Custom, Excise & Service Tax Tribunal
Abans Jewels Pvt Ltd vs Principal Commissioner, Customs-New ... on 28 March, 2022
Author: Dilip Gupta
Bench: Dilip Gupta
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. 1
CUSTOMS APPEAL NO. 50192 OF 2021
(Arising out of Order-in-Original No. 43/2020 U.G./Commr./ dated 07.09.2020
passed by the Principal Commissioner of Customs, ACC (Imports), New Delhi)
M/s Abans Jewels Pvt. Ltd. .... Appellant
VERSUS
Principal Commissioner of ...Respondent
Customs, ACC (Imports)
New Customs House, IGI Airport,
New Delhi
WITH
CUSTOMS APPEAL NO. 50165 OF 2021
(Arising out of Order-in-Original No. 42/2020 U.G./Commr./ dated 09.09.2020
passed by the Principal Commissioner of Customs, ACC (Imports), New Delhi)
M/s. Roots Network LLP .... Appellant
VERSUS
Principal Commissioner of ...Respondent
Customs, ACC (Imports)
New Customs House, IGI Airport,
New Delhi
WITH
CUSTOMS APPEAL NO. 50166 OF 2021
(Arising out of Order-in-Original No. 39/2020 U.G./Commr./ dated 11.09.2020
passed by the Principal Commissioner of Customs, ACC (Imports), New Delhi)
M/s. Insat Export Pvt. Ltd. .... Appellant
VERSUS
Principal Commissioner of ...Respondent
Customs, ACC (Imports)
New Customs House, IGI Airport,
New Delhi
AND
CUSTOMS APPEAL NO. 50197 OF 2021
(Arising out of Order-in-Original No. 50/2020 U.G./Commr./ dated 18.09.2020
passed by the Principal Commissioner of Customs, ACC (Imports), New Delhi)
M/s. Kesari Jewellery Marketing .... Appellant
VERSUS
Principal Commissioner of ...Respondent
Customs, ACC (Imports)
New Customs House, IGI Airport,
New Delhi
2
C/50192/2021, C/50165/2021
C/50166/2021 & C/50197/2021
APPEARANCE:
Shri Tarun Gulati, Senior Advocate with Shri Kishore Kunal, Shri Manish Rastogi and
Ms. Kanak Grover, Advocates for the Appellants
Shri Rakesh Kumar and Shri Sunil Kumar, Authorized Representatives of the
Department
CORAM: HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT
HON'BLE MR. P. V. SUBBA RAO, MEMBER (TECHNICAL)
Date of Hearing: 15.02.2022
Date of Decision: 28.03.2022
FINAL ORDER NO. 50285-50288/2022
JUSTICE DILIP GUPTA:
Customs Appeal No. 50192 of 2021 has been filed by M/s.
Abans Jewels to assail the order dated 07.09.2020 passed by the
1
Principal Commissioner of Customs, ACC (Imports) rejecting the
classification of the goods claimed by the appellant to be under
Customs Tariff Item 2 7114 19 10 and classifying them under CTI 7118
90 00 of the Customs Tariff Act, 1975 3 . The Principal Commissioner
also rejected the exemption claimed by the appellant under notification
dated 31.12.2009, as amended by notification dated 31.12.2016 and
ordered for recovery of differential duty with interest. The Principal
Commissioner also held that the goods provisionally cleared were liable
to confiscation under section 111(d) of the Customs Act, 1962 4 but
since the goods were not available and had already been cleared
against Bond and Bank Guarantee, redemption fine with penalty under
section 112 of the Customs Act was also imposed.
1. the Principal Commissioner
2. CTI
3. the Tariff Act
4. the Customs Act
3
C/50192/2021, C/50165/2021
C/50166/2021 & C/50197/2021
2. Customs Appeal No's. 50165 of 2021, 50166 of 2021 and
50197 of 2021 have also been filed by M/s. Roots Network LLP, M/s.
Insat Export Pvt. Ltd. and M/s. Kesari Jewellers Marketing,
respectively, to assail similar orders passed by the Principal
Commissioner.
3. The details of the Bills of Entry and the demand made in the
aforesaid four appeals are as follows:
Customs Appeal No. 50192 of 2021
SN. BoE No. and Date Value (₹) Total
Differential
Duty (₹)
Provisionally Assessed
1. 2628451 dated 28.07.2017 4,01,17,565 42,56,072
2. 2640702 dated 28.07.2017 13,89,31,850 1,47,39,280
3. 2884716 dated 17.08.2017 12,18,97,787 1,29,32,136
3,19,27,489
Finally Assessed
4. 2804040 dated 10.08.2017 27,12,028 28,77,191
5. 2927341 dated 21.08.2017 64,49,119 68,41,871
6. 2804039 dated 10.08.2017 11,21,61,113 1,18,99,173
2,16,18,235
Total Demand Details
(A) Grand Total 42,22,69,422 5,35,45,724
(B) Redemption Fine Imposed against 3,20,00,000
Provisionally Assessed BoEs [u/s. 125]
(C) Penalty Imposed [u/s. 112] 50,00,000
Customs Appeal No. 50165 of 2021
SN. BoE No. and Date Value (₹) Total
Differential
Duty (₹)
1. 2511165 dated 19.07.2017 11,01,47,562 1,16,85,555
2. 2777836 dated 08.08.2017 20,51,57,589 2,17,65,169
3. 2793056 dated 09.08.2017 13,58,51,775 1,44,12,515
4. 2807736 dated 10.08.2017 8,15,52,790 86,51,935
5. 2807769 dated 10.08.2017 8,06,89,080 85,60,304
6. 2807860 dated 10.08.2017 13,58,51,775 1,44,12,515
7. 2808090 dated 10.08.2017 13,58,51,775 1,44,12,515
8. 2820817 dated 11.08.2017 8,15,52,790 86,51,935
4
C/50192/2021, C/50165/2021
C/50166/2021 & C/50197/2021
9. 2820911 dated 11.08.2017 6,98,22,425 74,07,461
10. 2820936 dated 11.08.2017 5,38,07,932 57,08,484
11,56,68,388
Total Demand Details
(A) Grand Total 1,09,02,85,492 11,56,68,388
(B) Redemption Fine Imposed against 12,00,00,000
Provisionally Assessed BoEs [u/s. 125]
(C) Penalty Imposed [u/s. 112] 1,15,00,000/-
Customs Appeal No. 50192 of 2021
SN. BoE No. and Date Value (₹) Total
Differential
Duty (₹)
Provisionally Assessed
1. 2416573 dated 12.07.2017 8,55,77,887 90,78,958
2. 2447817 dated 14.07.2017 9,27,52,980 98,40,164
3. 2521313 dated 19.08.2017 9,71,73,734 1,03,09,161
4. 2558033 dated 22.07.2017 13,27,62,051 1,40,84,726
5. 2793057 dated 09.08.2017 12,13,75,310 1,28,76,707
5,61,89,716
Finally Assessed
6. 2759773 dated 07.08.2017 10,84,12,489 1,15,01,481
7. 2762058 dated 07.08.2017 6,84,46,148 72,61,452
8. 2762214 dated 07.08.2017 6,11,09,567 64,83,114
9. 2777835 dated 08.08.2017 13,55,14,910 1,43,76,777
10. 2793059 dated 09.08.2017 13,55,12,824 1,43,76,555
11. 2807575 dated 10.08.2017 12,16,11,903 1,29,01,807
6,69,01,186
Total Demand Details
(A) Grand Total 116,02,49,802 12,30,90,902
(B) Redemption Fine Imposed against 5,60,00,000
Provisionally Assessed BoEs [u/s. 125]
(C) Penalty Imposed [u/s. 112] 1,20,00,000
Customs Appeal No. 50197 of 2021
SN. BoE No. and Date Value (₹) Total
Differential
Duty (₹)
Provisionally Assessed
1. 2555130 dated 22.07.2017 5,33,35,677 56,58,382
2. 2555131 dated 22.07.2017 5,34,97,543 56,75,554
3. 2596441 dated 25.07.2017 10,76,27,657 1,14,18,218
4. 2622540 dated 27.07.2017 10,82,59,025 1,14,85,200
5. 2622542 dated 27.07.2017 12,17,77,903 1,29,19,418
5
C/50192/2021, C/50165/2021
C/50166/2021 & C/50197/2021
6. 2638220 dated 28.07.2017 12,19,49,799 1,29,37,654
7. 2652361 dated 29.07.2017 10,81,02,814 1,14,68,628
7,15,63,054
Finally Assessed
8. 2685522 dated 01.08.2017 23,29,20,566 2,47,10,543
9. 2699884 dated 02.08.2017 20,45,08,127 2,16,96,267
10. 2714101 dated 03.08.2017 13,74,82,447 1,45,85,513
11. 2772714 dated 08.08.2017 13,60,82,502 1,44,36,993
12. 2772714 dated 08.08.2017 20,44,09,211 2,16,85,773
9,71,15,089
Total Demand Details
(A) Grand Total 16,86,78,143
(B) Redemption Fine Imposed against 7,15,00,000
Provisionally Assessed BoEs [u/s. 125]
(C) Penalty Imposed [u/s. 112] 1,60,00,000
4. The appellants claim to have imported articles of gold which are
round in shape and have images of gods, saints, temples or historical
sites. These articles are struck in the form of a coin and according to
the appellant are not or were not intended to be legal tender and infact
were more akin to medals or medallions and were loosely or
colloquially described as gold coins.
5. The appellants claimed classification of these imported goods as
'articles of gold' under CTI 7114 19 10 and these goods were cleared
after availing exemption from payment of customs duty on the basis of
the notification dated 31.12.2009 that extends the benefit of NIL Basic
Customs Duty 5 to all goods falling under Customs Tariff Headings 6
71021 to 711890 on production of Country of Origin Certificate. The
aforesaid customs notification was issued in terms of the India-South
Korea Comprehensive Economic Partnership Agreement 7.
5. BCD
6. CTH
7. the Agreement
6
C/50192/2021, C/50165/2021
C/50166/2021 & C/50197/2021
6. However, show cause notices were issued to the appellants
seeking to re-classify the imported goods and deny the exemption
claimed by the appellant inter-alia on the following allegations:
i. Imported goods have incorrectly been classified under CTI 7114
19 10 and should be re-classified under CTI 7118 90 00 under
"other". According to the show cause notices, the said CTI 7118
90 00 covers all remaining coins (including all legal tenders
regardless of constituent material and gold coins); and
ii. In terms of the Reserve Bank of India 8 Guidelines, the appellants
were not entitled to import the said goods and consequently,
exemption under Serial No. 526 of the notification was not
available.
7. The appellants filed detail replies to the show cause notices, but
the demands were confirmed and the findings recorded in the order
passed by the Principal Commissioner are as follows:
"43. I find that while filing the Bills of Entry, ABANS have
themselves declared the said goods as "gold coins (other than
legal tenders)" and have classified the said goods under CTH
7114 19 10 whereas this heading covers 'articles of gold'.
******
45. ****** I examine the two competing tariff entries of CTH 7114 and CTH 7118 of the First Schedule of the CTA. The relevant extract of the said two entries read as under. ******
46. From the above, I find that heading 7118 covers coin of any metal. In the impugned case, goods are declared as coin, not being legal tender. The goods being coin are squarely covered under CTH 7118 as the terms of the CTH 7118 under the CTA is COIN while the entry in CTH 7114 is in the nature of residuary items. Hence by application of the GIR 1, impugned goods merit classification under CTH 7118, provided it is not guided otherwise by Section Note for Section XIV and Chapter Note for Chapter 71 of the
8. RBI 7 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 CTA which are relevant in this case. I do not find anything in the said Section Notes and Chapter Notes that excludes GOLD COIN from the CTH 7118. I also do not find any heading or sub-heading in Chapter 71 of the CTA or for that matter in any Chapter which has specific entry for "Coin" or "Gold Coin". Therefore, I find that the classification of impugned goods remains under CTH 7118. This view also finds support from GIR 3(a), as discussed hereinafter, which provides that "the heading which provides the most specific description shall be preferred to headings providing a more general description"
47. Now the issue to be decided is what would be the tariff item of gold coin not being legal tender. From the above, it is clear that CTH 7118 covers coin made of any metal including precious metal. I find that tariff item 7118 1000 of the CTA covers Coin (other than gold coin), not being legal tender whereas tariff item 7118 9000 of the CTA refers to coin other than coin of tariff item 7118 1000 of the CTA. In other words, tariff item 7118 9000 of the CTA covers all coins which are not covered under tariff item 7118 1000 of the CTA. Further, I find that the antonyms of the phrase 'not being legal tender" is being legal tender". The logical deduction from this is that tariff item 7118 90 of the CTA would include:
(i) Coin (other than gold coin), being legal tender;
(ii) Gold coin, not being legal tender, and
(iii) Gold coin, being legal tender.
Therefore, impugned goods declared as coin, not being legal tender are to be classified under tariff item 7118 9000 of the CTA.
48. I find that ABANS has claimed that HSN Explanatory Notes provides the scope and ambit of CTH 7118 and careful reading of the same discloses that the pre-condition for any goods to fall under this heading is that they are:-
a) made by stamping out from sheet metal and struck with appropriate dies;
b) of officially prescribed weight and design;
c) issued under government control for use as legal tender;8
C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021
d) are legal tender in the country of issue;
e) are no longer legal tender. ******
56. To sum up, the Explanatory Note has included coins of any metal (including precious metals) which are for use as legal tender; coins which are legal tender in the country of issue even if they are put up for general sale and coins which are no longer legal tender. The Explanatory Note has excluded coins which are collectors' pieces; medals even if "struck" in the same way as coins; coins mounted in brooches, tie-pins or other objects of personal adornment; and broken, cut or battered coins of a particular kind. It has not explicitly excluded gold coins, not being legal tender. Therefore, I find that impugned goods which are "gold coin, not being legal tender"
are not explicitly excluded from heading 7418 by the Explanatory Notes since they are made in similar fashion as specified in Explanatory Notes. Therefore, impugned goods merit classification under heading 7118 of the CTA.
57. Even otherwise, it is of paramount importance to point out here that in Khandwala's case, the Hon'ble High Court of Delhi has already clarified that all gold coins are classifiable under CTH 7118 9000 and has very clearly held that there can be no question of classifying the gold coins under CTH 7114 1910. ****** Accordingly, the view of the department stands fortified from the above position of law which leaves no scope for any deliberation with regard to classification of all gold coins irrespective of their being legal tenders or otherwise, the main argument put forth by ABANS that the goods imported by them were not gold coins as the same are not legal tenders of any country stands nullified. The undisputed fact which they cannot deny is that the goods imported by them are made up of gold and are round in shape and that is why they themselves have acceded to the fact that the same can loosely be referred to as the gold coins and therefore declared the same as gold coins in the Bills of Entry filed by them.
******
65. I also find that, to corroborate the claim of classification under heading 7114 of the CTA, ABANS has placed reliance on 9 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 S.No. 200 of Notification No. 12/2012-Central Excise dated 17.03.2012 vide which "Gold Coins of purity 99.5% and above having a brand name when manufactured from gold on which appropriate duty of Customs or Excise has been paid", have been exempted. It has been contended by ABANS that classification of such goods has been shown as heading 7114. ABANS has also invited attention to S.No. 3 of Notification No. 60/86-Customs dated 17.02.1986 wherein "current coin of the Government of India" classifiable under CTH 711890 have been fully exempted. I do not agree with the contention so made by Abans as classification of a product is to be decided on the basis of relevant heading and section and chapter notes of the CTA and classification cannot be decided on the basis of entries in an exemption notification.
******
67. I am not inclined to agree, with the stand of ABANS that the subject goods are more akin to medals or medallions struck in the form of a coin. As per the Oxford Dictionary, the term 'pendant' is described as a piece of jewellery that hangs from a chain worn round the neck and the medallion is a piece of jewellery in the shape of a medal, worn as a pendant. The description of these items by the Oxford English Dictionary substantiates the inclusiveness of medallions under the term pendants. It appears that medallions are also pendants in round shape. A medallion, as is commonly understood, is round in shape and used for meritorious awards and gifts presented on special occasions. It may also be treated as treasure of mementos or items of valuable investment. Gold coin, on the other hand, is usually round in shape without any hook or hole and it cannot be worn. Coin and medallions are different and distinct products.
******
74. I find that ABANS has argued that firstly, the imported goods fall under CTH 7114 and there is no prescription of any RBI Guidelines to be followed for such goods and that in any event, even if the goods were to be classified under CTH 7118, the SCN does not specify as to which RBI Guidelines were to be followed and which have not been followed by them; that the entire allegation in this regard is based on the assumption that the RBI has issued guidelines stating that only nominated 10 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 agencies can import Gold Coin, however, no such guidelines are available in the public domain.
75. I do not agree with the above contention of ABANS simply because of the fact that the goods in question are classifiable under CTH 7118 9000 and as discussed hereinabove, because DGFT'S Office Memorandum No. 01/89/180/36/AM-11/PC-II(A) dated 06.09.2017 has been upheld by Hon'ble High Court, it becomes clear that import of gold coins are subject to RBI guidelines. Here it is pertinent to mention that RBI and DGFT clearly say that apart from the authorized Banks and Nominated Agencies i.e. agencies nominated by DGFT, Banks authorized by RBI and Star and Premier Trading Houses, other entities are not permitted to import gold coins (as well as medallions). Hence, once it is upheld by the Hon'ble High Court, in the Khandwala's case, that the import of goods falling under CTH 7118 9000 will be regulated by the RBI guidelines, any contrary argument made in this regard will be a mere cavil on the part of ABANS and offering any discussion on the same will be a futile exercise. ******
86. Thus, in the light of the clarification by RBI, the DGFT and provisions of the FTP, I find that since ABANS is neither an authorized bank nor a nominated agency nor a Status Holder (Star and Premier Trading house), they are not permitted to import the impugned goods. Consequently, I find that the imported goods have been imported contrary to the prohibition imposed by the DGFT (i.e. RBI Regulations) under the provisions of Section 3(3) of the FTDR and Para 2.08 of the FTP.
******
89. In the present case the COO produced by ABANS mentions the imported goods are classifiable under CTH 7114, whereas the said imported goods have been held to be classifiable under CTH 7118. Hence, the COO is not a valid document to allow benefit of Notification No. 152/2009- Customs dated 31.12.2009 as amended by Notification No. 66/2016-Customs dated 31.12.2016(S.No. 526)."
(emphasis supplied) 11 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021
8. The gist of the findings recorded by the Principal Commissioner are as follows:
(i) The goods, being coins, are covered under CTH 7118 and entry in CTH 7114 is for residuary items;
(ii) CTI 7118 10 00 covers coin (other than gold coin not being legal tender), while CTI 7118 90 00 covers coin other than coin of CTI 7118 10 00. Thus, CTI 7118 90 00 would cover gold coin, not being legal tender;
(iii) HSN Explanatory Notes that define the scope and ambit of CTH 7118 do not explicitly exclude gold coins, not being legal tender;
(iv) The Delhi High Court in Khandwala Enterprise Pvt. Ltd. vs. Union of India 9 , clarified that all gold coins are classifiable under CTI 7118 90 00;
(v) The contention of the appellant that the subject goods are more akin to medals or medallions struck in the form of coin cannot be accepted;
(vi) As the subject goods are classifiable under CTI 7118 90 00, it is clear that the import of gold coins are subject to RBI Guidelines;
(vii) As the appellant is neither an authorized bank nor a nominated agency nor a status holder, it could not import the subject goods and, therefore, the subject goods have been imported contrary to the prohibition imposed by DGFT (i.e. RBI Regulations); and
9. 2020 (371) E.L.T. 50 (Del.) 12 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021
(viii) The Country of Origin Certificate issued to the appellant which mentions that the goods are classifiable under CTH 7114 cannot be considered to be a valid document.
9. Shri Tarun Gulati, learned senior counsel assisted by Shri Kishore Kunal, Shri Manish Rastogi and Ms. Kanak Grover made the following submissions to assail the orders passed by the Principal Commissioner:
(i) The correct classification of the imported goods is CTI 7114 19
10 and not CTI 7118 90 00 and in this connection reliance has been placed on the HSN Explanatory Notes that provide the scope and ambit of CTH 7118;
(ii) CTH 7118 10 would cover coins which are not legal tender and CTH 7118 90 would cover coins which are legal tender. Thus, the goods imported by the appellant, which are not legal tender, cannot fall under CTI 7118 90 00;
(iii) The presumption drawn in the impugned order that all coins are covered under CTH 7118 is incorrect;
(iv) Even by application of the General Rules of Interpretation 10, the imported goods would not be classifiable under CTI 7118 90 00 in view of the Explanatory Notes to HSN for CTH 7118;
(v) CTH 7114 covers "articles of gold". The goods imported by the appellants are articles of gold which are round in shape and, therefore, have correctly been classified by the appellant under CTI 7114 19 10;
10. GRI 13 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021
(vi) The foreign supplier issued a specific confirmation clarifying that the imported goods are articles of gold classifiable under CTH 7114;
(vii) The Country of Origin Certificates issued by the South Korea Governmental Authority also certify the classification to be under CTH 7114;
(viii) The burden of proof in classification cases is on the Customs Department and evidence has to be placed by it to establish mis-declaration by the importer;
(ix) In the present case the classification has been decided on mere assumptions and on a complete mis-reading of the judgment of the Delhi High Court in Khandwala Enterprise;
(x) In the face of consistent views that the subject goods were classifiable under CTH 7114, it was not permissible for the Principal Commissioner to hold that the goods were classifiable under CTH 7118;
(xi) The finding recorded by the Principal Commissioner that the imported goods are not in the nature of medallions is erroneous;
(xii) The finding recorded by the Principal Commissioner that CTI 7118 90 00 covers all remaining coins (including all legal tenders regardless of constituent material and gold coins) is incorrect;
(xiii) The finding recorded by the Principal Commissioner is based on an erroneous presumption that Explanatory Notes to HSN do not explicitly exclude gold coins which are not legal tender from CTH 7118. The intent and scope of CTH 7118 has been clearly 14 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 defined to include only coins which are or were, at any given point of time, legal tenders. Thus, goods which do not conform to the said description are excluded from the scope of CTH 7118. Since the goods imported by the appellant are not a legal tender and were never a legal tender, the same cannot be classified under CTI 7118 90 00;
(xiv) Even otherwise, both CTH 7118 and CTH 7114 are exempted under the exemption notification and the Agreement and thus the demand is without jurisdiction;
(xv) The imported goods are not "restricted or prohibited" items irrespective of the classification under CTH 7114 or CTH 7118; (xvi) The DGFT Memorandum and the RBI letter cannot be treated as equivalent to RBI Regulations. This apart, RBI cannot regulate imports and can only issue directions to authorized person with regard to making payment relating to foreign exchange or foreign security; and (xvii) Confiscation is not sustainable nor penalty can be imposed under section 112(a) of the Customs Act.
10. Shri Rakesh Kumar and Shri Sunil Kumar, learned authorized representatives appearing for the Department, however, supported the impugned orders and made the following submissions:
(i) The impugned orders are based on a correct interpretation of judgment of the Delhi High Court in Khandwala Enterprise;
(ii) The Country of Origin Certificates are not binding on the customs authority;15
C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021
(iii) The goods being coin are squarely covered under HSN 7118, while HSN 7114 are in the nature of residuary items. Thus, by applying GRI-1, the impugned goods merit classification under CTH 7118 and Chapter Notes and Section Notes also do not exclude gold coins from CTH 7118;
(iv) The attempt by the appellant to derive benefit from the definition of "coin" in the Coinage Act, 2011 is not correct;
(v) All gold coins, whether or not legal tender, are elements of sub-
heading 711890; and
(vi) Once the DGFT clarified that all the subject goods shall be classified under CTI 7118 90 00 as per the clarification dated 06.09.2017 and the same having been upheld by the Delhi High Court in Khandwala Enterprise; it is not open to take a contrary view.
11. The contentions advanced by the learned counsel for the appellant and the learned authorized representatives appearing for the Department have been considered.
12. The dispute in the present appeals relates to classification of the goods described in the Bills of Entry by the appellant as "gold coins (round) (other than legal tender)". According to the appellant, the imported articles of gold which are round in shape have images of gods, saints, temples or historical sites and are struck in the form of a coin. The appellants claim that these goods are not and were not intended to be legal tender and infact were more akin to medals or medallions and were loosely or colloquially described as gold coins. It is for this reason that the appellant classified these imported goods as "articles of gold" under CTI 7114 19 10 and these goods were cleared 16 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 on payment of NIL BCD in terms of the notification dated 31.12.2009 on production of Country of Origin Certificates. According to the Department, the goods imported by the appellant are gold coins and, therefore, deserve to be classified under CTI 7118 90 00.
13. To appreciate the issues involved in the present appeals, it would be necessary to reproduce the relevant Customs Tariff Items contained in Chapter 71 of the Tariff Act and they are as follows:
Tariff Item Description of goods Unit Rate of duty Standard Preferential Areas (1) (2) (3) (4) (5) III. - Jewellery, Goldsmiths and Silversmiths Wares and Other Articles 7114 Articles of goldsmiths or silversmiths wares and parts thereof, of precious metal or of metal clad with precious metal
- Of precious metal, whether or not plated or clad with precious metal:
7114 11 -- Of silver, whether or not plated or clad with precious metal:
7114 11 10 --- Articles Kg. 15% -
7114 11 20 --- Parts Kg. 15% -
7114 19 -- Of other precious metal, whether
or not plated or clad with
precious metal:
7114 19 10 --- Articles of gold Kg. 15% -
7114 19 20 --- Articles of platinum Kg. 15% -
7114 19 30 --- Parts Kg. 15% -
7114 20 - Of base metal clad with precious
metal
7114 20 10 --- Articles clad with gold Kg. 15% -
7114 20 20 --- Other articles Kg. 15% -
7114 20 30 --- Parts Kg. 15% -
7118 Coin
7118 10 00 - Coin (other than gold coin), not Kg. 10% -
being legal tender
7118 90 00 - Other Kg. 10% -
(emphasis supplied)
14. It would also be appropriate to refer to the General Exemption Customs Notification dated 31.12.2009 and it is reproduced below:17
C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 General Exemption No. 58 Effective rate of duty for specified goods imported from Korea. - In exercise of the powers conferred by sub- section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts goods of the description as specified in column (3) of the Table appended hereto and falling under the Chapter, Heading, Sub-
heading or tariff item of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as specified in the corresponding entry in column (2) of the said Table, when imported into India from the Republic of Korea, from so much of the duty of customs leviable thereon as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the aforesaid Table:
Provided that the importer proves to the satisfaction of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, that the goods in respect of which the benefit of this exemption is claimed are of the origin of Republic of Korea, in accordance with the provisions of the Customs Tariff (Determination of Origin of Goods under the Preferential Trade Agreement between the Government of the Republic of India and the Republic of Korea) Rules, 2009, published in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 187/2009-Customs (N.T.), dated the 31st December, 2009.
2. This notification shall come into force with effect from 1st January, 2010.
S. No. Chapter, Heading, Description of Rate (in Sub-heading or goods percentage Tariff Item unless otherwise specified) 526 711021 to 711890 All Goods 0.94
15. The aforesaid notification dated 31.12.2009 was amended by notification dated 31.12.2016 with effect from 01.01.2017 and the rate was reduced to NIL from 0.94.
16. It would also be useful to examine the relevant provisions of HSN.
18
C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021
17. 71.14 of HSN is reproduced below:
"71.14 - Article of 'Goldsmiths or Silversmiths' wares and parts thereof, of precious metal or of metal clad with precious metal.
- Of precious metal whether or not plated or clad with precious metal:
7114.11 - - Of silver, whether or not plated or clad with other precious metal 7114.19 - - Of other precious metal, whether or not plated or clad with precious metal 7114.20 - Of base metal clad with precious metal This heading covers articles of 'goldsmiths or silversmiths' wares as defined in Note 10 to this Chapter wholly or partly of precious metal or metal clad with precious metal. In general these goods are larger than articles of jewellary of heading 71.13; they include:
(A) Articles of tableware ***** (B) Toilet articles ***** (C) Office or desk equipment ***** (D) Smokers' requisites ***** (E) Other articles for domestic or similar use, for example, busts statuettes and other figures for interior decoration, jewel eases, table centre-pieces, vases jardinières; picture frames; lamps, candelabra;
candlesticks, chandeliers; mantelpiece ornaments, decorative dishes and plates, medals and medallions (other than those for personal adornment); sporting trophies; perfume burners, etc. (F) Articles for religious use *****"
18. 71.18 of HSN is reproduced below:
"71.18 - Coin (+) 7118.10 - Coin (other than gold coin), not being legal tender 7118.90 - Other This heading applies to coins of any metal (including precious metals) of officially prescribed weight and design, issued under government control for use as legal tender. Consignments of individual coins or of sets of coins which are legal tender in the country of issue are classified in this heading 19 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 even if they are put up for general sale in presentation cases. The heading includes coin which is no longer legal tender but it excludes collectors pieces (see Explanatory Note to heading 97.05).
Coins are made by stamping out blanks from sheet metal; these are then "struck" with the appropriate dies to produce simultaneously the designs on the two faces.
The heading does not cover:
(a) Medals even if "struck" in the same way as coins;
these usually fall in heading 71.13, 71.14 or 71.17 or heading 83.06 (see corresponding Explanatory Notes).
(b) Coins mounted in brooches, tie-pins or other objects of personal adornment (heading 71.13 or 71.17).
(c) Broken, cut or battered coins of a kind usable only as scrap or waste metal.
Subheading Explanatory Note.
Subheading 7118.10.
This subheading includes:
(1) Coins which were legal tender but have been withdrawn from circulation.
(2) Coins struck in one country to be put into circulation in another country; at the time of crossing frontier, they are not yet issued as legal tender by the competent authority."
(emphasis supplied)
19. The central excise tariff is broadly based on the system of classification derived from the International Convention called "The Brussels Convention on the Harmonised Commodity Description and Coding System" (HSN) with necessary modifications. In this connection, it will useful to reproduce the Statement of Objects and Reasons of the Central Excise Tariff Bill, 1985 which led to the enactment of the Central Excise Tariff Act, 1985. It is indicative of the pattern of the structure of the Central Excise Tariff and it reads as under:
20
C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 "Central Excise duty is now levied at the rates specified in the First Schedule to the Central Excises and Salt Act, 1944. The Central Excises and Salt Act, 1944 originally provided for only 11 items. The number of Items has since increased to 137. The levy, which was selective in nature, to start with, acquired a comprehensive coverage in 1975, when the residuary Item 68 was introduced. Thus, barring a few Items like opium, alcohol, etc., all other manufactured goods now come under the scope of this levy.
2. The Technical Study Group on Central Excise Tariff, which was set up by the Government in 1984 to conduct a comprehensive inquiry into the structure of the central excise tariff has suggested the adoption of a detailed central excise tariff based broadly on the system of classification derived from the International Convention on the Harmonised Commodity Description and Coding System (Harmonised system) with such contractions or modifications thereto as are necessary to fall within the scope of the levy of central excise duty. The Group has also suggested that the new tariff should be provided for by a separate Act to be called the Central Excise Tariff Act.
3. The Tariff suggested by the Study Group is based on an internationally accepted nomenclature, in the formulation of which all considerations, technical and legal, have been taken into account. It should, therefore, reduce disputes on account of tariff classification. Besides, since the tariff would be on the lines of the Harmonised System, it would bring about considerable alignment between the customs and central excise tariffs and thus facilitate charging of additional customs duty on imports equivalent to excise duty. Accordingly, it is proposed to specify the Central Excise Tariff suggested by the Study Group by a separate Tariff Act instead of the present system of the tariff being governed by the First Schedule to the Central Excises and Salt Act, 1944.
4. The main features of the Bill are as follows :-
(i) The tariff included in the Schedule to the Bill has been made more detailed and comprehensive, thus obviating the need for having a residuary tariff Item. Goods of the same class have been grouped together to enable parity in treatment.
* * * * * * * *
5. The Bill seeks to achieve the above objects.21
C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021
20. The Supreme Court in Collector of Central Excise, Shillong vs. Wood Craft Products Ltd.11 noted that for resolving any dispute relating to tariff classification, a safe guide is the internationally accepted nomenclature emerging from HSN and the relevant portion of the judgment is reproduced below:
"12. It is significant, as expressly stated, in the Statement of Objects and Reasons, that the Central Excise Tariffs are based on the HSN and the internationally accepted nomenclature was taken into account to "reduce disputes on account of tariff classification". Accordingly, for resolving any dispute relating to tariff classification, a safe guide is the internationally accepted nomenclature emerging from the HSN. This being the expressly acknowledged basis of the structure of Central Excise Tariff in the Act and the tariff classification made therein, in case of any doubt the HSN is a safe guide for ascertaining the true meaning of any expression used in the Act. The ISI Glossary of Terms has a different purpose and, therefore, the specific purpose of tariff classification for which the internationally accepted nomenclature in HSN has been adopted, for enacting the Central Excise Tariff Act, 1985, must be preferred, in case of any difference between the meaning of the expression given in the HSN and the meaning of that term given in the Glossary of Terms of the ISI."
(emphasis supplied)
21. The same view was expressed by the Supreme Court in L.M.L. Ltd. vs. Commissioner of Customs 12.
22. A perusal of CTH 7114 and heading 71.14 of HSN clearly shows that they are identical. Likewise, CTH 7114 19 is identical to sub- heading 7114.19 of HSN. It is also seen that CTH 7118 is identical to heading 71.18 of HSN and CTH 7118 10 and CTH 7118 90 are identical
11. 1995 (77) E.L.T. 23 (S.C.)
12. 2010 (258) E.L.T. 321 (S.C.) 22 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 to sub-headings 7118.10 and 7118 90 of HSN. In view of the aforesaid decisions of the Supreme Court, the Explanatory Notes to HSN can be taken to be safe guides for determining the classification under the Tariff Act.
23. It would, therefore, be useful to first examine the Explanatory Notes to heading 7118 of HSN. This Note extends to both the sub- headings 7118.10 and 7118.90 of HSN. It discloses that the pre- condition for any goods to fall under the heading 'COIN' (71.18) is that they are:
a) made by stamping out blanks from sheet metal which are then struck with appropriate dies to produce simultaneously the design on the two faces;
b) of officially prescribed weight and design;
c) issued under government control for use as legal tender;
d) are legal tender in the country of issue;
e) are no longer legal tender;
f) or intended to be legal tender.
24. It is clear that sub-headings 7118.10 and 7118.90 of HSN will cover only that sub-category of 'COINS' which fulfill the aforesaid conditions and the sub-headings cannot be read in a manner so to over ride or travel beyond the Explanatory Notes provided for the main heading. Thus, coins of heading 7118 of HSN would be those made by stamping sheet and struck with appropriate dies of officially prescribed weight and design and issued under government control for use as legal tender. Sub-heading 7118.10 of HSN would cover coins which are no longer legal tender or intended to be legal tender, while sub-
heading 7118.90 of HSN would cover coins which are legal tender in 23 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 the country of issue. It, therefore, follows that under the two sub- headings, the following coins are covered:
a) Coins which are legal tender in the country of issue: and
b) Coins which are no longer legal tender or intended to be legal tender.
25. The notification dated 17.02.1986 issued by the Ministry of Finance also granted customs duty exemption to goods falling under CTH 7118 90 and described as 'current coin of the Government of India'. The relevant portion of the notification is reproduced below:
"Notification: dated 17-Feb-1986 Pearl, precious metals and coins In exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods specified in column (3) of the Table hereto annexed and falling under the heading No. or sub-heading No. of the First Schedule to the Customs Tariff Act 1975 (51 of 1975), specified in column (2) thereof, when imported into India, from so much of that portion of the duty of customs leviable thereon which is specified in the said First Schedule as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the said Table.
TABLE Sl. Heading No. or Description of goods Rate of No. Sub- heading duty No. of the First Schedule to the Customs Tariff Act,1975 (1) (2) (3) (4)
1. 7101.10 Real pears, raw or 40% ad unworked valorem
2. 7112.20 Waste and scrap of 60% ad platinum and other valorem metals of the platinum group
3. Current coin of the Nil"
7118.90 Government of India (emphasis supplied) 24 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021
26. The aforesaid notification has described "current coin of the Government of India" as goods falling under CTH 7118 90 with NIL rate of duty.
27. In this view of the matter, when HSN is a safe guide for tariff classification under the Tariff Act, CTH 7118 under which the description of goods is 'coin' would apply to coins of any metal of officially prescribed weight and design issued under government control for use as legal tender. CTI 7118 10 00 and CTI 7118 90 00 would cover only that category of 'coins' which fulfill the aforesaid conditions. For the reasons stated while examining sub-heading 7118.90 of HSN, CTI 7118 90 00 would cover coins which are legal tender in the country of issue.
28. The appellant had described the goods in the Bills of Entry as "gold coin" (round) (other than legal tender). Thus, coins imported by the appellant are not legal tender and nothing has been brought on record by the Department to substantiate that the goods imported by the appellant are legal tender. The description of the goods imported by the appellant would, therefore, not fall under CTI 7118 90 00.
29. The next issue that arises for consideration is as to whether the appellant is justified in classifying the goods under CTH 7114. CTH 7114 would cover articles of gold and the goods imported by the appellant are also articles of gold which are round in shape. Heading 71.14 of HSN provides that these goods are larger than articles of jewellery of heading 71.13 and they include articles for domestic or similar use like medals and medallions (other than those for personal adornment).25
C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021
30. According to the appellant the imported articles of gold are round in shape and have images of gods, saints, temples or historical sites.
These articles are struck in the form of a coin and are not or were not intended to be legal tender and infact are more akin to medals or medallions and were loosely described as gold coins. It is not in dispute that the appellant had described the goods in the Bills of Entry as gold coins which are not legal tender. These have not been struck by any National Issuing Authority and are not legal tender. The Explanatory Notes to heading 71.14 of HSN clarify the tariff text "other articles for domestic or similar use" as including medals and medallions. Medals and medallions referred to in the Explanatory Notes share similar characteristics of commemorative coins in so far as they are for decorative or ornamental use. The goods, therefore, deserve to be classified along with medal and medallions or decorative ornaments under CTI 7114 19 10.
31. It would be useful to refer to the US Cross Ruling on headings 7118 and 7114 of HSN in Ruling HQ H266605 dated 09.04.2018 as available on customs ruling online search system (CROSS) on U.S. Customs and Border Protection. This pertains to the tariff clarification in the Harmonized Tariff Schedule of gold coin from New Zealand and Switzerland. The relevant portion of the ruling is reproduced below:
"The item is identified as the New Zealand Mint, "1 oz. Gold Kiwi." Present on the obverse surface of the round are the four stars of the Southern Cross, the word in all capitalized letters "AOTEAROA" - the traditional Maori name for New Zealand, and the words in all capitalized letters 1 OUNCE FINE GOLD .9999. Present on the reverse side of the round is the [sic] New Zealand's iconic flightless bird (the Kiwi) with head held high to reflect the nation's optimistic and proud spirit, NZ representing the New Zealand Mint, 1 oz, and 26 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 the words in all capitalized letters NEW ZEALAND GOLD KIWI. This round is not legal tender, has no engraved nominal value, and the purchasing and selling price are determined by the current spot price for its metal content.
******** ISSUE:
Whether the subject gold rounds are classified as goldsmiths' wares, of heading 7114, HTSUS, or as other articles of precious metal, in heading 7115, HTSUS.
******** We note at the outset that the rounds at issue are not legal tender. They are not struck by a national issuing authority, they do not have a face value, and they cannot be spent in their country of issue. It is for this reason that heading 7118, HTSUS, which provides for coins, is not being considered. See Headquarters Ruling (HQ) H074995, dated July 29, 2010 (classifying gold and silver coins by differentiating legal tender from commemorative coins), and see NY N016199, dated September 11, 2007 (classifying silver commemorative coins).
******** The Explanatory Notes to heading 71.14 clarify the tariff text "other articles for domestic or similar use" as including figures for interior decoration, mantelpiece ornaments, medals and medallions, among other listed articles. The myriad listed articles vary in size, shape, and purpose and so it could be challenging to find unifying characteristics beyond aesthetics. However, in this context, the use of the word "etc."
[etcetera] indicates that this list is not exhaustive, but rather is illustrative. Medals and medallions, which are provided for in the ENs, share similar characteristics as commemorative coins insofar as they are for decorative or ornamental use, to be viewed and enjoyed by their owner or guests, or could be given as gifts to memorialize a certain event or milestone. They are unlikely to be hoarded to build wealth or maintain oneself in a downward economy. As such, the subject coins are classified alongside medals and medallions, or decorative ornaments, and are properly classified in heading 7114, HTSUS, as an article of goldsmiths' wares. 27
C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 ******** HOLDING By application of GRI 1, the subject "Valcambi Suisse Minted Gold Round Bar" and the New Zealand "1 oz. Gold Kiwi"
commemorative coins are classified in heading 7114, HTSUS. They are specifically provided for in subheading 7114.19.00, HTSUS, which provides for, "Articles of goldsmiths' or silversmiths' wares and parts thereof, of precious metal or of metal clad with precious metal: Of other precious metal whether or not plated or clad with precious metal." The column one general rate of duty is 7.9% ad valorem."
(emphasis supplied)
32. It is for this reason that the appellant had classified the goods under CTI 7114 19 10 and cleared the same on NIL BCD in terms of the notification dated 31.12.2009 on production of Country of Origin Certificate.
33. One such Country of Origin Certificate issued by the Republic of Korea is reproduced below:
Quadruplicate
1. Exporter (name, address, country, e- Reference No. C020-17-0004532 mail address, telephone number, fax Reference Code s4f1-wo38 number) Samsung Gold Exchange Co. Ltd. KOREA-INDIA COMPREHENSIVE 210, 16, 6GA-GIL, Donhwamun-Ro, ECONOMICE PARTNERSHIP Jongno-Gu, Seoul, AGREEMENT PREFERENTIAL [email protected] CERTIFICATE OF ORIGIN Tel: 027642869 Fax: 07041704869
2. Producer (name, address, country) (Combined Declaration and Certificate) (optional) Samsung Gold Exchange Co. Ltd. Issued in The Republic of Korea 210, 16, 6GA-GIL, Donhwamun-Ro, Jongno-Gu, Seoul,
3. Importer (name, address, country) 5. For Official Use (optional) Abans Jewels Private Limited 416, 4TH Floor, Shah&Nahar Industrial Premises (A/1) Dhanraj Mills Compound, 28 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 Sitaram Jadhav Marg, Lower Parel, City:
Greater Mumbai (M Corp.), 400013, Taluka: Mumbai, India
4. Means of transport and route (optional) 6. Remarks Departure date : 2017.07.27 Vessel's name/Aircraft etc : OZ767 Port of Discharge : India, Delhi
7. HS 8. Description of 9. Gross weigh 10. Origin 11. Number Code goods, including and value (FOB) Criterion and date of (6 digit) quantity invoices (HS2007) 7114.19 1(CT) 15.8 (KG) CTH SGE170726-2 ///////////// Gold Coin (Round) 608,008 (USD) ////////////////// 2017.07.26 50GM each, /////////////////////// /////////////////// purity 99.5% (Other than legal tender) 15,000 (GR) ///////////////////////////
12. Declaration by the exporter 13. Certification The undersigned hereby declares that the It is hereby certified, on the basis above details and statement are correct; of control carried out, that the that all goods were produced in declaration by the exporter is THE REPUBLIC OF KOREA correct.
........................................................................
and that they comply with the origin Seal requirements specified for these goods in the KOREA-INDIA Comprehensive Eo Eun Sil Economic Partnership Agreement for the goods exported to INDIA ........................................................................ 2017.07.27 INCHEON MAIN Seoul, South Korea, 2017.07.27 CUSTOMS REPUBLIC OF KOREA ........................................................................ .....................................................................
Place and date, signature of authorised Place and date, signature and stamp signatory of issuing authority
14. Third country invoicing (name, address, country) (emphasis supplied) 29 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021
34. It clearly transpires from the aforesaid Certificate issued by the Republic of Korea that the goods were produced in the Republic of Korea and they complied with the origin requirements specified for these goods under the Korea-India Comprehensive Economic Partnership Agreement. It also certifies that the goods which have been described as gold coin (other than legal tender) fall under sub- heading 7114.19 of HSN and that the exporter is Samsung Gold Exchange Co. Ltd.
35. The exporter, Samsung Gold Exchange Co. Ltd. has also given a certificate that it has been manufactured by it and exported under India Korea CEPA, 2009. This document is reproduced below:
"SAMSUNG GOLD EXCHANGE CO., LTD.
(FORMELY SAMSUNG PRECIOUS METALS TRADING CENTER CO., LTD.) To whom it may concern This is certify that we, SAMSUNG GOLD EXCHANGE CO., LTD. are the Manufacturer of Gold/ Silver Jewellary. (Copy of Business Registration Certificate, Plant Registration Certification Attached) We declare that Goods (Gold Coin, Purity 99.5% other than legal tender) Exported vide Invoice No. SGE170726-2 dated 26th Jul. 2017 to ABANS JEWELS PRIVATE LIMITED Delhi India, has been manufactured by SAMSUNG GOLD EXCHANGE CO., LTD. and exported under India Korea CEPA 2009."
36. It would also be useful to refer to the Comprehensive Economic Partnership Agreement 13 between India and Republic of Korea that was entered on 07.08.2009. The Agreement, amongst others, provides in Articles 2.5, 2.6 and 2.11:
13. CEPA 30 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 "Article 2.5: Rules of Origin Goods covered by this Agreement shall be eligible for preferential tariff treatment, provided that they satisfy the rules of origin as set out in Chapter Three (Rules of Origin).
Article 2.6; Non-Tariff Measures
1. Neither Party shall adopt or maintain any non-tariff measures on the importation of any goods of the other Party or on the exportation of any goods destined for the territory of the other Party except in accordance with its rights and obligations under the WTO Agreement or in accordance with other provisions of this Agreement.
2. Each Party shall ensure that such measures are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to trade in goods between the Parties.
Article 2.11: Tariff Classification For the purposes of this Chapter and Chapter Three (Rules of Origin), the basis for tariff classification would be the HS."
37. As noticed above, it is pursuant to the aforesaid Agreement that the Customs Tariff (Determination of Origin of Goods under the Preferential Trade Agreement between Governments of the Republic of India and the Republic of Korea) Rules 2009 were framed and the notification dated 31.12.2009 was issued. Infact, the notification dated 31.12.2009 specifically refers to the Agreement and the 2009 Rules.
38. At this stage, it also needs to be noticed that the Commissioner of Customs addressed a letter dated 14.09.2017 to CBEC pointing out that gold coins (other than legal tender) are excluded from CTH 7118 as per the Explanation to HSN Notes and are covered under CTH 7114. It further mentions that there was no bar till 24.08.2017 on the import of such gold coins. The relevant portion of this letter is reproduced below:
31
C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 "4. In this context, it is stated that gold coins other than legal tenders are excluded from CTH 7118 as per explanation provided in HSN Explanatory Notes (copy enclosed) and therefore, the same are covered under CTH 7114. As per import policy given in ITC (HS) Schedule 1 for CTH 7114, policy for imports of the goods covered under the said heading is 'Free' without any policy conditions. Further, reference is also made to RBI Master Circular No. 17/2016-17 dated 01.01.2016 updated as on 12.01.2017 (as available on RBI website). As per para C.11.1.iv of the said Master Circular, "The import of gold coins and medallions is permitted.
5. In view of the above, this office is of the view that gold coins other than legal tender are covered under CTH 7114, that is an article of gold struck in the form of coin and there was no bar till 24.08.2017 on import of such gold coins. However, the matter is being brought to your kind notice for necessary clarification."
39. The Notification dated 25.08.2017 issued by the DGFT in connection with the amendment in import policy of gold and silver under Chapter 71 of the Tariff Act is reproduced below:
"Directorate General of Foreign Trade Notification No. 25/2015-2020 New Delhi, Dated: 25th August, 2017 Subject: Amendment in import policy of gold and silver under Chapter 71 of the ITC (HS) 2017, Schedule-1 (Import Policy).
S.O. (E): In exercise of powers conferred by Section 3 (2) of the FT(D&R) Act, 1992 as amended from time to time, read with paragraph 1.02 and 2.01 of the Foreign Trade Policy, 2015-2020, the Central Government hereby inserts Policy Condition No. 4 under Chapter 71 of the ITC(HS) 2017, Schedule-I (Import Policy) to read as under:-32
C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 "Imports from South Korea of articles of jewellery and parts thereof, of precious metal or of metal clad with precious metal under Exim code 7113; articles of goldsmiths' or silversmiths' wares and parts thereof, of precious metal or of metal clad with precious metal under Exim code 7114; other articles of precious metal or of metal clad with precious metal under Exim code 7115; and coins under Exim code 7118 are Restricted."
2. The facility/protection under para 1.05 of FTP shall not be available for import of the above items from the date of restriction.
3. Effect of this Notification: Policy Condition No. 4 restricting imports of gold and silver under Exim Codes 7113, 7114, 7115 and 7118 from South Korea is inserted in Chapter 71 of ITC(HS) 2017."
40. It needs to be noted that all the Bills of Entry involved in the four appeals are prior to 25.08.2017.
41. This apart, the foreign supplier has also issued a certificate to Insat Exports Pvt. Ltd. certifying as follows:
"FINE TECHNIX CO., LTD.
TO WHOSOEVER IT MAY CONCERN I, Lee Jae Kyu, am the Authorized Signatory of Fine Technix Co.
Ltd., ("Company") having office at Anyang-si, Gyeonggi-do, South Korea. During July & August, 2017 the Company had exported round shaped articles of gold to Insat Exports Private Limited in India which were of South Korean Origin. The details of Commercial Invoices issued are as follows:-
S.NO. Inovice No. Date
1. FTXG20170720 20 July 2017
2. FTXG20170807-2 07 Aug 2017
In this regard, it is certified that the exported goods are Articles of Gold which are round in shape. These goods are not or were never legal tender and been described in the export invoices 33 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 Gold Coin (other than legal tender). It is clarified that these goods are only struck in the form of a coin and the precise description of these goods is gold articles that are round in shape and are more like medals/medallions. These goods are classified under HS Code 7114 at the time of their exports from South Korea.
The goods exported by way of the above referred invoices are of South Korean Origin and were exported on the basis of Country of Origin Certificates issued by the Authorities in South Korea;
This Certificate is being issued at the request of the Customer."
42. The Bangalore Tribunal in Sri Exports also approved the classification of 'gold medallions' as 'articles of gold' from Korea under CTI 7114 19 10. This is also what was held by the Chennai Tribunal in ICICI Bank Ltd. vs. Commr. of Cus. (Airport-Cargo), Chennai 14.
43. There is, therefore, no manner of doubt that the goods imported by the appellant would fall under CTI 7114 19 10.
44. The Principal Commissioner has placed much emphasis on the judgment of the Delhi High Court in Khandwala to conclude that the goods imported by the appellant would be classifiable under CTI 7118 90 00 and, therefore, would be subjected to the RBI Guidelines.
45. It would, in this connection, be necessary to reproduce the relevant Office Memorandums and the Circulars issued from time to time as these were under challenge before the Delhi High Court in Khandwala.
14. 2014 (312) E.L.T. 366 (Tri. - Chennai) 34 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021
46. The Office Memorandum dated 06.09.2017 issued by the DGFT is regarding amendment in import policy of gold and silver under Chapter 71 and it is reproduced below:
"The undersigned is directed to refer to letter No. VIII(12) Import/Gr. III. IV & VI/KCPL/39/2016 /1605 dated 30.8.2017 from the Commissioner (Customs) Air Cargo Complex seeking clarification on the above mentioned subject.
2. In the matter, it is clarified that date of reckoning of import is decided w.r.t the date of shipment, as per Para 2.17 read with para 9.11 of the HBP (2015-20). Accordingly, shipments prior to 25.8.2017 may be considered for clearance by Customs. However, of late there has been an unprecedented surge in import of gold coins from South Korea under INDIA- Korea CEPA. Customs being the verifying agency for Rules of Origin (RoO) criteria of the imported goods, may like to examine these consignments of gold with duc diligence to ensure that such imports have complied with the RoO under the Indo-Korea CEPA.
3. To further amplify the point, since Korea is not a gold producing Country, the point to be checked is whether the exported gold articles from Korea are complying with the 'origin criteria' of Product Specific Rules of Origin under India-Korea CEPA. It may so happen that gold coins are being imported into Korea only for export purpose without any conversion facility. This is the right time for India to undertake a physical verification exercise (of manufacturing facility/premises) in coordination with our counterpart in Korea.
4. Further, as it has been observed that consignments of gold coins are being imported under HS: 7114 from South Korea, whereas the gold coins are classified under HS:
71189000 subject to RBI guidelines. This aspect may also be examined while dealing with these consignments. In case, you find any mis-declaration, you may take appropriate action against the importer under the Customs Act.
This issues with the approval of DGFT."35
C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021
47. The communication dated 13.09.2017 addressed by the Reserve Bank of India to the office of the Principal Commissioner of Customs regarding the import of gold medallions is reproduced below:
"2. We wish to advise that import of gold is governed by the provisions of Foreign Trade Policy (FTP) and the guidelines of RBI are primarily for payment and reporting of import of gold. We also advise that agencies notified by DGFT under the FTP are allowed to import gold in bullion form and in the form of gold coins (finished goods). Accordingly, payment for only such import of gold is permitted under RBI guidelines. These agencies are:
(i) Agencies nominated by DGFT
(ii) Banks authorized by RBI and
(iii) Star and Premier Trading Houses (STH/PTH)
3. While 2(i) and (ii) above are permitted to import gold on consignment basis, all domestic sale of gold should be against upfront payment. STH/PTH can import gold on Document against Payment (DP) basis as per their entitlement.
4. We also wish to inform that apart from the above mentioned agencies, other entities are not permitted to import gold coins (as well as medallions). Further, sale of gold coins and medallions by banks is prohibited. Since import of gold in dore form is governed by DGFT guidelines and RBI does not regulate it, we request you to kindly seek final confirmation from DGFT in the matter of import of gold in any form."
48. The CBEC issued an Office Memorandum dated 16.02.2018 on the classification of gold coins. It states that classification of gold coins should be under CTI 7118 90 00 and further action should be taken in terms of the Foreign Trade Policy. The relevant portion of the Office Memorandum is reproduced below:
Kindly refer to the letter no. VIII/12/ACCI/Gr-III, IV, VI dated 6th December 2017 from Commissioner of Customs (Import) regarding the above subject.
2. In the Customs Tariff heading 7118 reads as follows:36
C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 7118 Coin 7118 10 00 - Coin (other than gold coin), Kg. 10% -
not being legal tender
7118 90 00 - Other Kg. 10% -
2.1 Within this CTH, are included:
(i) coins (other than gold coin) which are "no longer
legal tender" - 7118 10 00
(ii) All remaining COINs (includes all legal tender,
regardless of constituent materials, and Gold Coins) - 7118 90 00 Accordingly, the classification of GOLD COINS ought to have been under 7118 90 00.
3. Furthermore, the communication exchanged with RBI dated 13th Sept, 2017, which has been enclosed with the subject letter, states that only nominated agencies can import gold coins or gold in primary forms. They have also categorically stated that other than the notified agencies/banks/Star & Premier Trading houses, import of gold coins and medallions is not permitted.
4. In view of the above, it appears that the issue of classification and eligibility of the entities who imported "gold coins" during the period 1st July to 25th Aug 2017 under India-
Korea FTA requires action in terms of Foreign Trade Policy.
5. This issues with the approval of the Board."
49. Before adverting to the decision Delhi High Court in Khandwala, it would be useful to refer to the two decisions of the Hyderabad and Bangalore Benches of the Tribunal in Sri Exports vs. Commissioner of Customs, Hyderabad 15 and Sri Exports vs. Commissioner of Customs, Bangalore 16.
50. In Sri Exports, the Hyderabad Bench of the Tribunal on 27.11.2018 noticed that the Revenue had taken a stand that import of gold granules was permitted only through a nominated bank subject to
15. 2019 (365) E.L.T. 934 (Tri-Hyd)
16. 2019 (368) E.L.T. 985 (Tri-Bang) 37 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 RBI Regulations and so the appellant could not have imported gold granules since it was not a nominated bank. This contention was not accepted by the Tribunal and the relevant paragraphs of the decision are reproduced below:
"11. In view of the above discussions, it would be evident that as per the import policy notified by the DGFT, gold in any form, other than monetary gold, are placed under "FREE" category with policy condition subject to RBI regulations. The RBI in the master circular only prescribed regulation at Para C.11.1 for method of import and types of payment vis-à-vis credit facility by banks for gold imports by nominated agencies notified by DGFT and at Para C.11.2 for others. In fact, the RBI categorically permitted the banks to open Letters of Credit for maximum period of 90 days for importing gold in any form. Nowhere in the master circular, the RBI has notified category of persons eligible for import of gold and have not imposed any restrictions on such imports. In the present case, gold granules were neither imported on a consignment basis nor on a credit basis. The importer/appellant paid an advance payment through bank Letter of Credit/Swift. I find that the RBI directions, at the most, are restrictions made at regulating import and export of goods in terms of restrictions on current account transactions in foreign exchange but not prohibiting import and export of goods as such. Prohibitions are actionable in terms of Section 111(b) of the Customs Act and restrictions are actionable in terms of Section 11(2) of Foreign Trade (Development and Regulation) Act, 1992 as held by the Hon'ble High Court of Bombay in the case of Riddi Siddhi Bullions Ltd. v. Commissioner [2016 (333) E.L.T. A174 (Bom.)]. Accordingly, in my considered view, gold granules are not prohibited goods within the meaning of Section 2(32) of Customs Act, 1962.
12. Further, the Customs Act, 1962 does not authorise C.B.E. & C. to impose prohibitions by way of circulars, since as submitted supra, circular is not law. Therefore, the contention of the Learned Commissioner (Appeals) that the appellants are prohibited from importing gold granules, in terms of Circular No. 34/2013-Cus., dated 4-9-2013 and Circular No. 27/2016- Cus., dated 10-6-2016 is not legally sustainable. They are only clarificatory/procedural circulars, to give effect to the exemption contained in the above notifications, with special 38 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 reference to disposal and monitoring of the gold imported, duty free, by the nominated agencies, in terms of the above notifications but do not impose any prohibitions/restrictions on the import of gold by others, on payment of appropriate Customs duty and the appellants have never claimed the benefit of the said exemption, as they are not nominated agency, specified in the FTP/Notification/Circular. Therefore, the Ld. Commissioner (Appeals) holding that, in terms of the said circulars, appellant was prohibited from importing gold is farfetched and without any legal basis."
51. In the decision of the Bangalore Tribunal rendered on 30.04.2019 in Sri Exports, the Department had rejected the claim of the appellant that 'gold medallion' would fall under CTI 7114 19 10 for the reason that the appellant was not a nominated bank or a nominated agency or a holder of a status of star/premier trading house. According to the Department, in view of the Reserve Bank of India Regulations only a nominated bank or a nominated agency notified by DGFT is permitted to import the said goods. This view of the Department was not accepted by the Tribunal and following the decision of the Hyderabad Tribunal in Sri Exports, 'gold medallions' were held to be classifiable under CTI 7114 19 10 as they were freely importable and there was no restriction. The relevant portion of the decision of the Tribunal is reproduced below:
"6. After considering the submissions of both the parties and perusal of the material on record, I find that the only allegations of the Department is that the appellant has imported the Gold Medallion of Purity 999.9 falling under CTH 7114 19 10 of Customs Tariff Act, 1975 and the same is not permitted because the appellant is not a Nominated Bank or a Nominated Agency or a Holder of a Status of a Star/Premier Trading House. As per the RBI regulations, it is only the Nominated Bank and Nominated Agency as notified by DGFT which is permitted to import the said goods. Further, I find that it is not in dispute that the Gold Medallion of Purity 999.9 fall 39 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 under CTH 7114 19 10 of CETA 1975 and as per the Import Policy, the 'Articles of Gold' are classifiable under CTH 7114 19 10 and are freely importable and there is no restriction and in view of the decisions cited supra, Gold Medallion fall within the definition of 'Articles of Gold'. Further, I find that the appellants have imported the Gold Medallion which is classified as 'Articles of Gold' from Korea and vide Notification No. 152/2009, dated 31-12-2009 the BCD leviable on the import of 'Articles of Gold' from Korea falling under Chapter 7114 19 10 is Nil. Further, I find that CBEC Circular No. 27/2016-Cus., dated 10-6-2016 relied upon by both the authorities is not applicable in the facts and the circumstances of this case because the appellant is not a Nominated Agency but it is only an individual importer who has imported gold against advance payment or Letter of Credit (not exceeding 90 days) for Home consumption, wholesale and retail sales. Further, the Master Direction issued by the RBI is also not applicable in the present case because that instruction of the RBI only applies to Nominated Banks and Nominated Agencies as notified by DGFT. Further, I also note that in the present case, the importer has not imported gold on consignment basis and therefore, the conditions laid down by the RBI is not applicable to the appellant."
(emphasis supplied)
52. Thereafter, the Circular dated 31.05.2019 was issued by the Board in connection with the decision rendered by the Bangalore Tribunal in Sri Exports stating therein that the order passed by the Tribunal is not legal and proper and, therefore, the Board decided to file an appeal. It further states that similar consignment may be dealt with in terms of the Foreign Trade Policy and Boards decision. The said Circular dated 31.05.2019 is reproduced below:
"Attention is invited to two CESTAT Judgments Sri Exports versus Commissioner of Customs, Hyderabad (Final Order No. A/31/194/2018, dated 22.11.2018 in Appeal No. C/30812/2018) and Sri Exports Versus C.C. Bangalore-Cus [arising out of No. 344/2018 dated 12.10.2018 passed by Commissioner of Customs, Bangalore-I] respectively. In the said orders passed by the Hyderabad and Bangalore benches of 40 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 CESTAT, import of Gold granules has been allowed to be imported by an importer not being a nominated agency/bank/star house etc. The said CESTAT orders have been examined in the Board. It is observed that the said orders are not legal and proper. Therefore, the Board has taken a decision that the said orders should be appealed against. Customs authorities at Hyderabad and Bangalore have been requested to take necessary action.
It is therefore, requested that any similar consignments pending clearance at the ports/airports may be dealt in terms of the FTP 2015-2020 and the Board's decision above."
53. It needs to be noted that the appeal filed by the Department before the Karnataka High Court against the decision of Bangalore Tribunal in Sri Export was dismissed and the judgment is reported in 2021 (375) E.L.T. 169 (Kar.) 17 . The relevant portions of the decision are reproduced below:
"8. Now we may advert to the facts of the case. In the instant case, admittedly, the gold medallions and gold granules were imported on 3-7-2017. Thereafter the DGFT by Notification dated 25-8-2017 has restricted the import of gold from South Korea. The relevant extract of Notification dated 25-8-2017 reads as under :
"In exercise of powers conferred by Section 3(2) of the FT (D&R) Act, 1992 as amended from time to time, read with Paragraph 1.02 and 2.01 of the Foreign Trade Policy, 2015- 2020, the Central Government hereby inserts Policy Condition No. 4 under chapter 71 of the ITC (HS) 2017, Schedule-I (Import Policy) to read as under :
"Imports from South Korea of articles of jewellery and parts thereof, of precious metal or of metal clad with precious metal under Exim Code: 7113; articles of goldsmiths' or silversmiths' wares and parts thereof, of precious metal or of metal clad with precious metal under Exim Code 7114; other articles or precious metal or of metal clad with precious metal under Exim Code 7115; and coins under Exim code 7118 are Restricted."
17. Commissioner of Customs, Bangalore vs. Sri Exports 41 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021
9. Thus on the date, the gold medallions were imported i.e. 3-7-2017 there was no restriction and the restriction was imposed by the Central Government vide Notification dated 25-8-2017 subsequently, which has been quoted supra. In other words, there was no restriction with regard to import of gold medallion on the date the same was imported by the respondent.
10. Similarly, the gold granules were imported on 21-9-2017 and thereafter DGFT issued a Notification dated 18-12-2019 by which import policy was amended and gold in any form was allowed only to be imported through nominated agencies as notified by the Reserve Bank of India in case of Banks and for other agencies by the DGFT. Thus, it is evident that on the date when the gold granules were imported i.e., on 21-9-2017, there was no restriction on its import and the restriction was imposed subsequently on 18-12-2019 by the DGFT by way of Notification. Thus, when gold medallions and gold granules were imported, they were freely importable and the same was brought under the restricted category subsequently."
(emphasis supplied)
54. The Office Memorandum dated 06.09.2017, the Office Memorandum dated 16.02.2018, the Circular dated 31.05.2019 issued by the CBEC were challenged before the Delhi High Court in Khandwala. The Revenue alleged that the gold coins imported by the petitioner were appropriately classifiable under CTI 7118 90 00 and not CTI 7114 19 10. It needs to be noted that the Delhi High Court did not go into the merits of the show cause notices.
55. Regarding the Circular dated 31.05.2019 issued by CBEC, the Delhi High Court observed as follows:
"29. It was, therefore, completely impermissible for the C.B.I. & C. to, in the impugned Circular dated 31st March, 2019, direct field formations to deal with consignments pending clearance at airports in accordance with the view of the C.B.I. & C., rather than the orders of the Tribunal in Sri Exports v. Commissioner of Customs, 42 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 Hyderabad (Final Order No. A/31/194/2018, dated 22-11- 2018 [2019 (365) E.L.T. 934 (Tribunal)] in Appeal No. C/30812/2018) and Sri Exports v. C.C., Bangalore-Cus. [arising out of No. 344/2018, dated 12-10-2018 passed by Commissioner of Customs, Bangalore-I), merely because the C.B.I. & C. felt that the said orders were not "legal and proper".
This direction flies in the face of two of the most fundamental principles governing adjudication, viz., firstly, that it is not open to any executive, or administrative, authority to control, in any manner, the adjudicatory process, and, secondly, that no adjudicating authority can be directed to act in conscious violation of the law. These principles are, indeed, so elementary, that we are astonished at the directions contained in the impugned Circular dated 31st May, 2019. The authority issuing the said circular ought to have been aware of the fact that "dealing with" consignments pending clearance at ports and airports involves a process of adjudication, and that it was not open to any such authority, dealing with such consignments, to act in violation of binding decisions of the Tribunal. The concluding paragraph of the impugned Circular dated 31st May, 2019, issued by the C.B.I. & C., in our view, flies directly in the face of the law, as laid down by the Supreme Court in Kamlakshi Finance Corporation Ltd. - 1991 (55) E.L.T. 433 (S.C.).
******
33. Para 8, in each of the impugned show cause notices in this writ petition, i.e. the show cause notice dated 12th July, 2019, issued to the petitioner, as well as show cause notice dated 28th June, 2019, issued to Mink, invokes the aforesaid Circular, dated 31st May, 2019, issued by the C.B.I. & C. The Circular, dated 31st May, 2019, having been found by us to be in contravention of the law, the invocation of the said Circular, in para 8 of the show cause notices dated 12th July, 2019 and 28th June, 2019, too, therefore, cannot be legally sustained. Neither could any authority, adjudicating the said show cause notices, be bound by para 8 thereof."
(emphasis supplied)
56. In respect of the Office Memorandum dated 06.09.2017 issued by DGFT, the Delhi High Court observed:
43
C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 "48. The grievance of the petitioner, needless to say, is directed against Para 4 of the aforesaid Office Memorandum dated 6th September, 2017, whereunder gold coins are held to be classifiable under sub-heading 7118 90 00, which would, per consequence, require the import thereof to be compliant with RBI guidelines.
49. Para 4 of the aforesaid Office Memorandum, dated 6th September, 2017, issued by the DGFT, merely states that gold coins are classifiable under Heading 7118 90 00 of the ITC (HS), whereas consignments of gold coins were being imported by wrongly classifying them under Heading 7114. Headings 7114 and 7118 of the ITC (HS) are completely aligned with the corresponding entries in the Tariff. A comparison of sub-
headings 7114 and 7118 of the Tariff [or of the ITC (HS)] clearly reveals that, whereas sub-heading 7114 19 10 of the Tariff [or of the ITC (HS)] deals with "articles of gold", Heading 7118 90 00 covers all coins which do not come within sub-heading 7118 10 00, which deals with "coins (other than gold coins) not being legal tender". All gold coins are, therefore, classifiable under sub-heading 7118 90 00, of the Tariff, as well as of the ITC (HS). It is well settled that where an item is covered by an entry specific thereto, it has to be classified under the said entry and resort to all other entries would, ex facie, stand proscribed.
50. Gold coins being specifically classified under sub- heading 7118 90 00 of the Tariff as well as of the ITC (HS), there can be no question of classifying gold coins under sub-heading 7114 19 10.
51. In stating, in Para 4 of the impugned Office Memorandum dated 6th September, 2017, issued by the DGFT, that gold coins fall within Heading 7118 90 00 of the ITC (HS), and that, therefore, their import would be subject to RBI guidelines, the C.B.E. & C. merely sets out the indisputable statutory position. We find no reason to interfere therewith.
52. At the same time, it is also settled that the manner in which an import item is described in the Bs/E, is not necessarily conclusive regarding its classifiability. It is always open to an importer to contend that an item is not exactly conforming to the description contained in the Bs/E. It is only in cases in which an assessee avails certain 44 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 benefits, whether by way of exemption or otherwise, based on the manner in which it describes or classifies its goods, that, at times, Courts have taken a view that the assessee cannot, having availed such benefit, seek to resile from the description, or classification, advanced by it. This, however, is not such a case. Irrespective, therefore, of the manner in which the goods in question have been described in the Bs/E filed by it, there can be no estoppel on the petitioner establishing, before the adjudicating authority, by cogent and convincing evidence, that the goods imported by it are, nevertheless, entitled to the benefit of exemption. In case such a contention is advanced, the authority, adjudicating the show cause notices dated 12th July, 2019/15th July, 2019, issued to the petitioner, and 28th June, 2019/19th July, 2019, issued to Mink, would have to consider and appreciate the contention on merits, and cannot refuse to do so merely on the basis of the impugned Office Memorandum dated 6th September, 2017, issued by the DGFT, or the impugned Office Memorandum dated 16th February, 2018, issued by the C.B.E. & C.
53. In sum and substance, therefore, it is required to be clarified that the impugned Office Memorandum, dated 6th September, 2017, issued by the DGFT, and 16th February, 2018, issued by the C.B.E. & C., cannot fetter, or bind, the adjudicating authorities, adjudicating the impugned show cause notices, issued to the petitioner and to Mink, in any manner. In other words, while the position, in law, enunciated in the said Office Memoranda, is correct, the extent to which the said position in law affects the cases of the petitioner, and of Mink, would have to be assessed, on their own merits, by the competent adjudicating authorities."
(emphasis supplied)
57. Regarding the Office Memorandum dated 16.02.2018, the Delhi High Court observed as follows:
"55. We are unable to sustain, to any extent whatsoever, the aforesaid Office Memorandum, dated 16th February, 2018, issued by the C.B.E. & C. To us, it appears obvious that this Office Memorandum is a 45 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 transparent attempt, on the part of the C.B.E. & C., to shackle the impartial exercise, by the competent adjudicating authorities, of adjudication of the show cause notices issued to the petitioner and to Mink - and, quite possibly, to other similarly situated importers. When the issue of classification, and entitlement to exemption, of the gold coins, imported by the petitioner, and other similarly situated importers, is at large before competent adjudicating authorities, who are in seisin thereof, the C.B.E. & C. was completely unjustified in issuing the Office Memorandum dated 16th February, 2018. The powers of the C.B.E. & C., as conferred by Section 151A of the Customs Act, cannot extend to issuance of executive instructions, or Office Memoranda, pronouncing on the merits of issues which are pending before adjudicating authorities. Such an attempt would result in reducing the adjudicatory process to a mockery, and deserves to be deprecated.
56. If the Revenue is of the opinion that an assessee has imported goods in violation of the law, or claimed the benefit of exemption to which it is not entitled, the grounds for such an opinion are required to be contained in the show cause notice issued to the assessee. It is completely impermissible for the Revenue to issue a show cause notice and, thereafter, seek to support, or even supplement, the recitals in the show cause notice by way of Office Memoranda, or executive instructions, such as the Office Memorandum dated 16th February, 2018, under challenge in these writ petitions. In this respect, the Office Memorandum, dated 16th February, 2018, issued by the C.B.E. & C., is clearly distinguishable from the Office Memorandum dated 6th September, 2017 supra, issued by the DGFT. While the latter Office Memorandum, dated 6th September, 2017, of the DGFT, merely recited the fact of imports from Korea possibly being made in violation of the law, requiring that such imports be properly verified and, thereafter, proceeded to reiterate the statutory position to be found in the ITC (HS), the Office Memorandum, dated 16th February, 2018, of the C.B.E. & C. practically adjudicates, by executive fiat, show cause notices, such as those issued to the petitioners in these writ petitions. This is completely impermissible. Being, as it is, in the nature of executive trespass on the quasi-judicial 46 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 terrain, the Office Memorandum dated 16th February, 2018, must necessarily perish.
57. We say no more."
(emphasis supplied)
58. Untimely, Delhi High Court observed as follows:
"59. Resultantly, these writ petitions are disposed of, in the following terms :
(i) Circular No. 450/67/2019-Cus. IV, dated 31st May, 2019, stands modified by Circular No. 450/67/2019-Cus. IV, dated 9th September, 2019, issued by the Central Board of Indirect Taxes and Customs. While no orders are, therefore, required to be passed in respect of Circular dated 31st May, 2019, Circular dated 9th September, 2019, is quashed and set aside, to the extent of the directions contained therein, especially in para 4 thereof. The effect of the said Circular shall be read as limited to conveying of information, regarding the fact that Final Order No. A/31494/2018, dated 27th November, 2018, of the Hyderabad Bench of the Tribunal, in Appeal No. C/30812/2018, and the Final Order, passed by the Bangalore Bench of the Tribunal against Order-in-Original No. 344/2018, dated 12th October, 2018, passed by the Commissioner of Customs Bangalore-I, had been appealed against, and no more. The authorities, adjudicating the show cause notices impugned in these writ petitions would be required, independently, and uninfluenced by the Circular dated 9th September, 2019, to examine, for themselves, whether such appeals have, in fact, been filed and, if so, the effect of the orders passed therein.
(ii) Para 8 of the impugned show cause notices, dated
(a) 12th July, 2019/15th July, 2019, issued to the petitioner in W.P. (C) 9225/2019,
(b) 28th June, 2019/19th July, 2019, issued to M/s. Mink Tradecom Pvt. Ltd., and
(c) 5th July, 2019/9th July, 2019, issued to the petitioner in WP(C) 9230/2019, are quashed and set aside. The authorities, adjudicating the said show cause notices, would do so, uninfluenced by Para 8 thereof, and keeping in view the directions/observations contained in this judgment.
(iii) Office Memorandum No. 01/89/180/36/AM-11/PC-II(A), dated 6th September, 2017, issued by the DGFT, is 47 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 upheld, to the extent of the position in law stated therein. However, the authority, adjudicating the show cause notices, impugned in these writ petitions and enumerated in (ii) supra, would have to assess the applicability, of this Office Memorandum, to the facts of the case of the petitioners, on merits.
(iv)Office Memorandum No. 20000/5/2015-OSD (ICD), dated 16th February, 2018, issued by the Central Board of Excise and Customs, is quashed and set aside, to the extent it seeks to opine on the classification of the gold coins imported by the petitioners, and other importers similarly situated, and of the eligibility, of such gold coins, to exemption.
The show cause notices, impugned in these writ petitions, would be adjudicated on their own merits, uninfluenced by the opinion conveyed by the Office Memorandum dated 16th February, 2018. It is clarified, however, it is open to the Revenue to canvass, before the adjudicating authority/authorities, the stance reflected in the Office Memorandum dated 16th February, 2018 and, if it so chooses to do, the adjudicating authority/authorities would consider the justifiability of the said stance on its own merits.
(v) The prayers, in these writ petitions, for setting aside the show cause notices enumerated hereinabove, are rejected. This Court clarifies that, subject to the observations made hereinabove, it has expressed no opinion on the merits of the said show cause notices, or on the allegations made therein. Needless to say, however, the adjudication of the show cause notices shall abide by the findings and observations recorded herein above."
(emphasis supplied)
59. The judgment of the Delhi High Court in Khandwala can be summarized as follows:
(i) The Circular dated 31.05.2019 issued by CBEC directing field formations to deal with consignments pending clearance at the airports in accordance with the view of CBEC rather than the orders of the Hyderabad Bench of 48 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 the Tribunal and Bangalore Bench of the Tribunal in Sri Exports has been set aside;
(ii) Office Memorandum dated 06.09.2017 issued by the DGFT merely states that gold coins fall under CTI 7118 90 00 and, therefore, import would be subject to RBI Guidelines. Since it merely sets out the indisputable statutory provision, there is no reason to interfere with it.
However, the manner in which an import item is described in the Bills of Entry is not necessarily conclusive regarding its classifiability and it is always open to an importer to contend that an item is not exactly conforming to the description contained in the Bills of Entry. Thus, the importer can establish before the adjudicating authority, by cogent and convincing evidence, that the goods imported by it are entitled to the benefit of exemption; and
(iii) The Office Memorandum dated 16.02.2018 issued by the CBEC has been set aside since it interferes with the impartial exercise to be undertaken by the competent adjudicating authority while adjudicating the show cause notice.
60. A perusal of the order passed by the Principal Commissioner, however, shows that the judgment of the Delhi High Court in Khandwala has been completely mis-read. The Principal Commissioner in paragraph 57 held that Delhi High Court in Khandwala has clarified that all gold coins are classifiable under CTI 7118 90 00 and has also held that gold coins cannot be classified under CTI 7114 19 10. The Principal Commissioner also observed that 49 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 Office Memorandum dated 06.09.2017 has been upheld by the Delhi High Court.
61. In regard to the Office Memorandum dated 06.09.2017 issued by the DGFT, the Delhi High Court clearly observed that the said Office Memorandum merely sets out the statutory position and, therefore, there was no reason to interfere with the Office Memorandum but at the same time the Delhi High Court also observed that an importer can always establish before the adjudicating authority by cogent and convincing evidence that the goods imported by it are entitled to the benefit of exemption. The Delhi High Court also observed that the manner in which in import item is described in the Bills of Entry is not necessarily conclusive regarding its classifiability and an importer can always establish that an item is not exactly conforming to the description contained in the Bills of Entry. The Delhi High Court specifically clarified that the Office Memorandum dated 06.09.2017 issued by the DGFT and the Office Memorandum dated 16.02.2018 issued by CBEC cannot fetter or bind the adjudicating authority in any manner and the factual position would have to be assessed on their own merits by the adjudicating authority.
62. Thus, merely because the goods were described as gold coins, though with a rider "other than legal tender", the Principal Commissioner could not have concluded that the goods imported would necessarily fall under CTI 7118 90 00.
63. The Principal Commissioner has assumed that the goods were "gold coins" and, therefore, classified them under CTI 7118 90 00. The Principal Commissioner should have also examined that the appellant had also stated "other than legal tender" in the Bills of Entry. This had 50 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 to be interpreted in the light of HSN Explanatory Notes to heading 71.18 of HSN and the two sub-headings.
64. The orders passed by the Principal Commissioner are based on an incorrect application of the GRI provisions and wrongly classify the imported goods under CTH 7118 on this basis. Even on application of GRI, the imported goods will not be classifiable under CTH 7118 90 00 in view of Explanatory Notes to HSN for heading 71.18. Rule 1 of the GRI states that classification has to be ascertained on the basis of Section and Chapter Notes. In terms of the Chapter and Section Notes read with the HSN Explanatory Notes, coins would be classifiable under CTH 7114 and CTH 7118 cannot be assumed to be the only entry with respect to classification of 'all coins'. The imported goods were correctly classified under CTH 7114, in as much as non-legal tender coins cannot be classified under CTH 7118.
65. The Principal Commissioner erred in holding that coins are specifically described in CTH 7118 and accordingly, on application of rule 3 (a) of GRI, the imported goods merit classification under CTH 7118. Rule 3 (a) can only be applied where goods fall in two or more headings. However, where coins which are not legal tender are excluded from CTH 7118 in terms of HSN Explanatory Notes, the same cannot be included under CTH 7118 on application of rule 3 (a) of GRI.
66. It needs to be remembered that the burden of proof in classification matters is always on the Department, which has necessarily to place evidence on record to establish mis-declaration by an importer. The Department did not place any evidence on record to establish that the goods will fall in CTI 7118 90 00 and infact even the order passed by the Principal Commissioner does not refer to any such 51 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 evidence. The documents placed by the appellant conclusively establish the correctness of the classification made by the appellant in the Bills of Entry under CTI 7114 19 10.
67. In any view of the matter, the exact nature of the imported goods was independently not examined either in the show cause notice or in the order passed by the Principal Commissioner and classification has been decided on a complete mis-reading of the judgment of the Delhi High Court in Khandwala.
68. What also needs to be noted is that the goods in terms of the notification dated 31.12.2009, as amended on 31.12.2016 reduces the rate of duty to NIL on goods under heading CTH 7114 and 7118. It further needs to be noted is that even under the Foreign Trade Policy CTH 7114 was "free" and no condition was imposed. With respect to CTH 7118, the Foreign Trade Policy specified "free" and "subject to RBI Regulations". If the classification under CTH 7114 is correct there is no prescription under the Foreign Trade Policy regarding restriction on the goods. Even if the goods are held to be classifiable under CTH 7118, Regulations have not been issued by the RBI in this context. Regulations can be issued by the RBI only under section 58 of the Reserve Bank of India Act, 1934 or section 47 of the Foreign Exchange 18 Management Act, 1999 . Section 58 of RBI Act requires such Regulations to be issued only by way of a notification with the previous sanction of the Central Government. Section 48 of FEMA requires Regulations issued under section 47 FEMA to be presented before the parliament Such Regulations have not been placed by the Department and only a reference has been made to a letter issued by the RBI
18. FEMA 52 C/50192/2021, C/50165/2021 C/50166/2021 & C/50197/2021 dated 13.09.2017 or the DGFT Memorandum. These cannot be termed as Regulations issued by RBI or under FEMA.
69. This position has also clearly been explained by the Bangalore and Hyderabad Benches of the Tribunal in Sri Exports and by the Karnataka High Court in the matter arising out the appeal filed by the Department against the decision of the Bangalore Tribunal. The Karnataka High Court clearly held that in the absence of a specific notification issued by DGFT, there is no restriction which existed in the import of gold medallion and such restriction cannot be imposed by way of communications.
70. The power of RBI to issue directions under section 11 of FEMA extends only to authorized person with regards to making payment for foreign exchange or foreign security and RBI cannot regulate imports which are in the exclusive domain of DGFT.
71. Thus, for all the reasons stated above, it is not possible to sustain the order dated 07.09.2020 challenged in Customs Appeal No. 50192 of 2021, the order dated 09.09.2020 challenged in Customs Appeal No. 50165 of 2021, the order dated 11.09.2020 challenged in Customs Appeal No. 50166 of 2021 and the order dated 18.09.2020 challenged in Customs Appeal No. 50197 of 2021. These orders passed by the Principal Commissioner are, accordingly, set aside and all the four appeals are allowed.
(Order Pronounced on 28.03.2022) (JUSTICE DILIP GUPTA) PRESIDENT (P. V. SUBBA RAO) MEMBER (TECHNICAL) Shreya/JB