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of <h1>CESTAT Mumbai: Penalty Reduced for Misclassification Error in Customs Claim</h1> <h3>MICRO CLEARING AGENCY Versus COMMISSIONER OF CUSTOMS (EXPORT), NHAVA SHEVA</h3> MICRO CLEARING AGENCY Versus COMMISSIONER OF CUSTOMS (EXPORT), NHAVA SHEVA - TMI Issues:1. Classification of goods for drawback claim under incorrect chapter heading.2. Imposition of penalty under Section 114 of the Customs Act, 1962.Issue 1: Classification of goods for drawback claim under incorrect chapter headingThe appellant, a Customs House Agent (CHA), filed a shipping bill on behalf of the exporter claiming drawback under Chapter Heading 7307 2900 and/or 7222 for stainless steel corrugated flexible hose pipes classified under Chapter Heading 8307. The discrepancy led to the recovery of drawback amount along with interest and imposition of a penalty of Rs. 50,000 on the appellant. The appellant contended that the misclassification was inadvertent, based on instructions from the exporter, and requested the penalty to be set aside. The Revenue argued that the appellant's failure to notice the correct classification in the export documents was a serious omission, justifying the penalty under Section 114 of the Customs Act, which does not require mens rea. The Tribunal observed the discrepancy and acknowledged the appellant's inadvertent error but upheld the penalty based on the strict liability under the Act.Issue 2: Imposition of penalty under Section 114 of the Customs Act, 1962The Tribunal analyzed Section 114 of the Customs Act, which provides for penalties without requiring mens rea for acts or omissions rendering goods liable to confiscation. Referring to legal precedents, the Tribunal emphasized that penalties may be imposed irrespective of mens rea, as established in relevant court cases. Despite recognizing the absence of deliberate intent on the appellant's part, the Tribunal upheld the penalty but considered it excessive, especially for a small-time CHA. Consequently, the Tribunal reduced the penalty from Rs. 50,000 to Rs. 5,000, deeming the lower amount sufficient to serve justice in the case. The Tribunal's decision highlighted the importance of adherence to correct classification in customs procedures while balancing penalties with the circumstances of the case.In conclusion, the Appellate Tribunal CESTAT MUMBAI addressed the issues of misclassification for drawback claim and the imposition of penalty under Section 114 of the Customs Act, 1962. The judgment upheld the penalty due to the strict liability under the Act but reduced it from Rs. 50,000 to Rs. 5,000 considering the inadvertent nature of the error and the appellant's status as a small-time CHA. The case underscores the significance of accurate classification in customs declarations and the application of penalties under relevant statutory provisions.
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