Customs, Excise and Gold Tribunal - Mumbai
Baader Schulz Laboratories, Sonam ... vs Commissioner Of Customs on 5 April, 2005
ORDER S.S. Sekhon, Member (T)
1. Appellants M/s Baader Schulz Laboratories (herein after referred to as Baader for short) is engaged in the manufacture of Vitamin Pre-Mixes including Feed Supplements for animal feeding in its factory at Daman. The other appellants are the importers & other persons found concerned with the imports & sale of the imported goods to M/s Baader Schulz Laboratories require raw material, viz various Feed Grade Vitamins, Anti-Oxidants, carriers & procure them, from Indian sources evidently imported as also import them. Accordingly, they purchased poultry Feed Supplement AV 110 from M/s Sonam International (herein after referred to as Sonam). Who had imported the same.
1.2 Pursuant to an information that Sonam was importing 3rd country goods from Nepal by mis-declaration & by misuse of notification 40/02, 29/96 DRI-Lucknow Officers initiated an inquiry. 89 bags containing 2,225 kgs of Poultry Feed Supplement purchased form Sonam was seized at the premises of Baader on 30.05.2005.
1.3 On test by M/s Analytical Testing Corporation vide report dated 12.6.2003, the seized goods were reported to be Vitamin E Powder (49.57% w/w). Central Revenue Chemical Laboratory, New Delhi vide its test report dated 28.7.05 reported the samples to be Vitamin E with Ash content (inorganic filler) of 42.2% w/w, vide test report dated 8.11.05 pursuant to Mumbai High Court order the sample was reported to be 42.3% by weight Vitamin E adsorbed over inorganic material.
1.4 Inquiries were made & a show cause notice was issued on 1.3.04 to the appellants requiring them to show cause as to why the seized goods should not be confiscated under Section 111 of the Customs Act 1962 & why penalty should not be imposed.
1.5 (a) After considering the submissions both oral & written, the Joint Commissioner Lucknow, vide order dated 23.4.04 ordered absolute confiscation of the goods under Section 111 of the Act and imposed a penalty of Rs.7.5 lakhs on the appellant amongst others.
b) In Appeal, the CC (Appeals) vide his common order dated 13.9.04 upheld the order of the Joint Commissioner. Hence this appeal.
2.1 After hearing both sides and considering the material it is found
a) The goods under seizure & confiscation are undisputedly goods imported from Nepal by Sonam who had claimed on BE no 5501 dated 27.02.2005 by producing a commercial invoice dated 065 dated 25.02.2003 describing the goods as 360 bags 9000 Kg of feed supplement poultry AK 110. The goods have been allowed clearance after examination & getting them tested from M/s Analytical Testing Corporation Lucknow who vide report dated 28.2.2005 reported the goods to be Vitamin E in the form of while Crystalline Assay 49.37% w/w claim 50% w/w.
b) From the various test reported on record, it is .. spouted that the goods ae vitamin E not more than 49.57% adsorbed on in organic material carriers. The reports subsequently reported Ash content is high as 42.2%.
c) Classification of the goods as Vitamin E under heading 29.36 of the Tariff is therefore not permissible as the HSN note thereunder stipulate an entity under to be pure Vitamain E or admixtures of Vitamins not less than 50%. Vitamin absorbed on inorganic carrier media.
d) Reading of chapter HSN notes of chapter 23 would lead to classification of such Vitamin E & inorganic carrier medium to be classified as Animal feed supplement under heading 23.09 of the Tariff. Boards circular No.189/23/96-CX dated 26.03.96 would also stipulate & uphold the classification of the present quality goods under 23.09 of the Tariff as 'feed'. This view on classification is supported by the binding decision of Tetragon Chemie Private Ltd (1999 (82) ECR (98) of the Larger Bench. Following the same, the impugned goods have to be held as with the exclusion notes heading under 23.01, & 29.36 would indicate that purity of Vitamin E with 50% or more only would be classified as Vitamin under 2936, provided the quantity added of stabilizers etc do not alter the character of the basic product (ie Vitamin E) to render the same for more specific use. Vitamin E is used and Traded as feed grade as is evident from the record relied ie the invoice of the Chinese supplier dated 16.04.03 which mention "Vitamin E oil 93 pct feed grade. The Vitamin E meant to be used as feed grade could be classified as 29.36, however that does not mean that this 'feed grade' when converted to a product with less than 50% Vitamin E% as in this case, would remain classified under 29.36. The process of reduction of 50% or 93 PCT to less than 50% ie 47 % approx as in this case would involve addition of inorganic material & thus manufacture which is claimed to have been conducted in Nepal would take place feed grade Vitamin E when diluted to below 50% would be feed supplement for poultry as in this case, commercially a new product.
h) Condition no A (2) to Notification 40/02 dated 12.4.2002 stipulated manufacturing process in Nepal to be such which would result a change of four digit classification from third country of origin classification at the time of import of the raw material to Nepal. These conditions specifically stipulate.
"....... the manufacturing process is not limited to in sufficient working or processing indicated in the illustrative list give below."
This would indicate that vitamin of 50% purity or 93 Vitamin E - Oil 93 PCT on clearance under 29.36 as imported from third country in drums, when reduced to 47.5% w/w, as found on test, is found to classified under 29.09 by us, would thus be change in nature and classification & would thus construct to be in conformity with the conditions of notification. The Proper officer also found it to be so. Merely because some documents of Nepalese authorities could be found fault with, cannot be a reason to deny the exemption under the notification as granted.
i) When benefit of notification is being upheld, there is no question of a liability to absolute confiscation as arrived at by the lower authorities of the goods under seizure. The confiscation liabilities at under Section 111(m) for mis-declaration is proposed in the show cause notice does not arrive as no misdecalaration on the BE has been established. The confiscation arrived at that also without offer of a redemption fine under Section 111 of the Customs Act 1962 without arriving at the sub section under which the confiscation has been ordered by the original authority cannot be upheld. The order of CC (Appeals) not findings any infirmity in the order has to be set aside in toto.
j) Once liability to confiscation is not upheld, & benefit of duty exemption as granted is upheld there is no reason to call for or a cause for penalty under Section 112 of the Customs Act 1962 the same is required to be set aside.
3.1 In view of the findings, the appeal are required to be allowed.
3.2 Ordered accordingly.
3.3 appeals disposed in above terms