2022 (1) TMI 1403 - AT - Customs

Re-classification of goods as per the HSN indicated in the supplier s documents - recovery of differential duty under section 28(4) along with interest under section 28AA of Customs Act - penalties under sections 114A and 114AA of Customs Act - imported goods are general articles of iron and steel or whether they were parts of the OT crane system and HRSGS specifically designed for the purpose? - to be classified under customs tariff item 73089090 of the Customs Tariff Act 1975 or not - HELD THAT - It cannot be disputed that the goods should be classified as per their nature and as they are imported and that they cannot be clubbed with some other goods imported under other Bills of Entry to determine the classification. It also cannot be disputed that if the invoices describe or classify the goods differently the assessee has to explain. In this case the assessee discharged this burden by providing drawings and designs explanation as to where each of the parts is used an expert opinion that the goods were specifically designed for use in the plant and were not goods of general use a Chartered Engineer s certificate to the same effect. The appellant has not produced any alternative drawings or designs or any evidence to show that the parts in question were only parts of general use and not ones designed for the plant. In the absence of any evidence in the appeal it is not possible to fault the Commissioner for considering the reply to the consultative letter the drawings and designs and the clarifications provided by the supplier to conclude that the parts in question were parts designed for the plant and were not ordinary articles of iron and steel. The Commissioner has given her findings relying on Rule 1 (NOT RULE 2) of the General Rules of Interpretation which states that classification shall be based on terms of the Tariff Headings and Section Notes and Chapter Notes and the titles of Sections and Chapters are for ease of reference only. She also referred to Section Note 1(f) to Section XV (under which Chapter 73 falls) which states that articles of Section XVI (machinery mechanical appliances and electrical goods) are excluded from Section XV. She further relied on Section Note 2 of Section XVI especially Note 2(b) which states that parts suitable for use solely or principally with a machine must be classified in the heading of the machine. General Rule of Interpretation 2(b) regarding which a submission is made appears irrelevant to this case - What is important is to examine what are the imported goods intended to be. If they are articles of general use they should be classified as such. If they are intended to be used in a particular way they should be classified as such. If one imports a pillow and uses it to smother someone to death it will be a murder weapon in the case under the Indian Penal Code but can still not be classified as a weapon under the Customs Tariff. It continues to be an article of bedding because it is intended to be used as an article of bedding and not as a weapon. What is relevant to classification whether the goods are goods of general use or they are designed for a particular use. The imported goods except the structural items on which the Commissioner confirmed the demand were not general articles of iron and steel but were parts of the OT crane system and HRSGS specifically designed for the purpose - They were correctly classified by the Commissioner as parts of the power plant in the impugned order - They were correctly classified by the Commissioner as parts of the power plant in the impugned order. The impugned order is therefore correct and proper and calls for no interference - Appeal of Revenue dismissed.

Summary

Issues Involved:

1. Classification of imported goods under the Customs Tariff.
2. The validity of the classification based on the Harmonized System of Nomenclature (HSN) mentioned by the supplier.
3. Determination of whether the imported goods are general articles of iron and steel or parts of specific machinery.
4. The correctness of the Commissioner’s decision to drop part of the demand, interest, and penalties.

Issue-wise Detailed Analysis:

1. Classification of Imported Goods under the Customs Tariff:

The core issue was whether the imported goods should be classified under Customs Tariff Heading (CTH) 8406 as "Steam Turbines and other Vapour Turbines of an output not exceeding 40 MW" or under CTH 7308 as "Structures and Parts of Structures of Iron or Steel." The Commissioner concluded that the goods imported under the six Bills of Entry, except for support structures, lifting steel with slings, and shackles, were correctly classified under CTH 8406, aligning with the assessee's classification. The Commissioner’s decision was based on detailed examination of drawings, designs, expert opinions, and a Chartered Engineer’s certificate confirming that the goods were specifically designed for the power plant.

2. Validity of Classification Based on HSN Mentioned by the Supplier:

The Revenue argued that the HSN mentioned in the supplier’s documents should determine the classification. The Tribunal rejected this argument, stating that classification is a part of the assessment process, which should be based on the actual goods imported and not solely on the HSN provided by the supplier. The Tribunal emphasized that the HSN in the supplier’s documents is relevant but not binding on the importer or the adjudicating authority.

3. Determination of Whether the Imported Goods are General Articles of Iron and Steel or Parts of Specific Machinery:

The Tribunal upheld the Commissioner’s findings that the imported goods, except for certain structural items, were parts of the Overhead Travelling (OT) Crane System and the Heat Recovery Steam Generator System (HRSGS), specifically designed for the power plant. The Tribunal noted that the Commissioner’s decision was based on substantial evidence, including technical literature, expert opinions, and physical verification by the Special Intelligence and Investigation Branch (SIIB) officers. The Tribunal found no error in the Commissioner’s interpretation of the evidence and rejected the Revenue’s contention that the goods should be classified as general articles of iron and steel.

4. Correctness of the Commissioner’s Decision to Drop Part of the Demand, Interest, and Penalties:

The Tribunal confirmed that the Commissioner was correct in dropping part of the demand, interest, and penalties. The Commissioner had classified certain structural items under CTH 7308 and confirmed the differential duty for these items. However, for other goods, the Commissioner concluded that they were parts of the power plant and not general articles of iron and steel, thus dropping the corresponding demand, interest, and penalties. The Tribunal found that the Revenue’s appeal did not provide any contrary evidence to challenge the Commissioner’s findings and upheld the decision to drop part of the demand.

Conclusion:

The Tribunal rejected the Revenue’s appeal, affirming the Commissioner’s classification of the imported goods as parts of the power plant under CTH 8406, except for certain structural items classified under CTH 7308. The Tribunal concluded that the Commissioner’s decision to drop part of the demand, interest, and penalties was correct and proper, based on a thorough examination of the evidence and adherence to the principles of classification under the Customs Tariff.