HSN Mismatch In Certificate Of Origin Alone Cannot Deny Customs Exemption: CESTAT Chennai

On 25 June, the Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that a discrepancy in the HSN classification mentioned in a Certificate of Origin cannot, by itself, justify denial of a customs exemption when the imported goods are otherwise correctly classifiable under the Customs Tariff Act.

Technical Member Vasa Seshagiri Rao and Judicial Member Ajayan T.V. allowed the appeal and set aside the demand of Rs.14.50 lakh against the importer of Clear Float Glass, along with the confiscation of goods, redemption fine, penalties and interest. The Bench held:

"The Certificate of Origin serves only to establish originating status and cannot override classification legally determined under the Customs Tariff Act. Since the Department has neither disputed the originating status of the goods nor alleged that the Certificate of Origin is invalid, the mere mention of CTH 7005 29 90 therein, the benefit of Notification No.46/2011-Cus cannot be denied."

The dispute arose after the appellant imported Clear Float Glass into India and claimed exemption under Notification No.46/2011-Cus by classifying the goods under CTH 7005 10 90. The Department disputed the classification and contended that the goods were properly classifiable under CTH 7005 29 90, making them ineligible for the exemption.

The Department thereafter initiated proceedings to recover differential customs duty of Rs.14,50,507 with interest and also proposed confiscation of the goods, redemption fine and penalties.

Before the Tribunal, the appellant contended that the imported Clear Float Glass had an absorbent tin layer and was correctly classifiable under CTH 7005 10 90. The appellant further argued that earlier proceedings involving identical goods had already settled the classification issue and that the Department had ignored binding precedents while raising the demand.

The appellant also relied on an Advance Ruling passed in its own case and submitted that a discrepancy in the HSN code mentioned in the Certificate of Origin could not independently justify denial of the exemption when the goods satisfied the origin requirements and were correctly classifiable under Indian customs law.

After examining the record, the Tribunal noted that the classification issue had already been decided in earlier proceedings involving identical goods imported from the same country. It also referred to the findings of the Customs Authority for Advance Rulings, which recognised that Clear Float Glass with an absorbent layer falls under CTH 7005 10 90 and qualifies for the exemption.

Further, the Bench held that tariff classification of imported goods must be determined under the Customs Tariff Act and cannot be overridden merely because a different HSN code appears in a Certificate of Origin issued under a preferential trade agreement. It observed that a Certificate of Origin primarily establishes the originating status of goods and cannot replace the statutory principles governing tariff classification. The Members observed:

"The imported Clear Float Glass is correctly classifiable under CTH 7005 10 90 and eligible for the benefit of Sl. No.934(I) of Notification No.46/2011-Cus. The tariff heading mentioned in the PTA Certificate of Origin cannot override the classification legally determinable under the Customs Tariff Act, 1975 and does not constitute a valid ground for denying the notification benefit,"

Lastly, the Tribunal held that once the classification issue stood resolved in favour of the appellant, the foundation for the differential duty demand and all consequential proceedings ceased to exist.

Accordingly, the CESTAT set aside the demand of Rs.14,50,507, along with the confiscation of goods, redemption fine, penalties, and interest.

For Appellant: Mr. G. Madan, Advocate

For Revenue: Ms. O.M. Reena, Authorised Representative