Customs, Excise & Service Tax Appellate Tribunal, New Delhi: In a matter concerning short-fall in the payment of Counter Vailing Duty (‘CVD’) due to wrong classification of the imported machineries for processing of areca nuts, by the appellant-pan masala manufacturer, the Bench of Dr. Rachna Gupta, Member (Judicial) and P.V. Subba Rao, Member (Technical) opined that the adjudicating authority cannot travel beyond the scope of show-cause notice and cannot confirm classification which was neither claimed by the appellant nor proposed by the department and therefore, it is not sustainable. Thus, the Tribunal set aside the impugned order demanding counter-vailing duty on areca nuts processing machines.
Background
The appellant, a pan-masala manufacturer, had an Importer Exporter Code (‘IEC’) and had filed the Bill of Entry (‘BOE’) for the clearance of the machines imported for crumbling or processing Areca Nuts. The department, in the audit of BOE observed that the appellant declared the imported machines under Custom Tariff Heading (‘CTH’), for which the CVD is at the rate of 0%. The said CTH was for the machines which are meant for cleaning, sorting or grading seed, grain or dried leguminous vegetables whereas the machines imported by the appellant were for use of crumbling or processing Areca Nuts (commonly known as supari), for production of Pan Masala. Hence, as per the department, the imported machines were classifiable under a tariff heading, for which the effective rate of CVD is at the rate of 12.5%.
Therefore, the department sent first show-cause notice to the appellant, alleging insufficiency in CVD of Rs. 27,74,130. Another show-cause notice bearing same number was served upon the appellant with identical allegations. The proposal of second show-cause notice was confirmed by the order-in-original (‘OIO’). The appeal filed against this order was dismissed by Commissioner (Appeals), who, after considering both the show cause notices, a corrigendum, and the OIO, upheld that the imported machines are classifiable under different CTH as proposed by the department.
Being aggrieved by the order of Commissioner (Appeals), the appellant approached the Tribunal.
Analysis, Law and Decision
The Tribunal observed that two show-cause notices have been issued with respect to the same BOE with the verbatim proposal. The second show-cause notice was issued when the first notice, the demand proposed therein, was neither confirmed under Section 28(4) of Customs Act, 1962 nor was being dropped. Hence, the second show-cause notice was held to be not maintainable.
The Tribunal noted that original adjudicating authority has travelled beyond the classification proposed in the show-cause notice by classifying the product under a classification which was neither claimed by the appellant nor was proposed in the show-cause notice. The decision beyond the scope of show-cause notice was not sustainable. Commissioner (Appeals) also could not go beyond the show cause notice while classifying a particular machine (Discharge Lock) into altogether different entry.
Furthermore, it was observed that the CTH proposed under show-cause notice and also those as confirmed under OIO were with respect to the machineries which were not specified or included elsewhere in the tariff but were meant for general use or for the industrial preparations or manufacture of food or drinks or such machines whose individual functions are not specified anywhere. However, from the literature about imported machines as produced by the appellants, the Tribunal opined that it is clear that three of these machines were meant for sorting/cutting, grinding etc., the seeds/grain/dried leguminous vegetables which were specifically mentioned under a different heading, i.e. CTH 8437200.
Thus, the classification proposed in the show-cause notice and confirmed by the adjudicating authority was held to be wrong. Accordingly, the Tribunal set aside the impugned order and stated that it was sustainable in law as it travelled beyond the scope of the show-cause notice.
[Dharampal Satyapal Ltd. v. Commr. of Customs, Customs Appeal No. 51630 of 2022, decided on 2-7-2025]
Advocates who appeared in this case :
Advocate for the Petitioners- Jayant Kumar, Advocate
Advocate for the Respondents- Rajesh Singh, Authorized Representative
