CESTAT Upholds Classification of AKD Wax Imported by Arjun Chemicals as Wax Product

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has upheld the Customs Department's classification of Alkyl Ketene Dimer (AKD Wax) imported by Arjun Chemicals Pvt. Ltd. under the tariff entry applicable to wax products.

However, the Tribunal held that Customs authorities could not invoke the extended limitation period because they had accepted the importer's classification of the product for several years. It therefore restricted recovery of differential duty to the normal period.

A Division Bench comprising Judicial Member P. Dinesha and Technical Member Vasa Seshagiri Rao passed the order while partly allowing appeals filed by Arjun Chemicals Pvt. Ltd., its Chief Operating Officer P.L. Ganeshan and customs broker Nippon Sea Freight Systems.

"Therefore, when the Department had consciously accepted the classification over several years, the subsequent allegation of deliberate suppression or intentional misdeclaration becomes inherently weak."

The dispute arose from imports of Alkyl Ketene Dimer (AKD Wax) from China between October 18, 2007 and July 30, 2012. The importer had classified the product under a tariff entry falling in Chapter 29 of the Customs Tariff.

Following an investigation by the Directorate of Revenue Intelligence (DRI), the Customs Department alleged that the goods were more appropriately classifiable under a tariff entry applicable to wax products. It consequently sought recovery of differential duty of ₹2,07,54,839 along with interest, confiscation and penalties.

The tribunal noted that the importer had adopted the same classification from October 2007 until the commencement of the investigation. It further noted that the classification had been repeatedly accepted by Customs authorities after assessment, examination and testing of samples.

The bench observed that 243 consignments had been imported and cleared under the same classification before the DRI investigation commenced. According to the Tribunal, Bills of Entry and connected import documents had been regularly scrutinised by Customs authorities.

The tribunal further noted that the imported goods had been consistently declared as "Alkyl Ketene Dimer (AKD Wax)" in import documents. It observed that the Department was aware throughout the disputed period that the goods imported were AKD Wax.

"the imported goods were consistently declared as “Alkyl Ketene Dimer (AKD Wax)” in all import documents and therefore there was no concealment regarding the identity of the goods."

On the classification issue, the Tribunal examined technical literature, HSN explanatory notes, laboratory reports and other material placed on record. It noted that the goods were imported in the form of pale-yellow waxy flakes. The Central Revenue Control Laboratory (CRCL) test report obtained from the live consignment recorded that the sample possessed waxy characteristics.

The Bench noted that the CRCL report referred to parameters such as dropping point and viscosity. It further observed that the records indicated that Alkyl Ketene Dimer was manufactured from fatty acids such as lauric acid and palmitic acid. According to the Tribunal, the product existed commercially in solid wax-like form and was used in paper sizing and finishing applications.

Relying on the CRCL test report, HSN explanatory notes and the characteristics of the imported goods, the Tribunal held that the product merited classification under Chapter Heading 34049090. It accordingly upheld the Department's classification.

"In the light of the CRCL test report, HSN explanatory notes, waxy characteristics, dropping point, viscosity parameters, fatty acid composition involving lauric acid and palmitic acid and the commercial identity of the imported goods as waxy sizing preparation, we hold that the imported product namely “Alkyl Ketene Dimer (AKD Wax)” merits classification under Chapter Heading 34049090 and not under Chapter 29 as claimed by the importer."

However, on limitation, the Tribunal found that the ingredients necessary for invoking the extended period were not established. It noted that the imports had been made openly over several years. The Bills of Entry and connected documents were available before the Department. Earlier consignments had also been subjected to examination and testing.

"Since the classification under Chapter 29 had been consistently accepted over several years, it cannot be said that the importer had concealed material facts or suppressed the nature of the goods from the Department."

The tribunal therefore held that invocation of the extended period was legally unsustainable. It ruled that recovery of differential duty would be restricted to the normal period along with applicable interest.

The bench also held that, except for the live consignment covered under Bill of Entry No. 7523378 dated July 30, 2012, the goods covered under earlier Bills of Entry had already been cleared for home consumption. According to the tribunal, those goods were not available for confiscation. It therefore set aside confiscation in respect of those consignments.

However, the tribunal upheld confiscation of the live consignment valued at ₹63,39,860. It also upheld the redemption fine of ₹6 lakh imposed on that consignment.

The tribunal further set aside penalties imposed on the importer company, P.L. Ganeshan and customs broker Nippon Sea Freight Systems.

"Consequently, the penalties imposed upon the importer company, Shri P.L. Ganeshan and M/s. Nippon Sea Freight Systems are also set aside in the absence of any evidence establishing suppression, collusion or deliberate abetment.", it ruled.

For Appellant: S. Murugappan, Advocate and Kannan, Liquidator

For Respondent: Sanjay Kakkar, Authorised Representative