Custom, Excise & Service Tax Tribunal
M/S Shakti Chemicals vs Commissioner Of Customs, Jnch, Nhava ... on 16 August, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II Appeal No. C/938 & 939/05 (Arising out of Order-in-Appeal No. 58/2005 (JNCH) dated 25.5.2005 passed by the Commissioner of Customs (Appeals), Mumbai-II). For approval and signature: Honble Shri Ramesh Nair, Member (Judicial) Honble Shri Raju, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair copy : Seen of the order? 4. Whether order is to be circulated to the Departmental : Yes authorities? ====================================================== M/s Shakti Chemicals Appellant Vs. Commissioner of Customs, JNCH, Nhava Sheva Respondent Appearance: Shri J.C. Patel, Advocate for Appellant Shri M.K. Mall, AC (AR) for Respondent CORAM: SHRI RAMESH NAIR, MEMBER (JUDICIAL) SHRI RAJU, MEMBER (TECHNICAL) Date of Hearing: 16.08.2016 Date of Decision: 06.12.2016 ORDER NO. Per: Ramesh Nair
These appeals are filed by the appellant against Order-in-Appeal No. 58/2005 (JNCH) dated 25.5.2005 passed by the Commissioner of Customs (Appeals), Mumbai-II.
2. The fact of the case is that the appellant filed Bill of Entry No. 771986 dated 28.12.2004 for clearance of Boric Acid. The department has contended that as per Circular No. 61/2004 dated 28.10.2004 issued by CBE&C, the goods namely, Boric Acid is to be treated as insecticide and to be classified under CTH 38081099. As per the said circular, the import of boric acid can be allowed only on production of a certificate of registration from Central Insecticide Board or a certificate of end use from the concerned Ministry/Department of Government of India. But the appellant had not produced the aforesaid certificate. Therefore, the goods were confiscated and an option to redeem the same was given to the appellant on payment of redemption fine of Rs.2 lakhs and a penalty of Rs.15,000/-. Aggrieved by the Order-in-Original dated 3.1.2004, the appellant filed an appeal before the Commissioner (Appeals), which was rejected. Aggrieved by the same, the appellant is before us.
3. Shri J.C. Patel, learned Counsel for the appellant submits that the goods imported by them namely, boric acid is specifically covered under CTH 2810, which is freely importable. He submits that the Revenue has relied upon a Circular No. 61/2004 dated 28.10.2004 whereas the goods were shipped much before the date of the circular. Therefore, there is no mala fide on part of the appellant. He further submits that the circular No. 61/2004 clarified that boric acid being an insecticide mentioned in Schedule to the Insecticides Act, 1968 would be classifiable under Heading 38.08. In this regard, he submits that as per the ITC (HS) to Export Import Policy prevailing at the time of import, the boric acid was clearly mentioned under CTH 2810 and was freely importable and there was no condition of any certificate under Insecticide Act was required. He referred to Notification No. 2 (RE-2006)/2004-09 dated 7.4.2006, wherein the boric acid was again classified under CTH 28100020 and its import was free and one condition was added that for the import of boric acid for non-insecticidal purposes will be subject to an import permit issued by the Central Insecticide Board & Registration Committee under the Ministry of Agriculture. This condition was brought under the ITC (HS) only w.e.f. 7.4.2006 whereas the import of the appellant is on 27.12.2004. Therefore, even this amendment w.e.f. 7.4.2006 has no application in the appellants case. Thus, it is clear that at the time of import there was no requirement of producing any certificate under the Insecticide Act. He further submits that the identical issue has been decided by this Tribunal in the case of Hardware Trading Corporation Vs. Commissioner of Customs, Nhava Sheva 2006 (198) ELT 220 (Tri-Mum).
4. Shri M.K. Mall, learned AC (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order. He relied on the Boards Circular No. 61/2004-Cus dated 28.10.2004 according to which the product boric acid imported by the appellant is classifiable under CTH 3808, which is not freely importable and subject to the conditions prescribed for import of insecticide falling under the CTH 3808. He further submits that the judgment cited by the learned Counsel in the case of Hardware Trading Corporation (supra), the same was appealed against by the Revenue before the Hon'ble Mumbai High Court, which has been admitted as Customs Appeal No. 35 of 2006.
5. We have carefully considered the submissions made by both sides. We find that as per ITC (HS), the boric acid is specifically classified under CTH 2810, which is freely importable.
5.1 We find that the Tribunal in the case of Hardware Trading Corporation (supra) has observed as follows: -
8. The authorities below relied upon the Board Circular? No. 61/2004, dated 28-10-2004 in rejecting the claim of the appellants. It is a contention of the appellants that no reasons have been given for classifying the imported Boric Acid under Heading 38.08 of the Customs Tariff as well as under the ITC-HS. Further, their contention is that the Board Circular is not binding on them to contrary to the Customs Tariff Act. The Boric Acid is multi-furious use and in this regard they have relied upon the Kirk Othmers Encyclopedia of Chemical Technology, 4th Edition, Vol. 4, the relevant text is extracted as under :-
USES :
(i) Boric acid has surprising variety of applications in both industrial and consumer products (6.57). It serves as a source of B2O3 in many fused products, including textile fiber glass, optical and sealing glasses, heat-resistant borosilicate glass, ceramic glazes, and porcelain enamels (see ENAMELS, PORCELAIN AND VITREOUS). It also serves as a component of fluxes for welding and brazing (see SOLDERS AND BRAZING ALLOYS: WELDING).
(ii) A Number of boron chemicals are prepared directly from boric acid. These include synthetic inorganic borate salts, boron phosphate, fluoborates, boron trihalides, borate esters, boron carbide, and metal alloys such as ferroboron (11108-67-1).
(iii) Boric acid catalyses the air oxidation of hydrocarbons and increases the yield of alcohols by forming esters that prevent further oxidation of hydroxyl groups to ketones and carboxylic acids (see HYDROCARBON OXIDATION).
The bacteriostatic fungicidal properties of boric acid have led to its use as a preservative in natural products such as lumber, rubber latex emulsions, leather, and starch products.
(iv) NF-grade boric acid serves as a mild, monirritating antiseptic in mouthwashes, hair rinse, talcum powder, eyewashes, and protective ointments (see DISINFECTANTS). Although relatively non-toxic to mammals (58), boric acid powders are quite poisonous to some insects. With the addition of an anticaking agent, they have been used to control cockroaches and to protect wood against insect damage (see INSECT CONTROL TECHNOLOGY).
(v) Inorganic boron compounds are generally good fire retardants (59). Boric acid, alone or in mixtures with sodium borates, is particularly effective in reducing the flammability of cellulosic materials. Applications include treatment of wood products, cellulose insulation, and cotton batting used in mattresses (see FLAME RETARDANTS).
(vi) Because boron compounds are good absorbers of thermal neutrons, owing to isotope 10 B, the nuclear industry has developed many applications. High purity boric acid is added to the cooling water used in high pressure water reactors (see NUCLEAR REACTORS).
9. Further their contention is that the Boric Acid? correctly falls under Heading 28.10 of the Customs Tariff/Excise Tariff/ITC-HS as it specifically covers boric acid by description.
(i) Sub-heading 281000.20 of the Customs Tariff by name, specifically covers boric acids.
(ii) Similarly, sub-heading 2810.00 of the Excise Tariff also covers by name, boric acids.
(iii) Chapter 28 of both Customs Tariff and Excise Tariff are aligned with Harmonised System of Nomenclature (HSN). HSN Explanatory Notes to Heading 28.10 provide as under :-
BORIC ACIDS :
(i) Boric acid (orthoboric acid) (H2BO3) is obtained either by acid decomposition of natural borates, or by physico-chemical treatment of crude boric acid.
(ii) It exists in the form of powder or small scales, micaceous flakes or vitrified lumps, with transparent edges, ash-grey or bluish (crystallized acid). It is odourless, greasy to the touch.
(iii) Its uses include : as an antiseptic (boracie water) : for the manufacture of borosilicate glass (low coefficent of expansion), vitrifiable compounds, Guighnets green (hydrated chromic oxide), artificial borates (borax), hydroxy-and amino-anthraquinones; for impregnating candle wicks; for fire-proofing cloth.
(iv) Crude natural boric acid falls in Heading 25.28 when containing not more than 85% of H2BO3, calculated on the dry weight, when the H2BO3, content exceeds 85%, the acid is classified in this heading. Metaboric acid (HBO2)n is also classified here.
This heading does not include :
(a) Tetrafluoroboric acid (fluoroboric acid) (Heading 28.11)
(b) Glyceroboric acid (Heading 28.20)
10. The HSN Explanatory Notes does not say that boric acid? is also used as insecticide or pesticide, presumably because boric acid is predominantly used as raw material.
11. The Supreme Court in the following cases has held that? HSN Explanatory Notes are safe guide for interpreting the Tariff Entries (both under the Central Excise Tariff and Customs Tariff):
(a) CCE, Shillong v. Wood Craft Products Ltd. - 1995 (77) E.L.T. 23 (S.C.)
(b) CC, Bombay v. Business Forms Ltd. - 2002 (142) E.L.T. 18 (S.C.)
(c) CCE, Hyderabad v. Bakelite Hylam Ltd. - 1997 (91) E.L.T. 13 (S.C.)
12. The General Rules for the Interpretation of the Custom? Tariff or Excise Tariff provide as under :
Classification of goods in this Schedule shall be governed by the following principles:
l. The titles of Sections, Chapters and sub-chapters are 1. provided for ease of reference only; for legal purpose, 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.
13. Since Heading 28.10 specifically covers boric acid by? name, irrespective of the end-use, the imported boric acid will fall under Heading 28.10 only.
14. There is no dispute that boric acid is specified in the? Schedule to the Insecticide Act and for the purposes of Insecticide Act, 1968, boric acid is an insecticide.
15. The CEGAT in? CCE v. Essen Synthetics Pvt. Ltd. - 1987 (32) E.L.T. 759, held for construing the expressions "Insecticides, Pesticides, Weedicides and Fungicides at Serial No. 18 of Notification No. 55/75-C.E., as under :-
9. Following the decision supra, we hold that the Insecticides Act, 1968 or the Schedule thereto would not govern the meaning of expressions in Serial No. 18 of the notification supra.
16. Heading 38.08 reads as under :-?
Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant-growth regulators, disinfections and similar products, put up in forms or packings for retail sale or as preparations or articles (for example, sulphur-treated bands, wicks and candles, and fly-papers).
17. HSN Explanatory Note to the products of Heading 38.08? can be divided into the following groups :
(I) Insecticides.
Insecticides include not only products for killing insects, but also having a repellent or attractant effect. The products may be in a variety of forms such as sprays or blocks (against moths), oils or sticks (against mosquitoes), powder (against ants), strips (against flies), cyanogens gas absorbed in diatomite or paperboard (against fleas and lice).
18 A perusal of HSN Explanatory Notes to Heading 38.08. clearly shows that boric acid will not fall under Heading 38.08 as an insecticide. The boric acid as imported by the appellants in capable of killing any pest.
19. As per the technical books, boric acid with the? addition of anti-caking agents, is capable of killing cockroaches. Therefore, the boric acid in the form in which it is imported, will not fall under Heading No. 38.08 insecticide.
20. The ld. Commissioner of Customs (A), Nhava Sheva,? rejected the appeals filed by the appellants for not producing the end-use certificate from the concerned Ministry and classified the Boric Acid under Chapter Heading No. 38.08.
21. After going through the record, the Board Circular dated 28-8-2004, encyclopedia of the Chemical Technology and HSN notes, we are of the considered opinion that the Boric Acid is classifiable under Chapter Heading No. 28.10 of the HSN, but not under Chapter Heading No. 38.08. First of all, we have to state that the Boric Acid is normally used as raw material in the industry. Heading No. 38.08 covers those goods which are insecticides. The Boric Acid imported in the form is incapable of killing pests. The authorities below have failed to consider the contentions put forth in the right prospective. They ought to have considered the contents of the letter dated 20-12-2004 and should not have insisted upon the formal registration by the appellants and production of end-use certificate. Therefore, we find the impugned order is erroneous and liable to be set aside. Accordingly, the same is set aside.
22. In the result, appeal is allowed with consequential? reliefs. It is seen that in the above decision, in para 14, it has been clearly held that Boric Acid as specified in the Schedule to the Insecticide Act, 1968 and for the purpose of Insecticide Act, boric acid is an insecticide. Thus, the import of boric acid would be governed in terms of Insecticide Act, 1968 and consequently, it follows that import of boric acid would require registration with the concerned authorities.
5.2 It is seen that on 8.11.2004, the meeting of the Registration Committee was held in the Krishi Bhawan in chairmanship of Agricultural Commissioner. In the said meeting, after deliberation following recommendations were made: -
(i) 17 applications are for import of boric acid for non-insecticidal use. These are exempted from the requirement of registration under the Insecticides Act, 1968. They may be informed accordingly to follow the guidelines as suggested by the Department of Agriculture & Cooperation.
(ii) 10 applications which need clarification. For these, clarification may be sought from the applicants. After the receipt of the same, the applications may be put up to the Registration Committee.
(iii) 3 applications are for indigenous manufacture for non-insecticidal use. These are also exempted from the requirement of registration under the Insecticides Act, 1968. They may be informed accordingly to follow the guidelines as suggested by the Department of Agriculture & Cooperation.
(iv) 2 applications which are for indigenous manufacture for insecticidal use and 5 applications which are for import for insecticidal use may be scrutinized as per the guidelines of the Registration Committee and put up to the Committee.
(v) Department of Agriculture & Cooperation may be informed the status of applications of boric acid accordingly with the request to provide the importers and indigenous manufacturers the guidelines for import/indigenous manufacture of boric acid for non-insecticidal use. From the findings of the said committee, it can be seen that the concerned Ministry is of the opinion that if boric acid is used for non-insecticidal purpose, no registration is required under the Insecticide Act, 1968. In other case, however, it may necessary to obtain registration.
5.3 From the above discussion, it is apparent that the boric acid would be classifiable under Chapter 28 and registration is required in cases where the use is for insecticidal purpose. In the instant case, the imports have been made by the Traders and it is not clear that the boric acid imported have been used for insecticidal purpose. In such circumstances, importation of boric acid may not require registration from the concerned authorities under the Insecticide Act, 1968.
5.4 We find that no evidence has been placed on record to establish that the material has been used for insecticidal purposes and therefore it cannot be said that registration under Insecticide Act is needed.
6. Under these circumstances, we hold that confiscation and penalty cannot be sustained. Appeal is allowed.
(Pronounced in Court on 06.12.2016)
(Raju) (Ramesh Nair)
Member (Technical) Member (Judicial)
Sinha
8
Appeal No. C/938 & 939/05