Sanitary wares having Premium Aesthetic and sleek design would not fall in category of Artwork: Delhi HC quashes Order Rejecting Duty Drawback under Customs Act [Read Order]

In a significant case, the Delhi High Court has held that Sanitary wares having Premium Aesthetic and sleek design would not fall in category of Artwork and quashed the order rejecting duty drawback under the Customs Act, 1962.

The petitioner M/S United Sanitations is the holder of the “Import Export Code‟ and is stated to be a regular exporter of CP Sanitary Bathroom Fitting in brass (Basin Mixer, Bath Mixer, Sink Mixer etc.), commonly known as sanitaryware under All Industry Rates Drawback Scheme. 

It was stated that the subject goods are made of more than 90% brass and are chrome plated and are exclusively used in bathroom, kitchen etc. Suffice to state that after effecting the export of the consignment, the petitioner had claimed duty drawback @ 11% or Rs. 83 per kg (whichever was lower) on 07 September 2011, by classifying the goods under drawback heading No. 741902 Customs Tariff Act, 1975, as amended upto date , while on the other hand, the Department asserted that the goods would be covered under sub heading 848180 of the “CTA” thereby attracting drawback @ 7.3% or Rs. 43.10 per kg.

It was further alleged by the Department that the petitioner had deliberately classified the goods in question under Chapter heading No. 7419 with the sole intention of availing extra drawback, and thus, the petitioner had contravened the provisions of Section 75 of the Act read with Customs Central Excise Duties and Service Tax Drawback Rules, 1995 . 

Although, the consignment was provisionally released, subsequently Show Cause Notice dated 26 September 2012 was issued by the Additional Commissioner of Customs (Export), TKD, New Delhi  to the petitioner as to why the goods in question should not be classified under Chapter heading 84818020 of the CTA and under Tariff heading 848101 of the Drawback Schedule to the customs, further proposing to confiscate the goods for misclassification with the intention to avail higher drawback by the petitioner.

 The petitioner refuted such allegations and submitted a detailed reply dated 17 October 2012 with relevant documents but its objections did not find favour with the ACC(E) vide Order-in-Original No. 101/2013 dated 10 April 2013, thereby confirming recovery of drawback amounting to Rs. 19,36,809/- in respect of the past exports and also holding that the goods exported were liable to confiscation under Section 113(h)(ii) of the Act besides redemption fee of Rs. 20 Lacs and penalty of Rs. 15 Lacs.

Appeal before the Commissioner (Appeals) was rejected and was challenged in the appeal by filing a Revision Application under Section 129 DD of the Act before the Revisionary Authority i.e. the Additional Secretary to the Government of India, Ministry of Finance, Department of Revenue, New Delhi.  The revision application was dismissed vide impugned order No. 215/22-Cus dated 08 July 2022 inter alia holding that the original authority (sic ACC(E)) on examination of the live consignment had found that the goods were essentially mixers of different kinds,

A careful perusal of the clause in Rule 1(d) of Chapter 84 manifests that there is specific exclusion of the category of goods dealt with under original heading of 7321 or 7321 or similar articles of other base material in chapter 74 to 76 or 78 to 81. 

The respondent has clearly overlooked even the brochures pertaining to the items that amply demonstrate the essential features of the sanitaryware and use of brass so as to make the articles more elegant and durable for the use of end consumers. 

Ultimately, it is the end use of the product that is decisive and in the instant case, the items are meant for use in the kitchen, toilets or bathroom and although it may portray some art work in its designs, it is not „artwork‟ or „handicraft‟ item. Therefore, duty drawback could only be claimed in category of goods falling Chapter 74 vide item No. 741802. 

A division bench comprising of Justice Yashwant Varma and Justice Dharmesh Sharma observed that the impugned order passed by the Revisionary Authority thereby approving the order-in-original No. 101/2013 dated 10 April 2013 by the ACC(E) cannot be sustained in law. 

While allowing the Writ Petition the impugned order was quashed, and thereby providing that the respondent shall consider the claim for duty drawback of the “subject goods‟ in terms of classification vide item No. 741802 as per tariff applicable for the year 2011-212.

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