Custom, Excise & Service Tax Tribunal
New Delhi(Icd Tkd)(Import) vs Shri Dinesh Lohia on 19 November, 2018
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IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi - 110 066.
Date of Hearing : 25.9.2018
Date of Pronouncement: 19.11.2018
Appeal No. C/51961 & 51963-51965/2018-DB
Date of
Case No Impugned Order Detail's Impugned Passed By Appellant Respondent
Order COMMISSIONER OIA- OF CGST & C.C.-NEW SHRI C/51961/2018-
07/2018/RNS/COMMR/IMP/ICD/ 29/03/2018 CENTRAL DELHI(ICD DINESH
DB
TKD EXCISE-NEW TKD)(IMPORT) LOHIA
DELHI(ICD ITC)
COMMISSIONER
OIO- OF CGST & C.C.-NEW SHRI
C/51963/2018-
07/2018/RNS/COMMR/IMP/ICD/ 29/03/2018 CENTRAL DELHI(ICD PUNEET
DB
TKD EXCISE-NEW TKD)(IMPORT) JAIN
DELHI(ICD ITC)
COMMISSIONER
OIO- OF CGST & C.C.-NEW VYOMA
C/51964/2018-
07/2018/RNS/COMMR/IMP/ICD/ 29/03/2018 CENTRAL DELHI(ICD DECORS
DB
TKD EXCISE-NEW TKD)(IMPORT) PVT LTD
DELHI(ICD ITC)
COMMISSIONER
OIO- OF CGST & C.C.-NEW JAYKAY
C/51965/2018-
07/2018/RNS/COMMR/IMP/ICD/ 29/03/2018 CENTRAL DELHI(ICD FREIGHTER
DB
TKD EXCISE-NEW TKD)(IMPORT) PVT LTD
DELHI(ICD ITC)
Appearance
Shri R.K. Manjhi, DR - for the appellant
Shri Pradeep Jain, Advocate - for the respondent
CORAM: Hon'ble Mr. Anil Choudhary, Member (Judicial)
Hon'ble Mr. Bijay Kumar, Member (Technical) Final Order No. 53296-53299/2018 Per Bijay Kumar :
Being aggrieved with the impugned order passed by Commissioner of Customs (Import), ICD, TKD wherein he has set aside the demand raised by Show Cause Notice F. No. DRI-HQ-
CI/50/ENQ-13(INT-22)/2016 (Vyoma) dated 22.5.2017 issued by 2 the Additional Director General (DRI) along with corrigendum/addendum dated 26.9.2017 to the respondents. The Revenue has filed these appeals.
2. The brief fact of the case is that the respondent/importer imported the consignment of polyester roller blinds fabric and PVC coated roller fabric, (component of roller blind) of respective size in Roll forms. The subject goods were imported classifying their product under CTH 63039200 and 59039090, based on the composition of imported fabric and their end use. It was observed that the 'roller blind fabrics' were being imported in roll form and there was no marking on the fabrics so imported in the different sizes, as per the requirement of window blinds/roller for curtain blinds. It was alleged that the importer has resorted to mis- classification of the goods imported in order to pay the Customs duty on advalorum basis instead of specific rate of duty. The said roller blinds fabrics were coated or uncoated and made of polyester and without processing i.e. cutting, stitching and assembled with other accessories, hence the roller blinds fabrics appear to be classifiable under different "Customs Tariff Heading", based on the composition of the fabrics which would attract the specific rate of duty, as per the Show Cause Notice, it was proposed to classify these imported goods under CTH 54077200 and 63039200. After following the due process of law, it was held by the adjudicating 3 authority that the appellant has correctly classified their imported goods under Tariff Heading No. 63039200 and accordingly, discharged the Show Cause Notices to the various appellant.
3. Revenue has filed the present appeal on the ground as under:
(i) The finding in the impugned order-in-original appeared to be primarily based on the issue as to whether or not the articles are made up. The averment of the adjudicating authority is that what precisely is made up does not appear to have been defined in the Tariff appears to be factually incorrect, as the same is defined in Section Note 7 of Section XI of the Customs Tariff and is almost identical to that mentioned in para 4 of the Show Cause Notice dated 22.5.2017.
(ii) The impugned order-in-original refers to the Explanation in HSN Explanatory Notes to the heading which is as under:
"the heading also covers material in length so processed after weaving that it is clearly suitable for conversion by minor operations into finished articles of this heading (i.e. fabric in the length to one edge of which has been added a frilled border 4 and which, by simply cutting to the required lengths and hemming is coverted into curtains)".
In this explanation, it was relied upon that the term minor operation is defined for example, cutting to required length, whereas the importer has accepted in his statement recorded under Section 108 of the Customs Act, 1962 that the imported goods, i.e. fabric is cut in different sizes for used in windows of different sizes. This is different and wider in scope that merely cutting to length. It has further been admitted in the said statement that the imported items are used as roller blinds after cutting and stitching the same. From the definition of 'made up' as per Section Note 7 of Section XI of the Customs Tariff (same as in the Show Cause Notice), it appears that the imported goods cannot be termed as 'made up'.
(iii) The adjudicating authority has also referred and relied on Rule 2(a) of the General Rules for interpretation which inter alia states that any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as 5 presented, the incomplete or unfinished article has the essential character of complete or unfinished article. However, the preceding Rule 1 of the General Rules for Interpretation clearly states, inter alia, that for legal purpose, classification shall be determined in terms of heading and respective Section or Chapter Notes. The Chapter Note 1 of Chapter 63 states that sub-chapter 1 (which covers Tariff Heading 6303) applies only to made up articles, of any textile fabric. Thus, the classification of imported item (not being made up article) under Tariff Heading 6303 is excluded by Rule 1 of the said Rules under Chapter Note 1 of Chapter 63. Invocation of Rule 2(a) to classify the said item under Chapter 63 does not appear proper.
(iv) Merely end use of the imported item as curtain blind cannot be the basis of classification of imported goods as has been held in catena of judgements included those of the Apex Court.
4. The ld. DR states that in view of above mentioned grounds, the adjudicating authority has erred in dropping the demand as raised by the Show Cause Notice dated 22.5.2007 and Corrigendum dated 26.9.2017.
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5. On the other hand, ld. Advocate, on behalf of the respondents submitted that the appellant is engaged in the import of aforestated components of roller blinds and PVC coated roller blind fabric in the running length in the form of rolls and being used in the manufacturing of curtains or wall hangings. The structure of imported good is still blind and the simple cutting does not alter the same. It does not have any fall. It cannot be cut to give a shape of apparels. It is not sold in the market as fabric but only as the curtain/wall length.
The hemming is done by applying stapled plastic tapes which is for smooth sliding in the roller is also done. The roller blind consist of roller blind fabric which are the major component part of roller blind, which has essential character and nature which make it as the main component of roller blind, and the respondent importer has imported almost all the components along with the blind fabric. He further denied that the goods are not cut at a particular place and it is in running length in roll form and also not hammed therefore not made up. It was stated that this fact incorrect because the imported goods are made up for window blinds only and as per size of window required to have cut and these are the new type of hamming of fabric blind to cover the window. It was submitted that while interpreting about HSN Explanatory Note of CTH 6303, the department has mentioned that the term minor operation is defined way of example restricting it to cutting into required length, is 7 purely and illustrative example applicable for the blind fabric need to be cut in different sizes for use in window and the size variant in length and width. The important criteria of HSN note "the heading also covers material in length so processed after weaving that it is clearly suitable for conversion by minor operation into finished articles of this heading" which appropriately meet the present case.
6. Ld. Advocate impressed upon the fact that the adjudicating authority has erred in indicating that made up is not defined in the tariff, however, that does not alter the merit of the case. The ld. Adjudicating authority in this case has relied upon the definition in Unit-II of Customs Classification of Textile and Textile Articles under HSN, a private publication which even the DRI in its HSN has mentioned and referred.
7. The process of assembly has been detailed in the reply to show cause notice which says that the cutting does not change the basic structure and characteristic of the imported goods. The nature of the fabric is so strong that it does not require any type of stitching and binding. The important feature of this fabric is that it is created and designed for the use in the window covering only and cannot have any other application. Therefore, this fabric does not have any application other than the roller blind. The ld. Advocate 8 also relied upon the case of CCE Vs. Tarpaulin International - 2010 (256) ELT 481 (SC), wherein it is held that no new product emerges by cutting to size the imported subject goods.
8. It was also submitted that Indian Customs Tariff is aligned with HSN and rulings of the WCO, which serves guidelines to decide the classification, which has been upheld by the Hon'ble Tribunal in a number of cases. It was submitted that the European Commission, Dte. General Taxation and Customs Union dealing with classification of an article consisting of shiny woven transparent fabric (100% polyester) and classified the same under 63039290 for the reason that the classification is determined by General Rule 1, 2(a) and 6 for the interpretation of the combined nomenclature by note 7 (d) Section XI and by the wording of CN codes 6303, 6303 92 and 6303 92 90.
9. The ld. Advocate also submitted that onus to prove the change in the classification is upon to Revenue which has not been discharged in the present case. The department has not produced any evidence to change the classification of the product as declared by them.
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10. The ld. Advocate also submitted that the Show Cause Notice is silent as to under which sub heading of the tariff the imported goods be covered. Merely stating that the subject goods be classified under Chapter 54 of Customs Tariff Act which attracts the specific rate of duty would not be sufficient for the department to discharge the onus of proving the classification. Even otherwise, proposing classification under sub heading 5407 and 5200 of the Tariff would not be sufficient for want of evidence. It was also submitted that the imported goods were mainly sold to the fabricators, who in turn after taking proper measurement and after carrying out the minor operations that is cutting to size of the window and the affixing it roller blinds on the window at the customer site. In view of above ld. Advocate has stated that the order passed by the adjudicating authority is correct and legal and as per law.
11. We heard both sides and perused the appeal record.
12. In this case the issue is regarding classification of the goods imported by the respondent as to whether under Chapter Heading No. 603900 and 590390 or under Chapter 54 of CTA 1975 under CTH 54077200 and 59039090. In this regard, we find that the ld. Adjudicating authority in his order has clearly held that the goods 10 are classifiable under the Heading as claimed by the importer on the grounds mentioned in para 34.1 to 34.9 which is reproduced as under:
"34.1 Behind the elaborate SCN, the issue at hand is rather simple. The party, M/s Vyoma Decor, have been importing a product, which they have been declaring either as "Component of Roller Blinds (Polyester Roller Blinds Window Fabric) (Made of polyester ready for use)" or as "Component of Roller Blinds (PVC coated Fabric)" and classifying the same under CTH 63039200 and 59039090 based upon the composition of the fabric. The DRI's case is that to be classified under CTH 63039200, the imported items ought to be "made up", that is to say, be ready to use without the need for further modification, which on the face of it the imported items are not. They therefore propose to classify them as fabrics, depending upon the nature of the fabric, i.e. under CTH 54077200, and some under CTH 59039090 itself. This is proposed to be done in respect of 2 live consignments (B/e No. 5348520 dated 23.5.16 and B/E No. 5802810 dated 29.6.16), certain goods seized in the godwons of the party (Annexures 'A' and 'C' of the panchnama dated 4.6.2016) and past imports made in 2014 (through Nhava Sheva and ICD, TKD), 2015 & 2016 (through ICD TKD). By changing the classification in this manner, the goods are alleged to be liable to specific rate of duty. Differential duty of Rs. 85,71,869/- has accordingly been demanded in this manner for such imports, under the provisions of Section 28 of the Customs Act, along with interest under Section 28AA. Bank Guarantee of Rs. 6,55,510/- (submitted by the party for provisional release of seized goods imported vide B/e No. 5348520 dated 23.5.16), Rs. 7,15,887/- submitted for provisional release of seized goods imported vide B/e No. 5802810 dated 29.9.16) and Rs. 11,92,432/- (submitted for release of goods seized in the party's godown vide panchnama dated 4.6.16) are also proposed to be encashed and appropriated towards Customs duty. Both the party and their Customs brokers, and their respective Directors are proposed to be penalised under Section 112 of the Act.
34.2 Since the issue is the appropriate classification of certain goods, it is first of all important to establish the nature and description of the goods, as they are imported. As per the panchnama dated 31.5.2016 drawn for seizure of goods imported vide B/e No. 5348520 dated 23.5.16, on 11 destuffing the container. "total 298 corrugated rolls and 30 corrugated boxes as per declaration were found". Notably, the declaration was "composition of Roller Blinds (polyester Roller Blinds Window Fabric) (Made of polyester ready for use)" or as "component of Roller Blinds (PVC Coated Fabric)"
with certain identifying numbers (2.15 x 2359), (2.60 x 1212) etc. against the 5 different types of rolls. Further to that, the panchnama doesn't provide any insight as regards the nature of the rolls. The panchnama dated 4.6.2016 drawn at the godown premises provides more details about the nature of the goods. It is stated therein that the roller blind fabrics were in roll form and packed in corrugated rolls. For the goods included in Annexure 'A' to this panchnama (roller blinds made of polyester), it is said that they were found in similar type in different colours. However, the rolls were of different width i.e. 2.50 mtr. 2.60 mtr., 2.80 mtr., 2.85 mtr., 2.15 mtr. and 3.15 mtr. The statement of Shri Dinesh Lohia (Director of M/s Vyoma Decor), dated 25.5.16 provides more clarity on the nature of the products. He has stated that the roller blinds imported by him are basically rolls of fabrics, which are 30 mtr. to 40 mtr. in length and generally 1.80 to 3 mtr. in width. Shri Lohia has further stated that he sold the goods as they were imported, i.e. without any changes or cutting. The fabricator cuts these rolls in different sizes for use as roller blinds by cutting and stitching the same. The rolls imported by them cannot be used as roller blinds as such blinds are used mostly in windows of different sizes.
34.3 The DRI has no quarrel with this claim of the importer. In fact they appear to have used this very statement to buttress their allegation regarding the mis- classification of the product.
34.4 The entire edifice of the DRI's case is in fact based on the fact that the imported roller blinds are imported in rolls and cannot be used as such, without cutting and stitching the same. It is, therefore, necessary to see what precisely is in the claimed classification of the product - CTH 63039200, which the DRI finds incommensurate with the nature of the products. The Chapter 63 relates to "Other made up textile articles; sets; worn clothing and worn textile articles; rags" and as per chapter note 1 to this chapter, sub- chapter 1 applies only to made up articles of any textile fabrics. What precisely is "made up" does not appear to have been defined in the Tariff, but the DRI has relied on Section Note of Unit-II of "Customs Classification of Textiles & Textile Articles under HSN", a private publication, to claim 12 that the items imported by M/s Vyoma Decor Pvt. Ltd. do not justify/fulfil the definition of 'Made ups'. As per the Section Note of Unit-II of this publication, it has been said that the expression 'Made up' means,
(a) Cut otherwise than into squares or rectangles;
(b) Produced in the finished state, ready for use (or merely needing separation by cutting dividing threads) without sewing or other working (for example certain dusters, towels, table cloths, scarf squares, blanker);
(c) Hemmed or with rolled edges, or with a knotted fringe at any of the edges, but excluding fabrics the cut edges of which have been prevented from unravelling by whipping or by other simple means;
(d) Cut to size and having under gone a process of drawn thread work;
(e) Assembled by sewing, gumming or otherwise (other than piece goods consisting of two or more lengths of identical material joined end to end and piece goods composed of two or more textiles assembled in layers, without or not padded);
(f) Knitted or crocheted to shape, whether presented as separate items or in the form of a number of items in the length.
34.5 Relying on the above definition, the DRI has concluded (para 23 of the SCN refers) that the goods imported by the party 'are used to cover wall/window and the fabrics imported by M/s Vyoma Decor Pvt. Ltd. appear to be a normal roll of polyester fabrics and can be treated as upholstery fabric." This conclusion of the DRI itself is rife with internal contradictions. On the one hand, it is being said that the imported goods are used to cover wall/windows and on the other, they are stated to be upholstery fabric. In the same paragraph of the SCN, the pendulum of DRI's belief appears to swing more towards their claim of the items being 'Polyester fabrics having different composition and "Upholstery fabrics" and the said fabrics are not made up and is not ready for use". 34.6 However, the heading No. 6303 (as per the table in page no. 24 of the SCN), includes "Curtains (including drapes) and Interior blinds, curtains or bed valances.' It is apparent that 'blinds' are included in this heading. The question arises that if blind fabric in rolls which need to be cut as per the size of the windows, are not to be included in 13 this heading, then which blinds will be included in the same? Since windows that are covered by blinds could be in a variety of sizes, can it be anybody's case that to qualify as blinds under heading 6303, they will be imported already in cut form to suit the dimension of the window that they are going to adorn? Such an argument is illogical on the face of it. It therefore appears that blind fabric in rolls, which only need to be cut to fit the size of the window, will fall under the heading no. 6303. Further, the fact that they need to be cut to size to fit the windows, does not mean that they cease to remain 'made ups' ; as there is no change in their essential character and the cutting is merely to align them with the size of the windows.
34.7 The factual matrix of the case, as brought out in the written defence of the notices, also supports and above inference.
The imported fabric is thick and made of such material that it cannot be sued as fabric for apparel or any other use, The structure of fabrics is stiff enough so that on plain cutting the salvage will not come out. It has no fall, nor can it be folded. In the market, it is not sold as fabric but only as roller blind fabric. Hemming in form of applying stapled plastic tape at ends for smooth sliding into the rollers is also done.
Almost all accessories required to make roller blind have been imported under the live bill of entry.
After import, the process involves mere assembly. The fabric is first cut as per size of window, the hard plastic tapes are stapled on top and bottom, and then those hemmed edges are inserted in aluminium section to provide support to the fabric for handing straight. Readymade tiller with ball chains is placed on one side of the top aluminium channel so that the blind fabric can be rolled up and down. As such, there is no change in the basic structure or composition of the imported goods.
34.8 Further support to the above, is available in the form of HSN Explanatory notes to the heading 63.03, it has been stated therein that:
"This heading includes:
(1) Curtains (including draps)............................... 14 (2) Interior blinds which are usually opaque and of the roller variety (i.e. those for railway carriages) (3) Curtain valances (for pelmets).............."
Further, the explanation under this heading states that :
"The heading also covers material in length so processed after weaving that it is clearly suitable for conversion by minor operations into finished articles of this heading (i.e. fabric in the length to one edge of which has been added a frilled border and which, by simply cutting to the required lengths and hemming is converted into curtains)."
The above clearly supports the classification of the item under CTH 63.03. It is also noteworthy that as per General Rules for the Interpretation 2(a), any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article. In the instant case, the imported items certainly fulfil the criteria of possessing the essential characteristics of blinds, as presented. Even the definition of "made ups", relied upon by the DRI, does allow a certain amount of separation by cutting and therefore supports this classification. 34.9 It is further noteworthy that the classification of this exact item had also come up for consideration in the 156th Meeting of the Customs Code Committee (Tariff and Nomenclature Section) of the European Commission, Directorate General Taxation and Customs Union held in Brussels in October, 2015. The meeting dealt with with classification of "an article consisting of shiny woven transparent fabric (100% polyester), with a machine embroidered decoration on it, presented on 300 cm long support rolls....The length of the fabric that is cut off the roll corresponds to the width of a future curtain. This fabric is converted into a curtain by simply cutting it at the edge of the densely woven selvedge to the required length of the curtain and by hemming this side and the two sides that had been cut off the roll. After consideration, the Committee had approved classification of the same under sub-heading 63039290 for the reasons reproduced as under:-
"Classification is determined by general rules 1, 2(a) and 6 for the interpretation o the combined nomenclature, by note 7(d) to Section XI and by the wording of CN codes 6303, 6303 92 and 6303 92 90.15
The Article has essential character of a finished curtain of heading 6303, because it is clearly suitable for conversion into a curtain by minor operations. Once the fabric is cut off the roll, only the minor operation of simply cutting to the required length of the curtain and hemming is needed (see also the Harmonized System Explanatory Notes to heading 6303, second paragraph) The unfinished article is considered made up, because it has already one hemmed edge (edge trimmed with interlock stitch).
The Article is therefore, to be classified under CN code 6303 92 90 as curtains of synthetics fibres."
13. After going through the impugned order, we find that the ld. Adjudicating authority has very clearly and precisely held that the 'subject goods' fall under chapter heading 63039200 and not under 54077200 as claimed by the Department. In the adjudication order ld. Adjudicating Authority has taken support from HSN and European Commission, Customs Code Committee, Section Notes and Chapter Notes to classify the product under 63039200. In the Appeal Memorandum, Revenue has taken only ground that since the imported goods are in Roll form and hence not 'made up' to be classified under Chapter 63039200. This aspect has been examined in the impugned order at para 34.4, 34.5 and 34.6 (supra). In this case, the importer has imported the fabrics which is suitable for use as curtain blends only. The CTH Heading 5404 of Customs Tariff is for "woven fabrics of synthetic filament yarn, including woven fabrics obtained from materials of Heading 5404". This heading covers the General purpose fabric with some others like parachute fabrics and Tent fabrics. The test report also confirmed that the 16 GSM of the product is high and such types of fabrics found used as roller blend fabrics in the literature available. From the Test Report, it is evident that these goods are not fit for any other use in normal course. We, therefore, conclude that Revenue appeal is devoid of merits.
14. We find no reason to interfere with the impugned order and therefore we reject the appeal filed by the department in this case.
(Pronounced in Court on 19.11.2018)
(Anil Choudhary) (Bijay Kumar)
Member (Judicial) Member (Technical)
RM