Custom, Excise & Service Tax Tribunal
M/S. Yakult Danone India P. Ltd vs Commissioner Of Customs, Mumbai-I on 22 June, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. C/85493, 85500 & 85719/14 Application No. C/MA(ORS)/92827 & 92828/16 [Arising out of Order-in- Original No. 146 /2013/ CAC/CC(I)/AB/GR. V dated 31.12.2013 passed by the Commissioner of Customs (Appeals), Mumbai-I] For approval and signature: Honble Mr Ramesh Nair, Member(Judicial) Honble Mr. C.J. Mathew, Member(Technical) =======================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
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in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : seen
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4. Whether Order is to be circulated to the Departmental: Yes
authorities?
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M/s. Yakult Danone India P. Ltd
Kiyoshi Tatsui Oike
Anil Chaudhary
:
Appellant
VS
Commissioner of Customs, Mumbai-I
:
Respondent
Appearance
Shri. V. Sridharan, Sr. Advocate with Shri. T. Vishwanathan, Advocate, Shri. Shekhar Vyas, Advocate, Ms. Srinidhi, Advocate, Shri. Ajay Sharma, Advocate and Ms. Poonam Lau for the Appellants Shri. M.K. Sarangi, Joint Commissioner(A.R.) for the Respondent CORAM:
Honble Mr Ramesh Nair, Member(Judicial) Honble Mr. C.J. Mathew, Member(Technical) Date of hearing: 22/8/2016 Date of decision: /2016 ORDER NO.
Per : Ramesh Nair These appeals have been filed against Order dt. 31.12.2013 passed by the Commissioner of Customs (Import), New Customs House, Ballard Estate, Mumbai, wherein the Commissioner has confirmed demand of duty of Rs. 4,22,58,706/- and also imposed equivalent amount of penalty against the Appellant M/s Yakult Danone India (P) Ltd. Penalties were also imposed on Managing Director Shri Kiyoshi Tatsui, ex- employee Shri Anil Choudhary.
2. The fact of the case is that the main Appellant M/s Yakult Danone are engaged in manufacture of probiotic drink. The Appellant, based upon investigation by the DRI, were issued Show Cause Notice dt. 25.04.2012 alleging that the Appellant had imported machines for their plant by mis-declaring the same as Dairy Machine and wrongly claiming exemption under serial No. 11 of Notification No. 6/2006- CE dt. 01.03.2006. That the said machine worked on the principles of heat exchange and were used for the purpose of sterilization, pasteurization, incubation (maturing after pasteurization) and dilution etc. and is thus excluded from goods under heading No. 8434 of the Customs Tariff as Dairy Machine. During investigation the officers retrieved the documents/records and also recorded statements of employees of the Appellant firm. Shri Kiyoshi, the Managing director in his statement dt. 25.08.2011 stated that the main plant was imported in 5 consignments of machineries under bills of entry No. 739124 dt. 18.01.2007, 763776 dt. 03.05.2007, 801219 dt. 18.06.2007, 625041 dt. 31.08.2007 and 628974 dt. 17.-09.2007: that the said plant comprised of machineries viz (1) tanks for blending, culturing, storage etc; (2) water sterilizer for water sterilization ; and (3) other machineries such as injection moulding machine, Unscrambler, Selector, Filling machine, Refrigeration Unit etc. That they had declared the description of goods of the two of the said five consignments (2nd and 3rd consignments) as dairy machines. During scrutiny of records seized from CHA, it was found that the supplier of machine M/s Yakult Honsha Co. Ltd has provided specification of production equipment sheet to the Appellant bearing HS codes as 8422.49, 847982 and other codes whereas the same was changed to 8434 2000 while submitting the same to the customs for clearance of said imported machines. Shri Kiyoshi, the Managing director in his statement dt. 12.09.2011 and 13.09.2011 also stated the HS code of imported machines of 2nd and 3rd consignment appearing in original SPE sheets were 842890, 847982, 842139, 844730, 842230 842839,844359. He also admitted that the description given in original SPE sheet does not match with the HS codes declared in Bill of Entries. That the machine of 3rd consignment were used for manufacturing of plastic bottles, printing of bottles, filing and sealing of bottles and multiwrapping of sealed bottles. That the misdeclaration of the description and HS code was done on the advice of their employee Shri Anil Choudhary and the changes were done in soft copies of original SPE Sheets were made in India office by Mr. Suzuki and Shri Anil Choudhary both ex-employees. Statement of Shri Anil Choudhary was also recorded wherein he stated that one Mr. Abhay Mathur of M/s SBFFL, consultant of Appellant had advised Appellant to arrange invoices showing description of goods as Dairy machinery and HS code as 8434 and that M/s Suzuki arranged the manipulated invoices showing description of 2nd and 3rd consignment as Dairy machine. The Appellant later informed that they have been pressurized to pay duty and that the machines are dairy machines and exempted under notification No. 6/2006 CE dt. 01.03.2006. The issue involved is of classification and not of duty evasion. Again a statement of Shri Oike was recorded on 03.10.2011 wherein he has given same statements as given on earlier occasions. Statement of Shri Narendra Sharma, Manager Process was recorded on 25.08.2011 wherein he stated that machines installed in the said plant had following functions :
(i) Mixing Tank: It mixes skinned milk powder with glucose and water(Sr. No. 1 of Annexure-B Attached to this order).
(ii) Seed Tanks: These tanks sterilizes the mixture mentioned above by ultra heat treatment. Thereafter, the mixture is allowed to cool and culture of lactobacillus bacteria is added for fermentation of sterilized mixture (Sr. No. 2 of Annexure B).
(iii) Storage tanks-These tanks are used for storage of fermented mixture for maturing and cooling. Storage tanks are also used to add sweetener/flavor and stir the homogenized mixture (Sr. No. 3 OF Annexure B)
(iv) Homogeniser and CIP units: It homogenizes the particles of fermented mixture by high pressure CIP units are for mechanically cleaning of manufacturing plant equipment(Sr No. 4 of Annexure B)
(v) Water dilution and storage surge tanks: Sweetened/flavoured solution is diluted with sterilized water. The diluted solution is marketed as Yakult(Sr. No. 5 of Annexure-B)
(vi) Filing Machine: It fills Yakult in empty plastic bottles(Sr. No. 6 of Annexure-B).
(vii) Unscrambler: unscramble aligns empty plastic bottles for feeding in filling machines (Sr. No. 7 of Annexure B)
(viii) Shrink Wrap Machine: It packs Yakult filled plastic bottles in the packs of 5 bottles or 50 bottles(Sr. No.8 of Annexure B)
(ix) Plastic Injection & Blow Machine: It manufactures empty plastic bottles for filing with Yakult (Sr. No. 9 of Annexure B)
(x) UHT/High Temperature Machine: It is used for ultra heat treatment of the mixture of skimmed milk powder, glucose and water (Sr. No. 10 of Annexure B)
(xi) Dissolving tank: It is tank of 15000 Ltr capacity. It mixes skimmed milk powder with glucose and water as mentioned at (i) above (Sr. No. 11 of Annexure B)
(xii) Reverse Osmosis Water Treatment Plant : It filters and purifies water (Sr. No. 12 of Annexure B) It was contended in the SCN that the imported machines mentioned at i to v & xi have functions as specified under CTH 84798200. The machines covered at vi, vii & viii appear to be functioning for filling, sealing and packing of plastic bottles which were classified under heading no 842230. The machinery mentioned at (ix) appear to be plastic injection/ blow machine classified under chapter 8477. The machine mentioned at (x) is appearing to be heating device being classifiable under 842121. The machinery at Para (xii) appear to be purification machine classifiable under 842121. That there was no machine in Sonepat Plant classifiable under 8434 (i.e dairy machine) in accordance with machinerys function and in accordance with the respective section notes, chapter notes and HSN Explanatory notes. Further no machine or machinery installed in said Plant found to be involved in functions meriting classification as dairy machine. Thus the appellant appears to have unduly availed exemption from payment of CVD under the notification applicable to Dairy machine. The machines are classifiable under chapter heading as per their HS codes and that even as per the suppliers the goods are not dairy machines. The show cause notice apart from demand of duty Rs. 4,22,58,705/- and imposition of penalties also proposed to confiscate the imported goods so mis-declared. Personal penalties were proposed against Shri Kiyoshi Tatsui Oike and Shri Anil Choudhary. The demands and penalties were confirmed against all the Appellants by the adjudicating authority. In addition the imported goods were also ordered to be confiscated with option of redemption on payment of redemption fine. Being aggrieved now the Appellants are before us in these appeals.
3. Shri. V. Sridharan, Sr. Counsel with Shri. T. Vishwanathan, Ld. Advocate, Shri. Shekhar Vyas, Ld. Advocate, Ms. Srinidhi, Ld. Advocate, Shri. Ajay Sharma, Ld. Advocate and Ms. Poonam Lau Ld. Advocate appeared for the Appellants. Ms. Srinidhi, Ld. Counsel for the Appellant M/s Yakult submits that the department had raised dispute on classification and issued query. All the queries were settled by submitting Chartered Engineer Certificate and other documents/ opinions certifying the goods as machinery for use in production of fermented milk. The goods were cleared after the satisfaction of the customs authorities and change of classification of part imported consignments as per discussion with the authorities. The Appellants bonafidely believed the goods are to be Dairy machinery. The Suppliers agreed with the Appellants reasoning and hence provided them with the soft copy of SPS Sheet enabling them the changes to be made. That even the department did not accept the classification indicated in SPS Sheet in case of some goods and assessed it based upon its understanding of Customs Tariff. That the imported goods involved in the case were cleared by availing exemption under Notification No. 6/2006 CE dt. 31.03.2006 (Serial No.11) which accorded complete exemption from CVD on Dairy Machine classified under 84.34 of the Tariff. The imported items are correctly classifiable under heading 84.34. The HSN Explanatory Notes to the heading states This heading covers mechanical milking machine, and other machines, whether for farm or industrial purposes, used in the treatment of milk or converting it into dairy products. The plant is set up for manufacture of Dairy based drink :Yakult falling under Heading 84.03 of the Tariff which is undisputed. That the relevant portion of Explanatory Notes pertaining to Heading 84.34 relied upon by the department is for classification of Vats/ Tanks/ Vessels/ is dependent on feature of product. The Appellant also relied upon the certificate dt. 10.05.2013 of Dr. Jasbhai Prajapati. SMC college of Dairy Science, Certificate dt. 25.06.0213 by Dr. Sushil Kumar, NDRI, Karnal, certificate dt. 16.05.2013 from the manufacturer of the imported machinery that the same has been specifically manufactured for Dairy products, Chartered Engineer Certificate and extracts from Food Engineering and Dairy Technology by professor Dr. Ing. H.G.Kessler. They submitted that even the steel used in imported goods is of ASTM grade 304, 316 which is used for Dairy industry as stated in books and publication for Dairy and Chemical Industry. In relation to 3rd consignment it was submitted that the same are for packing of Dairy product and the formation of dairy product is not complete unless it is packed. That there is an integrated Dairy Plant wherein all the machines are connected. They rely upon Section Note IV to Section XVI of Tariff that where a machine or combination of machine whether separate or connected by piping intended to contribute together to a clearly defined function covered by one of the headings of chapter 84 or 85, then the whole falls to be classified in the heading appropriate to that function. Therefore the complete combination of the imported machinery would be classifiable as dairy machine under Heading 84.34.He relies upon the judgment of M/s Adi HI Tech Textiles P. Ltd. vs. CC. Bombay 1999 (106) ELT 330 (TRI), Karmchand Thapar & Bros. vs. CC, Bombay 1994 (71) ELT 619 and Circular No. 964/07/2012 CX dt. 02.04.2012. They Submit that the judgment of Honble Supreme Court in case of HMT Ltd. 2007 (214) ELT 10 (SC) relied upon by the adjudicating authority is not applicable as the same is related to equipment possessing heating and cooling elements and further the applicability of Note 4 to Section XVI was never considered. That the exemption under Notification No. 6/2006 CE is available irrespective of classification of the goods. The Ld. Counsel submits that the HS codes mentioned in SPS sheet is only suggestive of possible heading but is not relevant for custom classification. Even the department altered the classification in unaltered SPS Sheets which proves their point. The law does not require them to produce or submits SPS Sheet. The extended period of limitation is not invokable as the goods were correctly described and were examined by the department. That since the demand has been raised under Section 28, the contention of the DR that the present case is under Section 125 (2) is not sustainable which is only for violations of post import conditions. He submits that since there is no mis-declaration, collusion, willful misstatement by the Appellant the goods cannot be confiscated. The ld. Counsel also submits that the impugned order is not sustainable as cross examination of Shri Anil Choudhary was not granted, expert certificates were not considered and no reasoning was provided for rejecting the classification of goods under heading 84.34.
4. The Counsel appearing for Appellant Shri Anil Choudhary requests for exonerating him on the ground that he was merely an employee and all the acts were on the direction of the company. That he was not benefitted personally. All the acts of alleged evasion were done by one Shri Suzuki who fled the country. He submits that from the correspondence exchanged between Mr. Suzuki and Yakult Honsha Tokyo, the parent company of the Appellant company that all the documents including SPS Sheets were prepared at Tokyo office and forwarded to them. That such changes were made on the advice of M/s SBFFL who were consultant for the clearances of imported goods. That in his statement he had clearly explained his and other officers role. That from the mail between Tokyo company and Mr. Suzuki which are annexures to show cause notice, it is clear that on the one hand there is request from Mr. Suzuki to change the invoice and SPEC sheets and on the other hand there is quick response from M/s Honsha in furnishing the changed SPE sheets and invoices. That in the same breath mails annexed as R 4 there is interesting query from Tokyo counterpart in regard to the 4th transaction as to why the changed/ manipulated sheets are not required for that particular consignment. That he had volunteered himself to any questioning by Appellant company which could have proved his innocence.
5. Per Contra the Ld. DR appearing on behalf of the Revenue supports the impugned order, He submits that the goods were imported by manipulating the documents as unearthed during investigations. He submits that the goods were to be classified as all the machines have individual functions and the machines under import are classifiable as per the codes given in original SPE Sheets. That the various goods are to be classified as per their individual function. That the importer has themselves accepted that the dairy plants are integrated plants which consists of various tanks/ machines which put together are used in dairy. He submits that as apparent from the adjudication order in terms of Explanatory Notes 2 (a) to Section XVI the imported goods to be classified under their respective headings. He further relies upon Explanatory Note 2 to chapter 84 and Explanatory Note 7 to chapter 84. He also relies upon the judgment of HMT Ltd. vs. CCE, Aurangabad 2007 (214) ELT 10 (SC), Dairy Development Corp. Vs. Collector of Customs 2000 (119) ELT 629 (TRI) and Indo Berg Ltd. Vs. CCE, Delhi 2001 (134) ELT 749.
6. We have carefully considered the submissions made by both the sides and perused the records.
7. We find that the Appellant had imported various goods covered by 5 consignments which was shipped by M/s Yakult Honsha Ltd., Japan. The investigation conducted by the department reveals that whereas out of the 5 consignments the first, fourth and fifth consignments were cleared by declaring the goods under the respective HS Codes and suppliers invoices. In case of 2nd and 3rd consignments cleared under Bill of Entry No. 763776 dt. 03.05.2007 and BE No. 801219 dt. 18.06.2007, the goods were shown as Dairy machines and were cleared by availing exemption from CVD in terms of Notfn. No. 6/2006 CE dt. 01.03.2006. It was during investigation that the officers found that the original Specification of Production equipment Sheets (SPE Sheets) received from the supplier containing HS codes were altered by the importer so as to show the same as Dairy machines. The original sheets issued by the supplier contained the HS codes showed the codes of machines of consignment as under 842890, 847982, 842139, 847730, 842230, 842839, 844359. The description of goods in original sheets i.e goods of the second consignments were steel tanks for various purposes such as dissolving tank and parts. Culture tank surge tanks etc, hopper, air unit, humidity control unit and other parts. The goods in third consignment were Moulding machine and parts , filling and packing machine, filling machine conveyor and filling machine conveyor printer. However in the sheet submitted to the Custom officers the codes were altered to 84342000 and the description of goods were shown as Dairy machine and parts, which enabled the importer to claim benefit of exemption notification no. 6/2006 CE dt. 01.03.2006. It is also an undisputed fact that the alterations were done by the Appellant, its parent company who had shipped the goods, the director Shri Oike, employee Shri Suzuki and Anil Choudhary. The director Shri Oike in his statement has blamed the co-appellant Mr. Anil Choudhary the ex-employee who has orchestrated the manipulation in the SPE Sheets and thereby claiming exemption. The Appellant on merits has contested the demand on the ground that the imported goods merit classification as Dairy Machine and the exemption has been correctly claimed. The Appellant has quoted the HSN explanatory Note to Heading 84.34 which states that this heading covers mechanical milking machine, and other machinery, whether for farm or industrial purposes, used in the treatment of milk or converting it into other dairy products. That since their product is dairy based drink hence are covered by the heading 84.34 which is eligible for exemption. The Appellant has also relied upon Section Note IV to Section XVI of the tariff to show that the plant is combination of various machines and all the machines are to be regarded as dairy machine. We find that as per Explanatory notes to HSN in heading 84.34, Parts of the machine are to be classified in the same heading subject to the general provisions regarding the classification of parts as per the General Explanatory Notes to Section XVI). Note 2(a) to Section XVI of the Central Excise Tariff Act clearly provides that Parts which are goods included in any of the headings of Chapters 84 and 85 are in all cases to be classified in their respective headings. Further as per Note to chapter 84 .a machine or appliance which answers to description in one or more of the headings 8401 to 8424 or heading 8486 and at the same time to a description in one or other headings 8425 to 8480 is to be classified under the appropriate heading of the headings 8401 to 8424 or under the headings 8486, as the case may be, and not under heading 8425 to 8480 Also the chapter note 7 to chapter 84 states that a machine which is used for more than one purpose is, for the purposes of classification, to be treated as if its principal purpose were its sole purpose. Subject to note 2 of this chapter and Note 3 to Section XVI, a machine, the principal purpose of which is not described in any heading or for which no purpose is, unless the context otherwise requires, to be classified in heading 8479. Heading 8479 also covers machines. We find that in the present case the tanks were thus to be classified under 8479 and even the original SPE Sheets provided that HS Codes. Similarly the other goods are also classifiable as per their individual description as stated in show cause notice.
8. The contention of the Appellant that Section Note IV to Section XVI of Tariff is applicable is not correct as initially the goods were classified under the respective HS code and at the time of filing of Bill of Entry the same were changed. The Section Note 2 (a) to Section XVI in such circumstances would be the guiding principle to classify the goods. Our views are also guided by the judgment of Honble Supreme Court in the case of HMT Ltd Vs. Commissioner of C. Ex. & Cus., Aurangabad 2007 (214) E.L.T. 10 (S.C.) wherein the Honble Apex Court while upholding the judgment of the Tribunal observed that CESTAT found that as per HSN Explanatory Note to Chapter Heading 84.34 the machines for processing milk depend on the principle of heat exchange and they are excluded from coverage under Chapter Heading 84.34 and the heading also excludes refrigerating appliance (whether or not specifically designed for cooling or keeping milk and milk cooling vats incorporating evaporator of the refrigerating unit from Chapter Heading 84.34). It was further noted that HSN Explanatory note also excluded the machines for wrapping or weighing the product from Chapter Heading 84.34. Further in case of Dairy Development Corp. Vs. Collector Of Customs, Bombay 2000 (119) E.L.T. 629 (Tribunal), the butter packing machine was classified under the respective heading and excluded from purview of 84.34. In case of INDO BERG LTD. Vs. COMMISSIONER OF C. EX., DELHI-I 2001 (134) E.L.T. 749 (Tri. - Del.) the Tribiunal held as under :
We have considered the submissions of both the sides. It is not disputed by the Appellants that the product in question Powder Conveying System conveys material that is milk powder in the present matter. Explanatory Notes of H.S.N. below Heading 84.28 provides that This heading covers a wide range of machinery for the mechanical handling of materials, goods, etc. (lifting, conveying, loading, unloading etc.). They remain here even if specialised for a particular industry, for agriculture, metallurgy, etc. The Explanatory Notes also mentions that the provisions of Explanatory Note to Heading 84.26 apply, mutatis mutandis, to the equipment of this heading..... which reads as under :
Lifting, loading, handling, etc., machines presented separately are, however, classified in this heading even if intended for incorporation in other machines or for mounting on transport vehicles or vessels of Section XVII.
5.?It is, thus, apparent that the impugned product will be rightly classifiable under Heading 84.28 even though it is finally to be incorporated in dairy machines. According to Explanatory Notes of H.S.N. below Heading 84.34, Parts of the machine are to be classified in the same heading subject to the general provisions regarding the classification of parts (see the General Explanatory Notes to Section XVI). Note 2(a) to Section XVI of the Central Excise Tariff Act clearly provides that Parts which are goods included in any of the headings of Chapters 84 and 85 are in all cases to be classified in their respective headings. As the impugned product is included specifically under Heading 84.28 it has rightly been classified there. This was the view expressed by the Tribunal in the case of Bhilai Engineering Corpn. Ltd., supra. Even the decision in the case of Laxmi Boilers is against the Appellants as the Tribunal observed therein that All these parts would doubtlessly fall under a number of headings. The Tribunal in the said case was considering the availability of Notification No. 205/88 (Sl. No. 18) which according to the Tribunal was generally worded so as to enable anything used in the construction of boilers to be covered thereunder. Accordingly, we find no infirmity in the impugned Order and reject the appeal.
In view of the fact that the goods were correctly classifiable in the SPE Sheets as per their respective description and individual function but were changed by the Appellants employee in consultation with the Management, we are of the view that the goods does not merit classification as parts of dairy Machinery. For the reasons stated above and looking to the fact that the issue involves of intended mis-declaration, mis-classification and suppression of facts we do not find any infirmity in the order passed by adjudicating authority and uphold the same in as much as the same is related to Appellant M/s Yakult Danone (India) Pvt. Ltd.
9. As regard penalty imposed upon Shri Kiyoshi Tatsui Oike, Managing Director is concerned we find that he was concerned with overall working and not particularly involved in any contumacious conduct. The correspondence for changes of HS codes and alteration of SPE sheets was an act between its parent company M/s Yakult Honsha Ltd, Japan and Mr. Tomoshi Suzuki on the advice of Consultant M/s SBBFL. We thus find that no active involvement of Shri Oike is appearing in record that he orchestrated the alleged acts of violation of Custom laws and intended to cause revenue loss. We therefore do not find it fit to impose penalty and set aside the penalty imposed upon him.
10. As regard penalty upon Shri Anil Choudhary is concerned, we find that he was merely an employee who acted on the directions of the company and had no personal involvement. We therefore do not find it fit to impose penalty upon him. The penalty upon Shri Anil Choudhary is therefore set aside.
11. The Appeal filed by M/s Yakult Danone (India) Ltd. is dismissed and appeals of Shri Kiyoshi Tatsuie Oike and Shri Anil Choudhary are allowed.
12. The appeals are disposed of in above terms and Misc. Applications also stand disposed of accordingly.
(Order pronounced in court on _______________) C.J. Mathew Member (Technical) Ramesh Nair Member (Judicial) sk 19 C/85493, 85500 & 85719/14