TMI Blog2017 (12) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... od, like sterilized or pasteurized millstone, and the like? - Held that: - On a comparison of the labels of the appellants CMD drops and that of Kevas Concentrance Mineral Drops, it is noted that both claim to be products from Great Lake of Utah and more or less make the same claims about the ingredients and minerals therein. Both the labels indicate an advisory that the product is not a drug / medicine and not intended to treat, prevent or cure any diseases. In our opinion, therefore Keva's Minerals Drops can be considered as a product identical to that imported by the appellant herein - Tribunal in the case of CC New Delhi Vs Keva Industries [2012 (4) TMI 67 - CESTAT, NEW DELHI] has held that the goods being natural sea water had not undergone any processes to be called as 'food preparations or any other preparation'; that there was no test report brought about by Revenue to discharge the burden of proof to claim that goods in question subject to Tariff Entry 2106 and also to satisfy that it was a preparation with or without certain composition and had undergone the process - In the case at hand also there has been no evidence adduced, say by way of an expert opinion or test repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the goods was taken up for investigation and later SCN was issued proposing to classify the products under 21069099, for enhancement of declared value and for differential duty demand, interest and proposed to impose penalties. After due process of adjudication, vide the impugned order dated 30/11/201516.12.2015, the lower authority inter alia held that CMD, Elete Electrolyte and NanoSil were required to be classified under CTH 2106 9099 and declared value of CMD was enhanced to USD 1.21 for 1OZ bottle and USD 2.08 for 2 OZ bottle. So also, declared value of NanoSil was enhanced to 15.0 USD per bottle (8 OZ). Certain amount of freight was ordered to be added to the assessable value. The differential duty proposed in the SCN was confirmed by the lower authority. Entire quantity of the imported goods were confiscated and option given by the adjudicating authority for their redemption on payment of fines under Section 125 (1) of the Customs Act, 1962. Penalties were imposed under Section 114A and Section 114AA ibid on the importer appellant. Penalty under Section 112 (a) and 114 AA ibid were also imposed on the Director of the appellant Company and other persons who were noticees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not added to any food item to get the character of food preparation/food supplement. The active ingredient contained in the CMD and Elete is only pure concentrated Great Salt Lake Brine ie., Sea water. iii) He placed reliance on the Order dated 10.02.2012 passed by Hon ble Appellate Tribunal Principal Bench, New Delhi in the matter of CC, New Delhi Vs. Keva Industries - 2013 (292) ELT 90 (Tri.-Delhi). Para 4 of the said order dated 10.02.2012 is reproduced as under:- ......... We are satisfied that the goods being natural sea water have not gone any preparation to be called as food preparation or any other preparation. There is no test report brought out by the Revenue to discharge the burden of proof to claim that the goods in questions submit to tariff entry 2106 and also to satisfy that it is a preparation with or without certain composition and has undergone the process. In such circumstances, a stand of the respondent does not appear to be devoid of merit. The goods were classified under 2501 having heading as Salt (including Table Salt and Denatured Salt) and Pure Sodium Chloride, whether or not is Aqueous Solutions or Containing Added Anti-Cacking or Free Flo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... honey, fructose etc., which may contain vitamins and minerals added to it. In other words, the primary base has to be a preparation of extract of plant, fruit, honey and to that vitamins or minerals are added to it as secondary items. Reliance is placed on the judgment Softesule Ltd. Vs. CCE, Mumbai 2002 (105) ECR 103 (Tri.) (b) The show cause notice dated 04.03.2013 (@page 1 to 58 of Volume I of paper book) nowhere states that the imported goods are food preparationhaving primary base of extract of plant, fruit, honey etc. In fact, the imported goods are 100% natural product and no sweeteners, preservatives, colour or flavouring are added to it. Therefore, it cant be a food preparation in any circumstances. (c) To fall under sub-heading 21069099 the product has to be:- i) a food preparationand ii) the said food preparation is not elsewhere specified or included. Emphasis is laid on Note 6 of Supplementary Notes of Chapter 2106 Tariff item 21069099 includes sweet meats commonly known as Mithans' or Mithai or called by any other name. They also include products commonly known as Namkeens , Mixtures , Bhujia , Chabena or called by any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. Commissioner classified the imported products under CTH 21069099 which is a residual sub-heading. It is further submitted that the above Supplementary Notes 5 6 do not mention mineral drops/ mineral supplements/ sea water. The imported goods/products are saline solution having concentrated natural sea minerals from inland sea of Great Salt Lake (Utah, USA). They are neither used for any kind of flavouring purpose nor are added as ingredients or any food preparations. (v) Ld. Commissioner grossly erred in classifying the imported goods as Food Articles or Food Supplement. It is pertinent to note that the Report of Central Food Laboratory, Mysore dated 07.12.2011 (@ page No. 482 Volume II of paper book) clearly states that the imported goods do not fall under the category of food articles and therefore not covered under Prevention of Food Adulteration Act. The said report was completely ignored by the Ld. Commissioner while passing the impugned order. (vi) In absence of definition of the term food preparation or food supplement under the Customs Tariff Act of 1975, the Ld. Commissioner ought to have interpreted the same according to common parlance or phrases pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted goods (CMD) had the word Concentrated so it should be a preparation and hence covered under CTH 2106. No conclusive evidence was produced by the department on record. The department as well as the Ld. Commissioner erred in not appreciating that the Report of the Central Food Laboratory do not even consider the imported goods (CMD) as food articles, which clearly puts the imported goods out of the ambit of Chapter 2106. The department had failed to discharge the burden of proof to establish that the imported goods CMD and Elete ought not to have been classified under heading 2501 or that the imported goods Nanosil ought not to have been classified under heading 3004 and hence could only be included in residuary heading of CTH 2106. The department as well as the Ld. Commissioner had places emphasis on the name of the imported goods Concentrated Mineral Dropsand concluded that it had gone through the process of preparation or manufacturing. It is submitted that the department had failed to produce any evidence regarding the use of the imported goods in common parlance or substantial report which states that the imported goods are food preparations. The appellant has also placed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (x) It is submitted that the penalty should not be imposed on the bonafide assessee. It is an admitted fact that initially there was a confusion regarding the classification of imported goods. The department themselves were determining if the imported goods fell in Chapter 21 or 22 while the appellant bonefidely paid customs duty initially under CTH 30 and then under CTH 25 on the basis of Keva judgment. It is pertinent to note that the appellant were new to the business of importing the goods in India and relied on the advice of previous imports of imported goods and on principle of common parlance. In the present appeal, the department was not able to prove malafide intention of the appellant to evade to duty. It is humbly prayed to set aside the impugned order. 3.1 On the other hand, Ld. AR, Shri B. Balamurugan strongly contended that the ratio of the Tribunal in Keva Industries will not apply to the present case since the impugned goods are manufactured items as indicated on the bottles themselves. The Ld. AR reiterated the findings in the impugned order. On receiving specific intelligence that appellants have been importing dietary supplements but clearing them on the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant in order to reduce the liability of customs duty besides wrongly classifying the goods as also mis-declared the description and the RSP for levy of CVD coupled with value of freight component with other ex-works charges which are includible in the assessable value. Thus, the appellants have under valued the invoices and evaded payment of appropriate customs duty. The department strongly rejected the transaction value and re-determine the same. He therefore prayed that the impugned order may be sustained. 4. Heard both sides and have gone through the facts and records. 5. The two issues that come up for appellate decision by this forum are (i) whether the goods imported by the appellant viz. Concentrated Minerals Drops (CMD), Elete Electrolyte (Elete) and Nanosil would merit classification as declared by the appellant under CTH 30045020 or under CTH 21069099 as maintained by the department (ii) whether the enhancement of the declared import values by the department is in order ? 6. The appellants have argued that CMD is an 100% natural mineral concentrate sourced from Great Salt Lake in Utah, USA; that CMD is harvested by using natural evaporation process w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r fortified goods, tonic beverages or mineral waters (natural or artificial) which fall to be classified under their own appropriate headings; therefore that any product to merit classification under CTH 30.04, it must invariably be meant for therapeutic or prophylactic use; that there are no active ingredients in any of the products having such proprieties. With regard to classification of CMD and Elete under CTH 25010090, the heading 2501 covers Salt (including table salt and denatured salt) and pure sodium chloride, whether or not in aqueous solution or containing added anti-caking or free flowing agents; sea water ; that as regards CMD and Elete, the same cannot be considered as 'salt' since the impugned process involved in making CMD is sought to be removing sodium; that salt water is only starting point for manufacture of CMD or Elete which are manufactured through a proprietary process and which removes sodium and ends up in enriching water in minerals; hence end product is not sea or salt water but a dietary supplement rich in minerals; therefore CMD or Elete cannot be classified under Heading 2501. 10. From a perusal of the impugned order, it emerges that cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king beverages, whether or not sweetened; (f) preparations consisting of tea or coffee and milk powder, sugar and any other added ingredients; (g) preparations (for example, tablets) consisting of saccharin and foodstuff, such as lactose, used for sweetening purposes; (h) pre-cooked rice, cooked either fully or partially and their dehydrates; and (i) preparations for lemonades or other beverages, consisting for example, of flavoured or coloured syrups, syrup flavoured with an added concentrated extract, syrup flavoured with fruit juices and concentrated fruit juice with added ingredients. 6. Tariff item 2106 90 99 includes sweet meats commonly known as Misthans or Mithai or called by any other name. They also includes products commonly known as Namkeens, mixtures, Bhujia, Chabenaor called by any other name. Such products remain classified in these sub-headings irrespective of the nature of their ingredients. 14. We are not able to appreciate that CMD drops would be of genre sought to be explained in the aforesaid chapter notes 5 6. In fact, in the three dash heading (---) Other , the following four dash (----) sub headings are found as under : 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts that the first appellate authority held that the goods shall fall under the Heading 2501 instead of the same falling under the Heading 2106. The goods covered by tariff item 2106 is food preparations not elsewhere specified or included whereas the tariff item 2501 speaks about salt (including table salt and denatured salt) and pure sodium chloride, whether or not in aqueous or containing added anti-caking or free flowing agents; sea water. Once the goods were meant for use for some purpose the classification claimed by the department under tariff item 2501 is correct. 2 . Learned Counsel Sh. Sudhir Malhotra submits that the goods brought through bill of entry No. 880111 dated 9-6-2010 is mineral drops 60 ml. each bottle RSP LE (Saline solution) (30 bottle x 6 ml.). These are liquids and the appellant made an averment that the goods are sea water containing natural mineral. Few drops i.e. 5 to 15 are added to fresh water for human intake twice a day. That curbs deficiency of mineral in the body. The intake of the impugned goods does not in any way has adverse impact on the body. The goods in question is the natures gift and reduces deficiency of certain mineral in the body. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would mutatis mutandi apply to classification of Elete and Nanosil. 19. Coming to the dispute on valuation, the SCN has alleged that on perusal of the Brokers Agreement of 2011 dt. 30.12.2010 between the foreign supplier and the appellant and subsequent amendment to Schedule-E thereof, the full container discount and discount for meeting the schedule, are actually available only when four containers are shipped each year. 20. It has been alleged that appellants resorted to misdeclaration of value and suppressed the value component of freight and other Ex-works charges which are includible in the assessable value; that appellants have colluded with their suppliers in raising undervalued invoices in respect of CMD by availing the discount facility, including discounts meant for container shipments (availed for air shipments) in contravention in their own agreement. SCN has also relied upon e-mail correspondence between the parties to allege this. For example when the invoice indicated US$15 per bottle of nanosil, appellant had misdecalred the value as US$ 12.60 'per bottle'. 21. From the narration in the SCN it is found that certain details had been retrieved from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Marysa Cardwell of MRI were recovered. In one of the e-mails dated 07/01/2011, covering the import of second shipment through ACC, Bangalore, of Ms Cardwell it was mentioned that The prices that I quoted are the prices of Schedule E in the contract but with an additional 2.5% discount for prepayment. The 3% discount for prepaying and 2% discount for prepaying before shipment average out to be 2.5% overall. Doing the Proforma this way is actual a benefit to you because you will only pay customs based on the amount shown after discount and not the price before. I will make sure that this is also reflected on the final invoice. This should save you a lot of money in customs fees.. When Shri Vipin Kumar was questioned about this, he declined to offer any comments on the said e-mail. Therefore, it is evident from the above that Itspossible and their suppliers MRI had a covert and tacit understanding as regards the pricing of the products is concerned. As against the actual price of $ 1.21 and $ 2.08 respectively, the value of the goods were invoiced as $0.97 or $0.94 and $ 1.67 or $ 1.61 respectively, to evade payment of customs duty. It is also pertinent to mention that when the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement and thereby evaded payment of appropriate Customs duty. It is also pertinent to mention that in respect of bill of entry no.2663420 dated 28/01/2011, the Assessing Group at ACC, Bangalore had assessed the value of CMD 1 oz (30ml) at $ 1.21 by rejecting the above said special discounts. The enhancement was accepted by the importer voluntarily without any protest. It is seen that value for the customs purpose was given after deducting all the discounts as per contract, but many such discounts were conditional and Itspossible did not fulfil the conditions for discount. Investigation also brought out the e-mail correspondence between Mr Harry Wilson of Precious Waters Inc and Mr Vipin Kumar on April 11, 2012 contained an attachment of the invoice showing the value @ USD15/bottle of NanoSil. Itspossible had mis-declared the value of NnaoSil as US$ 12.60 instead of the actual value of US$ 15 per bottle, to evade payment of appropriate duty. 22. We find that the appellant has not disputed the fact of recovery of the hard disc / files / documents which have been analyzed by the Commissioner as aforesaid. They have also not been able to adequately refute, by adducing any evid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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