Reclassification Based on Third-Party Test Report Without Supplying It Violates Natural Justice: CESTAT Chennai
Pranav B Prem
The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), comprising P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member), has set aside a customs demand raised against M/s Krishna Marketing, holding that reclassification of imported PVC Suspension Resin based solely on a third-party test report, without furnishing the same to the importer, amounted to a violation of principles of natural justice.
The appeal arose from Order-in-Appeal No. C.Cus. II No.1131/2015 dated 11.12.2015 passed by the Commissioner of Customs (Appeals-II), Chennai, upholding the Order-in-Original which had reclassified the imported goods under Customs Tariff Heading (CTH) 39041090 and denied the benefit of Notification No. 046/2011-Customs dated 01.06.2011.
The appellant had imported “Polyvinyl Chloride (PVC) Suspension Resin SP 660” from Thailand and classified the same under CTH 39042110/39042190 as “Other Poly (Vinyl Chloride); Non-Plasticised: Poly (Vinyl Chloride) Resins.” On this basis, the importer availed concessional Basic Customs Duty at 2% under the ASEAN-India Free Trade Area Preferential Trade Agreement and paid applicable CVD, Education Cess and Special Additional Duty at the time of clearance.
The Revenue, however, relied upon a test report issued by the Central Institute of Plastics Engineering & Technology (CIPET) in respect of goods imported by another importer and proposed reclassification under CTH 39041090. A show cause notice was issued and the Adjudicating Authority confirmed the reclassification and denied the benefit of the exemption notification. The Commissioner (Appeals) upheld the order, observing that reproduction of relevant portions of the CIPET report in the show cause notice was sufficient and that non-supply of the full report did not prejudice the importer.
At the outset, the Tribunal found this approach to be contrary to settled principles of natural justice. It observed that it is a fundamental requirement that no person should be condemned unheard and that mere reproduction of extracts from a document cannot substitute the obligation to furnish the complete material relied upon for effective rebuttal. The Bench remarked that natural justice constitutes the minimum protection available to an individual against arbitrary exercise of quasi-judicial power. Since the CIPET report formed the very foundation of the proposed reclassification and was admittedly not furnished to the appellant, the importer was deprived of a fair opportunity to contest the findings. On this ground alone, the impugned order was held to be flawed and liable to be set aside.
On merits, the Tribunal framed the core issue as whether the classification adopted by the appellant under CTH 39042110/39042190 was correct, or whether the Revenue’s reclassification under CTH 39041090 was justified. The Bench noted that an identical issue involving reliance on the same CIPET report had already been considered in the case of Arun Industries v. Commissioner of Customs. In that case, the Tribunal had followed earlier decisions including Ram Nath Co. Pvt. Ltd. and Arun Polymers, holding that PVC resin suspension grade, being non-plasticised, was specifically classifiable under sub-heading 3904.21 during the relevant period.
The Tribunal reiterated that it is a settled principle of tariff interpretation that a specific entry prevails over a general or residuary entry. Referring to Rule 3(a) of the General Rules for the Interpretation of the Import Tariff Schedule, it noted that the heading providing the most specific description is to be preferred. Since Tariff Item 3904 21 10 specifically covered “Poly (vinyl chloride) resins” during the relevant period, the residuary entry under 39041090 could not be invoked.
Following the ratio of earlier coordinate bench decisions and noting that the issue was no longer res integra, the Tribunal held that the reclassification attempted by the Revenue was unsustainable even on merits. Accordingly, the Tribunal set aside the impugned Order-in-Appeal dated 11.12.2015 and allowed the appeal with consequential benefits, if any, in accordance with law.
Appearance
Counsel For Appellant: Ajay Kumar Gupta, Advocate
Counsel For Respondent: Rajni Menon, Authorized Representative
Cause Title: M/s.Krishna Marketing Versus The Commissioner of Customs
Case No.: Customs Appeal No. 40336 of 2016
Coram: P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member)
