Custom, Excise & Service Tax Tribunal
Vivo Mobile India Pvt Ltd vs Principal Commissioner, Customs-New ... on 9 February, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI.
PRINCIPAL BENCH, COURT NO. I
CUSTOMS APPEAL NO. 50782 OF 2021
[Arising out of the Order-in-Original No. 65/2020-2021/C.J./Pr. Commr. dated
16.02.2021 passed by Principal Commissioner of Customs, Air Cargo Complex
(Import), New Delhi.]
M/s Vivo Mobile India Pvt. Ltd. ...Appellant
10th - 11th Floor, Palm Springs Plaza,
Golf Course Road, DLF Phase 5, Sector 54,
Gurugram, Haryana - 122 003.
Versus
Principal Commissioner of Customs, ...Respondent
Air Cargo Complex (Import),
New Customs House, Near I.G.I. Airport,
New Delhi - 110 037.
APPEARANCE:
Shri Kishore Kunal and Shri Ankit Prakash, Advocates for the appellant.
Shri Nagendra Yadav, Authorised Representative for the Department
WITH
CUSTOMS APPEAL NO. 50795 OF 2021
[Arising out of the Order-in-Original No. 63/2020-21/C.J./Principal Commissioner
dated 15.02.2021 passed by Principal Commissioner of Customs, Air Cargo
Complex(Import), New Delhi.]
M/s DBG Technology (India) Pvt. Ltd. ...Appellant
Plot No. 02, Sector - 8, Bawal,
Haryana - 123 501.
Versus
Principal Commissioner of Customs, ...Respondent
Air Cargo Complex(Import),
New Customs House, Near I.G.I. Airport,
New Delhi - 110 037.
APPEARANCE:
Shri V. Lakshmikumaran and Shri Subham Jaiswal, Advocates for the appellant.
Shri Nagendra Yadav, Authorised Representative for the Department
WITH
CUSTOMS APPEAL NO. 50796 OF 2021
[Arising out of the Order-in-Original No. 61/2020-21/C.J./Principal Commissioner
dated 15.02.2021 passed by Principal Commissioner of Customs, Air Cargo
Complex(Import), New Delhi.]
M/s Padget Electronics Pvt. Ltd. ...Appellant
C-33, Phase - II, Gautam Budh Nagar,
Noida.
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021
2 C/50888/2021 C/50291/2021 C/50275/2022
Versus
Principal Commissioner of Customs, ...Respondent
Air Cargo Complex(Import),
New Customs House, Near I.G.I. Airport,
New Delhi - 110 037.
APPEARANCE:
Shri V. Lakshmikumaran and Shri Subham Jaiswal, Advocate for the appellant.
Shri Nagendra Yadav, Authorised Representative for the Department
WITH
CUSTOMS APPEAL NO. 50797 OF 2021
[Arising out of the Order-in-Original No. 71/2020-21/C.J./Principal Commissioner
dated 17.02.2021 passed by Principal Commissioner of Customs, Air Cargo
Complex(Import), New Delhi.]
M/s Bhagwati Products Limited ...Appellant
SP1-1, Industrial Area, Karoli, Tapukara Extn.,
Bhiwadi, Rajasthan - 301 019.
Versus
Principal Commissioner of Customs, ...Respondent
Air Cargo Complex(Import),
New Customs House, Near I.G.I. Airport,
New Delhi - 110 037.
APPEARANCE:
Shri V. Lakshmikumaran and Shri Subham Jaiswal, Advocates for the appellant.
Shri Nagendra Yadav, Authorised Representative for the Department
WITH
CUSTOMS APPEAL NO. 50888 OF 2021
[Arising out of the Order-in-Original No. 67/2020-21/C.J./Principal Commissioner
dated 15.02.2021 passed by Principal Commissioner of Customs, Air Cargo
Complex(Import), New Delhi.]
M/s Intex Technologies Pvt. Ltd. ...Appellant
Kh. No. 1747/1274/1-19, 1277/3-0, 1278/1-18,
Dehla Road, VPO - Manpura, Tehsil - Baddi,
H.P. - 173 205.
Versus
Principal Commissioner of Customs, ...Respondent
Air Cargo Complex(Import),
New Customs House, Near I.G.I. Airport,
New Delhi - 110 037.
APPEARANCE:
Shri V. Lakshmikumaran and Shri Subham Jaiswal, Advocates for the appellant.
Shri Nagendra Yadav, Authorised Representative for the Department
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021
3 C/50888/2021 C/50291/2021 C/50275/2022
WITH
CUSTOMS APPEAL NO. 50921 OF 2021
[Arising out of the Order-in-Original No. 66/2020-21/C.J./Principal Commissioner
dated 16.02.2021 passed by Principal Commissioner of Customs, Air Cargo
Complex(Import), New Delhi.]
M/s Oppo Mobiles India Pvt. Ltd. ...Appellant
05th Floor, Building 8, Tower B, DLF Cyber City,
Gurgaon - 122 002.
Versus
Principal Commissioner of Customs, ...Respondent
Air Cargo Complex(Import),
New Customs House, Near I.G.I. Airport,
New Delhi - 110 037.
APPEARANCE:
Shri V. Lakshmikumaran and Shri Subham Jaiswal, Advocates for the appellant.
Shri Mihir Ranjan, Special Counsel for the Department
WITH
CUSTOMS APPEAL NO. 50275 OF 2022
[Arising out of the Order-in-Original No. 68/2020-21/S.J./Principal Commissioner
dated 15.02.2021 passed by Principal Commissioner of Customs, Air Cargo
Complex(Import), New Delhi.]
M/s Transsion India Private Limited ...Appellant
(presently known as Ismartu India Pvt. Ltd.)
B-198, Sector - 63, Noida, Gautam Budh Nagar,
Uttar Pradesh - 201 301.
Versus
Principal Commissioner of Customs, ...Respondent
Air Cargo Complex(Import),
New Customs House, Near I.G.I. Airport,
New Delhi - 110 037.
APPEARANCE:
Ms. Madhumita Singh, Advocate for the appellant.
Shri Nagendra Yadav, Authorised Representative for the Department
CORAM:
HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT
HON'BLE MR. P.V. SUBBA RAO, MEMBER (TECHNICAL)
FINAL ORDER NOS. 50226-50232 /2024
DATE OF HEARING : 12/01/2024
DATE OF DECISION: 09/02/2024
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021
4 C/50888/2021 C/50291/2021 C/50275/2022
P. V. SUBBA RAO:
These seven appeals involve the common issue of classification
of the front cover, middle cover and back cover and few other parts of
the mobile phones imported by the appellants. Hence, these are being
disposed of together by this common order.
2. Customs Appeal No. 50921 of 2021 is filed by M/s. Oppo
Mobiles India Pvt. Ltd.1 to assail the Order-in-Original dated
16.02.2021 passed by the Principal Commissioner of Customs, Air
Cargo Complex, New Delhi, whereby he confirmed the demand of
differential duty of Rs. 143,97,78,121/- on the appellant and imposed
penalty of Rs. 14,00,00,000/- under Section 112 (a) (ii) of the
Customs Act, 19622 for the period 23.02.2018 to 31.12.2019.
3. Customs Appeal No. 50782 of 2020 is filed by M/s. Vivo
Mobile India Pvt. Ltd.3 to assail the Order-in-Original dated
16.02.2021 passed by the Principal Commissioner of Customs, Air
Cargo Complex, New Delhi, whereby he confirmed the demand of
differential duty of Rs. 75,31,26,652/- on the appellant and imposed
penalty of Rs. 7,50,00,000/- under Section 112 (a) (ii) of the Act for
the period 24.02.2018 to 30.12.2019.
4. Customs Appeal No. 50795 of 2021 is filed by M/s. DBG
Technology (India) Pvt. Ltd.4 to assail the Order-in-Original dated
15.02.2021 passed by the Principal Commissioner of Customs, Air
Cargo Complex, New Delhi, whereby he confirmed the demand of
differential duty of Rs. 58,33,513/- on the appellant and imposed
penalty of Rs. 5,80,000/- under Section 112 (a) (ii) of the Act for the
period 20.08.2019 to 31.12.2019.
1 Oppo
2 Act
3 Vivo
4 DBG
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021
5 C/50888/2021 C/50291/2021 C/50275/2022
5. Customs Appeal No. 50796 of 2021 is filed by M/s.
Padget Electronics Private Limited5 to assail the Order-in-
Original dated 15.02.2021 passed by the Principal Commissioner of
Customs, Air Cargo Complex, New Delhi, whereby he confirmed the
demand of differential duty of Rs. 48,66,251/- on the appellant and
imposed penalty of Rs. 4,80,000/- under Section 112 (a) (ii) of the
Act for the period 09.03.2018 to 31.12.2019.
6. Customs Appeal No. 50797 of 2021 is filed by M/s.
Bhagwati Products Limited6 to assail the Order-in-Original dated
17.02.2021 passed by the Principal Commissioner of Customs, Air
Cargo Complex, New Delhi, whereby he confirmed the demand of
differential duty of Rs. 77,18,811/- on the appellant and imposed
penalty of Rs. 7,50,000/- under Section 112 (a) (ii) of the Act for
the period 10.03.2018 to 31.12.2019.
7. Customs Appeal No. 50888 of 2021 is filed by M/s. Intex
Technologies Pvt. Ltd.7 to assail the Order-in-Original dated
15.02.2021 passed by the Principal Commissioner of Customs, Air
Cargo Complex, New Delhi, whereby he confirmed the demand of
differential duty of Rs. 67,37,708/- on the appellant and imposed
penalty of Rs. 6,70,000/- under Section 112 (a) (ii) of the Act for
the period 27.02.2018 to 31.12.2019.
8. Customs Appeal No. 50275 of 2022 is filed by M/s.
Transsion India Private Limited8 (Presently known as Ismartu
India Pvt. Ltd.) to assail the Order-in-Original dated 15.02.2021
passed by the Principal Commissioner of Customs, Air Cargo
Complex, New Delhi, whereby he confirmed the demand of
5 Paget
6 Bhagwati
7 Intex
8 Transsion
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021
6 C/50888/2021 C/50291/2021 C/50275/2022
differential duty of Rs. 36,25,405/- on the appellant and imposed
penalty of Rs. 3,60,000/- under Section 112 (a) (ii) of the Act for
the period 01.03.2018 to 31.12.2019.
9. The appellants imported the aforesaid parts and sub-parts of
cellular mobile phones, self-assessed and paid duty and cleared
them. Show cause notices9 were issued by the Principal
Commissioner of Customs, Air Cargo Complex New Delhi proposing
to reclassify under CTH 39209999 the following goods and recover
the differential duty along with interest:
(a) DBG- Battery cover and front cover (classified by the
appellant under 85177090) and camera lens (classified by the
appellant under 90021100/ 85177090)
(b) Padget- Battery cover and front cover(classified by the
appellant under 85177090), main lens and camera lens
(classified by the appellant under 90021100/85177090)
(c) Bhagwati- Front cover housing, middle cover housing and
rear cover housing (classified by the appellant under
85177090)
(d) Intex- Battery cover, middle cover and front cover (classified
by the appellant under 85177090) and camera lens (classified
by the appellant under 90021100/85177090)
(e) Oppo- Battery cover, middle cover back cover and front cover
(classified by the appellant under 85177090) and camera lens
(classified by the appellant under 90021100/85177090)
(f) Vivo- Battery cover (classified by the appellant under
86177090) and camera lens (classified by the appellant under
90021100)
9 SCN
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021
7 C/50888/2021 C/50291/2021 C/50275/2022
(g) Transsion- Front cover, middle cover and back cover
(classified by the appellant under 85177090) and camera lens
(classified by the appellant under 90021100)
It was also proposed to confiscate the goods under Section 111 (m)
of the Customs Act, 1962 and impose penalty under Section 112(a)
(ii) of the Customs Act, 1962.
10. The grounds on which the SCNs proposed to reclassify
the goods are as follows :-
(i) the goods Battery cover, Front cover, Middle cover, Back
Cover and Camera Lens' (which are part/sub-part or
accessories of cellular mobile phones) are classifiable under
CTH 39209999 and attract BCD @ 15% in terms of S. No.
10 of notification No. 57/2017-Cus dated 30.06.2017, as
amended;
(ii) Chapter note 10 to Chapter 39 of the Schedule to the
Customs Tariff Act, 1975 mentions that in headings 3920
and 3921, the expression plates, sheets, film, foil and strip
applies only to plates, sheets, film and foil and strip (other
than those in Chapter 54) and to blocks of regular
geometrical shape, whether or not printed or otherwise
surface worked uncut or cut into regular rectangles but not
further worked even if when cut they became articles ready
for use,
(iii) As per the policy notified by the Ministry of Electronics and
Information Technology (MeITY) by notification F.No. 33(5)
2017-IPHW dated 1.8. 2018, the front covers, middle covers
and back covers are classifiable under HS Code 39209999.
11. The ground for proposing that the imported goods were liable
to confiscation under Section 111 of the Act is that it provides for
confiscation of various categories of goods. Clause (m) of this
section provides for confiscation of 'any goods which do not
correspond in respect of value or in any other particular with the
entry made under this Act or in the case of baggage with the
declaration made under Section 77 in respect thereof, or in the case
of goods under transshipment, with the declaration for
transshipment refer to in the proviso to sub-section (i) of Section
54'. According to the SCNs, the appellants had misclassified the
goods to evade customs duty which is recoverable from them
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021
8 C/50888/2021 C/50291/2021 C/50275/2022
under Section 28 (1) (a) and the imported goods were liable for
confiscation because the appellants had mis-declared their
classification.
12. According to the SCNs, since the appellants had
misclassified the goods which rendered them liable to confiscation
under section 111, the appellants thereby rendered themselves
liable to penalty under Section 112(a) (ii).
13. The appellants contested the proposals in the SCNs to
reclassify the goods, recover the differential duty, hold the imported
goods liable to confiscation and to impose penalty. However, the
Principal Commissioner passed the impugned orders confirming the
proposals in the SCNs.
Submissions on behalf of the appellants
14. Shri Lakshmikumaran, learned counsel for Oppo, DBG,
Padget, Bhagwati and Intex made the following submissions.
(i) The issue in these appeals is identical to the one in the case
of Samsung India Pvt. Ltd. in Customs appeal no.
50484 of 2021 which was decided in favour of the
importer by this Tribunal's Final Order No.51665/2023
dated 20.12.2023. Therefore, these appeals may also be
decided accordingly.
(ii) The appellants had imported front covers, middle covers
and back covers of cellular phones which house various
components of the phone and also provide for dissipation
of the heat. The details of these types of covers are as
follows:
Back Covers: These help in providing safety to the
battery and internal components. They also provide
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021
9 C/50888/2021 C/50291/2021 C/50275/2022
ingress protection, structural support and save
internal PCB, sub-components and battery from
dust, moisture and other foreign particles. When a
PCB or battery is exposed to such particles, it gets
damaged resulting in malfunctioning of mobile
phone. In some models, the back covers are also
layered with zinc, aluminum and other metallic alloys
for heat dissipation. Back covers may also have
rubber gasket and glass for sealing the camera lens.
Front Covers: These form the basic structures
wherein the camera, buttons, infrared sensors,
amongst others are embedded.
Middle Covers: These are layered with zinc and
provide housing and protection to sub-parts. The
layering helps in heat dissipation.
(iii) These phone covers, in general, undergo similar processes
of manufacturing. These are as under:
a. Extrusion: Two layers of Polymethyl
Methacrylate (PMM) and Polycarbonate (PC) are
layered using extrusion machine to form a sheet
of thickness of 0.64 mm.
b. Printing: In this step, various forms of printing
take place on the sheet. This includes Logo Silk
Print, Offset Print, and Nano Pattern Imprinting.
c. Physical Vapor Disposition (PVD): This step
takes place in a high vacuum chamber to form a
thin film coating. This is akin to lamination to give
the desired finish to the back cover.
d. Second set of Printing: In this stage, the
resultant sheet undergoes two kinds of color silk
print and dyne silk print depending on the model
of the phone.
e. Hard coating: In this step, the sheet is
layered, levelled and UV dried.
f. Thermoforming: Thereafter, the resultant sheets
undergo thermoforming process, wherein by a
process using vacuum and air pressure, the sheet
is pulled over a solid mold to obtain desired
shape. This gives grooves and ground edges to
the uncut phone cover to enable such a cover to
be clipped to the specific phone for which it is
made so that the phone is protected from dust
and moisture.
g. CNC Milling: In this step, specific cuts, speaker
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021
10 C/50888/2021 C/50291/2021 C/50275/2022
grills, and other compartments, are milled in the
cover, thereby giving it the final shape.
(iv) These phone covers have been correctly classified under
CTH 85177090 as these are parts of mobile phones and are
not merely articles of plastic. Hence, there is no
misclassification at all as held in the impugned orders.
(v) CTH 3920 covers ―other plates, sheets, film, foil and strip
of plastics, not cellular and not re-imposed, laminated,
supported a similarly by with other materials. Chapter note
10 to Chapter 39 reads as follows:-
(10)In headings 3920 and 3921, the expression
―plates, sheets, film foil and strips applies only to plates,
sheets, film, foil and strip (other than those of Chapter
54) and to blocks of regular geometric shape, whether or
not printed or otherwise surface-worked, uncut or cut
into rectangles (including squares) but not further
worked (even if whenso cut they become articles ready
for use).
(vi) It is evident from this chapter note that for any goods to fall
under CTH 3920 they must be plastic sheets or plates etc.
of regular geometric shapes and should not be reinforced or
laminated with other materials. In this case the middle
cover is laminated with zinc and hence clearly gets excluded
from CTH 3920. The use of these metals not only
enhanced the strength of the plastic, but also helps in
dissipations of the heat.
(vii) Further, for the goods to fall under CTH 3920 they should
not be further worked. The phone covers in their case have
ground edges, thermos-formed with grooves, drilled and
CNC milled and, therefore, they do not qualify as goods 'not
further worked'.
(viii) The phone covers were correctly classifiable under CTH
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021
11 C/50888/2021 C/50291/2021 C/50275/2022
85177090 in view of section note (ii) to Section XVI which
provides for classification of the parts of the goods falling
under chapter 85. Part is defined as one without which a
machine is not operational or does not suitably discharge its
function. Thus the parts can perform either an electronic
function or a mechanical one. In this case, the front covers,
middle covers and back covers of cellular phones performed
mechanical function as well as provide for heat dissipation.
The covers also protect the parts from dust, moisture
etc. They correctly merit classification under CTH 8517 7090
which reads as follows :-
Chapter 8517 Telephone sets, including telephones
for cellular networks or for other
wireless networks; other apparatus
for the transmission or reception of
voice, images or other data, including
apparatus for communication in a
wired or wireless network (such as a
local or wide area network), other
than transmission or reception
apparatus of heading 8443, 8525,
8527 or 8528
- Telephone sets, including telephones for
cellular networks or for other wireless
networks :
8517 11 --
8517 11 10 --
8517 11 90 --
8517 12 --
8517 12 10 --
8517 12 90 --
8517 18 --
8517 18 10 --
8517 18 90 --
8517 61 00 --
8517 62 --
8517 62 10 --
8517 62 20 --
8517 62 30 --
8517 62 40 --
8517 62 50 --
8517 62 60 --
8517 62 70 --
8517 62 90 --
8517 69 --
8517 69 10 --
8517 69 20 --
8517 69 30 --
8517 69 40 --
8517 69 50 --
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021
12 C/50888/2021 C/50291/2021 C/50275/2022
8517 69 60 --
8517 69 70 --
8517 69 90 --
8517 70 - Parts
8517 70 10 -- Populated, loaded or stuffed printed
circuit boards
8517 70 90 -- Others
(ix) Reliance is also placed on WCO Harmony System Company
Session May 2022 which classified cover glass for the
manufacture of a mobile phone, touch screen under
8517.70. Although WCS classification is not binding but it
has highly persuasive value and may be considered.
(x) Since, the Department has proposed to reclassify the
goods, the burden is on it to prove that the goods not fall
under CTH 8517 and fall under CTH 39209999 and this
burden has not been discharged by the Department.
(xi) The appellants have been importing these products for a
long time and has been classifying them under 85177090
and the Department has been accepting this classification.
(xii) Notification No. 57/2017-CUS dated 30.06.2017 and the
Meity notification dated 14.09.2017 cannot form the
basis of classification of the goods. Classification has to be
only based on the customs tariff read with the general
interpretative rules. Reliance is placed on Commissioner
of Central Excise, Bombay versus Oswal Petro
Chemicals Ltd.10 which was affirmed by the Supreme
Court11.
(xiii) As far as the lenses and lens covers of the mobile phones
10 2000 (126) E.L.T. 1232 (Tri)
11 2007 (127) E.L.T. 857 (S.C.)
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021
13 C/50888/2021 C/50291/2021 C/50275/2022
are concerned, they were correctly classified by the
appellants under CTH 90021100/85177090 and they have
been wrongly re-classified in the impugned order under
39209999 for the reason that CTH pertains to articles of
plastic and include plates, sheets, film, foil and strip (other
than those of Chapter 54) and blocks of regular geometric
shape, whether or not printed or otherwise surface-
worked, uncut or cut into rectangles (including squares)
but not further worked even if when so cut they become
articles ready for use. Evidently, lenses cannot fall in this
definition because they are not in geometrical shapes.
Revenue's contention that lenses need to be classified
under CTH 39209999 cannot be sustained.
15. Shri Kunal Kishore, learned counsel for Vivo reiterated the
submissions of Shri Lakshmikumaran. He further submitted that Vivo
had also imported lenses which form part of the camera of the mobile
phones and classified them under CTH 90021100 which the
Commissioner incorrectly re-classified under CTH 39209999 as
articles of plastic. In fact, the lenses imported by Vivo were not made
of plastic at all but were made of crystal and therefore, they can
never be classified as articles of plastic under Chapter 39. In support
of the claim that they were made of crystal, Vivo had submitted test
certificate from M/s. SGS- a reputed testing agency confirming that
the lenses were made of crystal. The Commissioner, however,
dismissed this report without giving any reason or without providing
any other test report of any other testing agency. It is his submission
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021
14 C/50888/2021 C/50291/2021 C/50275/2022
that if Revenue was of the opinion that the test certificate from SGS
was incorrect, samples could have been drawn and sent for testing to
Central Revenue Control Laboratories or any other laboratory but
neither were any samples drawn nor were they tested. Therefore, the
Commissioner ought to have accepted its declaration that the lenses
were made of crystal in the absence of any evidence to the contrary.
In this case, Vivo went a step further and even produced a test
report from M/s. SGS which the Commissioner has dismissed without
giving any reason.
16. He further submitted that the demand was, in any case,
revenue neutral because if the appellant had paid higher IGST as
proposed by the Revenue, it would have got the entire IGST as input
tax credit12 under GST because all the imported parts were used in
the manufacture of mobile phones on which GST was paid.
17. Ms. Madhumita Singh, Learned counsel for Transsion
reiterated the submissions made by Shri Lakshmikumaran and further
submitted that once the self-assessment was completed, it was open
to the Revenue to assail it by filing an appeal before Commissioner
(Appeals) as laid down by the Supreme Court in ITC Ltd versus
Commissioner of Central Excise Kolkata13 but without filing an
appeal and getting the assessment modified by the Commissioner
(Appeal), demand under Section 28 cannot be issued. In support, she
relied on the Final Order passed by a division bench of this Tribunal in
Rajib Saha vs Commissioner of Customs (Preventive)
Shillong14.
12 ITC.
13 2019 (368) E.L.T. 216 (S.C.)
14 Final Order no. 76465-76466/2023 dated 24 August 2023 passed in
CESTAT Kolkata Appeals C75278 and 75279 of 2016
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021
15 C/50888/2021 C/50291/2021 C/50275/2022
18. On behalf of the Department, Shr i Mihir Ranjan,
learned Special Counsel and Shri Nagendra Yadav, learned
authorised representative for the Revenue made the following
submissions:
a. The phone covers are correctly classifiable under CTH
39209999 as held by the Principal Commissioner in the
impugned order. They are made of plastic and the sub-
components are embedded at proper places in the front
cover and back cover. The purpose of the back cover is
to reduce the amount of dust on battery terminals and it
is also made of plastic. The middle cover fixes the inner
components and protects the battery from moisture and
dust and it is also made of plastic, therefore, the
impugned order was correct in holding that they are
classifiable under CTH 39209999. These three covers do
not contribute to the functionality of the mobile per-se
and, therefore, do not deserve to be classified as parts
of the mobile phones and should be classified under
Chapter 39. He placed reliance on the following case
laws:-
i. Ipea Paramount Pvt. Ltd. versus
Commissioner of
ii. C. Ex., New Delhi15
iii. Commissioner versus Ipea Paramount Pvt.
Ltd.16
iv. P.R. Packagings Pvt. Ltd. versus
17
Commissioner of C. Ex., New Delhi - II
v. Hariram Govindram versus Collector of
CentralExcise, Bombay18
vi. Karnataka Power Corporation Ltd. versus
Commr.of Cus., Chennai19
vii. General Mills India Ltd. versus Commr. of
Cus.(Import), JNCH, Nhava Sheva20
viii. Atul Kaushik versus Commissioner of
Customs(Export), New Delhi21
15 2002 (143) E.L.T. 632 (Tri. - Del.)
16 2008 (228) E.L.T. A136 (S.C.)
17 2002 (139) E.L.T. 495 (Tri. - Del.)
18 1997 (94) E.L.T. 574 (Tribunal)
19 2016 (337) E.L.T. 104 (Tri. - Chennai)
20 2019 (368) E.L.T. 705 (Tri. - Mumbai)
21 2015 (330) E.L.T. 417 (Tri. - Del.)
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021
16 C/50888/2021 C/50291/2021 C/50275/2022
ix. Towa Ribbons Pvt. Ltd. versus
Collector of Customs22
x. Speedway Rubber Co. versus Commissioner
ofCentral Excise, Chandigarh23
b. Each part of a machine does not merit being classified
along with the machine or as its part under Chapter
85. As has been held in the above cases some parts or
machine can also be classified under Chapter 39.
c. On the question of whether the specific entry should
prevail over the general entry, since the impugned
goods do not merit classification under 8517 at all and,
therefore, the question of general or specific entry does
not arise.
d. The products in this case and in of Bhagwati Products
Ltd, in which the Principal Commissioner of Customs,
Chennai held that the front housing and part housing of
a mobile phone deserve to be classified under CTH
85177090 are different. In this case, the appellant itself
has declared them as front cover, middle cover and back
cover not as housing and, therefore, the ratio does not
apply.
e. As far as the Notification No. 52/2017-CUS dated
30.06.2017, and the Meity Notification dated
01.08.2018 is concerned, these were relied upon only
as supporting evidence and the goods, in question, have
always been seen by the Government as filing under
Chapter 39 and not as filing under chapter 85.
f. The Department is not estopped from raising the
classification in a subsequent import even if the
classification was wrongly accepted during the prior
imports. He relies on the follows case laws :-
General Mills India Ltd. versus Commissioner of
Customs (Import) JNCH, Nhava Sheva24
Fitrite Packers versus Commissioner of Central
Excise, Mumbai - IV25
Assistant Commissioner of Central Excise
22 1993 (66) E.L.T. 320 (Tri. - Del.)
23 2002 (143) E.L.T. 8 (S.C.)
24 2019 (368) E.L.T. 705 (Tri. - Mumbai)
25 2016 (203) E.L.T. 452 (Tri. - Mum.)
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021
17 C/50888/2021 C/50291/2021 C/50275/2022
Tiruchirapally versus Indian Hume Pipe Co. Ltd.26
g. The Department has duly discharged its responsibility in
changing the classification and in confirming demands
differential duty along with interest. The appellant mis-
declared the classification of the goods and, therefore,
they are liable for confiscation under Section 111 (m).
Consequently, the penalty under Section 112 (a) has
been correctly imposed upon the appellant.
h. Submission of Ms. Madhumita Singh that once a Bill of
Entry is self-assessed and goods are cleared, Revenue
cannot raise a demand by issuing a notice under section
28 without first filing an appeal to the Commissioner
(Appeals) is not correct and is contrary to the legal
position. While both sides can appeal against the self-
assessment, Revenue can also issue a notice under
section 28 and raise a demand. On the other hand,
refund is not a quasi-judicial process but is a mechanical
process of refunding the amount if it is due as per the
assessment (including self-assessment). The officer
sanctioning the refund cannot, in the course of such
sanction, sit in judgment over or modify the
assessment. The judgments of the Supreme Court in
Priya Blue Industries vs Commissioner of Customs
(Prev)27, Collector of Central Excise vs Flock
India28 and ITC Ltd. all pertain to the question as to if
refund can be sanctioned so as to modify the
assessment and the question was answered in negative.
None of these judgments says that notice under section
28 cannot be issued without modifying the assessment
through an appeal. The order of the Kolkata bench of
this Tribunal in Rajib Saha is per incuriam being
contrary to the law laid down by the Supreme Court.
i. The appeals may, therefore, be dismissed.
19. We have considered the submissions of the learned
counsels for the appellants, learned Special Counsel for the Revenue
and the learned authorised representative for the Revenue and
perused the records.
Findings
26 2009 (238) E.L.T. 230 (Mad.)
27 2004 (172) E.L.T. 145 (S.C.)
28 2000 (120) E.L.T. 285 (S.C.)
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021
18 C/50888/2021 C/50291/2021 C/50275/2022
20. We have perused the records of the case and considered the
submissions made by both sides. The following inter-related issues
arise for determination:
a) Are the front cover, middle cover, battery cover,
back cover, front cover housing, middle cover
housing and back cover housing of cellular mobile
phones imported by the appellants classifiable under
CTH 85177090 (as claimed by the appellants) or
under CTH 39209999(as held in the impugned
order)?
b) Are the front lenses and camera lenses imported by
the appellants classifiable under CTH
90021100/85177090 (as claimed by the appellants)
or under CTH39209999 (as held in the impugned
order)?
c) Can an exemption notification issued by the
Government under Section 25 of the Customs Act
determine the classification of the goods?
d) Can a scheme notified by the MeiTY determine the
classification of the goods?
e) Can a demand be raised under section 28 by the
department without filing an appeal before the
Commissioner (Appeals) against the self-
assessment?
f) Was the differential duty recoverable from the
appellants?
g) Is interest recoverable from the appellant?
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021
19 C/50888/2021 C/50291/2021 C/50275/2022
h) Were the imported goods liable to confiscation under
Section 111(m) (although they were not actually
confiscated) because the classification of the
imported goods in the Bill of Entry is, according to
the Revenue, incorrect? Consequently, was the
penalty under Section 112 imposed correctly?
21. Before examining the question of classification, we
examine the above questions (c) to (h) above. For this
purpose, it is necessary to examine the nature of the Customs
duty and the legal provisions to determine and charge it, the
role of classification and who can decide the classification.
The charging section, i.e., the section which empowers the
Government to levy and collect duties of customs is Section 12
which reads as follows:
Section 12. Dutiable goods. -
(1) Except as otherwise provided in this Act, or any
other law for the time being in force, duties of customs
shall be levied at such rates as may be specified under
the Customs Tariff Act, 1975 (51 of 1975), or any other
law for the time being in force, on goods imported into,
or exported from, India.
(2) The provisions of sub-section (1) shall apply in
respect of all goods belonging to Government as they
apply in respect of goods not belonging to Government.
22. Thus, the taxable event, i.e., that event which triggers
levy of customs duty is the act of importation (bringing into
India from a place outside India) or exportation (taking to a
place outside India from India) of goods. The levy is on the
goods and not on any person and that levy will apply even if
the goods belong to the Government.
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021
20 C/50888/2021 C/50291/2021 C/50275/2022
Assessment
23. Customs duty is levied at such rates as are specified in
the Schedules to the Customs Tariff Act, 1975. These rates
can be based on quantity (specific rate of duty) or value
(ad valorem rate of duty) and on most goods latter is the
case. Based on the classification of the goods in the Schedule
to the Customs Tariff Act, their value, exemption
notifications, etc., the duty of customs has to be assessed.
24. Assessment is defined in Section 2(2) as follows:
Section 2. Definitions -
In this Act, unless the context otherwise requires,
.....
(2) "assessment" means determination of the dutiability of any goods and the amount of duty, tax, cess or any other sum so payable, if any, under this Act or under the Customs Tariff Act, 1975 (51 of 1975) (hereinafter referred to as the Customs Tariff Act) or under any other law for thetime being in force, with reference to-
(a) the tariff classification of such goods as determined in accordance with the provisions ofthe Customs Tariff Act;
(b) the value of such goods as determined in accordance with the provisions of this Act and the Customs Tariff Act;
(c) exemption or concession of duty, tax, cess or any other sum, consequent upon any notification issued therefore under this Act or under the Customs Tariff Act or under any other law for the time being in force;
(d) the quantity, weight, volume, measurement or other specifics where such duty, tax, cess or any other sum is leviable on the basis of the quantity, weight, volume, measurement or other specifics of such goods;
(e) the origin of such goods determined in accordance with the provisions of the Customs Tariff Act or the rules made thereunder, if the C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 21 C/50888/2021 C/50291/2021 C/50275/2022 amount of duty, tax, cess or any other sum is affected by the origin of such goods;
(f) any other specific factor which affects the duty, tax, cess or any other sum payable on such goods, and includes provisional assessment, self-assessment, re- assessment and any assessment in which the duty assessed is nil ;
25. Thus, classification of the goods under the Customs Tariff is a part of assessment. The next question is who can do this assessment. Section 17, reads as follows:
Section 17. Assessment of duty. -
(1) An importer entering any imported goods under Section 46, or an exporter entering any export goods under Section 50, shall, save as otherwise provided in Section 85, self-assess the duty, if any, leviable on such goods.
(2) The proper officer may verify the entries made under Section 46 or Section 50 and the self-assessment of goods referred to in sub-section (1) and for this purpose, examine or test any imported goods or export goods or suchpart thereof as may be necessary.
Provided that the selection of cases for verification shall primarily be on the basis of risk evaluation through appropriate selection criteria.
(3) For the purposes of verification under sub-section (2), the proper officer may require the importer, exporter or any other person to produce any document or information, whereby the duty leviable on the imported goods or export goods, as the case may be, can be ascertained and thereupon, the importer, exporter or such other person shall produce such document or furnish such information.
(4) Where it is found on verification, examination or testing of the goods or otherwise that the self- assessment is not done correctly, the proper officer may, without prejudice to any other action which may be taken under this Act, re- assess the duty leviable on such goods.
(5) Where any re-assessment done under sub-section (4) is contrary to the self-assessment done by the importer or exporter and in cases other than those where the importer or exporter, as the case may be, C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 22 C/50888/2021 C/50291/2021 C/50275/2022 confirms his acceptance of the said re- assessment in writing, the proper officer shall pass a speaking order on the re-assessment, within fifteen days from the date of re-assessment of the bill of entry or the shipping bill, as the case may be.
Explanation. - For the removal of doubts, it is hereby declared that in cases where an importer has entered any imported goods under Section 46 or an exporter has entered any export goods under Section 50 before the date on which the Finance Bill, 2011 receives the assent of the President, such imported goods or export goods shall continue to be governed by the provisions of Section 17 as it stood immediately before the date on which such assent is received.
26. Thus, as per Section 17 the importer or exporter has to self-assess duty and the proper officer can re-assess the duty. Both the self-assessment by the importer (or, as the case may be, the exporter) and the re-assessment by the proper officer fall under the definition of assessment as per Section 2(2). If the proper officer re-assesses the duty- unless the importer accepts the re-assessment in writing- he has to give a speaking order. Thus, the importer (or exporter) and the proper officer are competent to classify the goods and assess the duty payable on them.
27. After the duty is assessed on the imported goods and the duty is paid, the proper officer clears the goods for home consumption under Section 46. Once this action is completed, they cease to be imported goods, they cease to be dutiable goods and the importer ceases to be the importer. Sections 2(14), 2(25) and 2(26) which explain this legal position read as follows.
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 23 C/50888/2021 C/50291/2021 C/50275/2022
2. Definitions (14) "dutiable goods" means any goods which are chargeable to duty and on which duty has not been paid;
(25) "imported goods" means any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption;
(26) "importer", in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes any owner, beneficial owner or any person holding himself out to be the importer;
28. These processes of self-assessment by the importer and re- assessment by the proper officer come to an end once an order permitting the clearance of goods for home consumption is issued under Section 46. Thereafter, the goods cease to be imported goods or dutiable goods and no duty can be assessed. The only exception is when the goods are cleared for home consumption after provisional assessment in which case the assessment concludes after the assessment is finalized and an order is passed by the officer. Provisional assessment is not relevant to these appeals.
29. Assessment concludes the determination of the liability of the importer to pay duty and is similar to a decree under the Civil Procedure Code, 190829. Section 2 (2) of CPC defines decree as "It means the formal expression of an adjudication which conclusively determines the rights of the parties with regard to all or any of the matters in controversy in the suit." Assessment differs from decree inasmuch as the determination of what is due from the importer as duty is not 29 CPC C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 24 C/50888/2021 C/50291/2021 C/50275/2022 made by a Court of law but the duty is determined through a quasi-judicial process by the 'proper officer' who re-assesses the duty or is self-determined by the importer. Just like a decree in Civil suits, there is a provision for appeal against assessment. It is appealable by both sides to the Commissioner (Appeals) under section 128 and also to further higher judicial fora. The Commissioner (Appeals) does not assess but either affirms, modifies or annuls the assessment order. In this process, the Commissioner (Appeals) may also decide the issue of classification of the goods. Similarly, on appeals, the Tribunal or Supreme Court either sustain or set aside the orders of the Commissioner (Appeals) and in the process they may also decide the classification.
30. The Risk Management System30 of the Indian Customs Electronic Data Interchange31 system clears many consignments of imported goods based on self- assessment by the importer without the proper officer ever getting an opportunity to examine the self- assessment and reassess the goods. Some such cases, the Bills of Entry are subject to Post Clearance Audit32 while others are not even subjected to such audit. A question which arises is if a Bill of Entry which is only self-assessed by the importer without any re-assessment can it also be appealed against to the Commissioner (Appeals) under Section 128. The larger bench 30 RMS 31 EDI 32 PCA C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 25 C/50888/2021 C/50291/2021 C/50275/2022 of the Supreme Court held in ITC in the affirmative. The relevant portion of this judgment is as follows:
42. It was contended that no appeal lies against the order of self-assessment. The provisions of Section 128 deal with appeals to the Commissioner (Appeals). Any person aggrieved by any decision or order may appeal to the Commissioner (Appeals) within 60 days. There is a provision for condonation of delay for another 30 days. The provisions of Section 128 are extracted hereunder:
"128. Appeals to [Commissioner (Appeals)]. -- (1) Any person aggrieved by any decision or order passed under this Act by an officer of customs lower in rank than a [Principal Commissioner of Customs or Commissioner of Customs] may appeal to the [Commissioner (Appeals)] [within sixty days] from the date of the communication to him of such decision or order :
[Provided that the Commissioner (Appeals) may, if he is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of sixty days, allow it to be presented within a further period of thirty days.] [(1A) The Commissioner (Appeals) may, if sufficient cause is shown, at any stage of hearing of an appeal, grant time, from time to time, to the parties or any of them and adjourn the hearing of the appeal for reasons to be recorded in writing :
Provided that no such adjournment shall be granted more than three times to a party during hearing of the appeal.] (2) Every appeal under this section shall be in such form and shall be verified in such manner as may be specified by rules made in this behalf.‖
43. As the order of self-assessment is nonetheless an assessment order passed under the Act, obviously it would be appealable by any person aggrieved thereby. The expression "Any person‟ is of wider amplitude. The revenue, as well as assessee, can also prefer an appeal aggrieved by an order of assessment. It is not only the order of re-
assessment which is appealable but the provisions of Section 128 make appealable any decision or order under the Act including that of self- assessment. The order of self- assessment is an order of assessment as per Section 2(2), as such, it is appealable in case any person is aggrieved by it. There is a specific provision made in Section 17 to pass a reasoned/speaking order in the situation in case on verification, self-assessment is not found to be satisfactory, an order of re- assessment has to be passed under Section 17(4). Section 128 has not provided for an appeal against a speaking order but against 'any order' which is of wide amplitude. The reasoning employed by the High Court is that since there is no lis, no speaking order is passed, as such an appeal would not lie, is not sustainable in law, is contrary to what has been held by this Court in Escorts (supra). Demands under Section 28
31. While both the importer and Revenue can appeal to the Commissioner (Appeals) under Section 128 against an C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 26 C/50888/2021 C/50291/2021 C/50275/2022 assessment (including self-assessment) of a Bill of Entry, the proper officer has another option of issuing a Show Cause Notice under Section 28 to demand and recover duties not levied, not paid, short levied or short paid or erroneously refunded. In all these appeals, the SCNs proposed recovery of the duty alleged to be short paid under section 28.
32. Ms. Madhumita Singh, learned counsel for Transsion submitted that the demands themselves are not sustainable because unless the self-assessment itself is appealed against by the Revenue and modified by the Commissioner (Appeals), no demand can be sustained. She submitted that this was the laid down by the Supreme Court ITC. In support, she relied on the order of the Kolkata bench of this Tribunal in Rajib Saha.
33. The submissions of Ms. Singh are misplaced. The question before the Supreme Court in ITC was whether a refund under section 27 can be sanctioned if the goods were cleared on the basis of self-assessment without filing an appeal before Commissioner (Appeals) and not if a demand could be raised under section 28.
34. To understand this issue, it is profitable to understand the law laid down by successive judgments. In Flock India, the Assistant Collector had, after examining the classification lists filed by Flock India (as assessees were required to during the relevant period), rejected the classification claimed and passed an order changing the classification. This order of the Assistant Collector was appealable but the assessee had not C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 27 C/50888/2021 C/50291/2021 C/50275/2022 appealed to the Collector (Appeals). Instead, it had directly filed a refund application for the differential duty. Supreme Court held that refunds can be claimed if they flow from the assessment and not so as to modify the assessment. Therefore, unless the assessment order is appealed against and is modified, no refund can be sanctioned. The ratio of Flock India was followed by the Supreme Court in Priya Blue which was a Customs matter. It needs to be pointed out that unlike an SCN for demand of duty, sanction of refund is not an adjudication procedure. The officer sanctioning the refund cannot sit in judgment or modify the assessment by the assessing officer. Since every Bill of Entry is an assessment by itself, Bills of Entry can and are often appealed against.
35. Later, the Customs procedures changed and self- assessment and selective re-assessment by the officers were introduced initially as a practice. Later, in 2011 Section 17, which deals with assessment, itself was amended and the concept of self assessment and selective re-assessment were introduced in the Customs Act itself. The question which then arose was if the goods were cleared without any assessment by the proper officer, can a refund be claimed because there is no order or assessment by the proper officer to appeal against. In Aman Medical Products Ltd. vs Commissioner33 and Micromax Informatics Ltd. vs UOI34, Delhi High Court held that in cases where there is no 33 2010 (250) E.L.T. 30 (Del.) 34 2016 (342) E.L.T. A183 (Del.) C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 28 C/50888/2021 C/50291/2021 C/50275/2022 assessment or order by the proper officer, refunds can be claimed without any appeal to the Commissioner (Appeals). These and several other cases were appealed against before the Supreme Court by the Revenue. The larger bench of Supreme Court in ITC Ltd. finally decided that all assessments including self-assessments can be appealed against before the Commissioner (Appeals) and no refund can be sanctioned unless the assessment is modified.
36. Ms. Madhumita Singh has mis-construed this requirement for sanction of refund under section 27 as the requirement for issuing an SCN demanding duty under section
28. Neither Flock India nor Priya Blue nor Aman Medical nor Micromax ever dealt with the question of demand under section 28. Even the decision of the larger bench of Supreme Court in ITC Ltd. is also not regarding demands under section 28 but only regarding refunds under section 27. While assessment is like a decree, refund is like its execution. Needless to say that in an execution petition, the decree cannot be changed.
37. It has been made explicit by the Supreme Court in Flock India that the assessment can be modified either through an appeal or under section 28. The relevant portion of this judgment are as follows:
6. We are unable to accept this submission. Just such a contention has been negatived by this Court in Flock (India)'s case (supra). Once an Order of Assessment is passed the duty would be payable as per that order. Unless that order of assessment has been reviewed under Section 28 and/or modified in an Appeal that Order stands. So long as the Order of Assessment stands the duty would be payable as per that Order of Assessment. A refund claim C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 29 C/50888/2021 C/50291/2021 C/50275/2022 is not an Appeal proceeding. The Officer considering a refund claim cannot sit in Appeal over an assessment made by a competent Officer. The Officer considering the refund claim cannot also review an assessment order.
7. We also see no substance in the contention that provisions for a period of limitation indicates that a refund claim could be filed without filing an Appeal. Even under Rule 11 under the Excise Act the claim for refund had to be filed within a period of six months. It was still held, in Flock (India)'s case (supra), that in the absence of an Appeal having been filed no refund claim could be made.
8. The words "in pursuance of an Order of Assessment" only indicate the party/person who can make a claim for refund. In other words, they enable a person who has paid duty in pursuance of an Order of Assessment to claim refund. These words do not lead to the conclusion that without the Order of Assessment having been modified in Appeal or reviewed a claim for refund can be maintained.
9. In our view, the ratio in Flock (India)'s case (supra) fully applies. We, therefore, see no substance in the Review Petition. Accordingly, the Review Petition stands dismissed with no order as to costs.
(emphasis supplied)
38. This legal position was quoted with affirmation in ITC Ltd. The relevant portion of the judgment is as follows:
40. In Priya Blue Industries Ltd. v. Commissioner of Customs (Preventive) - 2004 (172) E.L.T. 145 (S.C.) = (2005) 10 SCC 433, the Court considered unamended provision of Section 27 of the Customs Act and a similar submission was raised which was rejected by this Court observing that so long as the order of assessment stands, the duty would be payable as per that order of assessment. This Court has observed thus :
"6. We are unable to accept this submission. Just such a contention has been negatived by this Court in Flock (India) case (2000) 6 SCC
650. Once an order of assessment is passed the duty would be payable as per that order. Unless that order of assessment has been reviewed under Section 28 and/or modified in an appeal, that order stands. So long as the order of assessment stands the duty would be payable as per that order of assessment. A refund claim is not an appeal proceeding. The officer considering a refund claim cannot sit in appeal over an assessment made by a competent officer. The officer considering the refund claim cannot also review an assessment order.
7. We also see no substance in the contention that provision for a period of limitation indicates that a refund claim could be filed without filing an appeal. Even under Section 11 under the Excise Act, the claim for C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 30 C/50888/2021 C/50291/2021 C/50275/2022 refund had to be filed within a period of six months. It was still held, in Flock (India)'s case (supra), that in the absence of an appeal having been filed no refund claim could be made.
8. The words "in pursuance of an order of assessment" only indicate the party/person who can make a claim for refund. In other words, they enable a person who has paid duty in pursuance of an order of assessment to claim the refund. These words do not lead to the conclusion that without the order of assessment having been modified in appeal or reviewed a claim for refund can be maintained."
(emphasis supplied)
41. It is apparent from provisions of refund that it is more or less in the nature of execution proceedings. It is not open to the authority which processes the refund to make a fresh assessment on merits and to correct assessment on the basis of mistake or otherwise."
39. Thus, both ITC Ltd. and Flock India make it explicit that the assessments can be modified either through an appeal to the Commissioner (Appeals) or modified under section 28. The submission of the learned counsel Ms. Singh is quite the opposite of this law laid down by the Supreme Court and hence cannot be accepted. It would also be pertinent to mention that if the learned counsel's submissions are accepted, it will result in absurd consequences. If a notice under section 28 is issued, after considering the reply and hearing the noticee, the proper officer (commissioner or additional commissioner or joint commissioner or deputy commissioner or assistant commissioner) has to adjudicate the matter and pass an order. If the assessment is already appealed against before Commissioner (Appeals) and is either affirmed or annulled or modified, the assessment order merges with the order of the Commissioner (Appeals) which C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 31 C/50888/2021 C/50291/2021 C/50275/2022 must be honoured. The question of the proper officer again issuing a notice under section 28 on the same issue after the Commissioner (Appeals) had decided the matter does not arise because the proper officer cannot sit in judgment over the Commissioner (Appeals) decision.
40. The question which may arise is if both sides can appeal against any assessment including self assessment, what is the nature of this power of 'the proper officer' to issue a Show Cause Notice under section 28 to modify the assessment and demand duty short paid, not paid, etc. The nature of this power was examined by the Supreme Court in two different judgments. In Commissioner of Customs (Preventive) vs Sayed Ali35, the question before the Supreme Court was if the Commissioner of Customs (Preventive) could exercise powers under section 28 and in that context, the Supreme Court examined the nature of the power under section 28 as follows:
"16. In the present cases, the import manifest and the bill of entry having been filed before the Collectorate of Customs (Imports) Mumbai, the same having been assessed and clearance for home consumption having been allowed by the proper officer on importers executing bond, undertaking the obligation of export, in our opinion, the Collector of Customs (Preventive), not being a "proper officer" within the meaning of Section 2(34) of the Act, was not competent to issue show cause notice for re- assessment under Section 28 of the Act. Nothing has been brought on record to show that the Collector of Customs (Preventive), who had issued the show cause notices was assigned the functions under Section 28 of the Act as "proper officer" either by the Board or the Collector/Commissioner of Customs."
(emphasis supplied)
41. This was again examined by the Constitution bench of Supreme Court as the power to review the earlier assessment 35 2011 (265) ELT 17(S.C.) C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 32 C/50888/2021 C/50291/2021 C/50275/2022 in Canon India Pvt. Ltd. versus Commissioner of Customs36. The question before the Supreme Court was if the officers of DRI could issue a notice under section 28. In that context, the Supreme Court examined the nature of the power under this section. The relevant text of this judgment reads as follows:
12. The nature of the power to recover the duty, not paid or short paid after the goods have been assessed and cleared for import, is broadly a power to review the earlier decision of assessment. Such a power is not inherent in any authority. Indeed, it has been conferred by Section 28 and other related provisions. The power has been so conferred specifically on ―the proper officer-
which must necessarily mean the proper officer who, in the first instance, assessed and cleared the goods i.e. the Deputy Commissioner Appraisal Group. Indeed, this must be so because no fiscal statute has been shown to us where the power to re-open assessment or recover duties which have escaped assessment has been conferred on an officer other than the officer of the rank of the officer who initially took the decision to assess the goods.
(emphasis supplied)
42. Thus, the power under section 28 is the power to review the assessment by the proper officer himself and modify it. Such power is not inherently available to any judicial or quasi- judicial authority as once the authority passes any order, he becomes functus officio. But where such power is conferred on an authority by law, he can exercise it. All the four judgments of the Supreme Court in Flock India, ITC Ltd, Sayed Ali and Canon India make it more than explicit the nature of the power under section 28 and that an assessment can be modified by resorting to section 28 or on an appeal.
43. We now consider the order of a bench of this Tribunal 23 2021 (376) E.L.T. 3 (S.C.) C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 33 C/50888/2021 C/50291/2021 C/50275/2022 passed in Rajib Saha relied upon by the learned Counsel Ms. Madhumita Singh. The relevant portion of this order is reproduced below:
7. The Appellant cited the decision of the Hon'ble Supreme Court in the case of I.T.C. Vs. Commissioner of Central Excise, New Delhi [2019(368) ELT 216 (SC) wherein it has been held that the department cannot demand differential duty without challenging the self-assessment made by the importer. Accordingly, they contended that the impugned order is not sustainable.
.....
10. We observe that the self-assessment of the Bills of Entry by the importer was not challenged by the department. The Hon'ble Supreme Court in the case of ITC Ltd, has held as under:
When we consider the overall effect of the provisions prior to amendment and post-amendment under Finance Act, 2011, we are of the opinion that the claim for refund cannot be entertained unless the order of assessment or self-assessment is modified in accordance with law by taking recourse to the appropriate proceedings and it would not be within the ken of Section 27 to set aside the order of self- assessment and reassess the duty for making refund; and in case any person is aggrieved by any order which would include self-assessment, he has to get the order modified under Section 128 or under other relevant provisions of the Act.
11. We observe that the ratio of the above said decision is squarely applicable in this case. We find that the impugned order passed demanding differential duty without challenging the original assessment of the Bills of entry is not sustainable. Hence, the demand is not sustainable on this count also.
(emphasis supplied)
44. It is self-evident from the above text of the order that while the judgment of the Supreme Court in ITC Ltd. was with respect to sanction of refunds under section 27, the bench had instead, agreeing with the appellant in that case, applied it to the demands under section 28. It held that a notice under section 28 cannot be issued without first filing an appeal before the Commissioner (Appeals), which, being C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 34 C/50888/2021 C/50291/2021 C/50275/2022 contrary to the explicit legal position and the law laid down by the Supreme Court in Flock India, ITC Limited, Sayed Ali and Canon India, is, in our opinion, per incuriam, and hence cannot be a binding precedent on us in this case.
45. While Section 128 does not place any restriction, other than the limitation of time, for filing an appeal against assessment, issue of SCN under Section 28 is restricted by WHEN, WHO and WHY. The notice has to be issued within the normal period of limitation (or the extended period of limitation) by 'the proper officer' and only to recover duties not paid, short paid, not levied, short levied or erroneously refunded.
46. To sum up, the power to assess duty lies with the importer and the proper officer. Classification, valuation and applying an exemption notification, are all part of the process of this assessment. Hence, the power to decide the classification lies with the importer during self- assessment, with the proper officer during re-assessment and while issuing an SCN under Section 28 and while adjudicating, with the Adjudicating Authority and with any appellate authority in the judicial hierarchy who deals with the appeals. Classification cannot be decided by anybody else (such as a MeITY in these cases) for two reasons. First, they do not have the authority to assess under Section 17 nor have any appellate powers to modify the assessment. Second, their orders, letters, C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 35 C/50888/2021 C/50291/2021 C/50275/2022 notifications, etc. are executive actions performed at the discretion of the government and are not quasi- judicial or appealable decisions. Therefore, any HSN code indicated against any goods in any policy of MeITY or any other Ministry cannot determine the classification of the goods under the Customs Tariff. Of the three grounds on which the classification is proposed to be changed in these SCNs, the policy of MeITY as a ground cannot, therefore, be sustained. Exemption notifications
47. Section 25 gives the Central Government the power to issue exemption notifications exempting goods either fully or partly, conditionally or unconditionally from duty. Issuing these notifications -which are in the nature of subordinate legislation- is a quasi-legislative function of the Government. Section 25 reads as follows.
"Section 25. Power to grant exemption from duty. -
(1) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after clearance) as may be specified in the notification goods of any specified description from the whole or any part of duty of customs leviable thereon.
******* (4) Every notification issued under sub-section (1) or sub-section (2A) shall, unless otherwise provided, come into force on the date of its issue by the Central Government for publication in the Official Gazette. *******"
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 36 C/50888/2021 C/50291/2021 C/50275/2022
48. The Central Government can issue exemption notifications under Section 25 if it is satisfied that it was necessary in public interest to do so. They are not meant to determine the classification of the goods in any assessment nor are they appealable but are meant to grant exemption from duty or modify or withdraw an exemption previously granted. However, the notifications can be conditional. For instance, in the notification no. 57/2017- Cus. dated 30.6.2017 (S.No.10) referred to and relied upon in the SCN to propose classification of the goods in dispute reads as follows.
In exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the goods of the description as specified in column (3) of the Table below, as the case may be, and falling within the Chapter, heading, sub- heading or tariff item of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as are specified in the corresponding entry in column (2) of the said Table, when imported into India, from so much of the duty of customs leviable thereon under the said First Schedule as is in excess of the amount calculated at the standard rate as specified in the corresponding entry in column (4) of the said Table subject to any of the conditions, as specified in the Annexure to this notification, the condition number of which is mentioned in the corresponding entry in column (5) of the said Table.
TABLE
S. Chapter Description of goods Stan- Condition
No. dard No.
or rate
Heading
or Sub-
heading
or tariff
item
(1) (2) (3) (4) (5)
10. 3920 99 All goods other than the following 10% -
99 parts or sub-parts or accessories of
cellular mobile phones, namely:
(i) Battery cover
(ii) Front cover
(iii) Front cover (with Zinc Casting)
(iv) Middle cover
(v) Back Cover
(vi) Main Lens
(vii) Camera Lens
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 37 C/50888/2021 C/50291/2021 C/50275/2022
49. As can be seen, only such goods which match the description in column 3 of the Table and which also fall under the Tariff heading at column no. 2 are exempted. If the goods do not match the description in column 3 and/or the tariff heading does not match column 2, the goods will not be exempted. Clearly, the notification does not say that the goods of the description in column 3 shall be classified in the heading in column 2. Evidently, goods of the description in column 3 may fall in the heading in column 2 in which case, the exemption applies or the goods may not fall under the heading in column 2 in which case, the exemption does not apply.
50. During assessment, the goods must be first classified and thereafter it must be examined if the notification applies or not and not the other way round. Issue or withdrawal or modification of a notification cannot determine the classification. The proposals in the SCNs to re-classify the goods relying on a notification are not correct. The reasoning in the SCNs is that since the front cover, middle cover and back cover will be exempted under the notification if they fall under CTH 39209999, it means all front cover, back cover and middle covers fall under CTH 39209999. This logic cannot be accepted because the issue of exemption notification is a quasi-legislative function of the Government (and is not appealable) and is not a quasi-judicial function of assessment, including classification, which is appealable. A plain reading of C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 38 C/50888/2021 C/50291/2021 C/50275/2022 the exemption notification also does not show that it intends to decide the classification of the goods under any heading. It only says that if the goods which match the description also fall under the tariff heading they will be exempt.
51. Goods must be classified under the Schedule to the Customs Tariff Act, 1975. For this purpose, the Rules of Interpretation have been provided of which Rule 1 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."
This Rule is followed by Rules of Interpretation 2 to 6 none of which provide for classification either based on any exemption notification or on the basis of any heading mentioned in any policy of any Ministry of the Government. Therefore, the goods cannot be reclassified based on the exemption notification issued under Section 25 or on the basis of any policy of any Ministry. Notifications or policies can be issued, modified or withdrawn but the classification of the goods under the tariff will remain the same. Only if the tariff itself is amended can the classification change.
Confiscation of goods under Section 111(m) and consequent penalty under Section 112
52. The impugned orders hold that the imported goods were C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 39 C/50888/2021 C/50291/2021 C/50275/2022 liable for confiscation under Section 111(m) and consequently, imposed penalties on the appellants under Section 112. Section 111(m) and Section 112 read as follows:
Section 111. Confiscation of improperly imported goods,etc. -
The following goods brought from a place outside India shall beliable to confiscation: -
(m) any goods which do not correspond in respect of value or in any other particular with the entry made under this Act or in the case of baggage with the declaration made under Section 77in respect thereof, or in the case of goods under trans-shipment, with the declaration for trans-
shipment referred to in the proviso to sub-section (1) of Section 54;
SECTION 112. Penalty for improper importation ofgoods, etc.-
Any person, -
(a) who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under Section 111, or abets the doing or omission of such an act, or
(b) ......
shall be liable, -
(i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty not exceeding the value of the goods or five thousandrupees, whichever is the greater;
(ii) in the case of dutiable goods, other than prohibited goods, subject to the provisions of Section 114A, to a penalty not exceeding ten per cent. of the duty sought to be evaded or five thousand rupees, whichever is higher.
53. According to the learned counsels for the appellants, even if the classification of the goods is decided against the appellants, it cannot be said that the goods were liable for confiscation under Section 111(m) because the appellants had self-assessed the goods classifying them under the Customs tariff heading, which, according to them, was correct. Since the goods were not liable to confiscation, no penalty could C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 40 C/50888/2021 C/50291/2021 C/50275/2022 have been imposed under Section 112. According to the learned special counsel and the learned authorised representative for the Revenue, classification of goods by the appellant importer is part of the entry made under Section 46 of the Customs Act, i.e., the Bill of Entry and since the goods had not matched this part of the Bills of Entry, the imported goods were squarely covered by and were liable to confiscation under Section 111(m).Since the goods were liable to confiscation, penalty can be imposed and was correctly imposed under Section 112.
54. We have already recorded that classification of the goods, their valuation and applying exemption notifications are all part of assessment of duty. This has to be done firstly by the importer (self-assessment) and can then be done by the officer (re-assessment) under Section 17. The remedy against wrong self- assessment is the re-assessment by the officer [or an appeal to Commissioner (Appeals)] and the remedy against the re-assessment is an appeal to the Commissioner (Appeals) which option is available to both sides or a notice under Section 28 (which is available only to the Revenue and only to recover duties not levied, not paid, short levied, short paid or erroneously refunded). However, there is no separate document or procedure through which the importer can self-assess the duty on the imported goods. All the elements necessary for assessing duty are filled in the Bill of Entry itself which is the entry of the goods made under Section 46. Thus, the Bill of Entry has factual elements C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 41 C/50888/2021 C/50291/2021 C/50275/2022 such as the nature of the goods, quality, quantity, weight, transaction value, country of origin, etc., which all need to be correctly declared and elements which are in the nature of the opinion of the importer such as classification of the goods, exemption notifications which apply, etc. While the facts are verifiable as correct or incorrect, opinions can differ. The importer may find that the goods are classifiable under one CTH while the officer re-assessing the goods may classify them under a different CTH. If appealed against, different views can be taken at different levels of judicial hierarchy from Commissioner (Appeals) all the way up to the Supreme Court. Similar will be the case with the availability of the benefit of exemption notifications.
55. Insofar as the value is concerned, it could be partly factual and partly based on the opinions. The transaction value of the goods, whether there was any other consideration for sale and if the buyer and seller were related are matters of fact and the importer is bound to truthfully declare these and assess duty accordingly. However, the proper officer is empowered to reject the transaction value under Rule 12 of the Customs Valuation Rules and re- determine the value of the imported goods based on the value of the contemporaneous imports of identical goods, similar goods, etc., following Valuation Rules 4 to 9. It needs to be pointed out that the power to reject the transaction value under Rule 12 vests in the proper officer and not in the C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 42 C/50888/2021 C/50291/2021 C/50275/2022 importer. The importer will also not have access to the values of contemporaneous imports of identical or similar goods by others. Therefore, the only way an importer can self-assess the duty on the imported goods is based on his own transaction value and any additional consideration which it may be paying.
56. It is impossible for the importer to predict if the proper officer would re-classify the goods and if the proper officer would, after rejecting the transaction value, re-determine the value based on contemporaneous imports or through other methods or what value the officer will fix. Nothing in the law requires an importer to anticipate what classification the proper officer would find proper for the goods and classify the goods or anticipate if the proper officer would reject the transaction value and anticipate what value he would determine and assess duty accordingly.
57. If Section 111(m) is read to mean that goods can be confiscated if the classification of the goods and the exemption notifications claimed by the importer self- assessing the duty under Section 17 and indicated in the Bill of Entry do not match the classification of the goods or the exemption notifications which the proper officer may apply during re-assessment or later, it would result in absurd results. The importer cannot predict the mind of the proper officer and self-assess duty so as to conform to it. Insofar as the valuation is concerned, the importer is required to truthfully declare the transaction value, any additional C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 43 C/50888/2021 C/50291/2021 C/50275/2022 consideration and relationship with the overseas seller. He is not required to predict if the proper officer will reject the transaction value under Rule 12 and if so, what value he will re-determine. Lex non-cogit impossibilia -the law does not compel one to do the impossible. If the classification and exemption notifications in the Bill of Entry do not match the views which the proper officer may during re-assessment or an audit party may take or later the adjudicating authority may take in any other proceedings, goods cannot be confiscated under Section 111(m). The case of the Revenue in this appeal is that the classification of the goods by the importers in self assessment was not correct. Even if the classification was not correct, it does not render them liable to confiscation under Section 111(m). Similarly, there could be cases where, according to the Revenue, the exemption notification claimed during self assessment will not be available to the imported goods. The importer self-assessing the goods must apply his mind when classifying the goods and not predict the mind of the proper officer. Classification of the goods by the importer, even if it is not in conformity with the re-assessment by the proper officer or even if it is held to be not correct in any appellate proceedings does not render the goods liable to confiscation under Section 111(m).
58. Consequently, no penalty can be imposed under Section 112 on the appellants for the alleged wrong classification. The appellants cannot be penalized for holding a different view than the proper officer.
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 44 C/50888/2021 C/50291/2021 C/50275/2022 Classification of goods
59. We now examine the question of classification of the goods, viz., front cover, middle cover, battery cover, front cover housing, middle cover housing and rear cover housing back cover of mobile phones. Of the three grounds on which these goods were re-classified in the impugned order, we have already found two grounds cannot determine the classification; these are the exemption notification issued by the Central Government and the policy notified by the MeITY. We proceed to decide the classification based on the Customs Tariff. The Rules of Interpretation of this tariff, in a nutshell are as follows:
Rule 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:
Rules 2 (a) which deals with incomplete or unassessmbled or disassembled articles and 2 (b) which deals with mixtures of substances are not relevant to this case.
Rule 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 of 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 the goods.
(b) Mixtures, composite goods consisting of different materials or madeup of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable.
(c) When goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 45 C/50888/2021 C/50291/2021 C/50275/2022 in numerical order among those which equally merit consideration.
Rule 4. Goods which cannot be classified in accordance with the above rules shall be classified under the heading appropriate to the goods to which they are most akin.
Rule 5. In addition to the foregoing provisions, the following rules shall apply in respect of the goods referred to therein:
(a) Camera cases, musical instrument cases, gun cases, drawing instrument cases, necklace cases and similar containers, specially shaped or fitted to contain a specific article or set of articles, suitable for long-term use and presented with the articles for which they are intended, shall be classified with such articles when of a kind normally sold therewith. This rule does not, however, apply to containers which give the whole its essential character;
(b) Subject to the provisions of (a) above, packing materials and packing containers presented with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provisions does not apply when such packing materials or packing containers are clearly suitable for repetitive use.
6. For legal purposes, the classification of goods in the sub- headings of a heading shall be determined according to the terms of those sub headings and any related sub headings Notes and, mutatis mutandis, to the above rules, on the understanding that only sub headings at the same level are comparable. For the purposes of this rule the relative Section and Chapter Notes also apply, unless the context otherwise requires.
60. The two competing entries in the Tariff are CTH 85177090 (as claimed by the appellant) and CTH 39209999(as held in the impugned order). The relevant chapter notes are as follows:
"Chapter 39
2. This Chapter does not cover:
....
(s) articles of Section XVI (machines and mechanical or electrical appliances);
10. In headings 3920 and 3921, the expression ―plates, sheets, film foil and strip applies only to plates, sheets, film, foil and strip (other than those of Chapter 54) and to blocks of regular geometric shape, whether or not printed or otherwise surface- worked, uncut or cut into rectangles (including squares) but not further worked (even if when so cut they become articles ready for use)."
61. Goods should be classified under the tariff should be as per the headings and sub-headings and relevant section notes and C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 46 C/50888/2021 C/50291/2021 C/50275/2022 chapter notes. Chapter note 2 (s) to chapter 39 clearly excludes goods falling under Section XVI under which chapter 85 also falls and therefore, if the goods are classifiable under chapter 85 as claimed by the appellant, they cannot fall under chapter 39 as held in the impugned order. On the other hand, Chapter note 10 to chapter 39 includes within the ambit of heading 3920 plates, sheets, film foil and strips and blocks of regular geometric shape, whether or not printed or otherwise surface-worked, uncut or cut into rectangles (including squares) but not further worked (even if when so cut they become articles ready for use).
62. Reading these two notes together, goods falling under 3920 will continue to be classifiable under this heading even if they become articles ready for use and therefore, they cannot fall under chapter 85 (section XVI). Therefore, they do not get excluded by virtue of note 2(s) from Chapter 39. This leads us to the next question whether the mobile cases fall under 3920. According to the Revenue, they do because they are made of plastic and are cut into geometric shapes and are printed or surface-worked but not worked further. According to the appellants, these articles were further worked and therefore, they do not fall under 3920. They are manufactured by extrusion (two layers of Polymethyl Methacrylate (PMM) and Polycarbonate (PC) are layered to form a sheet of thickness of 0.64 mm), printed, a layer is Physical Vapor Deposited (to give the desired finish to the back cover), again printed, hard coated, thermoformed into the desired shape and then milled through CNC to cut at the right places to insert the components of the mobile phone as required. These processes, C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 47 C/50888/2021 C/50291/2021 C/50275/2022 including the lamination and CNC milling, according to the appellants clearly take their goods out of the ambit of note 10 of Chapter 39. Further, according to the appellants, the middle cover is laminated with zinc to dissipate heat and the laminations add strength to the plastic. Since these do not fall under section note 10, they fall under chapter 85 and therefore, by virtue of note 2(s) are clearly excluded from Chapter 39.
63. Learned special counsel and learned authorized representative for the Revenue did not dispute the process of manufacture of these mobile cases described by the learned counsels for the appellants. They submitted that they are made of plastic and the sub- components are embedded at proper places in the front cover and back cover. The purpose of the back cover is to reduce the amount of dust on battery terminals and it is also made of plastic. The middle cover fixes the inner components and protects the battery from moisture and dust and it is also made of plastic, therefore, the impugned orders were correct in holding that they were classifiable under CTH 39209999. According to them, these three covers do not contribute to the functionality of the mobile per-se and, therefore, do not deserve to be classified as parts of the mobile phones and should be classified under Chapter 39. According to them, every part of a machine does not merit being classified along with the machine or as its part under Chapter 85 and some parts of machine can also be classified under Chapter 39. They rely on Ipea Paramount Pvt. Ltd., P.R. Packagings Pvt. Ltd., Hariram Govindram, Karnataka Powers Corporation Ltd., General Mills India Ltd., Atul Kaushik, Towa Ribbons Pvt. Ltd.
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 48 C/50888/2021 C/50291/2021 C/50275/2022 and Speedway Rubber Co. in support of this submission.
64. On the question of whether the specific entry should prevail over the general entry, learned special counsel and learned authorized representative appearing for the Revenue submitted that since the impugned goods do not merit classification under 8517 at all, therefore, the question of general or specific entry does not arise.
65. After considering the submissions on both sides on the question of classification, we find that the front cover, middle cover battery cover, back cover, front cover housing, middle cover housing and back cover housing of mobile phones are undisputedly, made of plastic and are parts of mobile phones and are not articles of general use. The case of the Revenue is that even if they become articles ready for use, if they are manufactured from plates, sheets, film foil or strips, whether or not they are printed or otherwise surface-worked, uncut or cut into rectangles (including squares) but not further worked they should be classified under CTH 3920 in view of Chapter note 2(s) to Chapter 39. Since they are made of sheets of plastic, printed and surface worked and not further worked, they should be classified under 3920. The case of the appellants is that the manufacture of these goods involves extrusion, printing, physical vapor deposition, second set of printing, hard coating, thermoforming and CNC milling and therefore, further work has clearly been done on the plasticsheets after cutting and therefore, they do not fall under Chapter note 2(s) to Chapter 39. The manufacturing process of described bythe appellants is not disputed by the Revenue and therefore, considering this manufacturing C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 49 C/50888/2021 C/50291/2021 C/50275/2022 process, we proceed to decide if these fall under 3920 by virtue of Chapter note 2(s).
66. We find that CTH 3920 covers ―other plates, sheets, film, foil and strip of plastics, not cellular and not re-imposed, laminated, supported a similarly by with other materials. The first step of manufacture - extrusion, involves pressing together two sheets of plastic- Polymethyl Methacrylate (PMM) and Polycarbonate (PC) into a single sheet of plastic. What emerges after this process is still a sheet of plastic. The second and fourth steps are printing which also make no difference and Chapter note 2(s) would still apply. The third step vapor deposition, is a process of depositing a thin layer of material to give the covers the glossy finish. According to the appellants, this is similar to lamination. Lamination takes the goods out of the scope of CTH 3920 because it covers only such goods which are ― "not re- imposed, laminated, supported similarly by with other materials". According to the appellants, the middle covers also have a layer of zinc to help dissipate the heat. The fifth step of thermoforming changes the shape of the article from a plain sheet of plastic to one with the required shape and dimensions including the rounded edges. Thermoforming is a common industrial process which involves heating of a plain plastic sheet and moulding it into articles - such as inner panels of a refrigerators, panels in a car or disposable food trays. In our considered view, this is a process beyond mere cutting and surface working and this process also takes it out of the purview of chapter note 2(s) to Chapter 39. The sixth and the last process is CNC milling to cut holes in these covers to install various components. CNC or C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 50 C/50888/2021 C/50291/2021 C/50275/2022 Computerised numerically controlled machines, as is well known, are modern, automated versions of lathe machines which are used to cutting, grinding, etc. to work on a piece of material to convert it into desired articles. In our considered view, CNC milling also goes beyond mere cutting and surface processing of the sheet.
67. Thus, applying the first Rule of Interpretation, they cannot be classified under CTH 3920- the vapor deposition (lamination) takes them out of the description of CTH 3920 and thermoforming and CNC milling, being processes beyond printing and surface working take them out of the scope of chapter note 2(s) . We also find that a specific entry (parts of mobile phones) prevails over a general entry (articles of plastic) as per Rule 3(a) of Interpretation and the later entry (Chapter 85) in the tariff prevails over the earlier entry (Chapter 39) as per Rule 3(c). However, it is a well settled legal principle that the Interpretative Rules must be applied sequentially. Once Rule 1 decides the classification, it is not even necessary to go through the other Rules of Interpretation such asRule 3(a) and 3(c).
68. The case laws relied upon by the Revenue do not carry its case any further as they were on different questions of law and facts. Ipea decision was in the peculiar circumstances of the case. The CBEC had issued a Circular which was in favour of the assessee and it was binding on the Revenue. Therefore, the classification was decided in favour of the assessee by the Tribunal and this decision was upheld by the Supreme Court. Relevant portion of the Tribunal's order is as follows:
5. .....The learned Advocate has placed heavy reliance on Board's Circular No. 6/86-CX 4, dated 25-9-1986, and in C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 51 C/50888/2021 C/50291/2021 C/50275/2022 our view rightly, wherein the Board has considered the classification of the parts and accessories of refrigerating and air-conditioning machinery and appliances. It has been clarified therein that the parts and accessories of refrigerators for the treatment of materials by a process involving a change of temperature, as mentioned in Annexure A to the Circulars, are to be classified under Heading 84.15, 84.18 or 84.19 of the Tariff. It is not the case of the Revenue that the impugned goods find mention in the said Annexure-A. In the Circular, a very large number of parts and accessories of refrigerators etc. have been mentioned in Annexure-B but these are to be classified in their respective Headings of the Tariff and not under Heading 84.15, 84.18 or 84.19 of the Tariff. It was observed by the Tribunal in the case of P.R. Packaging Pvt.
Ltd. that ―A perusal of Annexure- B reveals that the parts mentioned therein are also suitable for use principally with refrigerators and even then these are not to be classified with Refrigerators under Heading 84.18. It goes to show that all parts of refrigerating machines are not automatically to be classified under Chapter 84. The Revenue has also not contended nor brought any evidence on record that the impugned goods are for the treatment of materials by a process involving a change of temperature. Accordingly, we hold that the impugned goods are classifiable under respective Headings in Chapters 39 and 40 of the Central Excise Tariff. We, thus allow the Appeal.
69. Similarly, the decision in the case of RR Packaging was based on Trade Notice No. 67/86 dated 30-9-1986 issued by the Bombay Collectorate which was in favour of the assessee and was binding on the officers. The question in Hariram Govindram was related to classification of the outer covers of the cassettes. Relying on Board's order dated 29- 7-1994 issued under Section 37B of the then Central Excises and Salt Act, 1944, the classification was decided in favour of the assessee.
70. In Karnataka Power Corporation, the dispute was whether imported parts of Hydro Electric Generator i.e., 'Epoxy insulated single turn half coils with accessories and Epoxy insulated single turn half coils wave stator windings etc.' were classifiable under 8503 or under 8544. Applying Section note 2 (b) to Section XVI, it was held that the goods were suitable solely or principally for the generator and hence classified along with them under 8503.
C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 52 C/50888/2021 C/50291/2021 C/50275/2022 This case is on a different issue- whether the parts are to be classified as parts of mobile phones or as articles of plastic under Chapter 39.
71. In General Mills India, the dispute was regarding the classification of granola bars and the classification was decided in favour of the importer. In Atul Kaushik the question was about addition of certain elements in the valuation.
72. In Towa Ribbons, the question was about classification of typewriter ribbons and if the surface working of the strips of plastic including coating the surface will take them out of the purview of note 10 to Chapter 39 and the Tribunal held that surface working does not take the goods out of the ambit of note 10 to Chapter 39 and they continue to fall under 39.20 asasserted by the Revenue.
73. In Speedway, the question before the Supreme Court was the classification of procured treads manufactured by the appellant. Finding that the note 9 of Chapter 40 made a distinction between 'surface working' and 'further working', and that specific entry should prevail over general entry, it was held that the impugned goods in that case would be classified under sub-heading 4008.21 and not under sub-heading 4016.99 asclaimed by the Department.
74. For all these reasons, we find that rejection of the appellants' classification of the front cover, middle cover, battery cover, back cover, front cover housing, middle cover housing and back cover housing of mobile phones under CTH 85177090 in the impugned orders and their re-classification under CTH 39209999 cannot be sustained and needs to be C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 53 C/50888/2021 C/50291/2021 C/50275/2022 set aside.
75. As far as the classification of lenses is concerned, we find no reason to even consider them as being classifiable under 39209999 as plastic sheets, blocks, etc. because, these are not in geometric shapes at all and therefore, cannot be classified under CTH 3920. In the case of Vivo, the appellant had even submitted test reports showing that the lenses that it had imported were made of crystal and not plastic. The learned Commissioner, however, dismissed the test report and classified them as articles of plastic under CTH 3920 without giving any reasons for doubting the assertion of the appellant that they were made of crystal or the test report produced by the appellant. No samples were drawn or tested by the Customs to demonstrate that they were made of plastic. In the absence of any evidence from the Revenue, the appellant importer's declaration regarding the nature of the goods and the test reports that it had submitted must be accepted. If Revenue had a doubt regarding the declaration or the reports, it is for the Revenue to produce evidence in support and there is none whatsoever in this case. Thus, we find no justification whatsoever to classify lenses of mobile phones under 39209999 in the impugned orders regardless of which material they are made of. The impugned orders insofar as they relate to classification of lenses also need to be set aside.
76. To sum up:
a. Classification of the goods is a part of assessment and the importer, the proper officer and appellate C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 54 C/50888/2021 C/50291/2021 C/50275/2022 authorities alone are competent to decide it.
b. The policy of the MeiTY, which is in the nature of an executive policy decision of that Ministry cannot determine the classification of goods under the Customs Act firstly,because the authority making the policy is not empowered under Section 17 and secondly because the policy is not a quasi-judicial, appealable decision but is a policy decision while classification of goods is a part of assessment and is a quasi-judicial and appealable function.
c. The exemption notification issued by the Government under Section 25 exempts goods and does not determine the classification. If the description of the goods and also the CTH match with the notification, its benefit is available and not otherwise. Therefore, an exemption notification cannot determine the classification but it must be applied after classifying the goods.
d. Based on the Customs tariff and the nature of the goods, we determine the classification of the goods in favour of the appellants and against the Revenue. e. The importer assessees have no obligation under the law to anticipate under which heading the proper officer may classify the goods and match their self-assessment with it.
f. Classification of the goods in the Bill of Entry by the importer is essentially a part of the self-assessment under Section 17 which, even if found incorrect, does C/50782/2021, C/50795/2021 C/50796/2021 C/50797/2021 55 C/50888/2021 C/50291/2021 C/50275/2022 not attract confiscation of the goods under Section 111(m) or the consequential penalty under Section 112. g. The classification of none of the goods in any of the appeals under CTH 39209999 as held by the Commissioner in the impugned orders can be sustained.
77. Thus, all the seven appeals are allowed and the impugned orders are set aside with consequential relief(s) to the appellants.
[Order pronounced on 09/02/2024] (JUSTICE DILIP GUPTA) PRESIDENT (P.V. SUBBA RAO) MEMBER (TECHNICAL) Tejo