2022 (2) TMI 209 - AT - Customs

Tribunal Upholds Authenticity Belief, Reduces Penalties

Commissioner of Customs Versus M/s. Indian Oil Petronas Pvt. Ltd. (Vice-Versa)

Commissioner of Customs Versus M/s. Indian Oil Petronas Pvt. Ltd. (Vice-Versa) - TMI Issues Involved:1. Whether the Commissioner’s order in holding that value requires no redetermination is legally correct.2. Whether the Commissioner was right in holding that IOPPL (respondent) and their officers were not guilty of any misdeclaration and therefore, were not liable to penalty.3. Whether rejection of refund by the Commissioner (Appeals) is in order.Detailed Analysis:1. Misdeclaration of Country of Origin:The department alleged that the respondents misdeclared the country of origin of the imported goods. The respondents contended that they relied on the Certificate of Origin issued by the Chambers of Commerce and Industry, Abu Dhabi, and had no reason to disbelieve its authenticity. The Tribunal found no evidence from the Revenue to prove that the respondents had prior knowledge or intent to misdeclare the country of origin. The Commissioner had noted that the vessel's master and crew manipulated the documents, but there was no evidence against the respondents. Consequently, the Tribunal upheld the Commissioner’s finding that the respondents had a bona fide belief in the documents and were not liable for misdeclaration.2. Valuation of Goods:The respondents demonstrated that the agreed price with the supplier was on a CFR basis to Ennore Port, India, which included freight and insurance. The Tribunal found that the price was negotiated as per the spot offer letter and commercial invoice, and the country of origin did not affect the transaction value. The respondents provided evidence of the actual freight and insurance paid, which was accepted by the Commissioner. The Tribunal agreed with the Commissioner that the department’s claim for notional freight and insurance was not justified and upheld the Commissioner’s order on the valuation.3. Penalty on Employees:The Commissioner had concluded that the allegations against the employees were based on mere suspicion without any evidence of their involvement in document manipulation or prior knowledge of the actual country of origin. The Tribunal found no material on record to contradict the Commissioner’s findings and upheld the decision to drop penalties against the employees.4. Confiscation and Penalties:The Commissioner had confiscated the goods under Section 111(m) and imposed a redemption fine and penalty under Sections 125 and 112 of the Customs Act, 1962. The Tribunal noted that while mens rea (intent) is not a prerequisite for confiscation under Section 111(m), the absence of mens rea should be considered in determining the severity of penalties. Consequently, the Tribunal reduced the redemption fine from Rs. 50,00,000/- to Rs. 5,00,000/- and the penalty from Rs. 20,00,000/- to Rs. 2,00,000/-.5. Refund Claim:The respondents had filed a refund claim for Rs. 7,30,00,000/-, which was initially sanctioned by the Assistant Commissioner but later reversed by the Commissioner (Appeals). The Tribunal referred to CBEC circulars stating that refunds should not be withheld due to pending appeals unless a stay order is obtained. The Tribunal found that the refund was related to a security deposit and not duty, and the department’s retention of the amount was excessive. The Tribunal set aside the Commissioner (Appeals)’s order and allowed the refund with consequential relief.Conclusion:(i) Revenue Appeal No. C/41009/2016 is dismissed.(ii) Miscellaneous application (C/Cross/40946/2016) by M/s IOPPL is partially allowed, reducing the redemption fine to Rs. 5,00,000/- and the penalty to Rs. 2,00,000/-.(iii) Appeal No. C/41609/2018 filed by M/s IOPPL is allowed with consequential relief as per law.