HBL Power Systems Ltd. Vs Commissioner of Customs (CESTAT Chennai)
Nickel Hydroxide powder was classifiable as miscellaneous chemical product under Customs Tariff Heading (CTH) 3824 and not as Inorganic Chemical under CTH 2825
Conclusion: Nickel Hydroxide powder with additives like cobalt and graphite was classifiable as a miscellaneous chemical product under Customs Tariff Heading (CTH) 3824 and not as an inorganic chemical under CTH 2825. Assessee was not eligible for exemption under Notification No. 12/2012-Cus but was not liable for penalties or extended period demand.
Held: Assessee-company was engaged in the manufacture of nickel-cadmium batteries. To produce these batteries, the company imported Nickel Hydroxide powder with additives from various countries and classified the product under CTH 2825 4000, which covers “Nickel Oxides and Hydroxides.” The classification had been consistently accepted by the customs department since 2003. After the introduction of Notification No. 12/2012-Cus dated 17.03.2012, which provided exemption from basic customs duty for goods falling under this heading, assessee claimed the exemption for its imports. Department disputed the classification, arguing that the imported product was not a pure chemical compound but a formulated mixture intended for a specific use in batteries. Department held that it should be classified under CTH 3824 9090 as a miscellaneous chemical product. A show cause notice was issued, and Commissioner confirmed the demand, disallowed the exemption, and imposed penalties. Aggrieved by this order, assessee filed an appeal before CESTAT. Assessee argued that the product description was factually correct in all Bills of Entry and that similar classification had been accepted by the department for over a decade. It submitted that the classification issue involved the interpretation of tariff headings and did not involve any intent to mislead. They also pointed out that the product was being classified similarly by global suppliers. Department argued that Chapter 28 only included chemically defined compounds and that mixtures with additives fall outside its scope. Department asserted that the product was not eligible for exemption and that assessee had misclassified the goods to wrongfully avail benefits under the customs notification. It was held that the imported product was a mixture designed for specific industrial use and could not be treated as a chemically defined compound under Chapter 28. CESTAT followed its earlier decision in SAFT India Pvt. Ltd., which involved similar goods and concluded that the correct classification was under CTH 3824 9090. It also found that assessee had consistently used the earlier classification in good faith and there was no evidence of mala fide intention. It was observed that the dispute arose from the interpretation of the tariff and exemption notifications. While upholding the classification and confirming the demand for the normal period, CESTAT set aside the penalty and the invocation of the extended period of limitation. It was held that assessee was not eligible for exemption under Notification No. 12/2012-Cus but was not liable for penalties or extended period demand. The appeal was partly allowed.
