The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) ruled that the Coating Machine “Innopet Plasmax System 20Q” should be classified under the specific tariff heading for Aerating Beverages rather than under the general residual heading as mandated by GIR 3
SLMG Beverages Pvt. Ltd., the appellant is an aerated water bottling manufacturer of Coca-Cola and imported components of a modernized aerating beverages plant. Among the imports, a PET bottle coating machine called an “Innopet Plasmax System 20Q”. The appellant classified the machine under Customs Tariff Item ( CTI ) 8422 3000 ( machinery for aerating beverages ) to avail a reduced 5% customs duty under Notification 50/2017.
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The Directorate of Revenue Intelligence ( DRI ) alleged the coating machine was misclassified stating that it performed an independent coating function so it was classifiable under CTI 8479 8999 ( machines with individual functions ) attracting a higher 7.5% customs duty.
The Commissioner of Customs upheld the DRI’s view demanded differential duty and imposed penalties, and ordered confiscation. Aggrieved, the appellant appealed the order before the CESTAT.
The appellant’s counsel argued that the machine was integral to the entire bottling plant and not an independent entity. The counsel argued the coating process increased the shelf life of beverages making the machine a part of the aerated beverage machinery.
The main issue revolves around whether the Innopet Plasmax System 20Q was classified under CTI 8422 3000 component of a composite bottling plant as the appellant classified or an independent machine under CTI 8479 8999 which the department classified.
The two-member bench comprising S.K Mohanty ( Judicial Member ) and M.M Parthiban ( Technical Member ) observed that the “Innopet Plasmax System 20Q” was a component of a composite machinery system specifically designed for aerating beverage production.
The tribunal observed that Section Notes 3 and 4 of Section XVI of the Customs Tariff Act explain classifying composite machines by their principal function or as part of the system they are designed to serve. The interconnected design and operation of the coating machine with other components of the bottling plant demonstrated its dependent role within the larger system disqualifying it as a standalone machine.
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The tribunal dismissed the department’s claim that the machine should fall under the residuary category of CTI 8479 8999 as such classifications are not warranted when a more specific heading applies.
The tribunal pointed out that the application of GIR 1 and GIR 3 explained that classification should prioritize specific tariff headings over general or residuary categories. So the tribunal ruled that “Innopet Plasmax System 20Q” was classifiable under CTI 8422 3000. The tribunal quashed the penalties, differential duty demand, and confiscation ordered by the Commissioner of Customs.
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