Custom, Excise & Service Tax Tribunal
Hitachi Home And Life Solution Ltd vs Commissioner Of Customs (Import) on 24 May, 2012
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI COURT No. II APPEAL No.C/1143, 1145, 1146, 1147, 1155, 1157, 1159, 1161, 1181, 1182, 1186 & 1187/09 (Arising out of Order-in-Appeal No.442 to 453 (Gr.VA)/2009 (JNCH)/IMP-87 to 98 dated 31/08/2009 passed by Commissioner of Customs (Appeals), Nhava Sheva) For approval and signature: Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.R. Chandrasekharan, Member (Technical) 1. Whether Press Reporters may be allowed to see :No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the :Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether Their Lordships wish to see the fair copy :Seen of the Order? 4. Whether Order is to be circulated to the Departmental :Yes authorities? ========================================
Hitachi Home and Life Solution Ltd., Appellant Vs. Commissioner of Customs (Import), Respondent Nhava Sheva Appearance:
Shri.Prakash Shah, Advocate for appellant Shri.Navneet, Addl. Comm. (AR), for respondent CORAM:
Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.R.Chandrasekharan, Member (Technical) Date of Hearing : 24/05/2012 Date of Decision : /2012 ORDER NO Per: P.R.Chandrasekharan
1. There are a dozen appeals against Order-in-appeal Nos.442 to 453 (GR.VA)/2009(JNCH)/IMP-87 to 98 dated 31-8-2009 passed by the Commissioner of Customs (Appeals) Mumbai-II. As the issue involved in all these appeals are common, they are taken up together for consideration and disposal.
2. The appellant M/s Hitachi Home & Life Solution India Ltd., Ahmedabad, filed 12 bills of entry during May and June 2009 declaring the goods under importation as Hitachi Brand Refrigerator originating from Thailand and classifying the goods under CTH No.84182100 and claiming the benefit of notification No. 85/04-Cus dated 31-8-2004 which provides for a concessional rate of customs duty on specified goods imported from Thailand under the Free Trade Agreement between India and Thailand. The assessing officer classified the goods under CTH 84181090 on the ground that the goods under importation were combined refrigerators-freezers, fitted with separate external doors and therefore, not eligible for the aforesaid exemption. The appellant preferred an appeal before the lower appellate authority who rejected their appeals. Hence the appellant is before us. Thus the issue before us for decision is whether the goods under importation are combined refrigerators-freezers classifiable under CTH 84181090 as held by the department or refrigerators, household type classifiable under CTH 84182100 as claimed by the appellant.
3. Shri. Prakash Shah, Advocate, appeared for the appellant and made the following submissions:-
(1) The goods, though consist of separate refrigerator and freezer compartments fitted with separate external doors, are nothing but refrigerators, household type as these are used as such in households. The goods are known as refrigerators in commercial parlance. Hence the correct classification is CTH 84182100. (2) The term refrigerator should not be interpreted in a technical sense and it should be interpreted in terms of commercial parlance. If this is done, refrigerators containing freezers would be classifiable as refrigerators only. (3) Even if it is held to be classifiable both under CTH 841810 and CTH 841821, as per Rule 3 (c ) of the General Interpretative Rules to the Customs Tariff , the heading which occurs last in the numerical order should be preferred and since CTA 841821 occurs later than CTH 841810, the claim of the appellant in respect of classification under CTH 841821 is correct and hence they are rightly entitled for the benefit of notification No. 85/04-Cus. (4) With the advances in technology, domestic refrigerators these days do contain a freezer compartment; that by itself can not take the product out of classification as refrigerators (5) By classifying the product under CTH 841821, the entry under CTH 841810 is not made redundant since there are commercial/industrial type refrigerators which would merit classification under CTH 841810 as CTH 841821 covers only household type refrigerators. (6) He relies on the judgment of the honble Apex Court in the case of CCE, Bhopal vs. Minwool Rock Fibres Ltd. reported in 2012 (278) ELT 581 (SC).
4. Shri. Navneet, Addl. Commissioner (AR) appeared for Revenue and strongly opposed the submissions made by the appellant. He made the following contentions:_
(a) There is no dispute about the fact that the goods under importation consisted of a refrigerator and freezer with separate external doors. Therefore, CTH 841810 which covers Combined refrigerator-freezers, fittled with separate external doors is the most specific description for the goods under importation.
(b) As per rule 3 (a) of the General Rules for Interpretation, the heading which provides the most specific description shall be preferred to headings providing a more general description. Once a product is covered under rule 3(a), the question of invoking rule 3(c) does not arise at all.
(c) Heading No. 8418 covers Refrigerators, freezers and other refrigerating or freezing equipment, electric or other; heat pumps other air conditioning machines of heading 85.15. This shows that the classification is based on the function of the equipment. This heading is further sub-divided into seven sub-headings based on the functionality. The first sub-division is combined refrigerator-freezers, fitted with external doors; the second sub-division is refrigerators, household type; the third and fourth sub-division covers freezers of different types; the fifth sub-division covers other furniture for storage and display, incorporating refrigerating or freezing equipment; the sixth sub-division covers other refrigerating or freezing equipment; heat pumps and the last and seventh sub-division covers parts of the above. For the purposes of classification, the product has to be categorized under the sub-division which is the most specific based on the functionality of the product. If this is done, the appropriate classification in the instant case would be CTH 841810.
(d) He further submits that the terms refrigeration and freezing are not synonymous. Freezing starts where the refrigeration ends. Refrigeration refers to cooling above the freezing temperature of water. Whereas the freezing refers to temperatures starting from the freezing point of water and below. The purpose of refrigeration and cooling are different. While both are used for preservation of food, refrigeration can ensure non-decay of food materials for a shorter period. If long term storage of food is required, then freezing has to be resorted to. Thus functionally refrigerators and freezers are different and therefore, reference to refrigerator in the tariff can not bring within its scope an equipment which does both refrigeration and freezing. He also relies on the technical literature available in highered mcgraw-hill.com website in support of his above contention.
(e) Lastly he submits that the classification of subject goods was examined by the CBE&C and the Board vide Circular No. 23/2008 -Cus dated 29-12-2008 has clarified that combined refrigerator-freezers with separate external doors merits classification under sub-heading No. 8418.10 and therefore, will not be eligible for the benefit of exemption notification No. 85/2004_Cus dated 31-8-2004.
In the light of these submissions, he strongly pleads for upholding the classification of the impugned goods under CTH 841810 as done by the lower appellate and adjudicating authorities.
5. We have very carefully considered the rival submissions.
5.1 One of the models of the goods under importation covered by Bill of Entry No. 926451 dated 3-6-2009 is Hitachi Brand Refrigerator Model No. R-S37 SVND. We have perused the manufacturers product catalogue pertaining to the said goods. The specification for the said product, as per the product catalogue, reads as follows:-
Series 3-Door series Model No. RS37 SVND Door 3 Door Star Raing N/A Gross capacity (L) Total 438 Freezer 85 Refrigerator 265 Vegetable 88 Dimensions (mm) Width 600 Height 1680 Depth 655 Net weight (kg) 74 Cooling system Air Jet Flow Refrigerator compartment Convertible compartment
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Tempered glass shelves * 3-way Flexible shell * Slide out chilled case * Vegetable Compartment 2-way humidity controller
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High-moisture Radiation cooling * Slide type double deck drawer * Freezer compartment Front jet freezing
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Movable Twist ice tray
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Twist ice tray
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Automatic ice maker * Tempered glass shelf
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Slide type double deck drawer * General Features Electronic control * Eco-thermo censor * Nano titanium * Lock & key
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Refrigerant R 600a (CFC & HFC Free) Colour Stainless steel ST PCM
-
5.2 From the illustrative product specification given above, it can be easily seen that the equipment consist of separate refrigerator and freezer compartments and there are separate external doors for these two compartments. Further the capacity for these are different. There are different specifications for the refrigerator compartment and the freezer compartment. The catalogue also states that for the 3 door refrigerators, there are three compartments, three temperatures and three humidity levels, implying thereby that the functional parameters are different for refrigeration and freezing. In other words, from the product literature/catalogue available on record, it is crystal clear that the impugned product is not refrigerator simpliciter but a combined refrigerator-freezer fitted with separate external doors.
5.3 The next relevant issue for consideration is whether a refrigerator and a freezer perform the same function. According to Wikipedia, the free encyclopedia A refrigerator maintains a temperature a few degrees above the freezing point of water. Optimum temperature range for perishable food storage is 3 to 50 C (37 to 410 F). A similar device which maintains a temperature below the freezing point of water is called a freezer. According to McGrawhill web-site (referred supra) the storage life of fresh perishable goods such as meats, fish, vegetables, and fruits can be extended by several days by storing them at temperatures just above freezing, usually between 1 and 4: C. The storage life of foods can be extended by several months by freezing and storing them at sub-freezing temperatures, usually between -18 and -35: C, depending on the particular food. It is further stated that - The ordinary refrigeration of foods involves cooling only without any phase change. The freezing of foods, on the other hand, involves three stages: cooling to the freezing point (removing the sensible heat), freezing (removing latent heat) and further cooling to the desired sub-freezing temperature (removing the sensible heat of the frozen food). From the technical literature discussed above, two things are obvious. The temperature range of these two processes are different one is above freezing point of water (refrigeration) and the other is below the freezing point of water (freezing). Secondly, the purposes are also different. While refrigeration can prevent decay of perishable food for a short duration ( a few days), freezing can prevent decay for a longer duration (several months). If that be so, a machine which performs refrigeration should be functionally different from a freezer.
5.4 It is very relevant to see how the customs tariff treats these two products refrigerator and freezer for the purpose of classification. Heading 8418 of the Customs Tariff is reproduced below:-
Heading/sub-heading No. Description (1) (2) 8418 Refrigerators, freezers and other refrigerating or freezing equipment, electric or other; heat pumps other than air conditioning machines of heading 8415 8418 10 8418 10 10 8418 10 90
- Combined refrigerator-freezers, fitted with separate external doors:
--- Commercial type
--- Other
8418 21 00
8418 29 00
- Refrigerators, house hold type:
-- Compression type
-- Other
8418 30
8418 30 10
8418 30 90
- Freezers of the chest type, not exceeding 800 l capacity
--- Commercial type, electrical
--- Other
8418 40
8418 40 10
8418 40 90
- Freezers of the upright type, not exceeding 900 l capacity
--- Electrical
--- Other
8418 50
- Other furniture (chests, cabinets, display counters,
showcases and the like) for storage and display,
incorporating refrigerating or freezing equipment
- Other refrigerating or freezing equipment; heat pumps:
8418 61 00
8418 69
8418 69 10
8418 69 20
8418 69 30
8418 69 40
8418 69 50
8418 69 90
-- Heat pumps other than air-conditioning machines of
heading 8415
-- Other:
--- Ice making machinery
--- Water cooler
--- Vending machine, other than automatic vending
machine
--- Refrigeration equipment or devices specially used in
leather industries for manufacture of leather articles
--- Refrigerated farm tanks, industrial ice cream freezer
--- Other
- Parts:
8418 91 00
-- Furniture designed to receive refrigerating or freezing
equipment
8418 99 00
-- Other
5.5 Note 1 to General Explanatory Notes to the First Schedule to the Customs Tariff reads as follows:-
1. Where in column (2) of this Schedule, the description of an article or group of articles under a heading is preceded by -, the said article or group of articles shall be taken to be a sub-classification of the article or group of articles covered by the said heading. Where, however, the description of an article or group of articles is preceded by --, the said article or group of articles shall be taken to be a sub-classification of the immediately preceding description of the article or group of articles which has -. Where the description of an article or group of articles is preceded by --- or ----, the said article or group of articles shall be taken to be sub-classification of the immediately preceding description of the article or group of articles which has - or --.
5.6 The tariff heading 8418 has seven sub-classifications, namely, (1)-Combined refrigerator-freezers, fitted with separate external doors: ; (2) - Refrigerators, house hold type: ; (3) - Freezers of the chest type, not exceeding 800 l capacity ; (4) - Freezers of the upright type, not exceeding 900 l capacity ; (5) - Other furniture (chests, cabinets, display counters, showcases and the like) for storage and display, incorporating refrigerating or freezing equipment ; (6) - Other refrigerating or freezing equipment; heat pumps: ; and `(7) - Parts: . The scheme of classification in the Customs Tariff as enumerated above clearly reveals that Combined refrigerator-freezers with separate external doors, Refrigerators, household type and freezers of different types have been classified separately. Thus the tariff does not treat them as a single entity but distinct and different entities, for the purpose of tax treatment. The entry -Combined refrigerator-freezers, fitted with separate external doors have been further sub-divided into two categories 1) Commercial type and 2) Other. Thus such equipment which are used in households will merit classification under sub-heading No. 8418 10 90 and we hold accordingly.
5.7 The appellant has argued that the product in question merits classification equally under both sub-headings, namely, 8418 10 90 and 8418 21 00 and therefore, following rule 3(c) of the General Interpretative Rules, the entry occurring numerically later should be preferred. It will be useful at this juncture to refer to the said rules so that the issue becomes clear. General Interpretative Rules reads as follows:_ 1. The titles of sections, chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter notes and, provided such headings or Notes do not otherwise require, according to the following provisions.
2. (a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), presented unassembled or disassembled.
(b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of rule 3.
3. When by application of rule 2(b) or for any other reason, goods are prima facie, classifiable under two or more headings, classification shall be effected as follows:-
(a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of goods.
(b) Mixtures, composite goods consisting of different materials or made of different components, and goods put up in sets for retail sale, which can not be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them the essential character, in so far as this criterion is applicable.
(c ) When goods can not be classified by reference to (a) or (b), they shall be classified under the head which occurs last in numerical order among those which equally merit consideration.
4. Goods which can not be classified in accordance with the above rules shall be classified under the heading appropriate to the goods to which they are most akin.
5. ...
5.8 A reading of the rule makes it absolutely clear that the rules have to be applied sequentially. Only if the preceding rule does not apply, the subsequent rule can be invoked for the purpose of classification. Therefore, if rule 3(c ) has to be invoked, rules1, 2, 3(a) and 3 (b) have to be exhausted . One can not jump to rule 3 (c) directly. Rule 1 stipulates that classification shall be determined according to the terms of the headings. According to the terms of heading 8418, there is a specific classification proposed for Combined refrigerator-freezers, fitted with separate external doors under CTH 841810. If the impugned goods satisfies this description (terms), there is no need to go any further down in the rules. We have already seen from the product catalogue that the impugned goods satisfy the description given in heading 841810. Therefore, in the instant case, rule 1 of the interpretative rules itself determines the classification. If one wants to invoke Rule 3, that can be invoked only if rule 2(b) is exhausted. Rule 2(b) relates to classification of mixtures or combinations of materials or substances. In respect of an equipment with a specific function, mixtures or combinations of materials which it is made up has no relevance at all. If that be so, going to rule 3 would not arise at all. Assuming but not admitting that rule 3 has to be invoked, before going to sub-rule (c ), sub-rules (a) and (b) have to exhausted. Sub-rule (a) of rule 3 says that most specific description should be preferred over a general description. Combined refrigerator-freezers, fitted with separate external doors is the most specific description for the product under import as it performs both the functions of refrigeration and freezing and have separate external doors for the refrigeration compartment and the freezer compartment. Thus even under rule 3, sub-rule (a) will apply. Only in the case of mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, if classification can not be determined under sub-rule (a) or (b), sub-rule (c) can be invoked. In other words, in the case of impugned goods, rule 1 of the interpretative rules apply and not rules 2 or 3. Therefore, the appellants argument in this regard is totally mis-placed and we reject the same totally.
5.9 The appellant has relied on the judgment of honble apex court in the case of Minwool Rock Fibres Ltd.(supra). In that case, the honble apex court was dealing with a question relating to competing classification under CETH 6803 Slagwool, rockwool and similar wools and CETH 6807.10 Goods, in which more than 25% by weight of red mud, press mud or blast furnace slag or one or more of these materials have been used. The apex court held as follows The heading is based entirely on material used or composition of goods. A tariff heading, based on composition of goods, is also specific heading like a heading based on composition of nomenclature. Therefore, we are of the view that the goods in issue are appropriately classifiable under sub-heading no.6807.10. Two things are worth noting in this judgment. The dispute in classification was based on composition of the goods. Even then, the apex court classified the product under rule 3 (a), that is, specific heading to be preferred over general heading and not under the residual rule 3 (c). In the case before us, the dispute is not based on composition of the material. Therefore, the ratio of this judgment can not be imported for the purpose of classification. Even when one applies the ratio, the specific description has to be preferred over the general heading. In the case before us, it has already been held that heading no.841810 is most specific and not heading no. 841821. Thus this judgment does not support the case of the appellant at all; on the contrary, it supports the case of revenue.
5.10 It is a well settled position in law that in interpretation of fiscal statues, the principle of strict interpretation should be followed. The principle of strict interpretation of taxing statutes is best enunciated by Rowlatt J in his classic statement:
In a taxing statute one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used..
The reasons underlying this principle is that revenue laws are neither remedial laws nor laws founded on any permanent public policy. They operate to impose a burden on the public, or to restrict them in the enjoyment of their property and pursuit of occupations and hence have to be strictly construed. Since all taxation must be by legislation, the court can not extend its operation. A rigid application of the tax laws is for the protection of the citizen who should be informed in unambiguous terms of the amount and nature of his duty.
5.11 In Oswal Agro Mills Ltd. vs. CCE [1993 (66) ELT 37 (SC)], the honble apex court was considering the classification of toilet soap, the competing classification being Soap, household and laundry and Soap, other sorts. We are not concerned with the outcome of the decision which was classification under soaps, household and laundry. But the ratio/principle laid down by the honble apex court is very relevant . While examining the matter, the apex court held as follows:-
The provisions of the Tariff do not determine the relevant entity of the goods. They deal whether and under what entry, the identified entity attracts duty. The goods are to be identified and then to find the appropriate heading, sub-heading under which the identified goods/products would be classified. To find the appropriate classification description employed in the tariff nomenclature should be appreciated having regard to the terms of the headings read with the relevant provisions or statutory rules of interpretation put up thereon. For exigibility to excise duty, the entity must be specified in positive terms under a particular tariff entry. In its absence be deduced from a proper construction of the tariff entry. There is neither intendment nor equity in a taxing statute. Nothing is implied. Neither can we insert nor anything can we delete but it should be interpreted and construed as per the words the legislature has chosen to employ in the Act or Rules. There is no room for assumption or presumptions. The object of the Parliament has to be gathered from the language used in the stature. 5.12 An argument has been advanced to say that the term refrigerator used in the customs tariff should be interpreted not in technical terms but according to commercial parlance. This argument is fallacious as the customs duty applies to import and export transactions in commodity trade and the tariff takes into account the commercial parlance while classifying the products. The Indian Customs Tariff is based on the Harmonised System of Nomenclature (HSN in short). According to World Customs Organisation web site HSN is a multi-purpose international product nomenclature developed by the World Customs Organization. It comprises about 5000 commodity groups, each identified by a six digit code, arranged in a legal and logical structure and is supported by well-defined rules to achieve uniform classification. The system is used by more than 200 countries and economies as a basis for their Customs Tariffs and for the collection of international trade statistics. Over 98% of the merchandise in international trade is classified in terms of the HS. In other words, the commercial parlance in international trade is already built into the Customs Tariff. Therefore, when the commodity classification is done under the HS code, it automatically satisfies the trade parlance test.
5.13 If we apply the above principle to the facts of the present case, without any iota of doubt, it can be concluded that the most appropriate tariff nomenclature adopted in the Customs Tariff in respect of the impugned goods is Combined refrigerator-freezers, fitted with separate external doors which is classifiable under CTH 841810. Accordingly we hold that the correct classification of the goods under importation in the instant case is CTH 84181090 and not CTH 84182100. Consequently, the appellant is not eligible for the benefit of notification No. 85/04-Cus dated 31-8-2004.
5.14 The Central Board of Excise & Customs had issued a circular No.23/2008-Cus dated 29-12-2008 regarding classification of combined refrigerator freezer fitted with separate external doors. The relevant portion from the said circular is reproduced below:-
3. The matter has been examined by the Board. For the purpose of classification of Combined refrigerator-frezer with separate external doors it is stated that sub-heading 841810 covers refrigerators which are combined with freezers and have separate doors, whereas, subheading 841821 covers only refrigerators without separate freezers and separate doors. Further sub-heading 841830 covers only freezers. Therefore, a combined refrigerator-freezer with separate external doors merits classification under sub-heading 841810. This view is also supported by HS classification. Further, combined refrigerator-freezer with separate external doors of household type is appropriately classifiable under tariff item 841810.90 as the other tariff entry 8418 10 10 covers such refrigerators of commercial type only.
4. In view of the above, I am directed to clarify that the classification of combined refrigerator-freezer with separate external doors would be under sub-heading 8418.10 and not under 8418.21 as was being followed by certain customs field formations. Accordingly these goods are not covered under sl.No. 50 of notification No. 85/2004 _Cus dated 31-8-2004..
5.15 Though the circular issued by the Board is not binding on this Tribunal, it has a great weightage for the reason that CBE&C is the apex body implementing customs laws in this country and has the responsibility of enforcing the Free Trade agreement between India and Thailand contained in notification No. 85/2004-Cus. Therefore, the views expressed in the circular has to be given due consideration. It is a well-settled principle of interpretation that courts in construing a statute will give much weight to the interpretation put upon it at the time of its enactment by those whose duty has been to construe, execute and apply the same enactment [as held by the honble apex court in Collector of Central Excise, Guntur vs. Andhra Sugars Ltd. -1989 AIR 625]. The same position was affirmed by the honble Apex Court in the case of K.P. Varghese vs. ITO, Ernakulam [ (1982) 1 SCR 629] wherein it was held that the meaning ascribed by the authority issuing the notification is a good guide of a contemporaneous exposition of the position of law.
6. In view of the foregoing, we dismiss the appeals as devoid of merits.
(Pronounced in Court on ..) (Ashok Jindal) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) pj 1 23