C/10589/2023 — MUDRIKA CERAMICS I LTD vs Customs Ahmedabad

Customs, Excise & Service Tax Appellate Tribunal West Zonal Bench at Ahmedabad

REGIONAL BENCH-COURT NO. 3

CUSTOMS Appeal No. 10589 of 2023- DB (Arising out of OIA-AHM-CUSTM-000-COM-06-07-23-24 dated 21/06/2023 passed by Commissioner of Customs, Ahmedabad) MUDRIKA CERAMICS I LTD ……..Appellant 461 GIDC POR NH No.8 Vadodara, Gujarat-391243

VERSUS

COMMISSIONER OF CUSTOMS - AHMEDABAD …….Respondent 1st Floor, Customs House, Opposite Old High Court,
Navrangpura, Ahmedabad, Gujarat-38009
WITH

(i) CUSTOMS Appeal No. 10590 of 2023- DB (SHASTA FREIGHT SERVICES PVT LTD) (ii) CUSTOMS Appeal No. 10591 of 2023- DB (SHRI ATUL KUMAR MITTAL) (iii) CUSTOMS Appeal No. 10592 of 2023- DB (SHRI ANUJ KUMAR MITTAL) (iv) CUSTOMS Appeal No. 10593 of 2023- DB (NEXUS LOGISTICS) (v) CUSTOMS Appeal No. 10594 of 2023- DB (SHRI HIRANMAY JOSHI) (vi) CUSTOMS Appeal No. 10595 of 2023- DB (SHRI HITESH A PATNI) (vii) CUSTOMS Appeal No. 10642 of 2023- DB (VIKAS AGARWAL) (viii) CUSTOMS Appeal No. 10643 of 2023- DB (SHRI DHARM CHAND) (ix) CUSTOMS Appeal No. 10652 of 2023- DB (Global Ceramics Materials Limited) (x) CUSTOMS Appeal No. 10653 of 2023- DB (Mr.David Slinn)

APPEARANCE: Shri T Vishwanathan, Ms. Shruti Khanna & Shri Saurabh Dixit, Advocate for the Appellant
Shri Tara Praksah, Deputy Commissioner (AR) for the Respondent

CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON'BLE MEMBER (TECHNICAL), MR. RAJU

          Final Order No.10235-10245/2024  
                                                       DATE OF HEARING: 08.12.2023 
                                                    DATE OF DECISION: 24.01.2024 

RAMESH NAIR These appeals are filed by M/s Mudrika Ceramics (I) Limited against change of classification of goods imported by the Appellant and confiscation and imposition of penalties. Appeal has also been filed by M/s. Shasta Freight Services Pvt. Ltd, Shri Atul Kumar Mittal, Shri Anuj Kumar Mittal, M/s. Nexus Logistics, Shri Hiranmay Joshi, Shri Hitesh Patni, Shri Vikas Agarwal, Shri Dharan Chand and M/s. Global Ceramics against

2 | P a g e C / 1 0 5 8 9 - 1 0 5 9 5 / 2 0 2 3 & O r s

imposition of redemption fine and penalties under Section 112(a), 112(b), 114A, 114 AA, and 117 of the Customs Act.

1.1 The basic issue involved in the present appeal is whether "Apatite (Ground) Calcium Phosphate / Natural Calcium Phosphate” imported by the Appellant is correctly classifiable under CTH 25102030 as claimed by them or is to be classified under CTH 28352690 as confirmed vide the impugned order. The consequent differential import duties and penalties are imposed against the Appellant Company vide the impugned, apart from imposing various personal penalties on other co-Appellants.

Shri. Saurabh Dixit, Learned Counsel appearing on behalf of the Appellant Company and other Noticees, at the outset, submitted that the very same nature of goods imported from the same supplier earlier, were also the subject matter of classification dispute and vide OIA dt.5.9.11, the goods in question were held to be classifiable under CTH 2510 2030. The said OIA dt.5.9.11 was accepted by Customs department and no appeal was filed there against. He submitted that the sample drawn from factory premises after its clearance from Port of import, is improper and the test report of such samples cannot be relied upon as valid evidence.

2.1 He further submitted that the overseas supplier, viz. M/s. Global Ceramics had mistakenly mentioned Chapter 28 in their commercial document/BL instead of Chapter 25, and such mistake was later on corrected by them. In fact, they sought Tariff Ruling from UK wherein the said product was stated to be classifiable under CTH 2510 and not Chapter 28.

2.2 He also submitted that in the present case, re-test was conducted after original test report suggested that the product was synthetic in nature and the said re-test report dt.22.11.22 clearly states that the product is “natural” and hence, it can never be classified under Chapter 28 dealing with chemicals. It is his submission that the cross-examination of Shri. V. Suresh, JT Director(NFSG), CRCL, New Delhi conclusively proves that the goods are classifiable under CTH 25 and not 28.

2.3 He relied upon the HSN Explanatory Notes as well as Chapter Notes to Chapter 25 and 28, to submit that the imported goods in question were

3 | P a g e C / 1 0 5 8 9 - 1 0 5 9 5 / 2 0 2 3 & O r s

rightly classifiable only under CTH 2510 and not under Chapter 2835 of the CTA, 1985.

2.4 He further submitted that the identical goods imported before as well as after the material period have been successfully classified under CTH 2510 only without any dispute by the revenue department. So much so, all subsequent consignments were subjected to provisional assessment, wherein test reports and re-test reports were obtained which are ad-verbatim identical to the retest report in the present case, and all assessments have been successfully classified under CTH 2510 by Customs authorities and such assessment too has been accepted by Customs department.

2.5 It is his submission that the goods were merely heat treated to remove impurities and there was no thermal decomposition which would qualify as calcination. Mere heating a product even if assumed to calcination process, does not mean that product is per se calcined, in the state in which it was imported and hence, the classification under CTH 2510 was in order.

2.6 It is his submission that the communication exchanged between the importers, CHA and/or the overseas supplier, was only aimed at keeping the correct description of the product in the documents, to avoid any confusion and have clarified at the time of imports for Customs assessment purpose. Also, it is their case that such communication exchanged after the disputed imports, in no way have any bearing on classification of goods imported prior thereto.

Shri. T. Vishwanathan, Learned Counsel, appearing on behalf of M/s. Global Ceramics, submitted that the onus to classify goods is upon importer, and that the description and details were properly mentioned by the supplier on their documents and records. He also submitted that no penalty is called for against the overseas supplier in the given set of facts and circumstances.

Shri Tara Praksah, Learned Deputy Commissioner (AR) on the other hand reiterated the findings of the impugned order. He also submitted that the product literature shows that some process was being undertaken on the mineral product and hence, it was calcined and as such out of the purview of classification under CTH 2510.

4 | P a g e C / 1 0 5 8 9 - 1 0 5 9 5 / 2 0 2 3 & O r s

We have carefully considered the submissions made by both the sides and perused the records. We find that in the present case, the issue to be decided is whether the imported goods are Natural Calcium Phosphate and are classifiable under CTH 2510 or under CTH 2835 and whether any consequent duty, interest and penal liabilities follow or otherwise.

5.1 Before proceeding further, we find that the contents of Chapter Note 1 to Chapter 25 as well as HSN Explanatory Notes to Chapter 25, 28 and 31 are required to be appreciated in this regard, which are reproduced below:

5 | P a g e C / 1 0 5 8 9 - 1 0 5 9 5 / 2 0 2 3 & O r s

6 | P a g e C / 1 0 5 8 9 - 1 0 5 9 5 / 2 0 2 3 & O r s

7 | P a g e C / 1 0 5 8 9 - 1 0 5 9 5 / 2 0 2 3 & O r s

8 | P a g e C / 1 0 5 8 9 - 1 0 5 9 5 / 2 0 2 3 & O r s

9 | P a g e C / 1 0 5 8 9 - 1 0 5 9 5 / 2 0 2 3 & O r s

5.2 While the Appellants have raised various lengthy averments, at the outset, we find that the very same product was the subject matter of classification dispute in the past, wherein vide OIA dt.5.9.11, it was held as follows:

10 | P a g e C / 1 0 5 8 9 - 1 0 5 9 5 / 2 0 2 3 & O r s

11 | P a g e C / 1 0 5 8 9 - 1 0 5 9 5 / 2 0 2 3 & O r s

12 | P a g e C / 1 0 5 8 9 - 1 0 5 9 5 / 2 0 2 3 & O r s

13 | P a g e C / 1 0 5 8 9 - 1 0 5 9 5 / 2 0 2 3 & O r s

5.3 We also note that the impugned order as well as the submissions made by the Ld. AR, to the effect that the product literature and material safety data sheet will show that the goods are processed before being exported to India, refer to the same process as was discussed in the said OIA dt.5.9.11, as reproduced above. The revenue department did not raise any grievance against such OIA dated 05.09.2011 and accepted it on merits.

5.4 Also, the re-test report has clearly stated that the product in question of “natural” and not “synthetic” and as such, classification under CTH 28 per se cannot be upheld. Coming to the issue whether the product is “calcined” or not, again, we agree with the above analysis made in the OIA dt.5.9.11, that the term “calcined’ cannot be understood in generic sense, but would necessarily require thermal decomposition of the crystalline structure, which is admittedly missing in the present case. Chapter Note 1 to Chapter 25 as well as The Explanatory Notes to HSN for Chapter 25 and 28 clearly suggest that the product kept out of the purview of Chapter 25, ibid, require roasting, fusion or calcination to such

14 | P a g e C / 1 0 5 8 9 - 1 0 5 9 5 / 2 0 2 3 & O r s

extent so as to change the crystalline structure to the extent of thermal decomposition.

5.5 Also, we agree with the averment raised by the Appellant that even if the imported goods were calcined, and even if it is omitted from purview of Chapter 25, still it cannot be classified under Chapter 28, but at the most may be classifiable under Chapter 31. The present case therefore must fail. However, for the above reason, since the imported goods are not shown to be calcined, they remain classifiable under CTH 2510 only.

5.6 As against the specific averment made by the Appellant in this regard, the test/retest report as well as the contents of cross examination of Shri. V. Suresh JT Director (NFSG), CRCL, New Delhi has nowhere brought on record that there was any thermal decomposition of crystalline structure of the product and hence, the said product was not calcined at all. In light of the above as well as the HSN Explanatory Notes, which are a safe guide to decide Customs classification issues, the goods do not appear to be omitted from the purview of Chapter 25 at all.

5.7 Further, it has come out during the course of cross examination of Shri. V. Suresh JT Director(NFSG), CRCL, New Delhi had specifically accepted that the product was moist in nature when being retested and also stated that it was not hygroscopic in nature, and the LOI was found to be less than 1%. If the sample was already calcined, the same would not have any inherent moisture or would not have any Loss on Ignition as such, and this also shows that it could not have been in calcined state even otherwise.

5.8 Also, all subsequent imports, which were subjected to provisional assessment, were subjected to testing / retesting and based on ad- verbatim identical reports by CRCL, all classifications have been finally approved under Chapter 25 only, and not under Chapter 28. There is no reason why a different view should be taken in the intervening period for the present dispute as well, more so, when the re-test report in the present case too does not justify classifying the product under CTH 2835 at all.

15 | P a g e C / 1 0 5 8 9 - 1 0 5 9 5 / 2 0 2 3 & O r s

5.9 The product is admittedly natural and not calcined, and as such, being mere mineral, and accepted by the Customs department for previous period as well as all subsequent imports into India, should be therefore correctly classified under CTH 2510 as claimed by the Appellant and not under CTH 2835.

5.10 We also find that the UK Tariff Ruling obtained by the overseas supplier viz. M/s. Global Ceramics, too has confirmed that the goods, i.e. Natural Calcium Phosphate (Apatite) used for production of ceramic tableware is a natural mineral product falling under Tariff Heading 2510 only. While such ruling may not otherwise be a binding judicial precedent, however, it has sufficient persuasive value as rightly argued by the Ld. Counsel for the Appellant. This is also reinforced by the independent technical evidence in form of study report by Lucideon, a world renowned testing facility as argued by the Appellant, which has also unequivocally certified that the supplier’s product was natural mineral product and not calcined in absence of any thermal decomposition.

5.11 No doubt, any chemically precipitated calcium phosphate, would be classifiable under CTH 2835, however, for that purpose, it would be required to be shown that the end product has traces or characteristics of a product obtained by treating tricalcium phosphate contained in bones first with hydrochloric acid and then sodium hydroxide or by precipitating a solution of trisodium orthophosphate by means of calcium chloride in presence of Ammonia, as also evident as per Explanatory Notes to HSN for Tariff Heading 2835. Admittedly the goods in question were found to be natural and not precipitated in the re-test.

5.12 There is nothing on record to suggest that the goods were not natural Calcium Phosphate or Apatite Calcium Phosphate, which require to be classified under CTH 2510 alone being the most specific classification based on description as per General Rules of Interpretation for Tariff.

5.13 Since on merits of the issue, the product is found classifiable under CTH 2510 itself, and the demand therefore must fail, we do not deem it necessary to deal with various other averments raised by the Appellant. Suffice it to say, we do not see any reason to personally penalise either the Directors of importer, or CHA or the other importers for having engaged in communication with overseas supplier to put proper and correct description of goods on documents, or for that matter, the

16 | P a g e C / 1 0 5 8 9 - 1 0 5 9 5 / 2 0 2 3 & O r s

overseas supplier itself, since the goods were always classifiable under CTH 2510 as natural mineral itself all along.

Accordingly, the impugned orders are quashed and set aside and the appeals are allowed with consequential relief.

(Pronounced in the open court on 24.01.2024)

(RAMESH NAIR) MEMBER (JUDICIAL)

(RAJU) MEMBER (TECHNICAL) Raksha