2025 (7) TMI 361 - AT - Customs

Classification of imported consignments - polished (honed) marble slabs through Chennai Port - classifiable under CTH 62022190 or not - benefit of N/N. 04/2006-CE dated 01.03.2006 - Wilful misstatement of facts or not - HELD THAT - A Coordinate Bench of this Tribunal in ORIENTAL TRIMEX LTD. Vs COMMISSIONER OF CENTRAL EXCISE NOIDA 2017 (12) TMI 511 - CESTAT CHENNAI relying on TRU s D.O. letter/ Circular dated 16.03.2012 decided a similar matter in favour of the appellant in the said appeal while finding that the denial of benefit of notification was unjustified. Hence as per the Boards clarification the impugned goods even if classifiable under CTH 6802 2190 as per the impugned order are eligible for the benefit of N/N. 04/2006-CE dated 1.3.2006. However in Commissioner Of Central Excise Bolpur vs M/S. Ratan Melting Wire Industries 2008 (10) TMI 5 - SUPREME COURT a five judge Bench of the Hon ble Supreme Court had after examining the Constitutional Bench judgment in Collector Vs Dhiren Chemical Industries 2001 (12) TMI 3 - SUPREME COURT felt that the judgment was being misunderstood and that a circular which is contrary to the statutory provisions has really no existence in law. Since the TRU s circular referred to above has not been issued contrary to statutory provisions or in defiance of the interpretation of such provisions by a judicial forum and is clarificatory in nature to overcome a situation where the notification mentions the description of the goods but has inadvertently omitted the Customs Tariff Heading it will be binding on the department officers. Moreover as held by the Hon ble Apex Court in the case of Suchitra Components Ltd. v. Commissioner 2007 (1) TMI 4 - SUPREME COURT held that a beneficial Circular is to applied retrospectively. The matter having been resolved in favour of the appellant on merits the others issues involved like that of interest penalty etc. do not survive - the impugned order is set aside - appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the classification of the imported polished (honed) marble slabs under Customs Tariff Heading (CTH) 6802 2110 was correct, or whether they were correctly classifiable under CTH 6802 2190, thus affecting the applicability of exemption Notification No. 04/2006-CE dated 01.03.2006.

- Whether the appellants were eligible for exemption under Notification No. 04/2006-CE despite the classification dispute.

- Whether there was willful mis-declaration or mens rea on the part of the appellants to evade customs duty.

- Whether the extended period of limitation under Section 28 of the Customs Act, 1962 could be invoked for demand of differential duty.

- Whether penalty under Section 112(a) of the Customs Act, 1962 was rightly imposed in the absence of mens rea.

- The binding nature and applicability of clarificatory circulars and Board's letters on classification and exemption issues.

2. ISSUE-WISE DETAILED ANALYSIS

Classification and Eligibility for Exemption under Notification No. 04/2006-CE

The core dispute revolved around the classification of the imported polished marble slabs. The Department contended that the slabs were classifiable under CTH 6802 2190, attracting Countervailing Duty (CVD) at 16%, and thus not eligible for exemption under Notification No. 04/2006-CE, which mentioned slabs under CTH 6802 2110. The appellants claimed that the classification and exemption issue had been settled in their favor by a Board letter dated 16.03.2012.

The relevant notification exempted marble slabs and tiles under CTH 2515 1220, 2515 1290, and 6802 2110 by granting a concessional duty of Rs. 30 per square meter. However, the slabs were classified under 6802 2190 by the Commissioner, which was not explicitly mentioned in the notification, leading to confusion.

Precedents and Board clarifications were pivotal. A Coordinate Bench had earlier ruled in favor of the appellants in a similar case, relying on the Board's D.O. letter dated 16.03.2012, which clarified that polished marble slabs under CTH 6802 2190 are eligible for exemption under the said notification despite the heading not being explicitly mentioned. The letter acknowledged an inadvertent omission and stated that the benefit would be available to goods covered by the description "marble slabs and tiles" irrespective of the specific tariff heading.

The Tribunal emphasized judicial discipline in following decisions of co-equal benches and the binding nature of Board circulars and clarifications on departmental authorities, as held by the Supreme Court in multiple rulings. The Court cited the Constitution Bench decision in Collector of Central Excise, Vadodara v. Dhiren Chemical Industries, which held that circulars issued by the Board are binding on the Revenue and cannot be contradicted. Subsequent Supreme Court judgments reiterated that while circulars are not binding on courts or assessees, the Revenue cannot take a stand contrary to binding circulars.

Further, the Supreme Court in Suchitra Components Ltd. v. Commissioner held that beneficial circulars are to be applied retrospectively. The Tribunal found that the Board's clarification was neither contrary to statutory provisions nor judicial interpretations, but rather a clarificatory measure to remove confusion caused by inadvertent omission.

Applying these principles, the Tribunal concluded that even if the slabs were classifiable under CTH 6802 2190, they were eligible for exemption under Notification No. 04/2006-CE as per the Board's clarificatory letter, rendering the differential duty demand untenable.

Willful Mis-declaration, Mens Rea, and Penalty Imposition

The appellants contended that due to the confusion and conflicting Board communications, there was no willful mis-declaration or mens rea to evade duty. They argued that penalty under Section 112(a) of the Customs Act, 1962 could not be imposed in the absence of mens rea.

The Commissioner had imposed penalty equal to the duty demanded, but refrained from imposing mandatory penalty under Section 114A, which the appellants argued indicated the demand could not be confirmed by invoking the extended limitation period.

The Tribunal observed that since the classification and exemption issues were resolved in favor of the appellants, the penalty and interest issues did not survive. The absence of mens rea was implicit in the Board's clarifications and the admitted confusion regarding classification, negating the basis for penalty imposition.

Extended Period of Limitation under Section 28

The appellants challenged the invocation of the extended period of limitation for demand of differential duty, arguing that the confusion in classification and Board clarifications precluded willful mis-declaration, thus barring extended limitation.

The Commissioner's decision to refrain from imposing mandatory penalty under Section 114A was taken as acknowledgment that extended limitation was not applicable. The Tribunal, by setting aside the demand on merits, effectively negated the applicability of extended limitation.

Treatment of Competing Arguments

The Department relied on the Supreme Court's ruling that amendments to notifications apply prospectively and contended that the appellants could not claim exemption on the basis of Board clarifications issued after the import. However, the Tribunal distinguished this by emphasizing the clarificatory nature of the Board's letter, which was not an amendment but a correction of inadvertent omission, and binding on departmental authorities.

The Tribunal also relied on the principle that beneficial circulars are to be applied retrospectively and that the Revenue cannot take a stand contrary to binding circulars, thereby rejecting the Department's arguments.

3. SIGNIFICANT HOLDINGS

"Polished marble slabs and tiles are classifiable under C.T.H. No. 6802 2190 and are eligible for the benefit of exemption under Notification No. 04/2006-CE dated 01.03.2006, as clarified by the Board's D.O. letter dated 16.03.2012."

"Although a circular is not binding on a Court or an assessee, it is not open to the Revenue to raise the contention that is contrary to a binding circular by the Board. When a circular remains in operation, the Revenue is bound by it and cannot be allowed to plead that it is not valid nor that it is contrary to the terms of the statute."

"A beneficial circular is to be applied retrospectively while oppressive circulars are to be applied prospectively."

"In absence of any deliberate attempt to mis-declare and resultant mens rea to evade customs duty, penalty under Section 112(a) of the Customs Act, 1962 cannot be imposed."

"The extended period of limitation under Section 28 cannot be invoked where there is no willful mis-declaration or fraud."

Final determinations:

• The classification of the imported goods under CTH 6802 2190 is correct, but such classification does not disentitle the appellants from exemption under Notification No. 04/2006-CE due to Board's clarificatory letter.
• The demand of differential duty and interest is unsustainable and set aside.
• Penalty imposed under Section 112(a) is unwarranted in absence of mens rea and is set aside.
• The invocation of extended period of limitation is not justified.
• The appeals are allowed and the impugned order is set aside accordingly.