TMI Blog2022 (5) TMI 1319X X X X Extracts X X X X X X X X Extracts X X X X ..... Adjudicating authority in para 6.2.4.1, 6.2.4.2 and 6.2.4.3 has after referring to the said notifications opined stating that the benefit of exemption under these notifications is admissible to the all goods classified under heading 8415010 and since he has held that these goods are classifiable under headings 84158110, 84158190, 84158210 i.e. the headings not specified under these exemption notifications, hence benefit of these exemption notification is not admissible to them. Since we have held that the classification of the impugned goods as determined by the adjudicating authority cannot be upheld, and the classification as claimed by the appellants at the time of filing the Bill of Entry is correct classification, benefit of exemption Notification No 85/2004-Cus as claimed by the appellants under heading 84151010 and 84151090 is admissible to them. Applicability of RSP based assessment for determination of the countervailing duty - HELD THAT:- The demand that arises on the basis of RSP based assessment and determination of countervailing duty needs to be upheld. As the same has not be quantified separately the matter needs to be remanded back to the original authority fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TH 84151010 in respect of bills of entry as detailed in column 9 of Worksheet I to the Show Cause Notice and reclassify the same under CTH 84158190 as detailed in column 21 of worksheet I to the notice. ii) I reject the classification of room air conditioner of series MSH GE 60 VB + MUH GE 60 VB and all CMVRF (other than CMVRF with only outdoor unit of series PUCY) under CTH 84151010 or as 'parts of air conditioners under under CTH 84159000in respect of bills of entry as detailed in column 9 of Worksheet I to the Show Cause Notice and re-classify the CTH 84158110 as detailed in column 22 of the Worksheet I to the Show Cause Notice. iii) I reject the classification of packaged air conditioners of com model nos. PE 4/5/6 EAK + PU 4/5/6 YAKD, PE 5AAK+PU EN 4/8/12 EAK + PU 4/8/12, series PEY with model nos. 24/30/36/422 SUY KA 24/30/36/42/48 VA and series PE GAK with model, 8/10/16/20 GAK + PU 8/10/2*8/2*10 YAKD and CMVRF with indoor units along with outdoor units PUCY (only) imported within diversity ratio 50% to 130% imported under CTH 84151010 or as conditioners' under CTH 84159000 in respect of various bills of e detailed in column 9 of worksheet I to the Show C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditioners' under 84159000 as detailed in column 21 of worksheet I to this notice. x) I reject the classification of the BM adapter of series BAC HD 150 imported under various bills of entry as detailed in column 9 of Worksheet to this notice under CTH 85044030 and hold the same as 'parts of air conditioners' under CTH 84159000 as detailed in column 21 of worksheet to the notice. Consequentially due to reclassification as in (i) to (x) above, I reject the declared notification no. with corresponding serial No., based on which excess concessional duty benefit was availed, as mentioned in column no. 15 16 of the Worksheet and amended/ reassess the same as mentioned in column 23 24 of the Worksheet I to this Notice. However, I accept the following classifications done by the noticee: 1) I uphold classification of remote controllers imported under various bills of entry as detailed in column 9 of worksheet I to the Show Cause Notice under CTH 85437099. 7.2 Counter Veiling Duty: I reject the declared value of goods as in column No. 13 of the Worksheet I to the Notice for the purpose of levy of CVD in respect of imports of RAC or PAC o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valued at Rs.127,93,52,737/-under Section 111(d) and 111(m) of the Customs Act. 1962. however, as the goods are not physically available I do not propose to impose redemption fine although the noticees are liable for penalty on account of these goods also. 7.8 Penalty company: i) L impose penalty of Rs. 9,70,68,548/- (Rupees Nine Crore Seventy Lakh Sixty Eight Thousand Five Hundred and Forty Eight only) along with interest thereon on M/s. Mitsubishi Electric India Private Limited and penalty of Rs. 8,46,091/-(Rupees Eight Lakh Forty Six Thousand and Ninety One only) along with interest thereon on M/s. Mitsubishi Electric Asia Pvt. Limited under Section 114A of the Customs Act, 1962. ii) I also impose penalty of Rs. 1,00,00,000/- (Rupees One Crore only) on Ms. Mitsubishi Electric India Private Limited and penalty of Rs. 1,00,000/ Rupees One Lakh only)on M/s. Mitsubishi Electric Asia Pvt. Limited under Section 114AA of the Customs Act, 1962. 7.9 Personal penalty a) I impose penalty of Rs. 5,00,000/- (Rupees Five Lakh only) on Shri Manoranjan Nayak, Senior Manager (Supply Chain Management) under Section 112(a) of the Customs Act, 1962. b) I i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned Order are being challenged by the Appellant: Room Air Conditioning Systems (RAC) units cannot be classified under Customs Tariff Heading (CTH) 84151010, of the First Schedule of the Customs Tariff Act, 1975, and have to be classified under CTH 84158190. City Multi Variable Refrigerant Flow Systems (CMVRF) units, are not 'parts of air conditioners, but are complete air-conditioning systems; Hence they are not classifiable under CTH 84159000. RAC units have to be classified under CTH 84151010: RAC units are split type air conditioners which comprise of one indoor unit and one outdoor unit and do not require ducting [ductless] for installation and distribution of air flow. Units under dispute (MSG-GE, MSZ-HJ and MSZ-EF) are thus ductless (one indoor evaporator connected with one condenser, and have both cooling and heating function. The single dash CTH 841510 and triple dash CTH 84151010 - under such single dash for 'split system', always gets precedence over another double dash CTH 841581, appearing subsequently, under single dash 'Other [units not covered under 841510] The HSN Explanatory Notes to sub-heading 841510 provide that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Even if assuming but not admitting, that the imported units cannot be classified as parts of air conditioner, under CTH 84159000, the same has to be classified under CTH 84151010, as split systems. All split systems have heat pumps and the presence of heat pump is immaterial for classification. As mentioned in Point 3A(c) above, CTH sub- heading 841510 is the correct classification for all ductless' split systems. Since, a CMVRF is also a ductless split system, it has to be classified in this sub heading. Section Note 4 to Section XVI of the Customs Tariff Act provides that where a machine consists of individual components, whether separate or interconnected, intended to contribute to a clearly defined function, then the whole machine is to be classified in the heading appropriate to that function. The clearly defined function here is a 'split system ductless air conditioner', and hence it has to be classified as such. The classification is settled by the decisions of the Mumbai CESTAT in Daikin Air Conditioning and International Aircon, mentioned supra. Benefit of Notification No. 85/2004 (Cus) dated 31 August 2004 or Notification No. 46/2011 (Cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are of capacity less than 2 tons, are classifiable under tariff item 84158190 and the split air conditioner of series MSH GE 60 VB with matching outdoor unit which is of capacity 2 tons is appropriately classifiable under tariff item 84158110. 6.2.1.1 As per the brochure, Room Air Conditioner (RAC) Split Type come in different series/ models like MS-G, MS-GK, MS-H, MS-D, MS-E, MSY-GE, MSH-GE, MSZ-EF and MSZ-HJ. The relevant features of the ACs covered under aforesaid series are as under - All the aforesaid series of ACs comprise of one indoor unit and one outdoor unit Indoor unit and outdoor unit are connected through copper piping for refrigerant's flow. No ducting is required for installation and distribution of air flow MS-G, MS-GK, MS-H, MS-D, MS-E, and MSY-GE series does not \have the heating function. MSH-GE, MSZ-HJ and MSZ-EF series of air-conditioners provide both heating and cooling effect. The outdoor unit of these series of air conditioners has inbuilt reversible valve to perform heating function The compressor in outdoor unit of MSY-GE series and MSZ- EF series of air conditioners is driven by an inbuilt Inverter Cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Of a kind used for persons in motor vehicles: 8415 20 10 --- For buses 8415 20 90 --- Other - Other 8415 81 -- Incorporating a refrigerating unit and a valve for reversal of the cooling or heat cycle (reversible heat pumps): 8415 81 10 --- Split air-conditioner two tonnes or above 8415 81 90 --- Other 8415 82 -- Other, incorporating a refrigerating unit: 8415 82 10 --- Split air-conditioner two tonnes or above 8415 82 90 --- Other 8415 83 -- Not incorporating a refrigerating unit: 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be analysed. 6.2.1.12 Now coming to sub-heading 841581, it is seen that the scope of 841581, specifies that air conditioning machine incorporating a refrigerant unit and a valve for reversal of the cooling and heat cycle (reversible heat pumps)are classifiable under the said sub-heading. It is a matter of fact that PAC series MSH-GE 35/50/60 VB, MSZ-EF 25/35/52 and MSZ-HJ with matching outdoor units MUH GE 35/50/60 VB, MUZ EF 25/35/50 and MUZ-HJ 25/35/50 VA, respectively have both cooling and heating capacity. To elaborate, these air conditioners incorporate a refrigerating unit and a valve for reversal of cooling/heat cycle (reversible heat pumps) and perform a dual function of heating and cooling the premises, thereby fulfilling the conditions of sub heading 8415.81. Therefore, the impugned items are also classifiable under sub heading 8415.81. 6.2.1.13 I find that the noticees, in support of their claim has relied upon United States Tariff which covers split system type air conditioners incorporating a refrigerating unit and a valve for reversal of the cooling/ heat cycle (reversible heat pumps) within the scope of tariff sub heading 8415 10. 6.2.1.14 I have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the most specific description shall be preferred to the Heading providing a more generic description, I rely upon the following decisions 1) Moorco India Ltd. v. CC[1994 (74) ELT 5 (SC)], 2) CCE v. SPM India Ltd. [2007 (211) ELT 573 (Tri.)] 3) CCE v Woodcraft [1995 (77) ELT 23 (SC)] 4) Collector of Customs v Business Forms Ltd [2002 (142) ELT 18 (SC)] 5) Grasim Industries Ltd. Vs. Collector of Customs, Bombay [(1998 (103) E.L.T. 515 (Tribunal)], 6) Commissioner of Central Excise, Bhopal Vs. Minwool Rock Fibres Ltd. [2012 (278)E.L.T.581 (S.C.)], 7) Sanwar Agarwal vs Commissioner Of Customs (Port) ... on 7 April, 2016 in WP No. 496 of 2015 In all the decisions cited above, the Hon'ble Courts have observed that if the description of the item were covered by a specific heading, the same could not be classified under the residuary heading. 6.2.1.16 Accordingly, I hold that the impugned RAC conditioners are classifiable under Chapter sub heading 8415 81. The said Chapter Heading is further segregated in the form of two triple dash entries. 8415 81 -- Incorporating a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 84151010. As per Section Note 4 to Section XVI and SI Rule 2(a), the same are classifiable as complete AC. .. 6.2.2.5 I find that the noticee has contended that post May 2013, they were importing indoor units and outdoor units separately and maintaining stock of the same for sale to different projects as and when required and since the indoor units and outdoor units are imported separately they are rightly classifiable as parts. I find that the noticees, gave specific submissions for their imports, prior to May 2013 and post May 2013, which are as under: PRE MAY 2013 The noticees submitted that, till May 2013, complete ACs were imported as a set as one consignment under single bill of entry. As per Section Note 4 to Section XVI and GI Rule 2(a), the same are complete AC. In CMVRF, as already mentioned, customers have an option to choose indoor units as per their requirements and make a customized combination (set), needless to say in all the cases within such a case as per Noticee there are two possibilities: i) Ducting is required - It will be required in case ceiling concealed duct of detailed indoor units, i.e. of PEFY series are used. As per the detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elf-contained or split system and Chapter sub heading 8415 81 covers incorporating a refrigerating unit and a valve for reversal of the cooling or heat cycle (reversible heat pumps). Both these Chapter headings are not specific about the implications of ducting requirement. Further, these units have valve for reversal of the cooling or heat cycle i.e. have both cooling and heating capacity. Accordingly, these kinds of air conditioners are specifically covered under Chapter Heading 841581 as elaborately discussed, under paras 6.2.1 to 6.2.1.17 6.2.2.8 . 6.2.2.9 To classify the CMVRF, in addition to explanatory notes to HSN discussed above, it is pertinent to place reliance on Note 4 to Section XVI of the Customs Tariff. It states that: Where a machine (including a combination of machine) consists of individual components (whether separate or interconnected by piping by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function . 6.2.2.10 It is obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with the diversity ratio within 50% to 130%, applying the same analogy have to be classified as split air conditioner incorporating a refrigerating unit under sub heading 841582. As all the CMVRF air conditioners are above 2 ton, they are appropriately classifiable under tariff item 84158210. 6.2.2.14 The noticees have contended that in certain cases where ceiling concealed duct type indoor units i.e. of PEFY series are not used and in such cases, complete CMVRF type AC (irrespective of the type of outdoor unit or in other words, the provision for heating and cooling function or only cooling function) will be classified under tariff sub heading 841510. I find that out of the Air Conditioners CMVRF, 74% cases were carrying PEFY/Ducted IDUs. I notice that in Chapter Heading 8415 10, the Window or wall types self-contained or split system are included, whereas in 8415 8110, split air conditioners two tonnes and above are included. All the CMVRF type ACs imported by the noticees are above two tonnes, hence the more appropriate classification is 8415 8110. 6.2.2.15 Accordingly, in view of foregoing, the classification of different types of split air conditioners (CMVRF), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vations made by the Principal Additional Director General, while ignoring the ruling on US Tariff is contrary to sub article (3) to Article 3 of The International Convention on the Harmonized Commodity Description and Coding System (HS Convention) entered into force on 1 January 1988, to which India is signatory and also the fact that Customs Tariff has been fully aligned with the HSN, till the six digit level. Article 3 of the convention reads as follows: Article 3 Obligations of Contracting Parties 1. Subject to the exceptions enumerated in Article 4 : (a) Each Contracting Party undertakes, except as provided in subparagraph (c) of this paragraph that from the date on which this Convention enters into force in respect of it, its Customs tariff and statistical nomenclatures shall be in conformity with the Harmonized System. It thus undertakes that, in respect of its Customs tariff and statistical nomenclatures: (i) it shall use all the headings and subheadings of the Harmonized System without addition or modification, together with their related numerical codes; (ii) it shall apply the General Rules for the interpretation of the Harmonized Syste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure and humidity, including those machines in which the humidity cannot be separately regulated. 8415.10 - Window or wall types, self-contained or split- system 8415.20 - Of a kind used for persons, in motor vehicles - Other : 8415.81 -- Incorporating a refrigerating unit and a valve for reversal of the cooling/heat cycle (reversible heat pumps) 8415.82 -- Other, incorporating a refrigerating unit 8415.83 -- Not incorporating a refrigerating unit 8415.90 - Parts 4.7 The reason for why we have reproduced this table after deleting the expansions to the eight digit level, is obvious, as Principal ADG holds has held by comparing the entries at eight digit level to hold that 85158110 and 84158190 are more specific. For determining the classification it is settle principle that that entries at same lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: (a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable. (c) When goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. 4. Goods which cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollows: The applicability of the rule arises when the goods consisting of more than one material fall in two or more headings. It is further clear that each of the classes are mutually exclusive. What is covered in (a) cannot be classified in (b) and (c) operates when neither applies. It is like a residuary clause. The primary question, therefore, is whether the goods manufactured by the appellant fall in clause (a) as if it can be classified with reference to (a) then clauses (b) and (c) would not apply. Clause (a) incorporates the common and general principle that the goods which can be classified specifically with reference to any heading should be placed in that category alone. The specific heading of classification has to be preferred over general heading. The clause contemplates goods which may be satisfying more than one description. Or it may be satisfying specific and general description. In either situation the classification which is the most specific has to be preferred over the one which is not specific or is general in nature. In other words, between the two competing entries the one most nearer to the description should be preferred. Where the class of goods man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Rules for Interpretation of the Import Tariff 13 . From Heading No. 8415 of First Schedule to the Customs Tariff Act, 1975, it is seen that air-conditioning machines comprise of a motor driven fan and elements for controlling humidity and temperature. Generally, and more particularly in the retail segment, such machines are either of window or self- contained or split system types. There are several other equipment which are designed for larger spaces and for applications that go beyond residential or commercial. In the structuring of the sub-headings, emphasis is placed on the split system and, by default, the window types. All other air- conditioning equipment are relegated to the residuary categorization and it is within such that split air-conditioners finds deployment. From this, it can be inferred that split system air-conditioning machines and split air-conditioners are distinct. Neither has the show cause notice nor the adjudicating authority forayed an elaboration of either; that these existed at the eight digit level under different sub-headings did not appear to have impressed itself, let alone the need for appreciating the distinction on the adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refrigerant unit. Neither is there any ground for such supposition in the show cause notice nor is there reason to conclude that the cooling source in the split system was absent in the impugned goods and substituted by another. There is no descriptive restriction in sub-heading No. 8415 10 to conclude that heating capability is not intended for coverage by that tariff entry. The impugned order has failed to exclude applicability of description of split systems to the impugned goods which would have entailed some knowledge of what that is. 4.11 In case of International Aircon, tribunal stated as follows: 17. The sanctity of the classification narrative lies in its inexorable logic from beginning to end and within itself. Hence, the groupings, as well as descriptions, have a significance that are not to be ignored. The General Rules for Interpretation also acknowledges this inherent logic and rule 3 is applicable when goods are classifiable under two headings. It is now settled law that though the importer may seek a classification it is the responsibility of the assessing officer to determine the appropriate heading; hence the application of rule 3 of General Rules o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not 'window' type but they are all of the 'split' type with an external condenser unit and an indoor evaporator unit. In the Explanatory Notes to the Harmonized System of Nomenclature pertaining to sub-heading no. 841510, we find no qualifying characteristic that restricts the adoption thereof to 'cooling facility' alone; neither is there any capacity qualification included therein. The existence of such under a parallel hierarchy in the residual category within the four-digit level cannot be insinuated into the specified category merely to exclude coverage under the latter. That would be tantamount to conferring approval to the attempt by the adjudicating authority to alter the logic, and structure, of the Schedule beyond the pale of General Rules of Interpretation and The General Explanatory Notes to Import Tariff. 20. There is no doubt that the expression 'refrigerating unit' is not defined and we have observed that, to deem the 'cooling unit' to be the 'refrigerating unit', an entire sub-heading the tariff would stand erased which is neither within the empowerment of the Tribunal let alone the adjudicating authority. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er while doing so he has ignored the basic fact that at the time of importation and assessment these goods were never presented together as complete unit. Hence the classification arrived at by the adjudicating authority cannot be sustained. Hon ble Supreme Court has in case of Sony India Pvt Ltd [2008 (231) ELT 385 (SC)] held as follows: 14. We have already held that in this case the goods brought were not having the essential character of CTVs. We do not find anything to take a view that the goods were in unassembled or dis-assembled condition and they should be taken to be the complete CTVs, particularly when there is no finding recorded anywhere on facts that all these goods could make 1500 CTVs. However, we accept the argument that the goods brought in different consignments separately on the basis of valid import licences would not attract the import duty as if they were the finished goods. We have already referred to this aspect vis-a-vis the facts in Phoenix International s case where the goods were brought in one and the single consignment and they were all brought together though they were imported by two companies, i.e., PIND and PIL fraudulently. 15. Shri Lak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect of the amendment of HSN Explanatory Notes which came on 14-3-1997. We approve of the finding given by the Tribunal in para 25 of its order which takes into account the fact that there was no amendment to Clause (v) while this is amended to the effect that complexity of the assembly method was made irrelevant. However, it was made clear that the components would not be subjected to any further working operation for completion in the finished state. The Tribunal has referred in details to the manufacturing process to show that some of the components require further working operation for completing the manufacturing process and further that CTV is not a machine which is presented in assembly for the sake of convenience of packing, handling or transport. We are, therefore, in agreement with the finding that even applying the amended HSN Explanatory Notes the position would be no different. 16. Our attention was invited to a very interesting decision reported in Modi Xerox Ltd. v. CCE, New Delhi [1998 (103) E.L.T. 619] which was confirmed by this Court in 2001 (133) E.L.T. A91 (it must be noted that the decisions in Woodcraft Products is specifically confirmed in this decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r ease of reference only. But for legal purposes, classification shall be determined according to the terms of the headings and any relevant sector or chapter Notes . If neither the heading nor the notes suffice to clarify the scope of a heading, then it must be construed according to the other following provisions contained in the Rules. Rule-I gives primacy to the Section and Chapter Notes along with terms of the headings. They should be first applied. If no clear picture emerges then only can one resort to the subsequent rules. Relying on this the further contention of the counsel is that Section Note 2 of Section XVI provides mandate for classification of the parts of machines falling under Section XVI. In terms of Rule 1 of Interpretative Rules, invocation of Rule 2(a) for certain categories of goods covered in Section XVI like the goods of CTVs are prohibited. For this the learned counsel relied on the decision in Modi Xerox (supra). In that view the learned counsel says that Rule 2(a) would not be applicable at all. This question needs no consideration here particularly in view of the interpretation that we have given to Rule 2(a). On facts, we have already found that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings. b) other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of heading 84.79 or 85.43) are to be classified with machines of that kind or in heading 84.09, 84.31, 84.48, 84.66, 84.73, 85.03, 85.22, 85.29 or 85.38 as appropriate. However parts which are equally suitable for use principally with the goods of headings 85.17 and 85.25 to 85.28are to be classified in the heading 85.17. c) all other parts are to be classified in heading 84.09, 84.31, 84.48, 84.66, 84.73, 85.03, 85.22, 85.29, or 85.38 as appropriate or failing that in heading 84.87 or 85.48. 6.2.3.3 I find that the noticees had been classifying wired remote controllers under tariff item 84159000 and wireless remote controller under tariff item 85437099. which covers 'other electrical machines and apparatus having individual functions, not specified or included elsewhere in Chapter 85'. I also find that according to DRI, Wireless Remote Controllers are correctly class ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, that the goods in respect of which the exemption under this notification is claimed are of the origin of Thailand, in accordance with provisions of Interim Rules of Origin, published with the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 101/2004-Customs (N.T.), dated the 31st August, 2004. S No Sub-heading or Tariff Item Description of Goods 49 8415 10 All Goods 6.2.4.2 l find that it is a matter of fact that Sl. No. 49 of the Notification No. 85/2004-Cus provides conditional exemption from payment of BCD to all goods falling under customs tariff sub-heading 8415 10, when imported from Thailand. This exemption is available subject to fulfilment of condition that the importer proves to the satisfaction of the Assistant/Deputy Commissioner of Customs that the imported goods in respect of which exemption is claimed are of the origin of Thailand in accordance with the provisions of Interim Rules of Origin modified vide N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the parts of air conditioners (except classification of remote controller) are rightly classifiable under Chapter Heading 84159000 and the ineligible benefit availed by them. In view of this the said benefit claimed by the noticees is liable to be recovered from them. 6.2.5 Eligibility of benefit under Notification No. 46/2011- Cus dated 01.06.2011 (ASEAN): 6.2.5.0 From the foregoing I find that the imported goods viz RAC, PAC and CMVRF air conditioners appear to be appropriately classifiable under tariff item 84158110, 84158190, 84158210, 84158290 which do not figure in the notification no.85/2004 dated 31/08/2004, thereby attracting levy of BCD at merit rate. However, M/S MEIPL have classified them under CTH 84151010/84151090 and claimed the benefit of SI.No.49 of notification no.85/2004 and cleared the impugned goods at nil rate of basic customs duty, thereby evading payment of appropriate duty of customs. 6.2.5.1 The noticees submitted that without prejudice to their earlier claim for classification under tariff item 84151010 and benefit under Notification No. 85/2004 Cus, even if the AC's in question are in fact classifiable under sub heading 841 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31st December 2009. S.No. Sub-heading or Tariff Item Description of Goods Rate (in percentage unless other-wise specified) 1 2 3 4 5 1101 841510 All goods 7.0 8.0 1102 841581 to 841583 All Goods 7.0 8.0 1103 841590 All Goods 2.5 6.0 APPENDIX I S.No Name of the Country S.NO Name of the Country 1 Malaysia 2. Singapore 3 Thailand 4 Vietnam 5. Myanmar 6 Indonesia 7 Brunei Darussala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the parties which they may or may not claim. Exemption can neither be given suomotu nor after the parties relinquish their right to the claim, in my opinion, the benefit should have been claimed at the time of filing of Bill of Entry, and not at a later stage. I notice that the classification aspects are as per the prevailing instructions, sets of rules, acts and procedures etc. I understand that no force or no law permits seeking alternative claim, which makes the claim of the noticees redundant and non est in law. In this connection I am relying on the case of Maha Lakshmi Packagers Versus Commissioner of C. Ex., Chandigarh -'l 2015 (329) E.L.T. 823 (Tri. - Del.) wherein it was held that Filing of declaration not mere procedural or technical requirement - Declaration necessary to prevent misuse of exemption notification and to enable jurisdictional Assessing Officer to examine eligibility - As such, exemption under said notification to be available to assessee only with effect from date of filing declaration on 28.06.2010. Hence, I find that the noticee is not entitled for exemption under Notification No. 46/2011-Cus dated 01.06.2011 (ASEAN) (S. No. 1102). 4.19 Since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the product. In support of their claim, they have also relied upon various judgments to imply that PC rules do not apply to goods which are packaged merely for their safety, during transportation. 6.3.1 I find that the impugned goods imported by the noticees comes within the purview of definition of pre-packaged commodities. ! further find that the contentions of the noticees that the decision to buy an AC depends on certain circumstances to protect consumers' interest does not hold good, for the reason that the onus is always on the buyer whether to rely on the leaflet of the package or opt to get a demo in the show room. There is no hard and fast phenomena that the consumer has examined the package in detail before buying the goods The possibility that the consumer checks certain demo and opts for a different consignment, seeing the technical features or otherwise, cannot be lost sight of. | also find that the noticee has cited the case of Eureka Forbes Limited vs. Union of India and Other AIR 2003 Andhra Pradesh 275 wherein it is held that a protective cover during transportation cannot be treated as pre- packed' commodity. I notice that the cited case law by the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otification and attract the provisions of Section 4A of the Central Excise Act, 1944. Further, the impugned goods are found to be in a packaged form, in ready to use condition without any modification, which ultimately satisfies the second condition, attracting the provisions of the Standards of Weights and Measures Act. Therefore, since the impugned goods imported by the noticees satisfies the conditions therein, befit into RSP based assessment under the relevant rules. Further, it is also a matter of fact that the impugned goods are well covered within the definition of Standards of Weights and Measures (Packaged Commodities) Rules and does not fall under the excluded category. In support of my findings, I would like to rely upon the decisions of the Tribunal in the case of Nestle India Limited v. CCE, Jayanti Food Processing Pvt. Ltd. v. CCE, BPL Telecom (P) Ltd. v. CCE, Cochin, ITEL Industries Pvt. Ltd. v. CCE, Calicut and CCE, New Delhi v. Ishaan Research Laboratories Pvt. Ltd. wherein Hon'ble CESTAT had taken a consistent view that once the goods are notified under Section 4A(1) they are liable to be assessed on the basis of declared MRP as per Section 4A(2) and under Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that post investigation they started declaring RSP based assessment, which totally nullifies the claim of the noticee that CMVRF Type ACs are not liable for MRP based assessment. 6.3.7 I find that it is not under dispute that the impugned goods are not covered under the Notification No. 49/2008 dated 24.12.2008 and includes all goods under Chapter Heading 8415, except 841520 but specifically window room air-conditioners and split air conditioners of capacity upto 3 tonnes, are covered under the said Notification. The said Notification was subsequently amended vide Notification No. 26/2012-CE (NT), DT. 10/05/2012, wherein all goods except the goods falling under Chapter Heading 841520 are included thereby enhancing the percentage of abatement. Thus, by the new Notification all the air conditioners except the goods falling under Chapter Subheading 841520. are subjected to RSP based assessment. 6.3.8 It is a matter of record that the impugned air conditioners i.e. RAC, PAC and CMVRF imported by the noticees are in the form of retail packages and is admittedly sold to the consumers, without any modifications. Further, it is an admitted position in the instant proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were declared after the initiation investigation i.e. from May 2013). Section 3 of the Customs Tariff Act, 1975, envisages that if there are more than one R$P for a particular product, the maximum of the same has to be taken for calculating the CVD. Applying the same, the actual RSP of the impugned goods imported by M/s MEIPL have been arrived by taking the maximum prevailing RSP for a product. 6.3.12 it is also on record that even though, the Customs broker had brought to their knowledge about the amendment in the notification no. 49/2008, they still chose to not follow the said notification, for the reason that they are getting similar goods cleared at Chennai Seaport, without following the said notification. They further gave a letter to Customs that these models are meant for industrial use and does not require clearance on MRP basis and based on the said letter, the goods were cleared by Customs. 6.3.13 In view of the foregoing, it is apparent that the noticees, through adoption of various propaganda refrained from paying CVD on RSP basis thereby implying adverse revenue implications, which resulted in evasion of Customs Duty. 6.3.14 It is obvious that the wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t appears that the noticees imported the impugned goods, without duly following the conditions laid down by Legal Metrology Act, 2009 and the rules made thereunder. 6.3.17 The noticees have further contended that DRI has incorrectly re determined MRP of different models of ACs by taking into consideration the maximum prevailing MRP for such models. According to the noticees, the compliance needs to be with respect to every package. The noticees inferred upon various case laws in support of their claim. I find that during the course of investigations, price list containing the RSP of RAC and PAC, Standard price list of CMVRF and maximum retail price of parts of air conditioners were submitted by M/S MEIPL. It is noticed that, in certain instances for air conditioners of CMVRF the declared RSP were lesser than the standard price list of CMVRF provided by M/S MEIPL (RSP for CMVRF were declared after the initiation investigation i.e. from May 2013). Section 3 of the Customs Tariff Act, 1975, envisages that if there are more than one RSP for a particular product, the maximum of the same has to be taken for calculating the CVD. I also find that the noticees did not provide any sati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce, to declare on the package thereof the retail sale price of such article and b) where the like article produced or manufactured in India or in case where such like article is not produced or manufactured, then the class or description of articles to which the imported article belongs, is the goods specified by the notification in the official gazette under sub-section (1) of Section 4A of the Central Excise Act, 1944. It is abundantly clear that once the goods are specified under Section 4A (1) of the Central Excise Act, necessarily the CVD is to be charged on MRP basis. Similarly, the proviso to Section 3(2) of Customs Tariff Act unambiguously states that in case of such goods, the retail sale price has to be declared on the package. 6.3.20 l find that Section 3(2) of the Customs Tariff Act is a self- contained law and Section 12 of the Customs Act, 1962 is the charging section of duty which states that except as otherwise provided in this Act or any other law for the time being in force duties of Customs shall be levied at such rate as may be specified under the Customs Tariff Act, 1975. The Hon'ble Bombay High Court in case of Subhash Photographics Vs. Union of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otification. Further, explanation | after sub-section (4) of Section 4A defines Retail sale price means the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer and includes all taxes local or otherwise. Section 3(1) of the Customs Tariff Act as also the purposes and objects of Section 3, indicates that RSP minus abatement would be taken as the value for the purpose of CVD. As per the proviso under Section 3(2) of the Customs Tariff Act. 1975, the countervailing duty at the time of import will again be calculated in the same way as is being done for excise purpose i.e. importer will be required to declare RSP on the goods imported. Also, under Section 3(2), for the goods covered under RSP scheme, transaction value does not exist and there is no need to go for value which is deemed in nature. 6.3.24 l find that the purpose and object of Section 3 of the Customs Tariff Act is to levy additional duty equal to excise duty so that the Indian manufacturers of similar goods are not put to any disadvantageous position. The declaration relating to RSP has to be true and correct declaration, 6.3.25 I find that once the goods are speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contentions are therefore rejected. 6.3.29 It is a fact that as discussed in paras supra, M/S MEIPL have assessed the CVD of air conditioners above 3 ton and parts of air conditioners on transaction value instead of RSP basis. It can be seen in all the bills of entry filed by them, they have declared that wherever the RSP is applicable same has been truthfully declared . Hence, in the case of assessing the goods on RSP basis, it is clear that responsibility is trusted upon the importer to declare the correct RSP and get the CVD subjected to assessment on RSP basis. It is fact that M/$ MEIPL do not have any manufacturing unit for air conditioners and all the goods imported by them were for trading and are sold as such to the dealers/customers under a tax invoice. While this being the case, they have got the impugned goods assessed for CVD on normal transaction basis and to facilitate such assessment, they in the bills of entry filed have suffixed the wordings such as not for retail sale , captive consumption etc with the description of the goods, thereby misguiding the Customs. Further, in case of queries raised by Customs, they have mis led the Customs by furnishing fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vertently on a presumption that these high end models are intended for industrial consumers; that in actual, these units are also sold on retail basis to the customers under a tax invoice without altering the packages of the imported item to a customer. In the case of bill of entry no. 9437101 dated 28/02/2013 for clearance of PAC series air conditioner PE-16GAK + 2*PUSYAKD, it seems the Customs has raised a query to declare the RSP. In this connection, M/S MEIPL had given reply that these models are not retail models so MRP would not apply. When asked about this, he stated in this case also we have given letter to Customs that these air conditioners are not meant for retail sale and levying duty based on MRP is not applicable and stated that in order to substantiate their saying that the model is not meant for retail sale they added the words 'not for retail sale' along with the description of the goods in the bill of entry. In their letter dated 14/03/2013 to the Deputy Commissioner of Customs, ICD, Tughlakabad, M/S MEIPL has sought permission to amend the bill of entry No. 9556602 dated 13/03/2013 for inclusion of words 'not for retail sale' with respect to indoo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly classified the goods, wrongly availed the benefit of exemption notifications and not paid CVD on RSP basis of the impugned goods imported vide 561 bills of entry. The calculation sheet annexed with the Show Cause Noticee reveal that the actual duty on the goods imported vide 561 bills of entry works out to Rs. 37,68,93,810/- (Rupees thirty seven crore sixty eight lakh ninety three thousand eight hundred and ten only)as against Rs 27,64,32,525/- (Rupees twenty seven crore sixty four lakh thirty two thousand five hundred and twenty five only)paid by them, thereby resulting in short levy of Rs. 10,04,61,285/- (Rupees ten crore four lakh sixty one thousand two hundred and eighty five only). Similarly with respect to 5 consignments imported in the name of M/S MEAPL, as discussed supra have mis-declared the description, wrongly classified the goods and cleared the goods on transaction value and wrongly availed the benefit of exemption notifications not applicable to them and thereby evaded payment of appropriate customs duties. In the light of the above, the actual duty payable on the goods imported by M/S MEAPL vide the 5 bills of entry works out to Rs 25,11,485/- (Rupees twenty five ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y have wrongly classified the impugned goods under tariff item 84151010, 84151090 and 84159000 instead of customs tariff item 84158110, 84158190, 84158210 or 84158290, availed benefit of higher concession under various Sl. Nos. of different notifications, as discussed supra, which do not seem to be available to them and have also not paid countervailing duty (CVD) under proviso to Section 3(2) of the Customs Tariff Act, 1975 Similarly with respect to the imports made vide 5 bills of entry, it appears M/s MEAPL have wrongly classified the impugned air conditioners under customs tariff item 84151010 instead of customs tariff item 84158210, 84158290 and 84159000 and availed benefit of notification no. 85/2004-Cus dated 31/08/2004 (SI.No. 49) which do not seem to be available to them and not paid countervailing duty CVD under proviso to Section 3(2) of the Customs Tariff Act, 1975 in respect of 5 bills of entry. 6.4.4 I find that it is a matter of fact that M/s MEIPL and M/s. MEAPL in order to avail the benefit of concessional rate/nil rate of basic customs duty, had resorted to adopt varied classification depending upon the port of import/country of origin, mis- declaring the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners. The indoor unit models are PCFY, PEFY, PKFY and PLFY and matching outdoor unit was PUHY well within the diversity ratio. In the description given in the bill of entry the words 'not for retail sale', which are not there in the supplier's invoice were added to the item description. When asked to comment, Shri Manoranjan stated that the words 'not for retail sale' were added for all the items of CMVRF where the diversity ratio is within 50% to 130% on the presumption that these high end models are intended for industrial consumers. However, he also stated that these units are not only used for industrial or business premises but also are sold on retail basis to high end customers under tax invoice. With respect to bills of entry nos. 8537834, 8537737, 8537626 all dated 20/11/2012 filed at Nhava Sheva Port, M/s MEIPL had given letter titled to whomsoever it may concern' and stated that goods imported under these bills of entry are industrial type of air conditioners used for project supplies to Industries/Commercial buildings/Hostels and not sold to house hold; that since these air conditioners are used for project supplies which are of higher capacity an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reply that these models are not retail models so MRP would not apply. When asked about this, he stated that in this case also they had given letter to Customs that these air conditioners are not meant for retail sale and levying duty based on MRP is not applicable and state that in order to substantiate of their saying that the model is not meant for rotor sale they added the words 'not for retail sale' along with the description of the goods in the bill of entry. In their letter dated 14/03/2013 to the Deputy Commissioner of Customs, ICD. Tughlakabad, M/S MEIPL has sought permission to amend the bill of entry No 9556602 dated 13/03/2013 for inclusion of words 'not for retail sale' with respect to indoor units and outdoor units of PAC model no. PS5JAK+PU5YKD. On showing the above letter and also the letters given by them in respect of bill of entry 9437101 dated 28/02/2013, Shri Manoranjan was asked to clarify as to whether they have never sold PAC PE-16GAK or PS-5JAK to retail customers, he stated that the wording and selling are two different things, that they in order to clear the imported goods from Customs have mentioned the words 'not for retail sale' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that however, as they are getting similar goods cleared at Chennai Seaport, without following the said notification, they requested him to approach the customs for clearance and provided them with a copy of bills of entry filed at Chennai seaport; that as the broker insisted upon them to give letter, they gave a letter to Customs that these models are meant for industrial use and does not require clearance on MRP basis and based on the said letter, the goods were cleared by Customs. He further stated that as based on said letter the goods were cleared, they have not given relevance to the applicability of the said notification for their subsequent imports; that after the investigation of DRI, they understood the implication of the Notification and they started implementing the same by declaring MRP for all air conditioners including CMVRF, indoor and outdoor units declared as parts of air conditioners; that however, as the quantum of other parts of air conditioners are more, the supplier has declined to print ma stickers on the product and hence they have not disclosed the same at the time of import: that after the seizure of parts consignments by DRI in August, 2014 they have star ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited v. Collector of Central Excise, Bombay, Union of India vs. Garware Nylon Ltd., Jay Kay Exports Industries and Ganesh International vs. Commissioner of Central Excise. Further, in support of their contention that misclassification does not amount to mis-declaration, the Noticee has relied upon the judgements of Densons Pultretaknik vs. CCE, CC Bangalore vs. Mahesh Raj, CCE vs. Ishaan Research Lab (P) Ltd., Chamundi Die Cast (P) Ltd. vs. CCE , Collector of Central Excise vs. Chemphar Drugs Liniments, Cosmic Dye Chemical vs. Collector of Central Excise, Anand Nishikawa Co. Ltd. vs. Commissioner of Central Excise, Commissioner of Central Excise, Aurangabad vs. Bajaj Auto Limited etc. and contended that to invoke extended period under Section 28 of the Customs Act, it has to be proved that there was a conscious or intentional act of collusion, wilful mis-statement or suppression of fact, on the part of the importer. 6.4.12 I find that the Noticee have submitted that the show cause notice is barred by limitation has no substance. The show cause notice has been issued by invoking Section 28(4) of the Customs Act, 1962. Section 28(4) ibid provides that where any duty has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned order, Principal ADG records as follows: 6.5.4 I find that during the course of investigation, seizures were conducted and the impugned goods lying at various godowns were seized by the investigation. The SCN has alleged that the seized/other goods are liable to confiscation under Section 111(d) and (m) of the Customs Act, 1962. As discussed in the preceding paras, the noticees have resorted to mis-declaration by attempting to wrongly classifying the goods and also by availing the ineligible notifications in force, which tantamount to violation of the provisions of Section 46(4) of the Customs Act, 1962, and also rendering the same liable to confiscation under Section 111 of the Customs Act, 1962. It is on record that the noticees resorted to mis-classification, with a deliberate attempt to evade payment of proper customs duty which is totally uncalled for, especially, in the self-assessment era, when the onus to declare correct description/classification/eligible notifications etc. is on the importers. It was the noticees' responsibility to act in tune with the governments faith deposed on them especially when they are status holders. However, it is evidently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty not exceeding five times the value of goods. From plain reading of the said section it is quite evident that penalty under this section is impossible only in case where the person knowingly or intentionally makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document which is false or incorrect in any material particular, in the transaction of any business for the purposes of this Act. Thus for imposing penalties under this section, adjudicating authority is required to determine existence of such declaration, statement or document which is false or incorrect in material particulars. In the present case without making any determination to this penalties under this section have been mechanically imposed by the adjudicating authority. Such penalties imposed without determining existence of such documents and the connection of the such document with the person, penalties imposed under this section cannot be sustained. Thus we set aside the order imposing penalties under this section. 4.28 On the issue of penalty imposed on functionaries of the importers, and CHA, impugned order observes as follow: 6.7 As the omissions and com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and was added later on at the behest of the importers Bill of Entry no.9171839 dated 30/01/2013 filed by Chennai. The checklist was forwarded by the CB M/s. A.V. Global dated Co. to the importers for approval. The importers 30/01/2013 through email, to remove MRP from last two items shown in the checklist bill of entry as the air conditioners viz., PS5JAK+PU5YKD were above 3 Ton. 6.7.3.3 l find that with respect to the aforementioned Bills of Entries, the modus operandi or rather resorted mis-classification and non-declaration of RSP, was at the behest of the importers. Though, it is an acceptable fact that the CBS have an important role in ensuring correctness and truthfulness of the declarations and is expected to act within the limitations of CBLR, the very fact that the prime noticee is an accredited client, enjoying all the privileges of a status quo importer, makes the CB tend to believe in the versions submitted by the importer. Further, the very fact that the RSP based assessment as well as the classification related issues/queries were tackled by the importer directly with the Custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord which reveal that the CB did make an effort to inform the Customs Officers at Chennai that the item with the same description was cleared by Nhava Sheva Customs by re-classifying the same under Chapter subheading 84158110 The CB acts as a link between the Customs and the importers and it was their duty or rather responsibility to bring into picture the true facts. Since, the said Bills of Entries, both at Nhava Sheva and Chennai, were handled by the CB. MS. AV Global Co. and that too, in a short lapse of time, it was very much easy force to co-relate the facts and bring out whatsoever discrepancies. Though it is on admitted position that the CB filed the said Bill of Entry at Chennai as me advice of the importers, the CB also had a duty to bring to the notice Customs, any sort of noticed discrepancy. Therefore, in my considered opinion, the CB erred in bringing the fact of adopting different classifications at different ports to the notice of Customs and such act of omission and commission is in violation of the provisions of Regulation 11(d)of the CBLR, 2013,which renders the CB also liable for penal action under Section 112(a) of the Customs Act, 1962. Similarly, in view o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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