Rule 56B testing permission and no misdeclaration justify setting aside duty demand and penalties on battery clearances

Removal of batteries to a testing unit under departmental permission was not shown to involve suppression or deliberate misdeclaration, because the arrangement was adopted for OEM acceptability and certification and random testing was treated as commercially sufficient. The demand and penalties were therefore not sustainable, particularly as duty had already been paid on clearance after testing and a further recovery would have resulted in double duty on the same goods. Even if the Rule 56B permission was erroneous, it remained binding on the Department until withdrawn in accordance with law.

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Issues: Whether the permission granted under Rule 56B was obtained by misdeclaration and whether the demand of duty and penalties could be sustained when the goods were cleared on duty payment after testing.

Analysis: The removal of batteries from the manufacturer to the testing unit was undertaken with departmental permission. The application did not suppress material facts, and the record showed that the testing arrangement was adopted for OEM acceptability and certification. Random testing was treated as a form of testing in the commercial context, and the Department could not insist that every item be subjected to test. On these facts, the conclusion of deliberate misdeclaration was not sustainable. The duty already paid by the testing unit on clearance after testing was also relevant, because sustaining the original demand would result in duty being recovered twice on the same goods. Even if the permission under Rule 56B were regarded as erroneous, it remained binding on the Department until withdrawn in accordance with law.

Conclusion: The demand of duty and the penalties were not sustainable, and the appeals succeeded.

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