features such as folding, perforating, and punching paper, which are not characteristic of printers. The Tribunal noted that the distinction between 'printers' and 'printing machines' in the tariff schedule is ambiguous and overlapping, with both falling under heading 8443 but differentiated only at the sub-heading level.

The Tribunal acknowledged that the appellant's contention-that the goods are inkjet printers capable of connecting to an ADP machine or network as per tariff item 8443 3250-was supported by product brochures and emphasized connectivity capabilities. However, the Tribunal found that mere connectivity does not negate the autonomous functioning and integrated features that qualify the goods as printing machines under tariff item 8443 3910.

Key Evidence and Findings: The technical features of the impugned goods, including embedded ADP system, printing speed metrics, and production capabilities beyond printing, were pivotal. The CBEC circular was considered but found inapplicable since it addressed large format printers lacking ADP capability, whereas the impugned goods had autonomous ADP systems.

Application of Law to Facts: The Tribunal applied the GRI rules and found that the classification under tariff item 8443 3910 was appropriate. The 'tie breaker' rule 3(c) was invoked due to overlapping descriptions, favoring the latter entry (printing machines). The Tribunal rejected the appellant's argument that all printers capable of ADP connectivity should fall under tariff item 8443 3250, emphasizing that no tariff line should be rendered superfluous.

Treatment of Competing Arguments: The appellant's reliance on connectivity and supporting case law was considered but found insufficient to override the technical and functional distinctions. The respondent's argument emphasizing autonomous ADP capability and integrated printing machine features was accepted.

Conclusion: The impugned goods are correctly classifiable under tariff item 8443 3910 as ink jet printing machines, not under tariff item 8443 3250 as inkjet printers capable of connecting to ADP machines or networks.

Issue 2: Legality of Differential Duty Demand, Confiscation, Redemption Fine, and Penalty

Relevant Legal Framework: Sections 28 and 28AB of the Customs Act, 1962 govern the demand of differential duty and interest. Confiscation under section 111(m), redemption fine under section 125, and penalty under section 112 are also in issue.

Court's Interpretation and Reasoning: The Tribunal found that while the differential duty demand was justified based on correct classification, the appellant did not misdeclare the goods intentionally. The classification conflict arose from ambiguous tariff descriptions rather than deliberate misstatement. Therefore, confiscation and penalty were not warranted. The Tribunal set aside the redemption fine and penalty but upheld the differential duty and interest demand.

Key Evidence and Findings: The Tribunal noted the absence of evidence indicating fraudulent intent or misdeclaration. The classification dispute was essentially a matter of interpretation complicated by overlapping tariff entries.

Application of Law to Facts: The Tribunal applied the principle that penal consequences require culpable conduct. Since the appellant's declaration was not found to be a misdeclaration in the legal sense, confiscation and penalties were unjustified.

Treatment of Competing Arguments: The respondent argued for strict enforcement of confiscation and penalties due to incorrect classification. The Tribunal balanced this against the appellant's bona fide position and ambiguity in tariff classification.

Conclusion: Differential duty and interest are payable, but confiscation, redemption fine, and penalty are set aside.

Issue 3: Applicability of CBEC Circular and Precedents

Relevant Legal Framework and Precedents: CBEC circular no. 11/2008-Customs and decisions in Monotech Systems Ltd, Aztec Fluids, and Hewlett Packard India Sales.

Court's Interpretation and Reasoning: The Tribunal observed that the CBEC circular was intended for large format printers without ADP capability and thus not applicable to the impugned goods. The precedents cited by the appellant were found contextually distinct and not binding on the present facts. The Tribunal emphasized the need for first principle determination in the absence of clear precedent.

Key Evidence and Findings: The technical specifications and functional capabilities of the impugned goods distinguished them from products in cited precedents.

Application of Law to Facts: The Tribunal declined to follow precedents that were not factually analogous or binding, opting instead for a purposive interpretation of tariff entries and GRI rules.

Treatment of Competing Arguments: The appellant's reliance on precedents was acknowledged but ultimately found insufficient to override the detailed technical analysis.

Conclusion: The CBEC circular and cited precedents do not mandate classification under tariff item 8443 3250 for the impugned goods.

Issue 4: Interpretation of Overlapping Tariff Descriptions and Application of GRI

Relevant Legal Framework: General Rules for Interpretation (GRI) of Customs Tariff Act, especially rules 2(a) and 3(c).

Court's Interpretation and Reasoning: The Tribunal acknowledged the difficulty in distinguishing between 'printers' and 'printing machines' as both are machinery under heading 8443 with overlapping descriptions. The 'tie breaker' rule 3(c), which favors the later entry in case of ambiguity, was applied to classify the goods under 8443 3910.

Key Evidence and Findings: The absence of explicit exclusion or differentiation in explanatory notes and the similarity of functional descriptions complicated classification.

Application of Law to Facts: The Tribunal applied the 'tie breaker' rule to resolve ambiguity, thereby disfavoring the appellant's declared tariff item.

Treatment of Competing Arguments: The appellant's argument that the tariff line 8443 3910 was a 'vestigial relic' was rejected as no tariff line should be rendered superfluous.

Conclusion: Classification under tariff item 8443 3910 is appropriate under GRI rules.

3. SIGNIFICANT HOLDINGS

"The impugned goods are a printing machine (printing system). I find that unlike printers which get the data inputs from external Automatic Data Processing (ADP) Systems, the impugned item has inbuilt ADP System (SRA MP Controller) supported by 'PRISMA' software... no printer can have these features but the printing machine do have these features. This leaves no doubt about the impugned item being a printing machine and not a printer."

"The placement of 'inkjet printers' in tariff item 8443 3910 of First Schedule to Customs Tariff Act, 1975 cannot be faulted. The placement of impugned goods in tariff item 8443 3250 is also not devoid of merit... the 'tie breaker' of later entry comes into play; accordingly, the tariff item declared in the bill of entry must be disfavoured."

"It cannot be asserted that appellant had misdeclared the goods. Consequently, confiscation under section 111 and penalty under section 112 do not merit confirmation. Appeal is allowed to the extent of setting aside of redemption fine and penalty while upholding the demand of differential duty."

Core principles established include:

- Classification must be based on the technical and functional characteristics of goods, not solely on connectivity or potential use.

- Overlapping tariff entries require application of GRI rules, especially the 'tie breaker' rule, to resolve ambiguity.

- Penal consequences under customs law require culpable misdeclaration; genuine classification disputes do not warrant confiscation or penalties.

- Circulars and precedents must be applied contextually and are not binding if facts differ materially.