TMI Blog2022 (1) TMI 1403X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, explanation as to where each of the parts is used, an expert opinion that the goods were specifically designed for use in the plant and were not goods of general use, a Chartered Engineer s certificate to the same effect. The appellant has not produced any alternative drawings or designs or any evidence to show that the parts in question were only parts of general use and not ones designed for the plant. In the absence of any evidence in the appeal, it is not possible to fault the Commissioner for considering the reply to the consultative letter, the drawings and designs and the clarifications provided by the supplier to conclude that the parts in question were parts designed for the plant and were not ordinary articles of iron and steel. The Commissioner has given her findings relying on Rule 1 (NOT RULE 2) of the General Rules of Interpretation, which states that classification shall be based on terms of the Tariff Headings and Section Notes and Chapter Notes and the titles of Sections and Chapters are for ease of reference only. She also referred to Section Note 1(f) to Section XV (under which Chapter 73 falls) which states that articles of Section XVI (machinery, mech ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich was confirmed. 2. The factual matrix which lead to the dispute is as follows. 3. The assessee was awarded an Engineering, Procurement and Construction [EPC] contract by M/s. Reliance Power Ltd [Reliance Power] , Mumbai to set up a 2,400 MW Gas Power Project at Samalkot, East Godavari district, Andhra Pradesh. The assessee, in turn, entered into an Offshore Equipment Supply contract dated 7.8.2010 with M/s. Reliance Infra Projects International Ltd [Reliance Infra Projects] ., British Virgin islands for supply of various material and equipment to execute the EPC project. It also placed a Purchase Order dated 29.7.2011 with M/s Zhejiang Hangxiao Steel Structure CO. Ltd. [Zheijang] Hangzhou, China for supply of some material and equipment. 4. The assessee imported various equipment from Reliance Infra Projects and Zhejiang and cleared them by filing 36 Bills of Entry between June 2011 and February 2012 with the Customs at Kakinada. Bills of Entry filed in the Customs EDI system are either marked to an officer for assessment or marked for examination of goods or both or may be cleared without either assessment by the officer or examination of the goods by the Custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 114AA on the assessee. The specific proposals in the SCN were that the assessee was called upon to explain as to why: (i) The goods imported under Bills of Entry No. 5051226/31.10.2011, 5218089/17.11.2011, 6011406 /15.02.2012, 4789656/29.09.2011, 521873/ 17.11.2011 and 6070324/22.02.2012 as mentioned in the Annexure should not be classified under customs tariff item 73089090 of the Customs Tariff Act, 1975; (ii) The duty amount of Rs. 9,39,30,711(Rupees Nine crores thirty nine lakhs thirty thousand seven hundred and eleven only) being the differential duty of customs as a result of incorrect classification of the goods imported with an intention to evade payment of duty should not be recovered from them under section 28(4) of the Customs Act, 1962; (iii) The interest under section 28AA of the Customs Act, 1962 should not be recovered from them on the amount mentioned at (ii) above; (iv) A penalty should not be imposed on them under section 114A of the Customs Act, 1962 as detailed above; and (v) A penalty should not be imposed on them under section 114AA of the Customs Act, 1962 as detailed above. 6. After considering the submissions made in defence by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order and that the SCN proposed to classify the goods as articles of Iron and Steel. After considering the assessee s submissions and examining the detailed drawings and designs, the expert opinion and the certificate by the Chartered Engineer, the Commissioner concluded in the impugned order that the goods which were imported were not general articles of Iron and Steel but were specifically designed for the power plant and hence were correctly classifiable under 8406. Learned counsel submits that there is no dispute to the factual findings recorded by the Commissioner in the Department s appeal. He also submitted that the HSN mentioned by the supplier is beyond the assessee s control and even if wrong HSN is mentioned by the supplier it does not change the classification of the goods under the Customs Tariff. He, therefore, prays that the department s appeal may be rejected. 9. Before considering the grounds of this appeal, we proceed to examine the scope of the HSN code and other details mentioned in the documents of the overseas supplier in determining the classification of goods under the Customs Tariff. Since the Customs Tariff is based on HSN, it is a well settled princip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of the quantity, weight, volume, measurement or other specifics of such goods; (e) the origin of such goods determined in accordance with the provisions of the Customs Tariff Act or the rules made thereunder, if the amount of duty, tax, cess or any other sum is affected by the origin of such goods; (f) any other specific factor which affects the duty, tax, cess or any other sum payable on such goods, and includes provisional assessment, self-assessment, re-assessment and any assessment in which the duty assessed is nil 11. It is explicit from the definition after 2018 and it was implicit before that date that classification of goods under the Customs Tariff is a part of assessment. This power of assessment is conferred under Section 17 of the Customs Act. Prior to 2011, the assessment had to be done by the proper officer under section 12. After 2011, the importer of exporter has to self assess the duty under section 17(1) and the officer could re-assess the duty under section 17(4). This section, as it stood during the relevant period, was follows. Section 17. Assessment of duty. - (1) An importer entering any imported goods under section 46, or an ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported goods or export goods shall continue to be governed by the provisions of section 17 as it stood immediately before the date on which such assent is received. 13. Thus, the power of assessment of duty under the Customs Act, which includes the power to classify the goods under the Customs tariff, lies with the importer and the proper officer . In case of a demand of duty under section 28, this power of classification and determining the duty extends to the adjudicating officer and to those higher in the chain of appeals. In classifying goods they may refer to the description of the goods, literature, the HSN declared by the supplier, etc. but the HSN indicated by the supplier cannot bind either the importer or the proper officer or the adjudicating authority or the appellate authority in classifying the goods- a process which must be done on merits. 14. The supplier has no locus standi in the classification of the goods or assessing the duty. If the HSN indicated in the documents by the supplier is held to bind the importer or the proper officer in assessing the goods, it can result in absurd results with disastrous consequences. Any unscrupulous importer can simply fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igin 17. Before issuing the SCN, a consultative letter dated 7.5.2012 was issued to the assessee requesting it to pay the differential duty and in its reply, the assessee declined stating that the goods imported by them under three Bills of Entry from Zhejiang were components of OT crane system which they imported in different consignments since they were very large. With respect to the goods imported under the other three Bills of Entry, they explained that they were part of the HRSG system for heat recovery. Thus, their stand was that the goods were declared correctly and appropriate amount of duty was paid. 18. The Commissioner asked the Deputy Commissioner for a report on the imported goods and he replied that the goods were no longer in the Customs area. The Commissioner had then formed a team of officers of the Special Intelligence and Investigation branch (SIIB) of the Commissionerate to examine the goods. They visited the assessee s premises and after inspection, reported that all the goods were actually installed in the plant. The assessee also submitted its defence in response to the SCN and also appeared personally before the Commissioner. The assessee submitted de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iang that they had supplied only specific, made to order components for the power plant and they had not supplied general purpose articles and that they had using their normal formats, applied for the Certificate of origin and prepared the invoices, etc. mentioning the HS code for general articles of iron and steel; and f) The detailed designs and drawings and explanation by the assessee as to where each of the parts fit into the systems. 24. After considering all the above, the Commissioner observed that there were six Bills of Entry as follows: S.No. Bill of Entry Date Description of goods Classification claimed by the assessee Classification proposed in the SCN 1 5051226 31.10.2011 Steel structures/PPBS 84068200 73089090 2 5218089 17.11.2011 Steel structures/PPBS 84068200 73089090 3 6011406 15.02.2011 Steel s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hapter 84 or 85 (other than headings 8409, 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 8479 or 8543) are to be classified with the machines of that kind or in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate. However, parts which are equally suitable for use principally with the goods of headings 8517 and 8525 to 8528 are to be classified in heading 8517, and parts which are suitable for use solely or principally with the goods of heading 8524 are to be classified in heading 8529; (c) All other parts are to be classified in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate or, failing that, in heading 8487 or 8548. 28. Based on her finding that the goods were indeed parts of the OT Crane System and the HRSGS and were designed for the purpose and considering the above Rules of Interpretation and Section Notes, she held that since the imported goods were parts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied under the corresponding Customs Tariff Heading. 32. We are unable to accept this proposition because what is mentioned in the contract, including the HS Code may be relevant to but not determinative of the classification of the goods. If on examination of the goods and the product literature, the goods are found to be more appropriately classifiable under a different Heading of Customs Tariff, there is no reason to stick to the HS Code mentioned in the documents of the overseas suppliers in contracts and other documents. As discussed above, classification is a part of assessment which should be done by the importer, the assessing officer or the adjudicating authority based on what goods were actually imported and how they deserve to be classified under the Customs Tariff. The binding nature of the contracts binds the parties and not the adjudicating authority who has to decide classification based on merits. If the Revenue s proposition is accepted and if it is held that the HS Code mentioned in the contracts and other documents by the overseas suppliers binds the assessing officer or an adjudicating authority, it will open a Pandora s Box with disastrous consequences for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1994(73) ELT 723 (Trib-LB)] , M/s. Shri Ram Refrigeration Industries Ltd. [1993 (63) ELT 593 (Tribunal)], M/s. Carrier Aircon Ltd. [2006 (199) ELT 577 (SC)], M/s Netlon India Ltd. [2000 (121) ELT 675 (Trib)], M/s. Tata Hydro Electric Power Supply [1996 (83) ELT 642 (Trib)], Mukesh Kumar Agarwal Co. [2004 (178) ELT 3 (SC)], M/s. Muller and Phipps (India) Ltd. [2004 (167) ELT 374(SC)], M/s LE Industries [2005 (180) ELT 409 (Tri- Mumbai)] and Bharat Electronics Ltd. [1996 (102 ) ELT 717 (Trib)] (sub-paragraphs xiii to xviii) to assert that goods should be classified as they are imported and that they should be classified as they are understood in the trade. Reliance was also placed (sub-paragraph xii) on the product description in the documents between the supplier Reliance Infra projects and its original equipment supplier in Thailand to assert what were imported were individual articles of iron and steel. 34. We agree that the goods should be classified as they were imported and not based on what use they are put to after import. A screw, for instance, will be a screw and will not become a component of a chair if it is subsequently used in making a chair. The submission of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (sub-paragraphs xix and xx) that components imported under various Bills of Entry over a period of time cannot be clubbed together to hold that it is an incomplete article or an article in completely knocked down (CKD) condition. The case of Larsen Toubro Ltd. [2009 (239) ELT 373 (Tri-Chennai)] (sub-paragraphs xxi) in which Revenue s proposal to classify iron and steel towers manufactured and cleared as iron and steel structures was accepted on the ground that the remaining parts of the windmill were not manufactured or supplied by the same manufacturer was relied upon. It has been argued that even in this case, the importer has procured some other parts of the plant from other suppliers . M/s. Promostyle Exports [1997 (96) ELT 217 (SC)] (sub-paragraph xxii) was relied upon to assert that contrary claims in the invoice and in the Bill of Entry is not permissible. Joshi Steel Industries [2004 (177) ELT 522 (Tri- Del)] was relied upon to argue that while goods are to be classified according to the real nature of the goods, if the assessee seeks to dispute the description and classification in the documents, the burden is on the assessee to prove it. It has been submitted (sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lifting steel with slings and shackles, auxiliary steel, walkways, structural steel seismic bumpers, structural steelsidewall baffles, columns, bottom beam and top beam, beam and bracket steel, pattern support beam, bolts and nuts, stair tower, ship loose, module casing, roof panel, inlet duct roof, inlet duct casing, stack lift, stack inlets, handrails for stack, ladder for stack, stack platform, grating for stack, false bottom, lifting frame, lifting beam, shackle and slings, rigging handling bolts, handrails, etc. which are all articles of iron and steel and not articles of machinery or mechanical appliances. The Commissioner has wrongly classified these parts as parts of Overhead Travelling (OT) crane system which in turn, is a part of vapour turbines falling under 8406. Similarly, it has been submitted that the Commissioner has wrongly classified the Heat Recovery Steam Generator System (HRSG) which in turn, forms an essential part of the vapour turbine systems under 8406. It has further been argued (sub-paragraph xxx) that the goods were imported individually and not as a part of Project Import and hence they should have been classified individually based on their nature an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on given by the same supplier in their letter should be ignored; b) The drawings and designs submitted by the assessee and considered by the Commissioner in concluding that the parts were specifically designed for the plant should be ignored; c) Alternatively, the Commissioner s understanding or interpretation of the drawings and designs was incorrect and what is the correct way to interpret them; 39. The appellant has also not produced any alternative drawings or designs or any evidence to show that the parts in question were only parts of general use and not ones designed for the plant. In the absence of any evidence in the appeal, it is not possible to fault the Commissioner for considering the reply to the consultative letter, the drawings and designs and the clarifications provided by the supplier to conclude that the parts in question were parts designed for the plant and were not ordinary articles of iron and steel. 40. It has been submitted (sub-paragraph xxx) that the goods were not described as parts of vapour turbines and were not imported as Project imports to claim single classification. It has again been repeated (sub-paragraph xxxi) that the imported good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erpretation, which states that classification shall be based on terms of the Tariff Headings and Section Notes and Chapter Notes and the titles of Sections and Chapters are for ease of reference only. She also referred to Section Note 1(f) to Section XV (under which Chapter 73 falls) which states that articles of Section XVI (machinery, mechanical appliances and electrical goods) are excluded from Section XV. She further relied on Section Note 2 of Section XVI, especially Note 2(b) which states that parts suitable for use solely or principally with a machine must be classified in the heading of the machine. General Rule of Interpretation 2(b), regarding which a submission is made, appears irrelevant to this case. The argument that end use of the articles is irrelevant for classification is correct for articles of general use but if the articles are designed for a particular end use, they should be classified accordingly. If nails are to be classified, what use they are put to after import is irrelevant. However, if one imports engines of automobiles (which are mainly made of iron and steel) and declares them as articles of iron and steel, they are not put to use as engines before c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioning the wrong HSN in its documents such as invoice and packing list and also while applying for a certificate of origin should not be considered and only the supplier s original documents should be considered. h) Revenue s case is on the ground that the original documents of the suppliers mention the HSN corresponding to articles of general use and therefore, they cannot be called parts of machinery before Indian Customs in the Bills of Entry. It is also the case of Revenue that the goods should be classified as they are imported and not based on what use they were put to after their import. If the assessee wanted all the goods to be classified as a single unit, then they could have opted for Project Import Regulations and all the goods could have been classified under 98.01. We find the submission regarding project import is irrelevant because neither has the assessee claimed it nor has the Commissioner classified the goods under project imports. i) Revenue was correct in its submission that the imported goods should be classified as they are imported and not based on what use they were put to after import. If the imported goods were parts of machinery, they should be cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in parts of a power plant being classified as such parts instead of parts of general use. n) We are unable to accept the Revenue s contention that all the goods imported under the six Bills of Entry should be held to be parts of general use and classified as such and that the HSN indicated in the supplier s documents should determine the classification of the goods under the Customs Tariff as this contention is based on ignoring the defence submissions by the assessee before the Commissioner, the expert opinion and the Chartered Engineer s certificate that they were parts specifically designed for the purpose, the clarificatory letter by the supplier also confirming that they were parts specifically designed for the purpose, the drawings and designs demonstrating how and where each of the imported parts fits into the design. 45. In view of the above, we answer the questions framed by us in paragraph 25 as follows: a) The imported goods, except the structural items on which the Commissioner confirmed the demand, were not general articles of iron and steel but were parts of the OT crane system and HRSGS specifically designed for the purpose. b) They were correctly classif ..... X X X X Extracts X X X X X X X X Extracts X X X X
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