Frontier Trading Versus Commissioner of Customs (Import), Mumbai>2005(06)LCX0135

2005(06)LCX0135

IN THE CESTAT, WEST ZONAL BENCH, MUMBAI [COURT NO. III]

S/Shri S.S. Sekhon, Member (T) and T. Anjaneyulu, Member (J)

Frontier Trading

Versus

Commissioner of Customs (Import), Mumbai

Order No. A/756/2005-WZB/C-III, dated 17-6-2005 in Appeal No. C/387/2004-Mum.

DEPARTMENTAL CLARIFICATIONS CITED
C.B.E. & C. Circular No. 56/2001-Cus., dated 25-10-2001 [Paras 1,2,3]
C.B.E. & C. Circular dated 29-5-2003 [Paras 2, 3]

Advocated By -

Shri V. Sridharan, Advocate, for the Appellant.
Shri K.M. Mondal, Consultant, for the Respondent.

[Order per: S.S. Sekhon, Member (T)]. -

This issue is in the Tribunal for the second round on the very subject matter of issue of demands on an entity cleared on Bills of Entry described as "magnetic acupressure treatment instrument" claiming the classification under Heading 9019.10 of the Tariff which was contested by the Department and demands were made for correct assessable under Heading 9404.29 for the imports made during the period 1997-2001, where the Commissioner had upheld the classification under Heading 9404.29, holding that the extended period invoked in the Notices cannot be applied and dropped the demands for Rs. 17.92 Crores approx and duty short levied of Rs. 16.03 crores approx on goods imported between March and July, 2000 was confirmed under the classification arrived at by him. As regards goods provisionally assessed and cleared, the demand of Rs. 6.46 crores was the consequence of this decision. This Tribunal, in its order reported in 2003 (153) ELT 419, after considering the Board's instructions No. 56/2001, dated 25-10-2001 and the other pleas raised by both sides came to the conclusion that the classification of the said goods was not to be upheld as claimed by the appellants. However, on the issue of the applicability of the circular issued, and consequent thereof, they remitted the matter back for predetermination by the Commissioner of the applicability of the Board's Circular and the facts mentioned therein as to whether they would be applicable to the goods under import. The finding of the Tribunal as recorded in Para 18 of the decision is as follows:
"18. The applicability of the circular to the goods under consideration is essentially one of fact. While there is something to be said for the claim that the reference in the circular as to the magnetic principles and the "egg crate" structure appears to refer to the goods under consideration, it is not possible to conclude with any degree of certainty that it does describe the goods in question. The circular does rely heavily on the ability of the goods referred to in it to treat or prevent bedsores; the evidence that the goods under consideration before us do so is virtually non existent. We have also noted the fact that the Board's circular has also relied upon the technical literature relating to indigenously manufactured goods which it found similar to the imported goods that it deals with. We are therefore of the view that the matter should be examined in detail to see whether the goods in question correspond to the goods referred to in the circular. We think that since it calls for determination of facts and examination of goods, this exercise is best undertaken by the Commissioner. While doing so, the Commissioner should also consider and apply the case law relating to the scope and applicability of such circulars and determine whether the circular under consideration applies to the goods in question and if it does, whether it would apply to goods imported prior to its issue. While doing so, the Commissioner may also take into account the nature of the locally manufactured goods and technical literature relating to the omission. He shall pass orders after hearing the submissions of the appellant for which reasonable opportunity may be given."
2. The Commissioner, pursuant to this decision, has heard the appellants and has come inter alia to the following findings:
"15.8. From the aforesaid, it may be observed that the physical characteristics of the goods under import include magnet assembly is placed in a fixed position and does not move. If the patient remains stationery over a period of time, there would be no benefit to the patient in the prevention of bedsores or in providing superficial message. For the classification of the mattresses by considering the Circular dated 25-10-2001 it is essential to read the Circular dated 29-5-2003 along with. The physical characteristics of the goods, as described in Paras 2 & 5 of the Circular dated 25-10-2001 are similar to the goods under import. However, for the purpose of classification and its determination the contents of the Circular dated 29-5-2003 have also to be considered. When the mattresses do not have the ability to constantly vary the place at which the weight of the patients, body rests, in such circumstances it has to be held that the goods as described in the Board's Circular are not the same for classifying them under CTH 90.19 and they are of the type, which are appropriately classifiable under CTH 94.04."
and thereafter proceeded to determine the classification of the goods under dispute and relying upon a subsequent Circular order dated 29-5-2003 based on WCO advice therein, concluded the goods covered by 26 (20+6) bills of entry (de- tailed in Annexure B and C to SCN) all of which had been imported prior to is- sue of Board's Circular No. 56/2001, dated 25-10-2001 to be classified under- Heading 9404.29 and discharged the duty accordingly and confirmed the duty on 20 Bills of Entry pertaining to period 3-3-2000 to 31-7-2000 as listed in Annexure B to Show Cause Notice as also 6 Bills of Entry provisionally assessed were finally assessed under Heading 9404.29 at the appropriate rate of duty which was assessed at Rs. 6,46,16,561/- to be demanded and came to a specific order as follows in Para 21 of the order -
"21. In view of the foregoing discussions and findings, I, order as below:
(a) I, therefore, order that the impugned goods covered by 26 (20+6) bills of entry (detailed in Annex. B & C to SCN) all of which have been imported prior to issue of Board's Circular No. 56/2001, dated 25-10- 2001 comprising of mattresses, pillow and quilt and described Total Sleeping System/Magnetic Acupressure Treatment Instrument be classified under CTH 9404.29 and accordingly be charged to Customs Duty at the appropriate rate.
(b) I further order confirmation of demand for differential duty of Rs. 16,02,65,913/- (Rupees Sixteen Crores Two Lakhs Sixty Five Thousand Nine Hundred Thirteen Only) for the 20 bills of entry pertaining to period 3-3-2000 to 31-7-2000 and covered by 20 less charge demands as detailed in Annexure B of Show Cause Notice dated 7-12- 2000 and amount be recovered from M/s. FT.
(d) I also order that the provisional assessment of six (6) Bills of Entry as detailed in Annexure C of Show Cause Notice dated 7-12-2000 pertaining to the period from 9-8-2000 to 31-10-2000 are finalized under CTH 9404.29 by charging the appropriate duty and differential duty of Rs. 6,46,16,561/- (Rupees Six Crores Forty Six Lakhs Sixteen Thousand Five Hundred Sixty One Only) is demanded in terms of provisional bond executed, and the terms of provisional duty bond executed by the importer, M/s. FT are enforced.
(e) The aforesaid amounts be paid/recovered within 30 days of receipt of this order.
" 22..."
Hence this appeal.
3. After hearing both sides and considering the detailed submissions made on various issues as regards applicability of a Circular retrospectively or prospectively as in this case of Circular 56/2001, dated 25-10-2001 and the subsequent Circular issued in 2003 and various case laws relied upon, as also the contest on merits, on the classification as arrived at by the ld. Commissioner; considering all these aspects it is to be found:
(a) that the remand order vide Para 18 of the Tribunal order was to a specific effect and the issues which were required to be predetermined thereby would be
(i) to examine as to whether the goods in question corresponded to those mentioned in the first Circular (i.e. Circular of 56/2001, dated 25-10-2001);
(ii) to consider the case law regarding the scope and applicability of the Circular to determine whether it was applicable to goods in question, and if so, whether it would apply to goods imported prior to its issue i.e. 25-10-2001). From a perusal of Para 15.8 of the order impugned to the effect that:
"The physical characteristics of the goods, as described in Paras 2 & 5 of the Circular dated 25-10-2001 are similar to the goods under import..."
It is apparent that after arriving at this finding, the Commissioner was not required to proceed further and record in the same paragraph "However, for the purpose of classification and its determination the contents of the Circular dated 29-5-2003 have also to be considered. When the mattresses do not have the ability to constantly vary the place at which the weight of the patients body rests, in such circumstances it has to be held that the goods as described in the Board's Circular are not the same for classifying them under CTH 90.19 and they are of the type, which are appropriately classifiable under CTH 94.04." The Commissioner has, to our mind, has traversed in the remand proceeding beyond the scope of the directions of this Tribunal; once he had come to a conclusion that the goods were the same, as in the Circular dated 25-10-2001, he was only to determine reasons why this Circular should be applied or not applied. The Commissioner was not required to apply the Circular dated 29-5-2003 retrospectively to the imports as he has proceeded to do so. The order has therefore traversed beyond the order in remand and therefore is to be struck down and cannot be upheld.
(b) A perusal of the Circular dated 25-10-2001 and dated 29-5-2003 discloses, that while Circular dated 25-10-2001 does not prescribe any date for the applicability thereof while Circular dated 29-5-2003 under Para 6 which reads as follows:
"6. In view of this, it is hereby clarified that the said goods may henceforth be classified under Heading 94.04 of the Customs Tariff from the date of issue of this Circular. Board's Circular, till it is in force, is binding on the field formations. Therefore, it may kindly be noted that change of classification of the said goods will only be prospective and assessments of all Bills of Entry filed between 25-10-2001 i.e. the date on which the earlier Circular No. 56/2001-Cus. was issued, till the date of this revised circular, will be under CTH 90.19."
Provides specifically that the classification by this Circular has to be taken under Heading 94.04 henceforth i.e. from the date of issue of that circular and further provides that Board's circular till it is in force are binding on field formations. Thereafter it stipulates, it may kindly be noted that change of classification of the said goods will not only be prospective and assessments of Bills of Entry filed between 25-10-2001 i.e. the date on which the earlier circular was issued till the date of this revised circular will be under Heading 90.19. Therefore, we find no reason not to apply the classification for the impugned products after reading of the Tribunal's order reported in 2003(01)LCX0096 Eq 2003 (153) ELT 0419 (Tri.- Mumbai) to be under Heading 90.19 even prior to the issue of Circular dated 25-10-2001. We find that lot of arguments have been made on part of the Revenue that circular cannot be retrospectively applied. However, in fact the Commissioner has applied the subsequent Circular dated 29-5-2003 to the imports made much prior to issue of that circular, which is specifically 'Prospective' in nature. When that circular itself had a stipulation, of prospective application, there was therefore no reason to apply that and not to apply the Circular dated 25-10-2001 which has no bar of retrospective application especially when that circular has no effective date. The Customs Act classification in this case have been adopted at various places under different headings and Circular dated 25-10-2001 records that different practices were existing. The change in practice of an assessment cannot be brought about by applying Circular dated 29-5-2003 which is stipulated to be effective only prospectively as provided in that circular. The classification for imports earlier to Circular dated 29-5-2003 cannot be disturbed & if made as per Circular dated 25-10-2001 have to be continued as such. Provisional assessments have to be finalized as per the date of Circular and noting of BE as provided under the Customs Act, 1962. Therefore, altering classification to the disadvantage of an importer. The law on the subject of applicability on circular is very specific on this aspect. Alteration of the classification would be effectively only after 29-5-2003.
(c) We ,find that when the order impugned traverse beyond the direction of the Tribunal to be applied in the de novo adjudication and on facts this Circular dated 25-10-2001 is found to be covering the goods under import, there is no reason to come to a conclusion and uphold the duty demands and classification as applied and arrived at by the ld. Commissioner in the impugned order.
(d) Revenue's stance to apply Circular dated 29-5-2003 for post imports & not Circular dated 25-10-2001 is blowing hot & cold at same time. That cannot be an interpretation on applicability of Circulars to be upheld.
(e) This appeal is consequently to be allowed in view of the findings hereinabove.
4. Ordered accordingly.
(Pronounced in Court on 17-6-2005)

Equivalent 2005 (189) ELT 0102 (Tri. - Mumbai)