P K Exim Vs C.C. -Mundra (CESTAT Ahmedabad)
It is settled law that, irrespective of whether the classification claimed by the appellant is correct or not since the classification proposed by the Revenue is absolutely incorrect, the entire case of the Revenue will not sustain.
Further In view of the settled legal position the test of one particular consignment cannot be used to override the test conducted in respect of past consignments for deciding the classification in respect of previous consignment test report of the same was not under dispute. Therefore, for this reason also the demand of duty amount, consequential penalty in respect of previous consignment is not sustainable on this ground also.
Further we find that as regard the demand in respect of 11 earlier consignments the appellant has declared the goods as per the document such as Bill of lading, Commercial invoices from the supplier party etc. The goods was tested and then the Bill of Entry were assessed finally. Therefore, in filing the Bills of Entry there is no suppression or misdeclaration on part of the appellant. Hence, the extended period could not have been invoked in respect of 11 consignments therefore, the demand of duty in respect of goods imported under said 11 consignments is clearly hit by limitation also.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The brief facts of the case are that the appellant filed bill of entry No. 8924690 dated 15.04.2015 for clearance of item declared as Lime Mortar(Slaked lime) imported from M/s Chemical China Co. Limited under invoice No CC15227 dated 20.03.2015 and bill of lading no ABKUMN1500042 dated 17.03.2017.On the basis of intelligence gathered by the officers of DRI Gandhidham, they examine the goods i.e. lime Mortar/ Slaked lime (Expansive mortar) to ascertain mis-classification and mis-declaration under Panchnama dated 18.04.2015.During the course of examination the goods were found packed in the polythene bags with 4 such polythene bags placed in one corrugated box. The boxes cracking lime mortar, 20 kgs and in polythene bags “cracking non – explosive demolition agent (lime mortar)” were found. On opening of the polythene bags, the goods were found to be in form of ash type powder. The representative samples were drawn and sent to Customs House Laboratory, Kandla under test memo no 02/2015-16 dated 20.04.2015 for testing. The Joint Director,Customs House Laboratory, Kandla vide test report No 544 dated 21.04.2015 reported that the subject product is not slaked lime but is a product prepared from slaked lime having metallic additives and other than the product classifiable in chapter 25 of customs tariff. Further vide letter dated 04.06.2015 customs house laboratory kandla submitted detailed test report.
1.2 On the basis of such report it was contented that the subject imported goods have been misdeclared as Lime Mortar (Slaked Lime) and misclassified under CTH 25222000 and hence the goods were seized. The said goods was provisionally released by the Joint Commissioner Import and CH, on submission of bond of full value of the goods and revenue deposit of differential duty amount of Rs 139845/- and accordingly bill of entry no 8924690 dated 15.04.2015 was provisionally assessed. The statement of proprietor of the appellant company was recorded on 25.11.2016 and after analyzing Wikipedia and Harmonized System Notes(HSN) it was contended that the appellant have misclassified the imported Lime Mortar (Slaked Lime) under CTH 25222000 on the ground that the imported goods is processed slaked lime,hence the same is correctly classifiable under CTH 38245090 as the product is not pure calciumoxide but certain other chemicals were added in the processing of the same and further it is preparation based lime. The SCN was issued wherein it was proposed to change the classification as mentioned above and also proposed for confiscation of the goods, imposition of penalty under section 112(a) and 114 of Customs Act, demand of differential customs duty in Rs 139845/-and demand of interest under section 28A of customs Act. Demand, Interest and Penalty in respect of Past 11 consignment was also proposed. The Appellant did not file any reply and no one appeared for the personal hearing. Hence ex-parte OIO dated 14.03.2018 was passed as under:
1.3 Being aggrieved by OIO the appellant filed an appeal before Commissioner(Appeals) who vide impugned order in appeal No CUS-TM-000-App-008-19-20 dated 31.05.2019 upheld the OIO and appeal filed by the appellant was rejected. Therefore, the present appeal.
2. Shri Hasit Dave, Learned Counsel appearing on behalf of the appellant submits that the description of the goods, Chapter heading etc has been declared by the appellant based on the Bill of lading, commercial invoice of the supplier party. Therefore, there is no mis-declaration on the part of the appellant. He further submits that the entire case is based on the test report which is under serious doubt. He submits that the content of the test report is contrary to each other therefore, the test report cannot be relied upon. The goods Lime Mortar (Slaked Lime etc) is naturally occurred goods and hence must be classified only under the chapter heading 25222000.Therefore, it cannot be termed as preparation, instead the oxide are present as impurities which always part andparcel of the naturally occurred goods.
2.1 He further submits that there is no benchmark or formula specified for the product slaked lime (Lime Mortar) to specify them as preparation. The test report cannot be relied upon since the same were issued under the influence of inquiry of SIIB section of customs house itself. The opinion of CHL Kandla being absolutely wrong cannot be based for re – classification. The opinion is against the explanatory notes to Chapter 25 therefore, the opinion is wrong to the extent it state the imported goods as preparation and not naturally occurred goods. He submits that chapter 2522 clearly state that the slaked lime (impure calcium oxide) pertains to chapter 2522 itself. The imported goods cannot be classified under chapter 382450 since asper the chapter sub heading of 382450 the product must be binding preparation while the goods under consideration is reported as expanding nature. As regard the demand of Differential duty in respect of 11 Bills of Entry it is also bad in law as hit by limitation since all the bills of Entry were finally assessed Bills of entry. The finally assessed bills of entry are considered as order and therefore, the same cannot be reviewed by issuing SCN after expiry of two Years.
2.2 He further submits that in case of classification dispute the extended period cannot be invoked. The test report in respect of one particular consignment cannot be applied to another consignment. He submits that since there is no misdeclaration or classification of goods the imported goods are not liable for confiscation under section 111(m) of Customs Act. Consequently, penalty is also not imposable under section 112(a) of the customs Act, 1962. He submits that as per the chapter note 1 of chapter 2522 which covers mineral products only in crude state or washed(even with chemical substances eliminating the impurities without changing the structure of the product), crushed, ground, powdered, levigated, sifted, screened , concentrated by flotation, magnetic separation or other mechanical or physical processes (except crystallization)but not products that have been roasted, calcined obtained by mixing or subjected to processing beyond that mentioned in each heading. He submits that the Slaked Lime(Lime Mortar) is naturally occurred goods and definitely pertains to the chapter heading 25222000 only. Merely reading the chapter note is misleading as the explanatory note to the chapter heading prevails the chapter note. He submits that to know the exact classification of the goods pertains to chapter 2522, it is necessary to look into the explanatory notes to the chapter 2522 also. As per the plain reading of the explanatory notes the goods are slaked lime found a specific entry at the 2522.20 after the sub heading related to the quick lime.Even though the quick lime is obtained through calcining process that when water is combined with the quick lime it giving considerable heat and producing slaked lime. This slaked lime is also found entry at the chapter sub heading 2522000. The quick lime and slaked lime are impure calcium oxide in nature and chemically known as calcium hydroxide. He submits that on comparison of chapter note 1 and explanatory note to HSN, it can be said that the quick lime and slaked lime are mineral products and must be classified under the chapter sub heading 2522. Even though the quick lime is passed through the calcining process but the structure of the basic mineral lime has not changed. Therefore, the addition of water also has the same calcining process but the structure of the basic mineral lime has not been changed. Therefore, the addition of water also has the same effect therefore the slaked lime is also classifiable under chapter heading 2522 only. In this regard he placed reliance on the Hon’ble Supreme Court Judgment in the case of CCE vs 20 Microns Ltd reported at 2015 (324) ELT14 (SC) wherein it was held that even though the china clay was calcined the same was included under sub heading 2505.10.
2.3 As regard test report he submits that as the test report issued by CHL Kandla it contains self contrary result. In the said report it is stated that the impugned goods is a preparation but failed to established under what formula/ process the said preparation is prepared. The test report is also failed to state that the actual percentage of metallic additive in the said formula. There is no benchmark was shown as to how the imported goods become preparation based on certain formula. The formula was even not given in the said test report though the test report stated that the goods isthe preparation however, no explanation was given why the same is preparation. The test report in this context is not reliable. He submits that even as per the test report the percentage of slaked lime is 82.8% therefore, the imported goods are not preparation as stated by the chemical examiner in his report.
2.4 He submits that as regard the finding in the impugned order that as per the test report the preparation is based on different ingredients may include processes like calcination, hydration, roasting/drying followed by other reactive ingredients . The product is specially designed for application like demolition of rocks, concrete- structure-fracture etc. He submits that the slaked lime has natural property of expansion. Therefore, these are also called as lime mortar in trade parlance. The mortar means some kind of paste (Powder + water) which are poured in the tinybores at the surface of rocks so as to get the crack line therein to obtain the whole block there from. Since the goods have natural property of expansion therefore, it is used for developing cracks in rocks found in mines. The explanatory notes also support the contention of the appellant. He submits that even though the quicklime is obtained by the process of calcinations and then by hydration process, slaked lime is obtained but by the virtue of the Explanatory notes this process does not change the basic structure of lime. Therefore, being naturally occurred product classification declared under 25222000 is correct and legal. He submits that even the nature of quick lime is such that it can absorb moisture from atmosphere also and convert into slaked lime immediately. In this regard he referred to WWW.Wildturmeric.net giving the process of slaked lime. He submits that this shows that the test report is prepared under the pressure of inquiry officer therefore; the basic ingredient/ impurities were mentioned as mixing of various goods. It is also reported under duress in the test report that the prepared goods has expansive property despite the fact that the naturally occurred lime also has the same property. It does not require mixing for expansion at all. It will expand as and when mix with water even at random quantity.
2.5 He, without prejudice, to his submission made here in and above, further submits that the goods cannot be classified under Chapter 38245090. Learned Commissioner has considered the goods is a “Preparation”. The natural impurities of the imported goods cannot be rendered the goods under the definition of preparation therefore, the test report is wrong in the context it stated that the slaked lime is also a part of this preparation. The good is qualified as “Slaked Lime” as major portion of the goods is evenly reported as CaCO3. Therefore, the imported goods is nothing but slaked lime (Lime Mortar) as declared by the appellant. It is impure state of Calcium Oxide.
2.6 He submits that the description of goods slaked lime is clearly classified under the chapter heading 2522.Even the entry in the tariff is clear enough and without confusion. He further submits that as per the Chapter note 3 of the chapter 38 clearly stated that the heading 3824 includes only those goods which are not to be classified in any other heading. Therefore, the chapter heading 3824 is considered as residual chapter. Since the goods is slaked lime and clearly classifiable under the chapter 2522, residual chapter heading cannot be applicable in the present case.
2.7 The chapter 3824 is specifically meant for “Prepared Binders” only whereas admittedly the goods under question having expanding characteristics which is clearly different from binders hence cannot be classified under chapter 38245090.This again shows that the test report is prepared under duress of inquiry officer and therefore, it cannot be relied upon.
2.8 He submits that it is settled law that the test report of current consignment cannot be applied on the previous consignment . He placed reliance on the following judgments:
