Case Law Details
Bombay Fluid Systems Components Pvt Ltd Vs Commissioner of Customs (CESTAT Mumbai)
Introduction: In a crucial ruling, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Mumbai, recently overturned a previous decision by the Commissioner of Customs, concerning the classification of imported stainless steel tube fittings under the Customs Tariff Act, 1975. The dispute revolved around whether the fittings should be classified under tariff item 7307 2200, as proposed by Bombay Fluid Systems Components Pvt Ltd, or the residual entry 7307 2900, as determined by the customs authorities.
Analysis: The original classification by the customs authorities was based on the Harmonized System of Nomenclature (HSN) Explanatory Notes pertaining to heading 7307 of the First Schedule to the Customs Tariff Act, 1975, and the General Rules for Interpretation of the Tariff. They argued that the imported goods did not match the description of ‘flanges, threaded elbows, bends and sleeves,’ leaving no option but to resort to the residual entry.
However, the CESTAT noted that the lower authorities had not thoroughly examined the meaning of ‘threaded elbows and sleeves’ and that their findings did not seem to be based on either a visual examination of the goods or a review of the import documents. More critically, the authorities relied on the HSN Explanatory Notes without referring to the entries within heading 7307.
The CESTAT referred to previous Supreme Court decisions to emphasize that the burden of proof for a different classification falls on the Revenue department. In this case, the department had failed to provide any proper evidence supporting their chosen classification, which led the CESTAT to question the original process of re-determination.
Conclusion: The ruling in this case underlines the importance of a thorough and transparent process in determining tariff classifications under the Customs Tariff Act. The CESTAT’s decision illustrates that the onus lies on the Revenue department to provide sufficient evidence if it wants to reclassify goods under a different tariff heading. This ruling serves as a critical reminder for authorities to adhere to due process when classifying imports to ensure the correct application of customs duties.
FULL TEXT OF THE CESTAT MUMBAI ORDER
The short point in this appeal of M/s Bombay Fluid Systems Components Pvt Ltd against order1 of Commissioner of Customs (Appeals), Mumbai – III is the incorrectness of the manner in which classification under Customs Tariff Act, 1975 has been applied by the lower authorities to deny them the rate of duty corresponding to tariff item 7307 2200 of First Schedule to the Customs Tariff Act, 1975 claimed by them in the import of ‘stainless steel tube fittings – couplings, tees, crosses’ against bill of entry no. 5276675/14.10.2019 declared to be valued at ₹83,24,561/-. Effective rate of duty of 10% is applicable to the said goods in terms of notification no. 50/2017-Cus dated 30th June 2017 (serial no. 377).
2. We have heard Learned Counsel for the appellant and Learned Authorised Representative. It is seen that the lower authorities are both agreed upon re-classifying the impugned goods under the residual heading in tariff item 7307 2900 and it is seen from the impugned order that the first appellate authority has determined that the goods are neither ‘flanges, threaded elbows, bends and sleeves’ leaving no option but for resort to the residual entry. Reliance for this was placed upon HSN Explanatory Notes pertaining to heading 7307 of First Schedule to Customs Tariff Act, 1975 and the General Rules for Interpretation of the Tariff therein.
3. We find that neither of the lower authorities have examined the meaning of the expression ‘threaded elbows and sleeves’ as declared and have come to the conclusion that the imported goods do not match the description therein. There is no record of any evidence that the said finding is based upon visual examination of goods or scrutiny of any documents pertaining to the import. Furthermore, it is seen that, without reference to the entries within heading 7307 of First Schedule to Customs Tariff Act, 1975, the HSN Explanatory Notes have been relied upon. Crucial to the displacement of a tariff item as declared, is the available of an alternative tariff item that must, independently conform to the goods. This has been held in the decision of the Hon’ble Supreme Court in HPL Chemicals Ltd v. Commissioner of Central Excise, Chandigarh [2006 (197) ELT 324 (SC)] thus
’29. This apart, classification of goods is a matter relating to chargeability and the burden of proof is squarely upon the Revenue. If the Department intends to classify the goods under a particular heading or sub- heading different from that claim by the assessee, the Department has to produce proper evidence and discharge the burden of proof. In the present case the said burden has not been discharged at all by the Revenue……’
and in Hindustan Ferodo Ltd v. Commissioner of Central Excise, Bombay [(1997) 2 SCC 677] that
‘It is not in dispute before us as it cannot be, that owners of establishing that the said drinks fell within Item No. 22 lay on the Revenue. Revenue has led no evidence. The onus was not discharged, therefore, the Tribunal was right in rejecting the evidence that was produced on behalf of the appellant, the appeal should nevertheless have been allowed.’
4. With the two rival classifications at the eight digit level within the same heading the resort to one alternative classification that is a residual entry, it would appear that the lower authorities have not given any justification for discarding the claim by the appellant or preferring the revised one over the declared one.
5. Accordingly, the entire process of re-determination of the classification is not in accordance with the decision supra of the Hon’ble Supreme Court. For the above reason, we set aside the impugned order and allow the appeal.
(Order pronounced in the open court on 14/07/2023)
Notes
1 [order-in-appeal no. MUM-CUSTM-AMP-APP-108/2021-22 dated 21st May 2021]
