RADHIKA STEEL Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) THIS is an appeal against the order of the Commissioner of Customs (Appeals) New Delhi dated 21 -8 -1998 by which the Commissioner (Appeals) directed confiscation of certain porcelain items imported by the appellants under Section 111(d) of the Customs Act, 1962 and imposed a redemption fine of Rs. 1,10,000/ - apart from a penalty of Rs. 20,000/ - under Section 112(a) of the said Act on Shri Rakesh Anand, proprietor of Radhika Steel. The question relates to the correct classification of six items of Porcelain namely, (i) Vase, (ii) Champion Cup, (iii) Peacock Champion Cup, (iv) Gourd Pot, (v) Lamp Stand and (vi) Basket imported by the appellants.

(2.) THE Additional Commissioner of Customs after examining the items held that as far as Vases are concerned, they were no doubt ornamental, but they still retain their original utility value, thus they are fully capable of being used as a Vase. He observed that the same argument would hold good for Porcelain Basket as well. However; as regards three items, namely Champion Cup, Peacock Champion Cup and Gourd pot; he observed that these were not items which are of ordinary use in the common household and their main worth is ornamental. Even though these items can be used for filling liquid; that use is only incidental as these items are not intended or designed for any such definite use. He observed that as per Clauses (A) and (B) of Heading No. 6913 of the Explanatory Notes to the HSN, if a decorative article serves a useful purpose no less efficiently than their plainer counterparts; they are classified under Heading 6911 or 6912 rather than under Heading 6913. But if the usefulness of the article is clearly subsidiary to its ornamental character, it will fall under 6913. As regards Lamp Stand, Additional Commissioner held that it is clearly excluded from the purview of Chapter 69 by virtue of Clause (ii) of Note 2 to Chapter 69. Therefore, it will be classifiable under sub heading 9405.20. The Additional Commissioner held that since Champion Cup, Peacock Champion Cup and Gourd Pot are to be classified under 6913, their import was restricted under the Exim Code. Similarly, Lamp Stand also was restricted under the Export Import Code. In appeal, the Commissioner (Appeals) after examining the articles himself at the time of hearing observed that the articles are not items which are of ordinary use in any household and their main worth is purely ornamental. While upholding the classification of the goods under Chapter Heading 69.13 and the confiscation ordered by the Additional Commissioner and the quantum of redemption fine, Commission of Customs (Appeals) however held the ingredients of mens rea are absent when the dispute was only in relation to the classification of items and the allegation did not relate to any mis -declaration or under -valuation. He therefore, held that invoking of penalty was not called for and the same was set aside.

(3.) SHRI J.M. Sharma, ld. Consultant appearing for the appellants submitted that the imported goods made of Porcelain were items of "tableware and kitchen ware and other household articles of Porcelain or Chinaware" importable against Special Import Licence (SIL). They had imported similar items on a trial basis on 7 -1 -1998 as per Bill of Entry No. 613714 which were cleared on payment of duty against SIL. When another consignment under Bill of Entry No. 102883 dated 27 -2 -1998 was filed for clearance under Chapter subheading 6911.10 against SIL, excepting the six items aforesaid all the rest were allowed to be cleared. The lower authorities had held that the six items were not importable against SIL on the grounds mentioned above and passed the impugned order. Ld. Consultant submitted that the goods in dispute were merely decorated household articles capable of being used as efficiently as their plain counterparts and decoration on the articles did not make the said article less useful than their plainer counterpart. Further, the decoration on the goods had not impaired their usefulness as containers. He further submitted that the Commissioner (Appeals) had not given any finding based on records or evidence but had passed an arbitrary order. He submitted that the Commissioner (Appeals) only had raised some doubts about such heavily decorated ornamental pieces being used in any household as articles of chinaware, or tableware. Ld. Consultant referred us to HSN notes under Heading 6913. According to the HSN Notes, sub heading 6913 covered (a) statuettes and other ornamental ceramic articles of the type designed essentially for interior decoration of house, office, assembly rooms churches etc. and outdoor ornaments, for example garden ornament. Note (b) covered Tableware and other domestic articles only if the usefulness of the decorated articles is clearly subordinate to their ornamental character for e.g. trays molded in relief i.e. carving or molding in which the design stands out from the general surface (with greater, less approiximation to the depth of the object represented) so that their usefulness virtually is nullified. Note (c) stated that Tableware and domestic utensils designed and decorated in such a manner as to impair the usefulness of the article. Note (d) stated that such decorated articles serve the useful purpose less efficiently than their plainer counterparts. Note (e) further stated that in case the classification under 69.13 is ruled out then the articles will be classifiable under Heading 69.11 or 69.12. Ld. Consultant submitted that the three disputed items namely, Champion Cup, Peacock Champion Cup and Gourd Pot are essentially containers having two parts, namely, the lower part which can be used for keeping dry or liquid items. The upper part, that is, lid, functions as a protection to the contents stored in the lower parts. The decoration of the outer surface in no way impairs the usefulness of the items as containers. Though these are decorated containers, they served the same useful purpose as their plainer counterparts and hence they would stand excluded from Chapter Heading 69.13. They would therefore, be classifiable under Heading 69.11 or Heading 69.12. Further, since the goods in dispute are articles of Porcelain or China, they will be classifiable under Heading 69.11 only. As per HSN Notes sub -heading No. 69.11 would include pots, store jars and preserving jars. It was also contended that Revenue has failed to discharge the onus of establishing that the disputed items fall under Chapter Heading 69.13.