Classification of goods – Department cannot justify reclassification through general assertions, selective examination of few products, or by relying on website material which not placed on record

In a classification dispute, where the Department had sought reclassification of the auto parts imported by the assessee and consequent denial of the ASEAN FTA benefit, the Chennai Bench of the CESTAT has allowed assessee’s appeal holding that the Department failed to establish its proposed reclassification of specified imported automobile parts from TI 8708 99 00 (‘other parts and accessories’) to TI 8708 29 00 (‘parts and accessories of bodies’) and other tariff entries. The Tribunal in Toyota Kirloskar Motor Pvt. Ltd. v.Commissioner observed the following:

• Burden to justify reclassification lies squarely on the Revenue and cannot be discharged through general assertions, selective examination of a few products, or reliance on assessee’s website material that was never placed on record.

• While the Department sought to reclassify 226 different articles, the adjudicating authority examined only a handful of representative items and mechanically extended the conclusion to all goods in dispute.

• Classification must be determined strictly under the General Rules of Interpretation, relevant Section and Chapter Notes, and HSN Explanatory Notes.

• Absence of any finding by the Department identifying an article, setting out its objective characteristics as imported, matching those characteristics against the terms of Customs Tariff Item 8708 29 00 read with the Section and Chapter Notes, and explaining why it is a part or accessory of a body rather than a part or accessory of a motor vehicle simpliciter.

• Record contained no analysis of any individual article, no technical evidence and no trade evidence.

• Department’s failure to prove the proposed classification meant that the classification adopted by the importer would prevail. Benefit of FTA was thus allowed.

In respect of limitation for demand and invocation of extended period, the Tribunal observed the following:

• Information supplied by the importer itself and available on its website cannot simultaneously be treated as ‘suppressed’ facts.

• A corrigendum cannot be used to substantially enlarge a show cause notice by introducing fresh goods and transactions to the detriment of the noticee.

The assessee was represented by Lakshmikumaran & Sridharan Attorneys here.