In the Customs, Excise & Service Tax Appellate Tribunal, Bangalore
Shri T.K. Jayaraman, Member (Technical) Shri M.V. Ravindran, Member (Judicial)
OCL India Ltd.
Versus
Commissioner of Customs, Visakhapatnam
Final Order No. 160/2009 dt. 2.3.2009 certified on 11.3.2009 in Appeal No. C/475/2008
Per T.K. Jayaraman :
This appeal has been filed against the Order-in-Appeal No. 03/2008 dated 04.03.2008 passed by the Commissioner of Central Excise & Customs (Appeals), Visakhapatnam.
2. We heard both sides.
3. The issue involved is whether the goods imported by the appellant described as Fused Magnesium Chromide would be classifiable under Chapter Heading 2519 9040 as claimed by the appellant or under Chapter 3824 9090 as decided by the Department.
4. The learned Advocate stated that the impugned products is actually Fused Magnesium Oxide. He stated that the same product is bring imported through other Ports, which have classified it under CH 2519 9040. Only in Visakhapatnam Port, the Customs Authorities had changed the classification on the ground that a product which has undergone fusion cannot come under Chapter 25. He urged the following grounds:-
(i) The appellants are importing Fused Mag Chrom from China since last few years classifying them under Chapter 25 through various Ports. He produced Bills of Entry to show that in the past, the classification adopted was 2519.90.40. However, all of a sudden, the Revenue resorted to provisional assessment under Chapter 38. The Revenue finalized the provisional assessment and demanded differential duty to the tune of Rs. 33,14,457/- in respect of 3 Bills of Entry on the ground that the goods would be correctly classifiable under Chapter 38. Fused Mag Chrome contains 69% of Magnesium Oxide, which is more specifically covered under CH 2519.9040. Applying its essential character as provided under Rule 3(b) of the General Interpretative Rules of CTA, the impugned goods would be classifiable under CH 2519.9040 as Magnesium Oxide.
(ii) The impugned goods cannot be classified under Chapter 3824 as that Chapter deals with Chemical Preparations while the impugned goods is not Chemical Preparations but a mixture of naturally occurring substances.
(iii) The Adjudicating Authority finalized the assessment under Chapter 38. The appellants approached the Commissioner (Appeals). Even the Commissioner (Appeals) upheld the order of the lower authority. It was argued that the long standing practice of classifying the goods under Chapter 25 cannot be changed without change in facts. The findings of the lower authority are internally inconsistent and self-contradictory. In the Adjudication Order, the Assistant Commissioner finds that the composition of the goods are all minerals and not chemicals. However, he classified the goods under CH 3824.90.90, which deals with Chemical Products. Chapter 38 under Section (VI) of CTH deals with 'Products of Chemical and Allied Industries' while Chapter 25 under Section (V) deals with 'Mineral Products'.
(iv) In the impugned order, the learned Adjudicating Authority has resorted to Rule 3(c) of the General Interpretative Rules. Rule 3(c) deals with classification of commodities, which cannot be classified by reference to Rule 3(a) or Rule 3(b). Straightway, the Assistant Commissioner has resorted to Rule 3(c). Only when Rule 3(a) or Rule 3(b) are not applicable, recourse to Rule 3(c) should be taken.
(v) The impugned goods are not Chemical Preparations or goods of allied industries but product of naturally occurring substances i.e. essentially Fused Magnesium Oxide and hence they are classifiable under Chapter 25. In the course of the hearing, the learned Advocate took us through the Customs Tariff and also Chapter Note (1) to Chapter 25 which is reproduced below.
"1. Except where there context or Note 4 to this Chapter otherwise requires, the headings of this Chapter cover only products which are in the crude state or which have been washed (even with chemical substances eliminating the impurities without changing the structure of the product), crushed, ground, powdered, levigated, sifted, screened, concentrated by flotation, magnetic separation or other mechanical or physical processes (except crystallization), but not products that have been roasted, calcined, obtained by mixing or subjected to processing beyond that mentioned in each heading."
He stated that this Note has been interpreted by the Hon'ble Apex Court in the case of Deepak Agro Solution Ltd. Vs. CC, Maharashtra - 2008(05)LCX0003 Eq 2008 (086) RLT 0937 (SC)=2008(05)LCX0003 Eq 2008 (227) ELT 0052 (S.C.). Our attention was invited to para 17 of the said decision which is reproduced below:
"17. Chapter Note 1 of Chapter 25 starts with the words "except where their context or Note 4 to this Chapter otherwise requires".
It is, therefore, difficult to hold that the headings of the Chapter would cover only the products which are in the crude state or comes within the purview of other activities contained therein.
Interpretation of the said Note will depend upon the context in which the entries have been worded. If an entry is clearly worded and is broad in character, the same would lead to the conclusion that the context otherwise required."
Therefore, it cannot be argued that in order to classify the goods under CH 2519.90, the goods must be in crude state or naturally occurring state. He took us the entries to show that even fused, burnt, calcined and sintered products are classifiable under CH 2519.90 in terms of heading/sub-heading.
(vi) In the case of UOI Vs. Garware Nylons Ltd. - 1996 (016) RLT 0619 (SC)=1996(09)LCX0005 Eq 1996 (087) ELT 0012 (SC), it is held by the Apex Court that the burden of proof is on the taxing authorities to show that a particular item is taxable in the manner claimed by them.
(vii) In the case of Poulose and Mathen Vs. CCE - 1997 (018) RLT 0663 (SC)=1997(02)LCX0119 Eq 1997 (090) ELT 0264 (SC), it is held by the Hon'ble Apex Court that in matters of classification, where two opinions are possible, the assessee should be given the benefit of doubt and the opinion favourable to it should be given.
5. The learned Departmental Representative reiterated the impugned order.
6. We have gone through the records of the case very carefully. The relevant entry under Chapter 25 is as follows:-
2519
Natural magnesium carbonate (magnesite); fused magnesia; dead-burned (sintered) magnesia, whether or not containing small quantities of other oxides added before sintering; other magnesium oxide, whether or not pure
2519 10 00
Natural magnesium carbonate (magnesite)
2519 90
Other:
2519 90 10
Fused magnesia (natural)
2519 90 20
Dead-burnt (sintered) magnesia
2519 90 30
Magnesium calcined (other than dead-burnt) not elsewhere specified or included
2519 90 40
Magnesium oxide
2519 90 90
Other
The fact that the impugned product contains Magnesium Oxide of 69.3% is not in doubt. Just because the product had undergone fusion, we cannot conclude that it cannot come under Chapter 25. This is very clear from Chapter Note 1 to Chapter 25 and the interpretation of the Hon'ble Apex Court. Moreover, there is a practice of classifying these goods under Chapter 25 for a long time and also the other Ports are also classifying the item under Chapter 25. While comparing the entries in Chapter 25 and 38, it appears that the item would more appropriately be classified under Chapter 25 because the entries are more specific in Chapter 25. The Chapter 38 deals with the misc. chemical preparations. Rule 3(b) of General Rules of Interpretation is as follows:
"3(b): mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to Rule 3(a), shall be classified as if they consisted of the material or component which given them their essential character, in so far as this criterion is applicable."
In view of the above, there is no merit in the departmental contention. Hence, we set aside the impugned order and allow the appeal with consequential relief.
