2014 (12) TMI 693 - AT - Customs

Applicants Found Guilty of Customs Duty Evasion, Required to Deposit Cash and Bank Guarantee

The tribunal found that the applicants intentionally misdeclared goods and manipulated documents to evade customs duty. The main applicant was directed to ... Waiver of pre deposit - Evasion of duty - import of machinery for setting up of a plant to convert the skimmed milk to fermented milk under exemption notification - applicant have misdeclared the description of two consignments with an intention to avail undue benefit of concessional rate of customs duty under Notification 6/2006-CE and that the said importer had imported machinery which worked on the principles of heat exchange and were used for the purpose of sterilization, pasteurisation, incubation and dilution etc., which are excluded from the heading 8434. - Held that:- Plant has number of tanks and number of other machine some of which are interconnected. The plant also has a machine wherein they manufacture plastic bottles from granules and these plastic bottles are stored in plastic bottle storage tank and thereafter used along with filling and sealing machine and the milk is filled in the such bottles and packed. We have also gone through the printout of the correct SPE sheets as also the manipulated SPE sheets which were presented to the customs during clearance of the two consignments. We find that supplier has indicated certain HS code for each of the items. The manipulated SPE sheets had the same specification details but did not have these codes but the HSN Code was 8434 2000 in respect of all the items under the two bills of entry. We also note that the managing director or the Company has admitted the manipulation in his statement under Section 108 of the Customs Act. Shri Anil Choudhary also admitted the manipulation even though both of them have tried to put the blame on each other. We also note that Shri Anil Choudhary later on in email addressed to the managing director abroad has spoken about the manipulation being done and perhaps later on was removed from the service. Similarly, the invoice was manipulated. Prima facie we are of the view that the applicants have not made out a case for waiver of duty interest and penalties. During the hearing, advocate for the applicant has indicated that the unit is running into loss, though no documents in support of the same were produced. However, keeping in view the facts and circumstances of the case, we direct the appellant to deposit 50% of the duty demanded in cash within a period of six weeks. Further, the Bank guarantee for the 50% of the duty already executed by the applicant will be kept alive till the final disposal of the appeals. On payment of the said amount, there will be stay for recovery of Redemption fine, penalty and interest. While passing the said order, we keep in mind the Hon'ble Supreme Court decision in the case of Dunlop India. - stay granted partly. Issues Involved:1. Misdeclaration of goods to avail concessional customs duty.2. Classification of imported machinery under the correct HS code.3. Manipulation of documents (SPE sheets and invoices).4. Imposition of duty, fine, and penalties.5. Liability of individuals involved in the manipulation.Detailed Analysis:1. Misdeclaration of Goods to Avail Concessional Customs Duty:The main applicant imported machinery for converting skimmed milk to probiotic milk. While three consignments were described accurately and assessed on merits, two consignments were misdeclared as 'Dairy machinery parts' and 'Dairy machinery and parts' to avail concessional customs duty under Notification 6/2006-CE. The Directorate of Revenue Intelligence (DRI) collected intelligence suggesting the applicant misdeclared these consignments to benefit from a lower duty rate.2. Classification of Imported Machinery Under the Correct HS Code:The applicant classified the machinery under HS code 8434 2000, claiming them to be dairy machinery. However, investigations revealed that the machinery worked on principles of heat exchange, used for sterilization, pasteurization, incubation, and dilution, which are excluded from heading 8434. The correct classification should have been under different headings as per the actual use and function of the machinery.3. Manipulation of Documents (SPE Sheets and Invoices):The applicant manipulated the SPE sheets and invoices to misclassify the machinery under HS code 8434 2000. The correct SPE sheets received from the supplier were altered, and manipulated documents were presented to customs. The managing director and another individual admitted to the manipulation in their statements under Section 108 of the Customs Act. This fraudulent action was intended to mislead customs officials and evade higher duty.4. Imposition of Duty, Fine, and Penalties:Based on the investigation, the adjudicating authority confirmed a demand of Rs. 4,22,58,706/-. The goods were confiscated, and a redemption fine of Rs. 4,00,00,000/- was imposed. Additionally, a penalty equal to the duty evaded was imposed under Section 114A of the Customs Act, 1962. Personal penalties of Rs. 50 lakhs and Rs. 75 lakhs were imposed on the second appellant under Section 112(a) and Section 114AA, respectively. A penalty of Rs. 25 lakhs was imposed on the third appellant under Section 112A.5. Liability of Individuals Involved in the Manipulation:The managing director, who was actively involved in the manipulation, was directed to deposit Rs. 15 lakhs. The third appellant, who initially opposed the manipulation and later reported it to higher authorities, was granted a stay on the recovery of the penalty.Conclusion:The tribunal found that the applicants had intentionally misdeclared the goods and manipulated documents to evade customs duty. The tribunal directed the main applicant to deposit 50% of the duty demanded in cash and keep the bank guarantee for the remaining 50% alive until the final disposal of the appeals. The managing director was held liable for the manipulation and required to deposit Rs. 15 lakhs, while the penalty recovery from the third appellant was stayed. The tribunal emphasized the need for compliance and scheduled a report on 9th September 2014.