KARACHI: Deciding a bunch of 31 Special Custom Reference Applications (SCRA’s) filed by United Refrigeration Industries Ltd and others importers of Polymeric MDIs, a Customs Appellate bench of High Court of Sindh allowed the SCRAs setting asides orders/judgment passed by all forums below.

Rana Sakhawat Ali, Sardar M Ishaque, Dr Muhammad Khalid, Abdul Ghaffar Khan Advocates appearing for the applicants contended that the product(s) in question (Wannate PM-2010, Wannate PM-8221, Cosmonate M200, Millionate MR-200 and Lupranate M20S), being polymethylene polyphenylene isocyanates commonly referred to as Polymeric MDIs (generically) was regularly being classified by the Department under HS Code 3824.9091 over a considerable period of time

They further submitted that time and again issue of its Classification was raised by various Departments including the Directorate of Intelligence & Investigation and thereafter, the matter was referred to the Classification Committee of the Appraisement Collectorate at Karachi who vide its decision dated 27.12.2014 held that the goods in question are to be classified under HS Code 3824.9091.

The counsel pleaded that despite this Classification decision, the Directorate of Intelligence was of the view that the goods in question are correctly classifiable HS Code 3909.3000 and once again various Collectorates, pursuant to such view of the Directorate of Intelligence & Investigation changed the Classification and thereafter importers at Lahore had to approach FBR, who vide letter dated 18.11.2016 took exception to such change of Classification without further referring the matter to the Classification Committee and directed to release the consignments under HS Code 3824.9091.

They contended that  once again the Classification Committee vide Letter dated 02.12.2016 reiterated its earlier opinion that the goods are to be classified under HS Code 3824.9091; that Intelligence Directorate again approached FBR who vide its letter dated 7.3.2017 withdrew its earlier letter dated 18.11.2016 and once again directed the Classification Committee to re-examine the issue.

Thereafter, the Classification Committee has issued a new Classification Ruling vide Public Notice No. 9/2017 dated 12.6.2017 and has now changed its opinion by holding that the goods in question are classifiable under HS Code 3909.3000; that notwithstanding the changed stance of the Classification Committee the said Public Notice is only applicable prospectively, whereas, all consignments in question which are subject matter of these Reference Applications, were cleared prior to issuance of this Public Notice; that in terms of Para 74 of CGO 12 of 2002 it could only be applied prospectively; that subsequently, FBR has also amended the Customs Tariff through Finance Act 2017, and has now created a specific local heading of these goods under HS Code 3909.3000 which clearly reflects that insofar as the goods in question are concerned, they cannot be classified under the newly created heading as no retrospective effect can be given to an amendment made in the First Schedule to the Custom Act, 1969 by way of Finance Act, 2017 the prospective Classification under HS code 3909.3000

They maintained that they are not aggrieved; but their case is that the departure from a settled practice which has resulted by way of a Public Notice, can only be applied prospectively, whereas, reliance has been placed on various reported.

Khalid Rajpar Advocate representing the respondent Department rebutting the arguments submitted that since the Classification earlier determined was found to be incorrect, whereas, it was in respect of some other goods; hence, the Tribunal has come to a correct conclusion by holding that this is not a case of any retrospective application of the Public Notice but a case of mis-declaration of Classification by the Applicants and therefore, fine and penalty was also imposed upon the importers and their custom agents; that no exception can be drawn to the conclusion arrived at by the Tribunal; that it is otherwise a factual controversy which has been decided by the Tribunal against the Applicants; that the Explanatory Notes and the amendments to the harmonised coding system was very much in field and the product in question was always required to be classified under HS Code 3909.3000; that in view of the reported cases4 all these Reference Applications merit dismissal.

The bench after hearing the sides and perusing all determinations by the Classification Committee held that HS Code 3909-3000 dated 12-6-2017 would be applicable prospectively.

The bench held that “ since the Classification of goods in question under HS Code 3824.9091 during the period in dispute was pursuant to a determination by the competent forum in law19, whereas, it was a consistent practice and has only been changed after reviewing the changed circumstances, including amendment made in the First Schedule to the Customs Act, (i.e. Customs Tariff) by way of Finance Act, 2017, through which a specific local 8 (eight) digit HS code has been created for all sorts of MDI’s (crude MDI, polymeric MDI); therefore, the subsequent determination 18 1998 SCMR 237 Central Board of Revenue Vs. Shakeel Brothers. 19 The Classification Committee as per Para 2 of CGO 12 of 2002 SCRA Nos. 426 / 2019 & Others Page 22 of 22 under HS Code 3909.3000 vide Public Notice09/2017 dated 12.6.2017 would only be applicable prospectively on consignments for which Goods Declarations were filed on or after 12.6.2017.

The bench with the above order, allowed the SCRAs’ in favor of importer companies setting aside the impugned orders passed by the forums below.