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TMI Blog2023 (10) TMI 1260X X X X Extracts X X X X X X X X Extracts X X X X ..... .06.2017 of Schedule-I (Serial No.131) for IGST. While examining the B/E No. 6739528 dated 11.06.2018, the department interpreted on the basis of preliminary reading of Note 1 to Chapter 25 of the Customs Tariff Act, 1975 that the imported product is a calcined product of mined limestone, which has been roasted or calcined, and thus falls out of the purview of classification under chapter 25, and is rightly classifiable under tariff item/CTH 2825 90 90, attracting higher rate of import duties @ 7.5% BCD, 18% IGST and 10% SWS. On pointing out the above observations of the department, the appellants had sought for provisional assessment of the imported goods under Section 18 of the Customs Act, 1962, under CTH 2825 90 90 by executing the provisional duty bonds. Accordingly, the department had initiated show cause proceedings by issue of Show Cause Notice (SCN) dated 10.07.2019 for recovery of differential duty of Customs under Section 28(4) ibid along with interest thereon and for confiscation of imported goods under Section 111(m) ibid, imposition of penalties under Section 114A, 114AA ibid. The Order-in-Original dated 31.10.2019 passed in this regard by the learned Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and classifying the same under CTH 2522 10 00 of the Customs Tariff Act and the department are well aware that they were clearing it without any demur. It is only in the year 2018, an enquiry into the import of the subject goods was commenced which culminated into issuance of a show cause notice and the impugned order by the Commissioner of Customs (Preventative), Mumbai wherein the demand of differential customs duty for normal period amounting to Rs. 3,72,66,955/- has been confirmed against the appellants on the ground that the subject goods are classifiable under CTH 2825 90 90 and are not eligible for exemption benefit under the notifications, as they ought to have been classified under CTH 2825 90 90 of the Customs Tariff Act, 1975. 2.3 Furthermore he submitted that the issue of classification in the above case is no longer res integra in view of the decision of the Tribunal in the case of Commissioner of Central Excise, Hyderabad-III Vs. M/s Bhadradri Minerals Pvt. Ltd. reported in 2015 (324) E.L.T. 395 (Tri.-Bang.) and Jindal Stainless (Hisar) Ltd. Vs. Commissioner of Customs, New Delhi, reported in 2020 (8) TMI 743 -CESTAT - NEW DELHI wherein it was categorically held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated the findings recorded by the learned Commissioner (Preventive) in the impugned order and stated that the appellant have been importing Hi Cal Quicklime from M/s Carmeuse Majan LLC, Oman and M/s Ras Al Khaimah Lime Co. 'Noora', UAE. The declared description in the bills of entry is 'Quicklime' under CTH 25221000. The imported quicklime is used by the appellants for removing impurities from steel, as part of manufacturing process, in their smelting plant. As the department had noticed that the imported product was calcined product of the mined limestone and preliminary reading of Note 1 to Chapter 25 showed that the products which have been roasted or calcined, fell out of the purview of classification under Chapter 25, they resorted to reclassification of the goods. Further, the Department claimed that the Hi Cal Quicklime was a manufactured product, obtained by calcinations and did not merit classification under CTH 2522 10 00. Thus in respect of B/E No. 6739528 dated 11.06.2018 in which the mis-classification was noticed and thereafter all the assessments were done on provisional basis. 3.2 It was further submitted by learned AR, that from the conjoint readin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Revenue, and the arguments advanced during the hearings of this case. 5. Brief issue for consideration before us is the classification of imported goods by the appellants as to whether, the same merits classification under Customs Tariff Item 2522 10 00 as claimed by the appellants; or, is it classifiable under Customs Tariff Item 2825 90 90 as contended by the Department, for deciding on the appropriate levy of customs duty, in respect of various Bills of Entries filed during the disputed period. 6. In order to address the above issue of classification of imported goods, we would like to refer the relevant legal provisions contained in Section 12 of the Customs Act, 1962; the Customs Tariff Act, 1975 and rules framed thereunder for consideration of proper and appropriate classification of the subject goods under dispute. "Section 12. Dutiable goods. - (1) 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 rates as may be specified under the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, on goods imported into, or exported from, India. (2) The provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 be classified in accordance with the above rules shall be classified under the heading appropriate to the goods to which they are most akin. 5. In addition to the foregoing provisions, the following rules shall apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 52 of 1962), the duty being equal to such percentage of the value as is indicated in that column. 3. In any entry, if no rate of duty is shown in column (5), the rate shown under column (4) shall be applicable. ADDITIONAL NOTES In this Schedule,- (1)(a) "heading", in respect of goods, means a description in list of tariff provisions accompanied by a four-digit number and includes all sub-headings of tariff items the first four-digits of which correspond to that number; (b) "sub-heading", in respect of goods, means a description in the list of tariff provisions accompanied by a six-digit number and includes all tariff items the first six-digits of which correspond to that number; (c) "tariff item" means a description of goods in the list of tariff provisions accompanying eightdigit number and the rate of customs duty; (2) the list of tariff provisions is divided into Sections, Chapters and Sub-Chapters; (3) in column (3), the standard unit of quantity is specified for each tariff item to facilitate the collection, comparison and analysis of trade statistics." 7. From the plain reading of the above legal provisions, it transpires that in order to determine th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the complete or finished article. Further, reference in a heading to a material or substance shall be taken to include mixtures or combinations of that material or substance with other materials or substances, and to goods consisting wholly or partly of such material or substance; (GIR 2) (iii) if the goods are found to be classifiable under two or more headings, then the classification shall be effected as per the rules provided under 3(a), 3(b) and 3(c) [GIR 3] (iv) Goods which cannot be classified in accordance with the aforesaid rules, then the same shall be classified under the heading appropriate to the goods to which they are more akin. (GIR 4) (v) For legal purposes, the classification of goods in the subheadings shall be determined according to the terms of those subheadings and any related sub-heading Notes (GIR 6) (vi) When the description of the goods under a heading is preceded by 'single dash 'i.e., "-", the said goods shall be taken to be a subclassification of the article or group of articles covered by the said heading. (GEN1) (vii) Where, however, the description of goods is preceded by "- -", the said goods shall be taken to be a sub-classification o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10% - 2825 20 00 - Lithium oxide and hydroxide Kg. 10% - 2825 30 - Vanadium oxides and hydroxides: 2825 30 10 --- Vanadium pentaoxide flakes Kg. 10% - "Tariff Item Description of goods Unit Rate of Duty Standard Preferential Areas (1) (2) (3) (4) (5) 2825 30 90 --- Other Kg. 10% - 2825 40 00 - Nickel oxides and hydroxides Kg. 10% - 2825 50 00 - Copper oxides and hydroxides Kg. 10% - 2825 60 - Germanium oxides and zirconium dioxide : 2825 60 10 --- Germanium oxides Kg. 10% - 2825 60 20 --- Zirconium dioxide Kg. 10% - 2825 70 - Molybdenum oxides and hydroxides: 2825 70 10 --- Molybdenum trioxide Kg. 10% - 2825 70 20 --- Molybdic acid Kg. 10% - 2825 70 90 --- Other Kg. 10% - 2825 80 00 - Antimony oxides Kg. 10% - 2825 90 - Other : 2825 90 10 --- Tin oxide Kg. 10% - 2825 90 20 --- Cadmium oxide Kg. 10% - 2825 90 40 --- Calciumhydroxide Kg. 10% - 2825 90 50 --- Ammoniumhydroxide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er heading 2825, owing to the reason that the chemical properties of the goods have been changed from the mineral product to chemical product. Thus, it is clear from the above analysis and discussion that the scope of coverage of goods under chapter heading 2522 and 2825 are exclusive to each other. 10.3 We find that careful examination of the tariff entries of chapter heading 2522 & 2825, it reveals that it is not the case that the goods covered under CTH 2522 and CTH 2825 represent contending classification for applying GIR 3 as made out by Revenue. This is for the reason that quick lime cannot be referred to as containing wholly or partly of goods of CTH 2522 and CTH 2825. There is clear exclusion of calcium oxide and hydroxide of CTH 2825 from the scope of CTH 2522, and only separate chemical elements or separate chemically defined compounds are covered under the scope of CTH 2825. 10.4 Further, it transpires from plain reading of GIR 2 and 3, that GIR 2(b) would apply for classifying goods so as to include mixtures or combination of a particular material or substance when found mixed or combines with other material. In attempting such classification of goods in terms of GIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds for customs purposes as per the Harmonized System of Nomenclature (HSN) is an international obligation for India under an International Convention on the Harmonized Commodity Description and Coding System brought into effect from 01.01.1988 and among the various uses, one of it relevant to this case before us to follow the HSN as a basis for Customs tariffs and as a vital element of core Customs process areas of Customs controls and procedures, including risk assessment, information technology and compliance. Accordingly, the extract of relevant Chapter notes in First Schedule to Customs Tariff Act and the WCO's HSN in respect of heading 2522 and 2825 is discussed in detail along with extracted portion of the same as given below: "SECTION V MINERAL PRODUCTS CHAPTER 25 Salt; sulphur; earths and stone; plastering materials, lime and cement Notes: 1. Except where their context or Note 4 to this Chapter otherwise requires, the headings of this Chapter cover only products which are in the crude state or which have been washed (even with chemical substances eliminating the impurities without changing the structure of the product), crushed, ground, powdered, levigated, sift ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter Note 2 for excluding from the scope of chapter 25, it is clear that there is no overlapping of classification in respect of any goods of heading 2522. Further, as the description of sub-heading 2522 itself provide for excluding calcium oxide and hydroxide of Chapter heading 2825 from the scope of its coverage as discussed in detail at paragraphs 10.1 to 10.3 above, there arises no specific requirement to mention it as product under the exclusion list of chapter note 2. If we analyse the Chapter Note 1, there are six major elements guiding the classification of goods. These have been listed as follows: (a) Mineral products that are in the crude state are only covered under Chapter 25; (b) Mineral products which are subjected to certain specific process such as washing, crushing, grounding etc. (as specified therein) or other mechanical process or physical process would alone be covered under Chapter 25 (c) Mineral products after being subjected to certain processes by which these have become products that have been roasted, calcined are not covered under Chapter 25 (d) Mineral products which are obtained by mixing or subjected to processing beyond that mentioned in each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one. In this process the limestone is brought to a temperature high enough to expel the carbon dioxide, producing the lime in a highly friable or easily powdered condition. Calcination in special cases may be carried on in furnaces designed to exclude air, for which an inert gas may be substituted. 12.4 In other words, from the above HSN explanatory notes it could be concluded that 'lime stone' being a mineral product is calcined to produce 'quicklime'. Further, when lime stone is subjected to the process of low temperature of calcination then 'hydraulic lime' is produced. These two products would remain classifiable under Chapter heading 2522. However, when the lime stone is subjected to high temperature calcination ranging as high as 1340°C, dissociation of limestone happens i.e., a general chemical process in which molecules (or ionic compounds such as salts, or complexes) gets separated or split into other things such as atoms, ions, or radicals, usually in a reversible manner. In simple words, it can be said that the mineral product 'quicklime' when subjected to high temperature calcination becomes 'calcium oxide' by eliminating carbon-dioxide (CO2) and such calcium oxide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods, I concur with the findings of the Judicial Member ordering dismissal of the department's appeal. The papers may be referred to the Bench for passing the final order in accordance with the majority view." 14.1 In order to further examine the classification in terms of HS explanatory notes of the WCO, which describe in detail the scope and coverage of the goods under the Customs classification, the extract of HS classification in respect of heading 2825 is given below: "Harmonized Commodity Description and Coding System Explanatory Notes 28.25- Hydrazine and hydroxylamine and their inorganic salts; other inorganic bases; other metal oxides, hydroxides and peroxides. 2825.10 - Hydrazine and hydroxylamine and their inorganic salts 2825.20 - Lithium oxide and hydroxide 2825.30 - Vanadium oxides and hydroxides 2825.40 - Nickel oxides and hydroxides 2825.50 - Copper oxides and hydroxides 2825.60 - Germanium oxides and zirconium dioxide 2825.70 - Molybdenum oxides and hydroxides 2825.80 - Antimony oxides 2825.90 - Other This heading covers : (A) Hydrazine and hydroxylamine and their inorganic salts. (B) The metal oxides, hydroxides and peroxi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Iron & Silicious matter'. On the percentage of chemical composition, the report stated that 'available lime = 93.8%'. Further, one another such chemical testing of imported goods by CRCL in report dated 16.05.2018, indicate that the imported goods contain '92.27% of calcium oxide and 0.96% of magnesium oxide'. Further, the HSN explanatory notes in the second para of B(11) also specify that calcium oxide of high degree of purity i.e., app. 98% or more would alone gets covered under the scope of sub-heading 2825. As seen from the test reports, the content of calcium oxide or lime is much less than the requisite 98%. Thus, we are of the considered view that in terms of the HSN explanatory notes, both on account of presence of specified material making it not in pure state and the composition of calcium oxide not upto the requisite 98% making it not a product of high degree, would not enable the imported goods to be classified under sub-heading 2825. 15. Revenue has also claimed that the exemption entry for the purpose of levy of CVD/IGST under Notification No. 01/2017-Integrated Tax dated 28.06.2017 of Schedule-I (Serial No.131) have specified only quicklime of heading 2522, and imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hstanding the fact that the goods are not covered by the Chapter/Heading No./Sub-heading Nos. mentioned in the notifications would still be available, on the basis of the law laid down by the Hon'ble Supreme Court in the case of Jain Engineering Vs. Collector of Customs - 1987 (32) E.L.T. 3 S.C. Further, it is not the case of Revenue that the impugned goods do not find fitment in heading 2522 of the First Schedule to Customs Tariff Act, 1975 or that the 'integrated tax' rate at serial no. 131 of Schedule I is, by the corresponding description, unquestionably excluded from every tariff item comprising heading 2522 of the First Schedule to Customs Tariff Act, 1975. Nor is it the case of Revenue that the 'quicklime' at serial no. 131 of Schedule I of the 'integrated tax' rate notification do not find placement in chapter 25 of First Schedule to the Customs Tariff Act, 1975. Thus, we find that the impugned order dated 31.10.2019 rejecting the exemption benefit of the above notification, is not legally sustainable. 16. We further find from the standards prescribed by the Bureau of Indian Standards (BIS) in respect of IS:1540 (Part-I):1980 providing the 'specification for Quick lime and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eat and producing slaked lime (Calcium hydroxide) The heading excludes purified calcium oxide and calcium hydroxide (heading 28.25)." The HSN also prescribes as follows: "1. Except where their context ..... otherwise requires, ..... but not products that have been roasted, calcined, obtained by mixing or subjected to processing beyond that mentioned in each heading." 4.2 It is seen that Revenue has relied on the decision of the Tribunal in the case of Nuchem Industries Pvt. Ltd. (supra) which was upheld by Hon'ble Apex Court. It is seen that the said decision has been given in the context of Central Excise duties. At the material time, Central Excise Tariff was not aligned to HSN. Learned Counsel for the appellant pointed out that the Central excise Tariff was align with HSN only with effect from 20.03.1990. He pointed out that this distinction has been specifically examined by Tribunal in the case of Bhadradri Minerals Pvt. Ltd. (supra) in para 5.1 and 5.2. In view of above, it is apparent that the said decision would render in different circumstances and, therefore, cannot be relied as binding precedent. 4.3 It is seen that the decision of Tribunal in the case of B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit the strength of decisions rendered in a different context and then facing a backlash at a later stage." From the above it is apparent that the facts and circumstances were significantly different. 5. As a result of above observations, we find that the ratio of decisions of Tribunal in the case of M/s Bhadradri Minerals Pvt. Ltd. is applicable to the facts of the instant case. Therefore, the product is rightly classified under chapter 25. The appeal is consequently allowed." 19. In view of the foregoing detailed discussions, analysis and findings recorded in the above paragraphs, we conclude that the imported goods 'quicklime' would be appropriately classifiable under Customs Tariff Item 2522 10 00 and not as 'other' under the Customs Tariff Item 2825 90 90, as claimed by Revenue. 20. Therefore, we are of the considered view that the impugned order passed by the learned Commissioner (Appeals) dated 05.04.2021 cannot stand for judicial scrutiny by confirming the classification under the Customs Tariff Item 2825 90 90 in respect of the impugned goods and thus, the same is liable to be set aside. We are also of the considered view that the impugned order passed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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