TMI Blog2023 (12) TMI 1155X X X X Extracts X X X X X X X X Extracts X X X X ..... er has to self-assess duty and the proper officer can re-assess the duty. Both the self-assessment by the importer (or, as the case may be, the exporter) and the re-assessment by the proper officer fall under the definition of assessment as per Section 2(2). If the proper officer re-assesses the goods, unless the importer accepts the re-assessment in writing, he has to give a speaking order. Thus, the importer (or exporter) and the proper officer are competent to classify the goods and assess the duty payable on them - After the duty is assessed on the imported goods and the duty is paid, the proper officer clears the goods for home consumption under Section 46. Once this action is completed, they cease to be imported goods, they cease to be dutiable goods and the importer ceases to be the importer. Assessment concludes the determination of the liability of the importer to pay duty and is similar to a decree under the Civil Procedure Code, 1908 - The Commissioner (Appeals) does not assess but either affirms, modifies or annuls the assessment order. In this process, the Commissioner (Appeals) may also decide the issue of classification of the goods. A question which arises is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notification claimed during self assessment will not be available to the imported goods. The importer self-assessing the goods must apply his mind when classifying the goods. Classification of the goods by the importer, even if it is not in conformity with the re-assessment by the proper officer or even if it is held to be not correct in any appellate proceedings does not render the goods liable to confiscation under Section 111(m) - no penalty can be imposed under Section 112 on the appellant for the alleged wrong classification. The appellant cannot be penalized for holding a different view than the proper officer. Are the front cover, middle cover and back cover of cellular mobile phones imported by the appellant classifiable under CTH 85177090 (as claimed by the appellant) or under CTH 39209999(as held in the impugned order)? - HELD THAT:- Applying the first Rule of Interpretation, the front cover, middle cover and back cover cannot be classified under CTH 3920- the vapor deposition (lamination) takes it out of the description of CTH 3920 and thermoforming and CNC milling, being processes beyond printing and surface working take them out of the scope of chapter note 2(s). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ared to the Department that the back covers, front covers and middle covers of the cellular phones, which were classified by the appellant under CTH 85177090 deserve to be classified under CTH 39209999 instead and accordingly the differential duty needs to be paid by the appellant. Audit issued a consultative letter dated 01.02.2020 but the issue could not be resolved through consultations. Thereafter, a show cause notice [SCN] dated 19.02.2020 was issued by the Principal Commissioner of Customs, Air Cargo Complex, New Delhi proposing to reclassify the front covers, middle covers and back covers of the cellular phones under 39209999 and recover the differential duty along with interest. It was also proposed to confiscate the goods under Section 111 (m) of the Customs Act, 1962 and impose penalty under Section 112 (a) (ii) of the Customs Act, 1962. 2. The three grounds on which the SCN proposed to reclassify the goods are as follows :- (i) the goods Battery cover, Front cover, Middle cover, Back Cover and Camera Lens (which are part/sub-part or accessories of cellular mobile phones) are classifiable under CTH 39209999 and attract BCD @ 15% in terms of S. No. 10 of notificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tune of Rs. 62,44,28,858/- (Rs. Sixty Two Crore forty Four Lakh Twenty Eight Thousand Eight Hundred and fifty Eight only) on the impugned goods imported by M/s Samsung India Electronics Pvt. Ltd. against the Bills of Entry as mentioned in Annexure A to D to the SCN under Section 28 (1) of the Customs Act, 1962. (iii) I drop the demand of Rs. 24,15,22,593/- (Rs. Twenty Four Crore Fifteen Lakhs Twenty Two Thousand five Ninety Three only) in terms of the findings at para 11.10 and 11.11.1 above. (iv) I hold that interest under Section 28AA of the Customs Act, 1962 is payable in this case by M/s Samsung India Electronics Pvt. Ltd. on the demand as confirmed at (ii) above from the due date till the duty is paid in accordance with law. (v) I hold that the goods imported and already cleared by M/s Samsung India Electronics Pvt. Ltd. against the Bills of Entry as listed in Annexure A, C D to the show cause notice totally valued at Rs. 367,31,62,198/- (Rs. Three Hundred Sixty Seven Crore Thirty One Lakh Sixty Two Thousand One Hundred and Ninety Eight only) are liable for confiscation under Section 111 (m) of the Customs Act, 1962. However, as the goods have already been clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tant sheets undergo thermoforming process, wherein by a process of vacuum and air pressure, the sheet is pulled over a solid mold to obtain desired shape. This gives grooves and ground edges to the uncut phone cover to enable such a cover to be clipped to the specific phone for which it is made so that the phone is protected from dust and moisture. g. CNC Milling : In this step, specific cuts, speaker grills, and other compartments, are milled in the cover, thereby giving it final shape. (iii) These three covers have been correctly classified under CTH 85177090 as these are parts of mobile phones and not merely articles of plastic. Hence, there was no misclassification at all as held in the impugned order. CTH 3920 covers other plates, sheets, film, foil and strip of plastics, not cellular and not re-imposed, laminated, supported a similarly by with other materials . Chapter note 10 to Chapter 39 reads as follows :- 10. In headings 3920 and 3921, the expression plates, sheets, film foil and strips applies only to plates, sheets, film, foil and strip (other than those of Chapter 54) and to blocks of regular geometric shape, whether or not printed or otherwise surface-w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8517 12 90 -- 8517 18 -- 8517 18 10 -- 8517 18 90 -- 8517 61 00 -- 8517 62 -- 8517 62 10 -- 8517 62 20 -- 8517 62 30 -- 8517 62 40 -- 8517 62 50 -- 8517 62 60 -- 8517 62 70 -- 8517 62 90 -- 8517 69 -- 8517 69 10 -- 8517 69 20 -- 8517 69 30 -- 8517 69 40 -- 8517 69 50 -- 8517 69 60 -- 8517 69 70 -- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions:- (i) The phone covers are correctly classifiable under CTH 39209999 as held by the Principal Commissioner in the impugned order. They are made of plastic and the sub-components are embedded at proper places in the front cover and back cover. The purpose of the back cover is to reduce the amount of dust on battery terminals and it is also made of plastic. The middle cover fixes the inner components and protects the battery from moisture and dust and it is also made of plastic, therefore, the impugned order was correct in holding that they are classifiable under CTH 39209999. These three covers do not contribute to the functionality of the mobile per-se and, therefore, do not deserve to be classified as parts of the mobile phones and should be classified under Chapter 39. He placed reliance on the following case laws :- Ipea Paramount Pvt. Ltd. versus Commissioner of C. Ex., New Delhi [2002 (143) E.L.T. 632 (Tri. Del.)] Commissioner versus Ilpea Paramount Pvt. Ltd. [2008 (228) E.L.T. A136 (S.C.)] P.R. Packagings Pvt. Ltd. versus Commissioner of C. Ex., New Delhi II [2002 (139) E.L.T. 495 (Tri. Del.)] Hariram Govindram versus Collector of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hanging the classification and in confirming demands differential duty along with interest. The appellant mis-declared the classification of the goods and, therefore, they are liable for confiscation under Section 111 (m). Consequently, the penalty under Section 112 (a) has been correctly imposed upon the appellant. (viii) The appeal may be dismissed. 9. We have gone through the records of the case and considered the submissions from both sides. Findings 10. We have perused the records of the case and considered the submissions made by both sides. The following inter-related issues arise for determination: a) Are the front cover, middle cover and back cover of cellular mobile phones imported by the appellant classifiable under CTH 85177090 (as claimed by the appellant) or under CTH 39209999(as held in the impugned order)? b) Can an exemption notification issued by the Government under Section 25 of the Customs Act determine the classification of the goods? c) Can a scheme notified by the MeiTY determine the classification of the goods? d) Is the differential duty recoverable from the appellant? e) Is interest recoverable from the appellant? f) Were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Customs Tariff Act) or under any other law for the time being in force, with reference to- (a) the tariff classification of such goods as determined in accordance with the provisions of the Customs Tariff Act; (b) the value of such goods as determined in accordance with the provisions of this Act and the Customs Tariff Act; (c) exemption or concession of duty, tax, cess or any other sum, consequent upon any notification issued therefore under this Act or under the Customs Tariff Act or under any other law for the time being in force; (d) the quantity, weight, volume, measurement or other specifics where such duty, tax, cess or any other sum is leviable on the 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 17 as it stood immediately before the date on which such assent is received. 16. Thus, as per Section 17 the importer or exporter has to self-assess duty and the proper officer can re-assess the duty. Both the self-assessment by the importer (or, as the case may be, the exporter) and the re-assessment by the proper officer fall under the definition of assessment as per Section 2(2). If the proper officer re-assesses the goods, unless the importer accepts the re-assessment in writing, he has to give a speaking order. Thus, the importer (or exporter) and the proper officer are competent to classify the goods and assess the duty payable on them. 17. After the duty is assessed on the imported goods and the duty is paid, the proper officer clears the goods for home consumption under Section 46. Once this action is completed, they cease to be imported goods, they cease to be dutiable goods and the importer ceases to be the importer. Sections 2(14), 2(25) and 2(26) which explain this legal position read as follows. 2. Definitions (14) dutiable goods means any goods which are chargeable to duty and on which duty has not been paid; (25) imported goods means ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pened in this case also. A question which arises is if a Bill of Entry which is only self-assessed by the importer without any re-assessment can it also be appealed against to the Commissioner (Appeals) under Section 128. The larger bench of the Supreme Court held in ITC Ltd versus Commissioner of Central Excise Kolkata IV [2019 (368) E.L.T. 216 (S.C. ) ] in the affirmative. The relevant portion of this judgment is as follows: 42. It was contended that no appeal lies against the order of self-assessment. The provisions of Section 128 deal with appeals to the Commissioner (Appeals). Any person aggrieved by any decision or order may appeal to the Commissioner (Appeals) within 60 days. There is a provision for condonation of delay for another 30 days. The provisions of Section 128 are extracted hereunder: 128. Appeals to [Commissioner (Appeals)]. (1) Any person aggrieved by any decision or order passed under this Act by an officer of customs lower in rank than a [Principal Commissioner of Customs or Commissioner of Customs] may appeal to the [Commissioner (Appeals)] [within sixty days] from the date of the communication to him of such decision or order : [Provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower of the proper officer was held by the larger bench of Supreme Court as the power to review the earlier assessment in Canon India Pvt. Ltd. versus Commissioner of Customs [ 2021 (376) E.L.T. 3 (S.C.) ] The relevant text of this judgment reads as follows: 12. The nature of the power to recover the duty, not paid or short paid after the goods have been assessed and cleared for import, is broadly a power to review the earlier decision of assessment. Such a power is not inherent in any authority . Indeed, it has been conferred by Section 28 and other related provisions. The power has been so conferred specifically on the proper officer which must necessarily mean the proper officer who, in the first instance, assessed and cleared the goods i.e. the Deputy Commissioner Appraisal Group. Indeed, this must be so because no fiscal statute has been shown to us where the power to re-open assessment or recover duties which have escaped assessment has been conferred on an officer other than the officer of the rank of the officer who initially took the decision to assess the goods. (emphasis supplied) 22. While Section 128 does not place any restriction, other than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toms leviable thereon. ******* (4) Every notification issued under sub-section (1) or sub-section (2A) shall, unless otherwise provided, come into force on the date of its issue by the Central Government for publication in the Official Gazette. ******* 25. The Central Government can issue exemption notifications under Section 25 if it is satisfied that it is in necessary in public interest to do so. They are not meant to determine the classification of the goods in any assessment nor are they appellable but are meant to grant exemption from duty or modify or withdraw an exemption previously granted. However, the notifications can be conditional. For instance, in this case, the notification no. 57/2017- Cus dated 30.6.2017 (S.No.10) referred to and relied upon in the SCN to propose classification of the goods in dispute reads as follows. In exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the goods of the description as specified in column (3) of the Table below, as the case may be, and falling within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cover and back cover will be exempted under the notification if they fall under CTH 39209999, it means all front cover, back cover and middle covers fall under 39209999. This logic cannot be accepted because the issue of exemption notification is a quasi-legislative function of the Government (and is not appealable) and is not a quasi-judicial function of assessment, including classification, which is appealable. A plain reading of the exemption notification also does not show that it intends to decide the classification of the goods under any heading. It only says that if the goods which match the description also fall under the tariff heading they will be exempt. 28. Goods must be classified under the Schedule to the Customs Tariff Act, 1975. For this purpose, the Rules of Interpretation have been provided of which Rule 1 reads as follows: 1. The titles of Sections, Chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under Section 111(m) because the appellant self-assessed the goods classifying them under the Customs tariff heading, which, according to it, was correct. Since the goods were not liable to confiscation, no penalty could have been imposed under Section 112. According to the learned special counsel for the Revenue, classification of goods by the appellant importer is part of the entry made under Section 46 of the Customs Act, i.e., the Bill of Entry and since the goods did not match this part of the Bill of Entry, the imported goods were squarely covered by and were liable to confiscation under Section 111(m).Since the goods were liable to confiscation, penalty can be imposed and was correctly imposed under Section 112. 31. We have already recorded that classification of the goods, their valuation and applying exemption notifications are all part of assessment of duty. This has to be done firstly by the importer (self-assessment) and can then be done by the officer (re-assessment) under Section 17. The remedy against wrong self-assessment is the re-assessment by the officer [or an appeal to Commissioner (Appeals)] and the remedy against the re-assessment is an appeal to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble for the importer to predict if the proper officer would re-classify the goods and if the proper officer would, after rejecting the transaction value, re-determine the value based on contemporaneous imports or through other methods or what value the officer will fix. Nothing in the law requires an importer to anticipate what classification the proper officer will find proper for the goods and classify the goods or anticipate if the proper officer will reject the transaction value and anticipate what value he will determine and assess duty accordingly. 34. If Section 111(m) is read to mean that goods can be confiscated if the classification of the goods and the exemption notifications claimed by the importer self-assessing the duty under Section 17 and indicated in the Bill of Entry do not match the classification of the goods or the exemption notifications which the proper officer may apply during re-assessment or later, it would result in absurd results. The importer cannot predict the mind of the proper officer and self-assess duty so as to conform to it. Insofar as the valuation is concerned, the importer is required to truthfully declare the transaction value, any additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Rules 2 (a) which deals with incomplete or unassessmbled or disassembled articles and 2 (b) which deals with mixtures of substances are not relevant to this case. Rule 3. When by application of rule 2(b) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cut they become articles ready for use). 37. Goods should be classified under the tariff should be as per the headings and sub-headings and relevant section notes and chapter notes. Chapter note 2 (s) to chapter 39 clearly excludes goods falling under Section XVI under which chapter 85 also falls and therefore, if the goods are classifiable under chapter 85 as claimed by the appellant, they cannot fall under chapter 39 as held in the impugned order. On the other hand, Chapter note 10 includes within the ambit of heading 3920 plates, sheets, film foil and strips and blocks of regular geometric shape, whether or not printed or otherwise surface-worked, uncut or cut into rectangles (including squares) but not further worked ( even if when so cut they become articles ready for use ). 38. Reading these two notes together, goods falling under 3920 will continue to be classifiable under this heading even if they become articles ready for use and therefore, they cannot fall under chapter 85 (section XVI). Therefore, they do not get excluded by virtue of note 2(s) from Chapter 39. This leads us to the next question whether the front cover, mid cover and back cover fall under 3920. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . and Speedway Rubber Co. in support of this submission. 40. On the question of whether the specific entry should prevail over the general entry, learned special counsel submitted that since the impugned goods do not merit classification under 8517 at all, therefore, the question of general or specific entry does not arise. Regarding the case of Bhagwati Products Ltd , relied upon by the appellant, he submitted that the goods in question in that case were front housing and back housing which were parts of a mobile phone and deserved to be classified under CTH 85177090. In this case, the appellant itself has declared them as front cover, middle cover and back cover not as housing and, therefore, the ratio does not apply. 41. After considering the submissions on both sides on the question of classification, we find that the front cover, middle cover and back cover of mobile phones are undisputedly, made of plastic and are parts of mobile phones and are not articles of general use. The case of the Revenue is that even if they become articles ready for use, if they are manufactured from plates, sheets, film foil or strips, whether or not they are printed or otherwise surface- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and this process also takes it out of the purview of chapter note 2(s) to Chapter 39. The sixth and the last process is CNC milling to cut holes in these covers to install various components. CNC or Computerised numerically controlled machines, as is well known, are modern, automated versions of lathe machines which are used to cutting, grinding, etc. to work on a piece of material to convert it into desired articles. In our considered view, CNC milling also goes beyond mere cutting and surface processing of the sheet. To sum up, the processes of vapour deposition, being lamination, takes the front cover, back cover and middle cover out of the purview of CTH 3920 and the processes of thermoforming and CNC milling being processes beyond cutting and surface working, take them out of the scope of chapter note 2(s) to Chapter 39. 43. Thus, applying the first Rule of Interpretation, the front cover, middle cover and back cover cannot be classified under CTH 3920- the vapor deposition (lamination) takes it out of the description of CTH 3920 and thermoforming and CNC milling, being processes beyond printing and surface working take them out of the scope of chapter note 2(s) . We also f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eatment of materials by a process involving a change of temperature. Accordingly, we hold that the impugned goods are classifiable under respective Headings in Chapters 39 and 40 of the Central Excise Tariff. We, thus allow the Appeal. 45. Similarly, the decision in the case of RR Packaging was based on Trade Notice No. 67/86 dated 30-9-1986 issued by the Bombay Collectorate which was in favour of the assessee and was binding on the officers. The question in Hariram Govindram was related to classification of the covers of the outer covers of the cassettes. Relying on Board s order dated 29-7-1994 issued under Section 37B of the then Central Excises and Salt Act, 1944, the classification was decided in favour of the assessee. 46. In Karnataka Power Corporation, the dispute was whether imported parts of Hydro Electric Generator i.e., Epoxy insulated single turn half coils with accessories and Epoxy insulated single turn half coils wave stator windings etc. were classifiable under 8503 or under 8544. Applying Section note 2 (b) to Section XVI, it was held that the goods were suitable solely or principally for the generator and hence classified along with them under 8503. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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