N. Ranga Rao & Sons Versus Commissioner of Customs, Chennai>2007(08)LCX0086

2007(08)LCX0086

In the Customs, Excise & Service Tax Appellate Tribunal, Chennai

Shri P.G. Chacko, Member (Judicial) and Shri P. Karthikeyan, Member (Technical)

N. Ranga Rao & Sons

Versus

Commissioner of Customs, Chennai

Final Order No. 1024/2007 dt. 2.8.2007 certified on 24.8.2007 in Appeal No. C/185/2007

Cases Quoted -

Jindal Vijayanagar Steel Ltd. Vs. CC, Mangalore 2005(09)LCX0258 Eq 2006 (073) RLT 0467 (CESTAT-Ban.) Referred [Para 4]

CC, Mangalore Vs. Jindal Vijayanagar Steel Ltd. 2006(08)LCX0278 Eq 2007 (207) ELT 0047 (Kar.)- Referred [para4]

Ashok Leyland Ltd. Vs CCE, Chennai 2004 (067) RLT 0082 (CESTAT- Che.) -Referred [para4]

Boving Fouress Ltd. Vs. CCE, Chennai 2006(08)LCX0061 Eq 2006 (202) ELT 0389 (SC)- Relied on [paras4,8]

Jayaswals Neco Ltd. Vs CCE Nagpur 2006(01)LCX0025 Eq 2006 (073) RLT 0230 (SC)-Relied on [para8]

Deptt/s Instructions Referred :

Circular No. 495/61/99-CX-3 dated 22.11.1999 issued by CBEC [reported in 1999 (035) RLT M59] [Para 4]

Advocated By -

S/Shri K.S. Ravi Shankar and N. Anand, Advs. for Appellants
Shri M.K.A.K. Mohiddin, JDR for Respondent

Per P.G. Chacko :

The appellants had filed 11 bills of entry during October-November, 2006, for clearance of goods declared as 'RAW INCENSE STICKS', 'FINISHED CHARCOAL RAW BATHIES', 'BLACK CHARCOAL INCENSE STICKS' or 'CHARCOAL INCENSE STICKS', imported from China/Vietnam. The goods were classified under Heading 3707 41 00 attracting 'nil' rate of additional duty of customs (countervailing duty). The appellants requested for provisional assessment, which was declined by the original authority on the ground that identical goods had already been classified finally by the Commissioner of Customs (Appeals) under Heading 4421 90 90 attracting 16% CVD. Against the decision of the original authority, they preferred an appeal to the Commissioner (Appeals) and the latter affirmed the decision of the lower authority. Hence the present appeal of the assessee.

2. After examining the records, we note that the imported incense sticks were of length 8" to 9" and that the Chemical Examiner, who tested samples, reported as follows:-

"The sample is agarbathi in the form of sticks having mild odour while burning. It consists of wood sticks covered with wood flour charcoal and small amount of additives."

Note: Presence of perfumery material could not be detected.

It appears that, in an Order dated 14.02.2006, the Commissioner (Appeals) had affirmed classification of incense sticks of length 19" imported by the appellants some time before the period of the subject imports, under Heading 4421 90 90. The said Order-in-Appeal was not challenged by the party. Further, it appears that the appellants had imported incense sticks of length 8" to 9" (similar to those covered by the subject imports) during the period from 08.03.2006 to 27.09.2006 and filed 28 bills of entry classifying the goods under Heading 3707 41 00 for the purpose of clearance without payment of CVD. Some of these imports were from China and others from Vietnam. All the 28 bills of entry were finally assessed under Heading 3307 41 00 and accordingly the goods were allowed to be cleared without payment of CVD.

3. In the impugned order, learned Commissioner (Appeals) compared the above test report with the test report relating to a sample of 19"-long incense stick covered by bill of entry dated 18.10.2005 which was the subject matter of the case considered in Order-in-Appeal dated 14.02.2006. The Chemical Examiner's report on the 19" incense sticks was as follows:

"The sample is in the form of longer agarbathis in the form of sticks having a wood burning odour, on burning. It consists of wood stick covered with wood flour and having a covering of colourant. It is free from charcoal and odoriferous substances."

The appellate authority rejected the assessee's claim (based on the two test reports) that the goods considered in Order-in-Appeal dated 14.02.2006 was different from the subject goods. It relied on a statement of a functionary of the appellants, and recorded the finding that the subject goods were not different from the goods considered in the above Order-in-Appeal. As the appellants had not challenged the Order-in-Appeal, learned Commissioner (Appeals) took the stand that classification of the goods in question was conclusively covered by the said Order-in-Appeal. Accordingly, the direction issued by the original authority to the party to reclassify the goods under Heading 4421 90 90 and pay differential duty accordingly was upheld.

4. Learned counsel submitted that the incense sticks imported by the appellants during March-September, 2006 were allowed to be classified under Heading 3307 41 00 and to be cleared without payment of CVD and that the assessments were not challenged by the Revenue. That was why Order-in-Appeal dated 14.02.2006 classifying incense sticks under Heading 4421 90 90 was not challenged by the party. In this context, learned counsel referred to the Tribunal's decision in Jindal Vijayanagar Steel Ltd. Vs. Commissioner of Customs, Mangalore, 2005(09)LCX0258 Eq 2006 (073) RLT 0467 (CESTAT-Ban.)=2005(09)LCX0258 Eq 2006 (200) ELT 0263 (Tri.-Bang.), wherein it had been held that, once an assessment order had been made on a bill of entry, such order was appealable. The cited decision of the Tribunal was affirmed by the Karnataka High Court in Commissioner of Customs, Mangalore Vs. Jindal Vijayanagar Steel Ltd., 2006(08)LCX0278 Eq 2007 (207) ELT 0047 (Kar.). Reliance was also placed on the decision of this Bench in Ashok Leyland Ltd. Vs. Commissioner of Central Excise, Chennai, 2004 (067) RLT 0082 (CESTAT-Che.)=2004(08)LCX0042 Eq 2004 (173) ELT 0518 (Tri.-Chennai), wherein assessment of bill of entry was held to be an appealable order. Learned counsel argued that, where classification of agarbathis imported during earlier period had been concluded in favour of the importer by the Revenue, it was not open to them to take a different stand in respect of the same item imported later. In this connection, the apex court's judgments in Boving Fouress Ltd. Vs. Commissioner of Central Excise, Chennai, 2006(08)LCX0061 Eq 2006 (202) ELT 0389 (SC) and a few other cases were relied on. Learned counsel sought to differentiate the subject goods from the goods covered by Order-in-Appeal dated 14.02.2006 by submitting that the incense sticks covered by the past import were free from charcoal and odoriferous substance while the goods in question contained charcoal and also had pleasant odour while burning. This distinction was based on the test reports. On account of such distinction, counsel argued, classification of the subject goods was not in any way affected by Order-in-Appeal dated 14.02.2006. Learned counsel further pointed out that the Revenue called the goods "agarbathi" only. In this context, he referred to the Board's Circular No. 495/ 61/99-CX-3 dated 22.11.1999 [reported in 1999 (035) RLT M59], wherein it had been noted that different brands of agarbathi had different fragrance on account of different formulations used by the manufacturers and that the odoriferous substance applied on agarbathi varied from manufacturer to manufacturer. He submitted that Heading 3307 41 00 was a specific entry for "agarbathi" and, therefore, the subject goods could be classified under this Heading only.

5. Learned JDR submitted that the item imported by the appellants was only raw agarbathi which required to be further processed to obtain agarbathi. He referred to the test report relating to the subject imports and pointed out the presence of any perfumery compound could not be detected by the Chemical Examiner. He pleaded for classifying the imported item as "other articles of wood" under Heading 44.21 on the strength of HSN Notes under the Heading. Relying on HSN Notes, he argued that, if match splints impregnated with chemical substances could be classified under the above heading, wood sticks covered with charcoal, wood flour and additives could also be classified likewise. Learned DR also argued in support of the findings recorded by the Commissioner (Appeals).

6. We have given careful consideration to the submissions. We may, at the outset, state that any HSN Explanatory Note under Heading 44.21 does not in any way support the case of the Revenue as put forth by the DR. On the other hand, the appellants might take the cue from the Note referred to by learned DR, to fortify their case. The particular Note is to the effect that Heading 44.21 includes match splints which are manufactured by cutting drawn/sliced/peeled wood to the dimensions of matches. This Note further says that such match splints may be impregnated with chemical substances such as Ammonium Phosphate. It is this part of the HSN Note that has been relied on by learned DR. Obviously, he likened the incense sticks (covered with charcoal etc.) to match splints impregnated with chemical substances. We have not found this comparison to be correct inasmuch as covering (of wood sticks) with chemical substances is different from impregnation with such substances. As seen from the test report in the present case, wood sticks were only covered with charcoal and other substances and not impregnated with such substances. It is significant to note that the HSN Note referred to by learned DR states further that match splints impregnated with chemical substances would not be classified in Chapter 44 if they are with their inflammable heads. It is easily decipherable that such match splints with inflammable heads are matches classifiable in a different Chapter. It can almost be said with certainty that the appropriate comparison is between these matches and the agarbathis imported by the appellants. The functional property of matches is the inflammability of their heads, while that of agarbathis is their fragrance on burning. It appears from the Chemical Examiner's report that he noted a mild pleasant odour emanating from the sample while burning. The Chemical Examiner found the sample to be incense stick and called it "agarbathi". This report squarely supports the appellant's case. Of course, the Chemical Examiner added a 'note' to his report to the effect that presence of perfumery compounds could not be detected. This, however, does not mean that perfumery compounds were absent. It only means that the Chemical Examiner was unable to detect any particular odoriferous compound in the given sample. We are, therefore, of the view that the Revenue cannot claim advantage of the note appended to the test report.

7. The sub-heading 3307 41 00 canvassed by the appellants is a '- -' entry appearing under the '-' entry reading thus: "Preparations for perfuming or deodorising rooms, including odoriferous preparations used during religious rites".

It reads as follows:

'- -' "Agarbathi" and other odoriferous preparations which operate by burning.

As we have already noted, the Chemical Examiner who tested samples of the subject goods found them to be incense sticks and called them "agarbathi". The department accepted the test report. It is not in dispute that the subject item operates by burning. Hence, as rightly claimed by the appellants, SH 3307 41 00 is a specific entry covering the subject goods. Learned DR pointed out that what was imported by the appellants was "raw agarbathi'. Nevertheless, raw agarbathi is also "agarbathi". Even if it be assumed that the subject goods is raw agarbathi, it would not ipso facto cease to be agarbathi.

8. The Customs authorities themselves assessed similar goods (incense sticks of length 8" to 9") imported by the assessee during March-September, 2006, under Heading 3307 41 00 and accordingly the goods were allowed to be cleared without payment of CVD. The Revenue did not seek to revise those assessments. Today, the Revenue has no case that the subject goods are different from the goods imported in March-September 2006. Therefore, they will not be justified in taking a different stand in respect of the subject goods imported subsequently by the assessee. This legal principle has come to be established by now through several decisions of the Supreme Court vide Boving Fouress case (supra) and Jayasivals Neco Ltd. Vs. Commissioner of Central Excise, Nagpur, 2006(01)LCX0025 Eq 2006 (073) RLT 0230 (SC)=2006(01)LCX0025 Eq 2006 (195) ELT 0142 (S.C.).

9. Past import of 19" incense sticks by the appellants was also referred to before us by both sides. It was submitted by the DR that an Order dated 14.02.2006 passed by the Commissioner (Appeals) classifying the said goods under Heading 4421 90 90 was not challenged by the party. Learned counsel countered by referring to the assessments of 28 bills of entry covering imports of the period March-September, 2006. He has also sought to differentiate the 19-"long incense sticks from the 8"/9"-long incense sticks. This differentiation, however, does not appeal to us inasmuch as length of wood stick is not any determinative factor in the classification of incense sticks, whether as "agarbathi" or as "other articles of wood". The 19"- long incense sticks were imported prior to March, 2006. The next imports were those covered by 28 bills of entry and the same were made during March-September 2006. Then came the subject imports in october-November 2006. In this chronology, the earliest imports were assessed under Heading 4421 90 90 and this assessment was accepted by the appellants by not challenging Order-in-Appeal dated 14.02.2006 of the Commissioner (Appeals). The next imports were assessed under Heading 3307 41 00 and this assessment was accepted by the Revenue. The next are the subject imports. The question is whether these goods should be classified under Heading 4421 90 90 or under Heading 3307 41 00. In the impugned order, learned Commissioner (Appeals) has held the subject goods to be similar to the 19"-long incense sticks covered by Order-in-Appeal dated 14.02.2006. He has, however, kept out of reckoning the assessment of the 8"/9"-long incense sticks imported by the party during March-September, 2006, i.e., immediately before the subject imports. Further, the appellant's claim that the assessment of the goods imported during March-September, 2006, under Heading 3707 41 00 for clearance without payment of CVD was accepted by the Revenue has not been rebutted. Having accepted such assessments, we think, it is not open to the department to contest the assessee's claim for classification of the subject goods under the same Heading 3307 41 00. Insofar as the said imports are concerned, what stands proximate is the assessment under Heading 3707 41 00 of similar goods imported by the assessee during March-September, 2006. The Revenue has not demonstrated as to how it could get over its own pro-assessee conduct of the near past for reaching out to the assessee's pro-revenue conduct of the remote past.

10. In the result, we hold that the incense sticks imported by the appellants during the period of dispute merit classification under Heading 3707 41 00 attracting 'nil' rate of CVD and, consequently, the impugned order is liable to be set aside. Accordingly, the appeal is allowed.

Operative portion of the order was pronounced in open Court on 02.08.2007.

Equivalent 2007 (083) RLT 0326 (CESTAT-Che.)

Equivalent 2007 (218) ELT 0146 (Tri.- Chennai)