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L & T Metro Rail (Hyderabad) Limited, Hyundai Rotem Company Versus The Commissioner of Customs, The Additional Director General, Directorate of Revenue Intelligence

2017 (9) TMI 1092 - MADRAS HIGH COURT

Maintainability of appeal - Jurisdiction - Principles of Natural Justice - Classification of imported goods - EL-S-PR Railway Coach-TC (Coach) - re-classified as Not Self-Propelled- passenger coaches, under CTH 8605 of the first Schedule to the Customs Tariff Act, 1975 or otherwise? - if the appellate jurisdiction of this Court has been specifically excluded, when it pertains to determination of the value or regarding the classification of the goods (good), whether this Court exercising jurisdic .....

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xercise of the appellate jurisdiction, the Division Bench of this Court should be satisfied that the case involves a substantial question of law when an appeal is filed against an order passed by the appellate Tribunal, CESTAT. The jurisdiction of the Court is excluded when such an order of CESTAT relates to determination of the rate of duty of customs or the value of the goods for the purposes of the assessment. - In the case of Commissioner of Customs (Exports), Chennai vs. D.S.Metal (P) L .....

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nufacturing and Trading Co., Ltd., vs. Collector of Customs, [1993 (9) TMI 107 - SUPREME COURT OF INDIA] and held that the issue which arise for consideration is what will be the rate of duty that is payable by the importer, but for the notification in question and by applying the law in the case of Navin Chemicals Manufacturing and Trading Co., Ltd., and taking note of Section 130 of the Customs Act, it was held that the appeal is not maintainable, as the question has a direct and proximate rel .....

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Customs Tariff Act and collect duty at the applicable rate. If on the contrary, pursuant to a bilatory treaty, the Government had amended the tariff heading, it would have been a different matter. Therefore, this issue has to be agitated by the petitioner before the appellate forum and not in a Writ Petition. - Petition dismissed being not maintainable. - W.P.Nos.40081 & 40082 of 2015, M.P.Nos.1&1 of 2015, W.M.P.Nos.18761, 18762, 23601 & 23602 of 2016 - Dated:- 14-9-2017 - T. S. Sivagnanam, .....

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e petitioner in W.P.No.40081 of 2015, to be re-classified as Not Self-Propelled- passenger coaches, under CTH 8605 of the first Schedule to the Customs Tariff Act, 1975 (hereinafter referred to as Act); confirmed the customs duty leviable amounting to ₹ 9,17,89,622/-, that the same is payable, but has not been paid by the petitioner due to willful mis-statement and misclassification under the provision of Section 28 along with interest under Section 28AA of the Customs Act, 1962, (hereinaf .....

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toms Act and imposed a penalty of ₹ 1,00,00,000/- on the petitioner in W.P.No.40082 of 2015 (hereinafter referred to as 'Hyundai'). 2. As against the order impugned, the petitioners have a remedy by way of an appeal before the CESTAT. The Writ Petitions have been filed challenging the impugned order as being passed in violation of principles of natural justice; that the first respondent is bound by the International legal obligations entered into by the Government of India with the .....

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dering the confiscation proceedings wholly bad for want of jurisdiction, and consequently rendering the imposition of redemption fine in lieu of confiscation is equally bad for want of jurisdiction. The integrated nature of driver motor coach and trailer coach cannot be dissected, as it is one integrated unit meaning that each component installed in the driver coach works in complete synchronization with other components in the trailer car and or of no function in the absence of the trailer car. .....

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of archaic understandings. The metro train trailer coaches cannot be seen on the same footing and interpretation of the general coach, which is recognised by international expert bodies, railway manufacturers and metro train operators all over the world. The impugned order on the one hand has said that the classification must be done on nature and characteristic of the coach, but on the other hand has failed to see that the archaic understanding of ordinary train coaches cannot be imposed on the .....

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other documents had erred in placing reliance only on portion of the same, while ignoring the other part ,which is contrary to the settled principle that one cannot approbate and reprobate. The above are broadly the grounds on which the impugned order has been challenged. 3. Mr.C.Natarajan, learned Senior counsel for the petitioner submitted that though the impugned order has been challenged on several grounds, he would restrict the grounds of challenge to two, namely, that the Courts will give .....

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al standards, while recognizing the importance of balance between compliance and facilitation to ensure the free flow of trade and to meet the needs of government for revenue and protection of society; entry procedures be consistent and transparent to ensure predictability for importers and exporters. Further under Article 5.2, each party (India/Korea) shall ensure that its customs authorities shall adopt or maintain procedures that provide for release of goods on completion of all formalities i .....

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he purpose of preferential tariff treatment. Further, each party, on request, shall notify the other party, in writing the classification of a good of the other party determined by it. The parties shall consult to address the discrepancies regarding classification between the parties. Further, under Article 5.10, the parties agree to establish a customs committee to address any customs related issues. For uniform interpretation, application of various chapters, Rules/regulations addressing issue .....

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ds exported by Hyundai. This document was referred to justify that the goods have been correctly classified under CTH 8603. It is further submitted that a civil complaint was lodged by Hyundai was registered by the Korean customs service, which was taken up for consideration by the harmonized system committee, which among other things performs the function to prepare recommendations to secure uniformity in the interpretation and application of the Harmonized System and the said committee opined .....

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verters transformer the electric current from AC (alternating current) to DC (direct current) and send it to inverters, which change the DC into three-phase AC to activate the electric motors. 5. It is submitted that though the opinion was rendered w.e.f. 01.01.2007, it has to be given due weightage and supports the classification adopted by the petitioner. Thus, it is submitted that the first respondent, while adjudicating the show cause notice, has observed that the materials placed by the pet .....

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ion. This finding renders the decision making process as completely flawed and therefore, the matter should be remanded back to the Commissioner for fresh adjudication to consider the documents placed by the petitioner. Reliance was placed on the decision of the Hon'ble Supreme Court in the case of All Kerala Online Lottery Dealers Association vs. State of Kerala reported in (2016) 2 SCC 161, for the proposition that in a modern progressive society, it would be unreasonable to confine the in .....

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submitted that what evidence would be sufficient to prove the case of a party is a matter for the party to determine and the party cannot be expected to ask the adjudicating authority whether he would be willing to accept such evidence and such finding of the Adjudicating Authority, is wholly untenable. In support of such contention, reliance was placed on the decision of the Hon'ble Supreme Court in the case of Heinz India Pvt., Ltd vs. State of U.P., reported in (2012) 5 SCC 443. It is fu .....

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he petitioners by declaring the goods as EL-S-PR coach had mis-declared the same as self-propelled coaches falling under CTH 8603 1000 instead of classifying the same under CTH 8605 0000 and not entitled for the benefit of the exemption notification No.152/2009-CUS, dated 31.12.2009. It is further submitted that the Tariff Act does not contain any tariff entry as train sets, as alleged by the petitioner and on investigation, it was found that the petitioner inspite of having specific knowledge o .....

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titioners have filed the present Writ Petitions, which are not maintainable. It is further submitted that the issue involves classification of goods and this Court even in exercise of its appellate jurisdiction under Section 130 of the Customs Act, shall not entertain the appeal in view of specific exclusion. When the appellate jurisdiction of the High Court under Section 130 of the Customs Act, is excluded the special original jurisdiction cannot be invoked. In support of such contention, relia .....

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ressed into service, when the domicile law is different. In support of such contention, reliance was placed on the decision of the Sony India vs. CTO, reported in (2009) 245 ELT 100, which was affirmed by the Hon'ble Supreme Court in the case of Sony India Pvt., Ltd. vs., Commercial Tax Officer and Anr., reported in (2009) 23 VST 1 (SC), with a direction to the appellant to file an appeal. Further, it is submitted that the second respondent DRI has jurisdiction to issue show cause notice by .....

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only be subject matter of appeal or revision before the appropriate authority and this Court exercising jurisdiction under Article 226 of the Constitution will not adjudicate such disputed facts. The tariff entry of the importing country, namely, India, is different and the duty is leviable according to such tariff entry and not relating to the tariff entries of other countries. Thus, the present dispute being one relating to classification of goods, the petitioner should necessarily avail the .....

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y the World Customs Organisation (WCO), in 57th session of the Harmonized System Committee, wherein according to the petitioner, the electric multiple unit has to be classified as a single unit under CTH 8603 as opposed to each car assessed separately before March 2016 in the impugned order, dated 25.09.2015. It is submitted that the contention raised by the petitioner is misconceived, as it is not relevant to the period of import, which being prior to March 2016, as the bill of entry was filed .....

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ory rules for interpretation, chapter notes, section notes, tariff ratings. 10. Heard the learned counsels appearing for the parties and perused the materials placed on record. 11. The petitioner L&T MR has been constituted as a special purpose vehicle registered under the Companies Act in India to design, build and operate Metro rail system for the city of Hyderabad, which will be transferred to Government of Andhra Pradesh after the concession period of 35 years. As a part of the project, .....

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0000, dutiable at 3.75% ad-volrum, when imported from Republic of Korea under the Comprehensive Economic Partnership Agreement, (CEPA). The investigation lead to the issuance of show cause notice, dated 11.05.2015, proposing to reclassify the ELS-PR Railway coach-TC (Coach), as not self-propelled passenger coaches under CTH 8605 of the first Schedule to the Tariff Act, proposing to levy customs duty, proposing confiscation and imposition of penalty. 12. Both L&T MR and Hyundai submitted the .....

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ver motor cars and therefore, the driver motor cars and trailer cars are collectively classifiable under CTH 8603 as metro train cars. The classification has to be made based on the essential character of the goods; that identification of the value of the each car separately does not mean that the cars have to be classified under different headings; that once goods have been cleared for home consumption redemption fine is not imposable. Further, the imported goods can no longer be confiscated an .....

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petitioner and confirmed the proposal in the show cause notice by levying customs duty, ordering confiscation with option to redeem on payment of redemption fine and apart from imposition penalty on both the petitioners. 13. Mr.C.Natarajan, fairly submitted that as against the impugned order, the petitioner has a remedy of an appeal before the CESTAT, but the petitioner is before this Court challenging the impugned order as there is serious error in the decision making process. As pointed out ea .....

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gh it has been rendered on 01.01.2017. Therefore, it is his argument that the matter should be remanded to the Commissioner for fresh adjudication. 14. Mr.V.Sundareswaran, on the other hand, would submit that the Writ Petition is not maintainable, misclassification is deliberate and the trailer coach is to be classified as a non-self-propelled coach under CTH 8605 and not under CTH 8603 and invoices being raised separately and it is clear that both the petitioners were aware of the proper classi .....

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to the High Court from every order passed in appeal by the Appellate Tribunal on or after 01.07.2003, not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of customs or to the value of goods for purposes of assessment. Thus, even in exercise of the appellate jurisdiction, the Division Bench of this Court should be satisfied that the case involves a substantial question of law when an appeal is filed against an order passed by .....

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stitution would be justified in testing the correctness of the impugned order. 18. In the case of Commissioner of Customs (Exports), Chennai vs. D.S.Metal (P) Ltd., (supra), an appeal was preferred by the Revenue challenging the order passed by the CESTAT setting aside the demand by allowing the benefit of an exemption notification in favour of the respondent importer having fulfilled post importation condition of submitting end-use certificate. The Division Bench while considering as to whether .....

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of Section 130 of the Customs Act, it was held that the appeal is not maintainable, as the question has a direct and proximate relationship to the rate of duty and to the value of goods for purposes of assessment. 19. In the case of United Bleachers Ltd., vs. CEGAT Chennai (supra), this Court considered whether a Writ Petition was maintainable challenging an order passed by the CEGAT, in which the Revenue raised a preliminary objection contending that as against the order of the CEGAT, the peti .....

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applying the law laid down in the above mentioned decisions, the only conclusion that can be arrived at is to hold that the Writ Petition is not maintainable and the petitioner has to avail the remedy provided under the Act. This is sufficient to dismiss the Writ Petitions and relegate the petitioners to appellate remedy provided under Section 129A(1) of the Customs Act. 21. Mr.C.Natarajan, submitted that the decision making process being flawed, the Court can exercise jurisdiction under Articl .....

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ontain an embargo as contained in Section 130(1) of the Customs Act. 22. The argument is that when the petitioner placed the documents pertaining to the classification of the goods as classified by the Korean Customs, the first respondent was not justified in stating that he did not call for such opinion or documents and it will not bind them. It may be true that the findings given by the first respondent in paragraph 29 of the impugned order is not well worded. The sentence the department has n .....

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e classification. Therefore, it cannot be stated that the decision making process is flawed on account of an observation made in paragraph 29 of the impugned order. Therefore, on that ground, this Court cannot exercise its jurisdiction under Article 226 of the Constitution. 23. Much emphasis was laid on the India Korea Comprehensive Economic Partnership (Treaty) to demonstrate that both the countries should assist each other in the tariff classification, valuation and determination of origin of .....

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published in the Compendium of Classification Decisions on 01.01.2017, this material has to be considered by the Adjudicating Authority and the petitioner should be given an opportunity to putforth the same before the authority. 24. Admittedly, the opinion of the Harmonized System Committee was rendered much after the impugned order of adjudication. Therefore, a material which was available to the petitioner much after the order of adjudication, cannot be pressed into service for setting aside t .....

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neral Rules for interpreting of Harmonized System, Rule 2(a), complete or finished Article presented unassembled or disassembled are to be classified in the same heading as the assembled article. Therefore, the trailer cars have essential character of the complete metro train cars being its essential components and should be classified under HS code 8603. Further, it was submitted that three coaches are inextricably connected and can become functional only they are put together and the first res .....

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ven by a Division Bench of this Court under Section 130(1) of the Customs Act. Therefore, the factual matrix relating to the classification of goods has to be necessarily agitated before the appellate forum. 26. The binding effect of the opinion rendered by the Korean Custom Authorities is an arguable issue. Admittedly, there has not been any amendment to the schedule to the Tariff Act, and the relevant Tariff Heading and description of goods as existing on the date of import is as hereunder:- T .....

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