Extended period of limitation cannot be invoked if no suppression or mis-declaration

Karnavati Car Air Conditioners Pvt Ltd Vs C.C.-Ahmedabad (CESTAT Ahmedabad)

Introduction: In a recent judgment, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Ahmedabad addressed the matter of Karnavati Car Air Conditioners Pvt. Ltd. challenging the change in classification of imported goods. This article provides an in-depth analysis of the case, focusing on the tribunal’s dismissal of the plea for an extended period of limitation.

Detailed Analysis: The appeal filed by Karnavati Car Air Conditioners Pvt. Ltd. pertains to the reclassification of imported goods. The appellant sought classification under heading 8708 for their imported goods, filing Bill of Entry 6422284 dated 19.08.2016. The issue arose when the Risk Management System (RMS) system raised a query regarding the Maximum Retail Price (MRP) of the goods, a crucial factor under the Central Excise Act, 1944, for the levy of Countervailing Duty (CVD).

The appellant, responding to the audit notice, informed the SGST Authority about a concurrent show cause notice issued by the anti-evasion wing of the CGST Department. The show cause notice covered the financial years 2017-2018 to 2021-2022, addressing all points mentioned in the audit memo. Despite the ongoing adjudication, the State GST Authority’s audit wing expressed uncertainty regarding the settlement of a specific discrepancy.

The tribunal considered the arguments put forth by the Learned Counsel for the appellant, emphasizing that the goods imported were parts of air conditioning systems, not vehicles. The contention was that Notification No. 49/2008, which provides abatement for goods covered by MRP, covers only parts of vehicles, excluding parts of air conditioners.

The tribunal analyzed the nature of the imported goods, including cooling coils, radiators, and compressors, essential components of a refrigeration system. Contrary to the appellant’s claim of these being accessories, the tribunal deemed them as integral parts.

Additionally, the appellant argued against the imposition of penalties, asserting that there was no suppression or mis-declaration. The tribunal examined the penalty clauses under sections 114(AA) and 112(a) of the Customs Act, 1962.

In a crucial decision, the tribunal dismissed the plea for an extended period of limitation, stating that all necessary data for the show cause notice, except the MRP, was available in the bill of entry. The tribunal held that the revenue failed to establish the case for revocation of the extended period.

Conclusion: The CESTAT Ahmedabad’s judgment in the Karnavati Car Air Conditioners case carries significant implications for the determination of value, especially concerning the MRP for the purpose of CVD. The tribunal’s dismissal of the plea for an extended period of limitation underscores the importance of providing complete and accurate information in bill entries. Importers must be meticulous in complying with all relevant regulations to avoid potential challenges and penalties. This case serves as a reminder of the intricacies involved in customs matters and the necessity for thorough documentation and compliance with statutory provisions.

FULL TEXT OF THE CESTAT AHMEDABAD ORDER

This appeal has been filed by the Karnavati Car Air Conditioners Pvt. Ltd against change of classification of goods imported by the appellant.

2. The Learned Counsel for the appellant pointed out that their imported goods and sought classification under heading 8708 and filed bill of entry 6422284 dated 19.08.2016. The RMS system raised a query seeking the MRP of the goods as that was considered mandatory under the provisions of section 4A of the Central Excise Act, 1944 for the purpose of levy of CVD. The Central Excise had issued notification No. 49/2008-CE (NT) dated 24.12.2008, whereby abatement has been provided in respect of goods covered by MRP. This bill of entry filed by the appellant was recalled for amendment under section 149 of the Customs Act, 1962 and reassessment under section 17 of the Customs Act, 1962. The bill of entry was thereafter, reassessed and countervailing duty was demanded on the basis of MRP. After noticing the above, the revenue sought reassessment of similar bill of entries cleared by the appellant in the past without declaring the MRP. Accordingly, the past bills of entries were sought to be reassessed and a demand of Customs duty was raised by the appellant. The provisions for demanding interest and penalty were also invoked. The Learned Counsel for the appellant argued that the items imported by them are not part of vehicles but are parts of AC.

2.1 The Learned Counsel argued that the part of AC cannot be considered as parts of vehicles. The argument was that since notification No. 49/2008 the No. 108 covers only the parts of vehicles. It did not cover the parts of AC imported by the appellant. The Learned Counsel argued that while the Annexures 1 to 5 and Annexure E6 of the show cause notice show calculation on the basis of MRP, it does not indicate how the MRP has been obtained. It was argued that the revenue must show the basis for determination of MRP and that must be in accordance with the provisions of Rule framed under section 4A of the Central Excise Act, 1944 i.e. under Central Excise (determination of retail sale price of excisable goods) rules, 2008.

2.2 The Learned Counsel further argued that since the goods classified by them under section 87 then mere non-mention of MRP can at the best be a mutual mistake of department as/has been an There was no suppression on the part of appellants.

2.3 The learned Counsel argued that mere non-mention of MRP cannot be bar is for proposed confiscation of goods especially when the MRP could also have been asked for by the revenue. The Learned Counsel argued that mere non-mention of MRP based assessment cannot be an offence under section 111(m) of the Customs Act, It was further argued that the goods are no longer available for confiscation and therefore no proposal for confiscation could have been made.

2.4 The Learned Counsel further argued that for penalty section 114(AA) has been invoked. The argued that the said section applies only when a person “knowingly or intentionally” makes a false declaration.

The learned Counsel argued that mere non-mention of MRP based assessment for the purpose of CVD cannot be called mis-declaration within the meaning of said section.

2.5 The Learned Counsel further argued that the goods imported by them are accessories and not parts. They relied on the decision of Tribunal in the case of Banco Products 2009 in 25 ALD 636.

3. The Learned AR relied on the impugned order.

4. We are considered rival submission. We find that the issue pertains to import of following goods.

3.1 The appellant had imported these goods and had not declared the MRP on the said goods. Subsequently, the order in original notes in para 48 that MRP was later declared by the appellant and on that basis a demand show cause notice was issued seeking to demand the countervailing duty on the basis of MRP.

3.2 Notification 9 of 2010 CE (NT) dated 02.2010 which amends notification no. 49/2008 Central Excise NT dated 24.12.2008 inserts following in the table.

After introduction this entry the parts components and assemblies of vehicles specified in this entry became chargeable to Central Excise Duty on the basis of Section 4A of the Central Excise Act, 1944. Consequently, for the purpose of charging CVD also, the MRP based assessment became applicable. The goods in respect of which the show cause notice was issued were cleared in the situation where the importer had not declared MRP though there was no mis-declaration in description of goods or classification. This show cause notice was issued after obtaining MRP from the importer. The Learned Counsel for the appellant pointed out that the goods are accessories and not parts. He relied on the decision of Tribunal in the case of Banco Products India Pvt. Ltd. This argument was that accessories will not be covered under Sr. No. 108 of notification no. 49/2008 CE (NT) and therefore, MRP based assessment cannot be applied on passed imports made by the appellant. On perusal of the nature of goods show that radiator, evaporator, condenser or compressor or all essential ingredients refrigeration system and can by no means the called accessories. The decision of Banco Products India Ltd. is different sides of facts. In the said case the goods in dispute were not essential ingredients of the final product.

3.3 The next issue raised by the appellant is that, it was not a case of any suppression as the fact regarding classification under section 87 was known to revenue. There was no mis-declaration of description. He argued that in these circumstances, penalty should not be imposed. We find that penalty of Rs.50,000/- has been imposed under section 114 AA of the Customs Act, 1962. The penalty of Rs. 50,000/- has been also imposed under section 112(a) of the Customs Act, 1962.

4. We find that extended period of limitation has been involved to raise this The show cause notice has been issued on 13.04.2018 whereas, the bill of entries are dated 26.07.2016 to 13.08.2016. It is seen that all the data required for the notice except the MRP was available in the bill of entry filed by the appellant. In these circumstances, we do not find any reason to hold that anything was suppressed by the appellant for the purpose of evasion. The description of the goods the heading in which classification has been claimed and the rate of duty for the purpose of CVD and the value for the purpose of CVD are all available on the bill of entries. In these circumstances, we do not find that revenue has been able to establish the case for revocation of extended period of limitation.

5. In view of above, we hold that the extended period of limitation could not have been involved in the instance case. This appeal is therefore allowed on the ground of limitation.

(Pronounced in the open Court on 09.01.2024)