2025 (7) TMI 576 - AT - Customs

Classification of imported goods - Poly Vinyl Chloride Resins (Suspension grade) - classifiable under the CTH 3904 21 10 or CTH 39041090? - concessional rate of basic custom duty in terms of Sr. No. 459(I) of Notification No. 46/2011-Cus. dated 01.06.2011 as amended - On the basis of the Test Report received from CIPET the department was of the view that the said goods imported by the appellant are more appropriately classifiable under the CTH 39041090 - HELD THAT - During the relevant period it is found that Tariff Item 3904 21 10 was specific entry for PVC resin . This entry got deleted from sub-heading 3904 21 and shifted to sub-heading 3904.10 vide the Finance Act 2017. The disputed imports were effected prior to the above amendment. Thus the Tariff entries modified after 2017 has no relevance for the present proceedings. From the Heading 39.04 it is evident that during the period in dispute Tariff Item 3904 21 10 was specific entry for Poly (vinyl chloride) resin . It is settled law that specific entry will prevail over general one. Rule 3(a) of General Rules for the Interpretation of Import Tariff Schedule also provides that the heading which provides the most specific description shall be preferred to headings providing a more general description. In the present case Tariff Item 3904 21 10 is specific for Poly (vinyl chloride) resins whereas Tariff Item 3904 10 90 covers Others which is a residuary entry and the same cannot be preferred over a specific entry. The imported goods are PVC resin suspension grade which is non-plasticised. Therefore going by the General Rules for Interpretation it is found that subheading 3904 21 is a specific heading which is to be preferred over the general Heading 3904 00. Thus the imported goods are correctly classifiable under sub-heading 3904.21 (Tariff Item 3902 21 10) by application Rule 3(a) of General Rules for the Interpretation of Import Tariff Schedule. It is a settled law that specific entry will prevail over general one. Rule 3(a) of General Rules for the Interpretation of Import Tariff Schedule also provides that the heading which provides the most specific description shall be preferred to headings providing a more general description. In the present case it is found that Tariff Item 3904 21 10 is specific for Poly (vinyl chloride) resins whereas Tariff Item 3904 10 90 covers Others which is a residuary entry and hence the same cannot be preferred over a specific entry - going by Rule 3(a) of General Rules for the Interpretation of Import Tariff Schedule it is held that the imported goods are appropriately classifiable under the sub-heading 3904 21 which is a specific heading. In view of the above findings the classification of the imported goods under the CTH 3904 21 10 as claimed by the appellant uphled and the reclassification of the goods under the CTH 3904 1090 in the impugned order is rejected. Accordingly the demand of customs duties along with interest confirmed in the impugned order is not sustainable and hence the same is set aside. As the allegation of mis-declaration is not sustained the goods are not liable for confiscation under section 111(m) of the Customs Act on account of misclassification. Accordingly the order for confiscation of the goods is set aside. Consequently the redemption fine of Rs.20, 00, 000/- imposed under section 125 of the Customs Act is also set aside. As the allegation of mis-declaration is not sustained no Penalty imposable on the appellant and hence all the penalties imposed in the impugned order are set aside. The impugned order is set aside - appeal allowed.

Summary

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

1. Whether the imported goods, described as Poly Vinyl Chloride (PVC) Resins (Suspension grade), are correctly classifiable under Tariff Item (CTH) 3904 21 10 or whether they fall under the residuary entry CTH 3904 10 90.

2. Whether the Customs Department was justified in reclassifying the goods based on the test reports received from the Central Institute of Plastic Engineering & Technology (CIPET).

3. Whether the demand for differential customs duty, interest, confiscation of goods, redemption fine, and penalties imposed under various sections of the Customs Act are sustainable in light of the classification dispute.

Issue-wise Detailed Analysis

Issue 1: Correct Classification of Imported Goods

Relevant legal framework and precedents: The classification of goods under the Customs Tariff is governed by the General Rules for the Interpretation (GRI) of the Import Tariff Schedule, particularly Rule 3(a) which mandates that a specific description shall be preferred over a general or residuary one. The relevant tariff headings and sub-headings prior to the amendment effected by the Finance Act, 2017, were examined. The settled principle that specific entries prevail over general ones was emphasized.

Court's interpretation and reasoning: The Tribunal noted that during the relevant period, Tariff Item 3904 21 10 specifically covered 'Poly (vinyl chloride) resins' under sub-heading 3904 21 which was designated for non-plasticized PVC resins. Conversely, Tariff Item 3904 10 90 was a residuary entry under sub-heading 3904 00, covering 'Poly (vinyl chloride), not mixed with any other substances' under the label 'Others'. The appellants had declared the goods as 'PVC resin suspension grade' and claimed classification under the specific entry 3904 21 10.

The Tribunal highlighted that the amendment shifting the classification from 3904 21 10 to 3904 10 90 occurred only after the relevant imports, and thus had no bearing on the present case.

Application of law to facts: Applying Rule 3(a) of the GRI, the Tribunal found that the appellants' classification under the specific heading 3904 21 10 must be preferred over the general, residuary heading 3904 10 90. The appellants' description of the goods as 'PVC resin suspension grade' was undisputed, and the specific tariff entry was applicable during the relevant period.

Treatment of competing arguments: The Customs Department argued that the goods were 'pure' or 'uncompounded' PVC resin and thus fell under the residuary entry 3904 10 90. However, the appellants contended that the goods contained impurities and that the test report was inconclusive on the plasticized or non-plasticized nature of the goods. The Tribunal found that the Department did not bring sufficient evidence to refute the appellants' claim regarding impurities and the nature of the goods.

Conclusions: The Tribunal concluded that the goods were correctly classifiable under the specific tariff entry 3904 21 10 as claimed by the appellants, and the Department's reclassification under 3904 10 90 was unsustainable.

Issue 2: Reliance on Test Reports for Classification and Purity of Goods

Relevant legal framework and precedents: The Department relied on multiple test reports from CIPET, which described the goods as 'uncompounded Poly Vinyl Chloride (PVC) Suspension Resin (Grade PM 66R)'. The test reports were central to the Department's contention that the goods were 'pure' and thus fell under the residuary tariff entry.

Court's interpretation and reasoning: The Tribunal carefully examined the test reports and noted that they did not explicitly test or conclude on whether the goods were plasticized or non-plasticized. The reports confirmed the goods as 'uncompounded PVC resin' but were silent on the presence or absence of plasticizers or other substances that would affect classification.

Application of law to facts: Since the test reports did not conclusively establish the purity or plasticization status of the goods, the Tribunal found that the Department's reliance on these reports to reclassify the goods under the residuary heading was misplaced.

Treatment of competing arguments: The appellants submitted that the goods contained impurities and other substances, which was not disputed by the Department. The Tribunal accepted this submission in the absence of contrary evidence.

Conclusions: The Tribunal held that the test reports were inconclusive on a critical aspect affecting classification and thus could not justify reclassification or the consequent demand for differential duty and penalties.

Issue 3: Legality of Demand for Differential Duty, Confiscation, Redemption Fine, and Penalties

Relevant legal framework and precedents: The Customs Act, 1962 provisions invoked include Section 18 (provisional assessment), Section 111(m) (confiscation for misdeclaration or misclassification), Section 112(a) (penalty for improper importation), Section 114AA (penalty for failure to declare correctly), and Section 125 (redemption fine).

Court's interpretation and reasoning: Since the Tribunal held that the goods were correctly classified under the appellants' declared tariff entry, the fundamental basis for the Department's show cause notice and subsequent order was negated. The allegation of misclassification and misdeclaration was therefore unsustainable.

Application of law to facts: Without a valid finding of misclassification or misdeclaration, the confiscation of goods and imposition of penalties could not be upheld. The Tribunal accordingly set aside the confiscation order and the redemption fine imposed for release of the goods. Penalties imposed under the relevant sections were also quashed.

Treatment of competing arguments: The Department maintained the correctness of its order based on the test reports and classification under the residuary heading. The Tribunal, however, found the Department's evidence insufficient and the classification erroneous.

Conclusions: The Tribunal held that the demand of differential customs duty, interest, confiscation, redemption fine, and penalties were not sustainable and set aside the entire impugned order.

Significant Holdings

"It is settled law that specific entry will prevail over general one. Rule 3(a) of General Rules for the Interpretation of Import Tariff Schedule also provides that the heading which provides the most specific description shall be preferred to headings providing a more general description."

"The test report is inconclusive on the aspect of whether the goods are non-plasticised or not. It is a fact on record that the test has not been conducted to ascertain whether the goods are plasticized or not. Thus, on the basis of the Test Report, it cannot be concluded that the goods imported are 'pure' or not."

"The allegation of mis-declaration is not sustained, we hold that the goods are not liable for confiscation under section 111(m) of the Customs Act on account of misclassification. Accordingly, the order for confiscation of the goods is set aside. Consequently, the redemption fine of Rs.20,00,000/- imposed under section 125 of the Customs Act is also set aside. As the allegation of mis-declaration is not sustained, no Penalty is imposable on the appellant and hence, all the penalties imposed in the impugned order are set aside."

"We uphold the classification of the imported goods under the CTH 3904 21 10 as claimed by the appellant and reject the reclassification of the goods under the CTH 3904 1090 in the impugned order."

The Tribunal's final determinations are that the imported goods are correctly classifiable under Tariff Item 3904 21 10 as 'Poly (vinyl chloride) resins' during the relevant period; the Department's reclassification under the residuary heading 3904 10 90 is unsustainable; the demand for differential customs duty, interest, confiscation, redemption fine, and penalties are set aside; and the impugned order is quashed with consequential relief to the appellants as per law.