2012(02)LCX0212

IN THE CESTAT, WEST ZONAL BENCH, MUMBAI

S/Shri Ashok Jindal, Member (J) and P.R. Chandrasekharan, Member (T)

Sharp India Ltd.

Versus

Commissioner of Cus. (Import), Nhava Sheva

Stay Order No. S/217/2012-WZB/C-KCSTB), dated 1-2-2012 in Application No. C/Stay/207/2011 in Appeal No. C/16/2011

Cases Quoted -

Bombay Chemicals Pvt. Ltd. v. Appellate Collector - 1975(06)LCX0001 Eq 1990 (049) ELT 0190 (Bom.) - Distinguished [Paras 3,5.2, 5.3]

Commissioner v. Hico Enterprises - 2008(04)LCX0157 Eq 2008 (228) ELT 0161 (S.C.) - Referred [Paras 3, 5.3]

Union of India v. Azadi Bachao Andolan - 263 ITR 706 - Referred [Paras 3, 5.2, 5.3]

Zuari Industries Ltd. v. Commissioner - 2007(03)LCX0010 Eq 2007 (210) ELT 0648 (S.C.) - Referred [Paras 5.2, 5.3]

Departmental Clarification Quoted-

C.B.E. & C. Circular No. 23/2008-Cus., dated 29-12-2008 [Paras 2, 3,4, 5.6, 5.7]

Advocated By -

S/Shri V.S. Nankani and Aqeel Sheeraji, Advocates, for the Appellant.
Ms. DM. Durando, Deputy Commissioner (AR),for
the Respondent.

[Order per : P.R. Chandrasekharan, Member (T)]. -

The appeal and stay application are directed against the Order-in-Appeal No. 292(Gr.VA)2010(JNCH) IMP-273, dated 13-10-2010 passed by the Commissioner of Customs (Appeals), JNCH, Mumbai-II. The stay application is being taken up for consideration.


2. The facts arising for consideration of this case are as follows :-

The appellant, M/s. Sharp India Ltd., filed 18 Bills of Entry involving the total assessable value of Rs. 2,95,85,090/- during the period 29-4-2008 to 22-9-2008 and declared the goods as Refrigerator falling under CTH 8418 21 00 and claimed the benefit of exemption under Sr. No. 50 of Notification No. 85/2004-Cus., dated 31-8-2004 and the goods were al-lowed to be cleared as per the declaration. They imported another six consignments vide six Bills of Entry filed in December, 2008 and claimed the benefit of the aforesaid exemption. These Bills of Entry were assessed provisionally and allowed to be cleared on execution of Bond and Bank Guarantee. A less charge demand was issued to the appellant vide notice dated 14-10-2008 demanding differential duty of Rs. 36,25,948.63 in re-spect of the said goods imported vide 18 Bills of Entry during the period April to September, 2008 proposing to classify the goods under importa-tion under CTH 8418 10 90 and deny the benefit of Sr. No. 50 of Notification No. 85/2004-Cus., dated 31-8-2004. Since the goods under importation were Refrigerator-Freezer fitted with separate external doors, a reference has been made to the CBE&C seeking clarification as to whether aforesaid goods are eligible for exemption under the said Notification. The CBE&C vide Circular No. 23/2008-Cus., dated 29-12-2008 clarified that the classification of Refrigerator-Freezer fitted with separate external doors of household type is appropriately classified under tariff 8418 10 90 and not under tariff 8418 21 00 and the said goods are not covered under Sr. No. 50 of Notification No. 85/2004-Cus., dated 31-8-2004. After receipt of the clarification, the less charge demand of Rs. 36,25,948.63 was confirmed. The provisional assessment in respect of 6 Bills of Entry was finalized and a differential duty of Rs. 17,78,289/- was also confirmed and demanded vide the impugned order. The appellant preferred an appeal against the said order before the Commissioner (Appeals), who vide the impugned order rejected their appeal and upheld the order of original adjudicating authority. Hence the appellant is before us.


3. Shri V.S. Nankani, learned Advocate for the appellant makes the following submissions: -

(a) The appellants are engaged in importing "Combined Refrigerator-Freezer fitted with separate external doors or otherwise" from Thailand under the Thailand-lndo Free Trade Agreement and in accordance with the Interim Rules of Origin for Preferential Tariff Concessions for trade between India and Thailand issued by the Central Government vide Notification No. 101/2004-Cus., dated 31-8-2004. The appellant classified the goods under CTH No. 8418 21 00 supported by the certificate of Origin issued by the competent authority of the exporting country. The goods under importation are eligible for the concessional rate of duty as provided for under Notification No. 85/2004, dated 31-8-2004. Sub-heading No. 8418 21 00 covers all forms, types and varieties of household refrigerators including those fitted with external doors and the said sub-heading does not exclude Combined Refrigerator-Freezer fitted with external doors of household type. The department's proposed classification under CTH 8418 10 90 appears first in the sequence and following the principle of classification that later entry excludes the former, it follows that the household type refrigerators are excluded from Heading 8418 10 90. Classification of the imported goods would be most appropriate if classified as provided in the Certificate of Origin as the goods have been imported under the Thailand-lndo Free Trade Agreement and the appellate authority failed to take into consideration the provisions of the said Agreement and the Rules of Origin. The said Agreement was primarily established to eliminate the tariffs and non-tariff barriers in substantially all trade in goods between the parties, and the basic intention for creating the Thailand-India FTA was to eliminate the conflicts between the tariffs of the country and therefore, the classification prescribed by the Certificate of Origin is final and conclusive. He relied on the judgment of Hon'ble Mumbai High Court in the case of Bombay Chemicals Pvt. Ltd. v. Collector of Customs - 1990 (049) ELT 190 and Commissioner of Customs v. Hico Enterprises - 2008(04)LCX0157 Eq 2008 (228) ELT 0161 (S.C.). He also relied on the judgment in the case of Union of India v. Azadi Bachao An-dolan £r/W - 263 ITR 706.

(b) The reliance placed by the department on the Board Circular is in-correct as Board's Circular does not having any overriding effect over the Certificate of Origin issued by the originating country.

(c) The learned Counsel further submits that the appellant-company is making losses and submitted a balance sheet for the year ending on 31-3-2011, therefore, if any pre-deposit is ordered the appellant would be put to financial hardship. In the light of these arguments, the learned Counsel submits that waiver of pre-deposit of dues adjudged be granted at this stage.


4. The learned AR appearing for the Revenue reiterates the findings of the lower adjudicating and appellate authorities and also the Board's Circular dated 29-12-2008 wherein it has been clarified that the classification of combined refrigerator-freezer fitted with separate external doors would be under subheading No. 8418.10 and not under sub-heading No. 8418.21 and accordingly, the said goods are not covered under Sr. No. 50 of Notification No. 85/2004-Cus., dated 31-8-2004. In view of the above, she prays for upholding the order of the lower authorities and putting the appellant to terms.


5. We have considered the rival submissions carefully. We have also perused the product catalogue of the goods under importation. There is no dispute of the fact that the product under importation is a combined Refrigerator-freezer fitted with separate external doors.

5.1 We have also perused Notification No. 101/2004-Cus., dated 31-8-2004 which notifies Thailand - Interim Rules of origin for preferential tariff concessions for trade between India and Thailand. Annexure-A to the said Notification gives details of the goods covered under the agreement. In Sr. No. 13 of the said Annexure, the following goods have been described :-

From the above description, it is clear that what is covered under the agreement is Refrigerators household type; compression type falling under Tariff item No. 8418 21 of the HS Code. The HS Code relating to Heading 8418 reads as follows: -

A perusal of the above tariff entry makes it clear that combined Refrigerator-freezer fitted with external doors would fall under Tariff Item No. 8418 10. It covers both the commercial type of the said goods under sub-heading No. 8418 10 10 and the non-commercial type under 8418 10 90. In other words, Combined Refrigerator-freezer fitted with external doors fall under Heading No. 8418 10 only. Refrigerators, household type are covered by 8418 21 00 if they are of compression type and under Heading No. 8418 29 00 if they are non-commercial type. Thus it excludes Combined Refrigerator-freezer (household type) fitted with separate external doors. It is thus obvious that the import of Combined Refrigerator-freezer fitted with external doors is not covered by the agreement and consequently they are not eligible for duty concession vide Sr. No. 50 of Notification No. 85/2004, dated 31-8-2004. Sr. No. 50 of the said Notification covers only goods falling under 8418 21 00. Thus, from the plain reading of agreement and the Notification, it prima facie appears that the goods are not eligible for the concessional rate of duty under the Indo-Thailand Free Trade Agreement. As per the rules of interpretation of tariff, the heading which gives specific description has to be preferred over the entry giving a general description. Following this rule, the product under importation is classifiable under CTH No. 8418 10 90 and not under CTH 8418 21 00.

5.2 The appellant has relied on the judgment of the Hon'ble High Court of Bombay in the case of Bombay Chemicals Ltd. rendered in 1982 and also in 1990 (cited supra). In these cases pertaining to exemption under Notification dated 1-3-1968, the condition for availing the exemption was to obtain a certificate from the Director General of Technical Development that the goods covered by the Notification are required for the manufacture of insecticides and are not produced in India. The Customs authorities in that case denied the exemption on the ground that the goods are not being used for agriculture purpose even though the Director General of Trade Development (DGTD) has issued the certificate. In that context, it was held by the Hon'ble High Court of Bombay that the certificates granted by DGTD are binding and conclusive on the customs authorities and therefore, once the certificate is produced and conditions are complied with, it was obligatory upon the customs authorities to grant the exemption. In the case of Zuari Industries Ltd. - 2007(03)LCX0010 Eq 2007 (210) ELT 0648 (S.C.) relied upon by the appel-lant, the issue related to duty exemption on a captive power plant, which was set up as part of the fertilizer project. The question was whether the captive power plant installed in project can be said to be eligible for exemption available to fertilizer project? In that context, the I lon'ble Apex Court held that once the competent authority has given the essentiality certificate that the product was necessary, the customs authorities cannot question the same and deny the benefit of exemption. The appellant has also relied on the judgment in the case of Azadi Bachao Andolan and another (supra). The said case pertains to Double Taxation Avoidance Agreement in respect of the Income Tax - Indo-Mauritius Double Taxation Avoidance Convention, 1983. In that case, the Hon'ble Apex Court held that principles of interpretation of international treaty are not the same as those under interpretation of statutes and this should be kept in view while interpreting international treaties.

5.3 In the case under consideration, the facts are substantially different. In the Bombay Chemicals' case, the question was one of end-use and it was held that once the end-use certificate was given by the competent authority, the customs cannot question the end-use and deny the benefit. Similarly, in the case of Zuari Industries (supra), the Hon'ble Apex Court held that once the essentiality certificate was issued, power plant imported as part of the fertilizer project can also be granted the benefit of exemption. The Azadi Bachau Andolan's case dealt with an income-tax case, which has no relevance to the case under consideration. In the case under consideration, the issue relates to eligibility of exemption under Notification No. 85/2004-Cus., dated 31-8-2004. Sr. No. 50 grants exemption to goods falling under Heading 8418 21 00. Therefore, the question to be decided is whether the goods under importation fall under Heading 8418 21 00? As already discussed, the goods under importation are Combined Refrigerator-freezer fitted with external doors and they are covered under Heading No. 8418 10 of the Customs Tariff and not under Heading No. 8418 21. Once, the goods are not covered under Heading No. 8418 21 00, the question of benefit of duty exemption under Notification No. 85/2004 does not arise at all.

5.4 The appellant has tried to confuse the issue by placing the reliance on the "Rules of Origin" notified under Notification No. 101/2004-Cus., dated 31-8-2004. These rules have been framed for determining the origin of the products eligible for the preferential tariff concessions for the Early Harvest Scheme pursuant to the Framework Agreement between the Republic of India and the Kingdom of Thailand and it deals with what are the terms and conditions for determination of origin. Rule 14 of the said Rules states that "A claim that products shall be accepted as eligible for preferential concessions in the importing Party shall be supported by a Certificate of Origin issued by a Government authority designated by the exporting Party and notified to the other Party to the Agreement in accordance with the Operational Certification Procedures, as set out in Annexure - B". As per the Article 6 of Annexure-B, the Issuing Authority shall, to the best of their competence and ability, carry out proper examination upon each application for the Certificate of Origin to ensure that that application and the certificate of origin are duly completed and signed by the authorized signatory and the origin of the product is in conformity with the Indo-Thailand Interim rules of Origin. The other statements of the certificate of origin correspond to supporting documentary evidence submitted, description, quantity and weight of goods, marks and number of packages, number and kinds of packages, as specified, conform to the consignment to be exported. No where the Rules of Origin specify that the classification for customs purposes shall be done by the certificate issuing authority of the exporting country and the same shall be accepted by the importing country.

5.5 There is one more reason why this function cannot be delegated to or outsourced from any authority in a foreign country. Levy and collection of tax is a sovereign function. Levy includes assessment and assessment comprises of classification and valuation of the goods and applying the rate of duty on the value determined. Thus, classification of the goods under Indian Customs Tariff is a sovereign function pertaining to levy of tax and such a power cannot be delegated to any foreign authority. Therefore, the argument of the appellant that once the certificate of origin has been issued indicating the classification, the same should be accepted by the Indian authorities does not stand to any logic or reason and should be completely rejected.

5.6 It will also be relevant at this point to consider the Circular issued by C.B.E. & C. vide Circular No. 23/2008-Cus., dated 29-12-2008, which reads as under :-

"Subject: Clarification on classification of combined refrigerator freezer with separate external doors for the purpose of extending benefit of Notification No. 85/2004-Customs dated 31-8-2004 - Regarding.

Your attention is invited to Notification No. 85/2004-Customs, dated 31-8-2004 wherein duty concessions have been extended to certain specified goods when imported into the country from Thailand subject to the condition that such goods are of the origin of Thailand in accordance with provisions of Interim Rules of Origin, published with the Notification No. 101/2004-Customs (N.T.), dated 31-8-2004.

2. In this regard, on an enquiry from the Board, some of the Customs field formations have reported that the 'combined refrigerator freezer fitted with separate external doors' are being classified under the Tariff Item 8418 21 00 on the premise that these goods are household type refrigerators. Accordingly, duty concession applicable on goods of Tariff Item 8418 21 00 under Sl.No. 50 of the notification No. 85/2004-Customs is also being extended to such imports from Thailand under bilateral trade agreement. Certain other Customs field formations have also raised doubts about this classification and sought a clarification from the Board.

3. The matter has been examined by the Board. For the purpose of classification of 'Combined refrigerator freezer with separate external doors', it is stated that sub-heading 841810 covers refrigerators which are combined with freezers and have separate doors, whereas, sub-heading 841821 covers only refrigerators without separate freezers and separate doors. Further, sub-heading 8418 30 covers only "freezers". Therefore, a 'Combined refrigerator freezer with separate external doors' merits classification under sub heading 841810. This view is also supported by HS classification. Further, 'Combined refrigerator freezer with separate external doors of household type' is appropriately classifiable under tariff item 8418 10 90, as the other tariff entry at 8418 10 10 covers such refrigerators of commercial type only.

4. In view of the above, I am directed to clarify that the classification of 'Combined refrigerator freezer with separate external doors' would be under sub-heading 8418 10 and not under 8418 21, as was being followed by certain Customs field formations. Accordingly, these goods are not covered under Sl.No. 50 of the notification No. 85/2004-Customs, dated 31-8-2004.

5. Necessary action for review of classification and applicability of notification benefit in respect of past clearances may be initiated so that differential duty, if any, could be recovered for the past period.

6. Difficulties, if any, faced in the implementation of these instructions, may be immediately brought to the notice of the Board."

5.7 From a reading of the above Circular, it is very clear that CBE&C has clarified that the 'combined refrigerator-freezer fitted with separate external doors' would be classifiable under Heading No. 8418 10 and not under Heading No. 8418 21 and, therefore, they are not covered under Sr. No. 50 of the Notification No. 85/2004-Cus., dated 31-8-2004. CBE&C is an apex authority implementing customs laws in this country and, therefore, the clarification issued by such an authority needs to be given due consideration. Hence, the same cannot be brushed aside merely on the basis of a certificate issued by a foreign authority, who is not required to undertake classification for customs purposes.

5.8 In view of the above discussions, we are of the view that the appellant has not made'out any case on merits for waiver of pre-deposit of dues ad-judged. On the other hand, we are of the view that the Revenue has a very strong case in their favour.


6. As regards the plea of the appellant with regard to financial hardship, we have carefully perused the balance sheet submitted by the party. As per the balance sheet, as on 31-3-2011, the appellant had cash and bank-balance worth Rs. 5,41,76,000/-. In the instant case, the differential duty demanded and confirmed is only Rs. 54,04,238/-. The cash and bank-balances available with the party is much higher than this amount and, therefore, even if the appellant is directed to make pre-deposit of the dues adjudged, it will not cause any undue financial hardship.


7. In the light of the foregoing, we direct the appellant to make a pre-deposit of Rs. 30,00,000/- (rupees thirty lakhs) within a period of eight weeks and report compliance on 12th April, 2012. On such compliance being reported, pre-deposit of balance of dues adjudged shall stand waived and recovery thereof stayed during pendency of the appeal.

(Pronounced in Court on 1-2-2012)

Equivalent 2013 (294) ELT 0239 (Tri. - Mumbai)