In a significant ruling, the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT) in Chennai addressed the appeal filed by the Commissioner of Customs against M/s. K.B. Autosys India Pvt. Ltd. The case revolved around the classification of imported materials used in the manufacture of brake pads. The central legal question was whether these materials should be classified under CTH 3824 as declared by the respondent or under CTH 6813 as argued by the appellant.
The appellant, represented by Ms. O.M. Reena, contended that the imported items were friction materials in powder form, warranting classification under CTH 6813. They argued that the materials were processed to achieve specific properties suitable for bonding to metal plates, thus justifying the reclassification and the demand for differential duty amounting to over ₹7.5 crores.
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Conversely, the respondent’s counsel, Mr. Hari Radhakrishnan, argued that the imported goods were not friction materials as defined under CTH 6813 since they were in powder form and required further processing to become usable brake pads. They maintained that the classification under CTH 3824 was appropriate and that the extended period for duty demand was unjustified.
The Tribunal analyzed the arguments presented by both parties, focusing on the definitions and classifications outlined in the Customs Tariff Act. The court emphasized that the classification should be determined based on the essential character and intended use of the imported materials. It noted that the materials, despite being in powder form, were indeed friction materials as they were integral to the manufacturing process of brake pads.
The court also referenced previous rulings and the General Rules for Interpretation (GRI) of the Customs Tariff, concluding that the imported materials were more appropriately classified under CTH 6813. Furthermore, the court found that the invocation of the extended period for duty demand was not legally tenable, as there was no evidence of suppression of facts by the respondent.
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Ultimately, the two member bench of the tribunal comprising Vasa Sesha Giri Rao (Technical member) and Sulekha Beevi C.S (Judicial member) ruled in favor of the respondent, rejecting the appellant’s classification under CTH 3824 and upholding the classification under CTH 6813. The court ordered that the demand for duty be limited to the normal period, thereby dismissing the extended period claims. This decision underscores the importance of accurate classification in customs law and the implications of misclassification for importers.
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