2022 (6) TMI 1227 - AT - Customs

Tribunal overturns penalties for misclassification, highlighting burden of proof on taxing authorities

The tribunal set aside the orders imposing duties and penalties on the appellants for the misclassification of imported goods as Polyester Bed Cover, ... Classification of imported goods - goods declared as Polyester Bed Cover - the goods are Polyester Bed Cover or Polyester Fabric? - classifiable under Custom Tariff Heading 63041930 as declared by the Appellant or under Custom Tariff Heading 54075490 as claimed by revenue? - main contention of appellant is that department has not discharged the burden of proof of classifying the impugned goods under chapter 54 - applicability of case of MS SUNRISE TRADERS, JAI DURGA IMPEX, ALISHAN IMPEX, SATISH JINDAL, ADITYA LOOMTEX, TUSHAR TILAK, JMD TRADING CO, MOHIT SOIN, AJAY HIRALAL VIJ, JAI HANUMAN OVERSEAS, PANKAJ KUMAR KATARIA, PANKAJ KUMAR, SHREE SHYAM INTERNATIONAL AND TUSHAR GUPTA VERSUS C.C. -MUNDRA [2022 (1) TMI 468 - CESTAT AHMEDABAD]. HELD THAT:- In the relied upon order in the Textile Committee report, it was mentioned in the column of correct description and Classification of the sample that appropriate HS Code could not be provided due to rupture of yarn in weft while untwisting, the condition of having 85% texturised polyester yarn to classify under CTH 54075490 which is similar in the present set of appeals where warp is 38.4% texturised yarn and weft cannot be ascertained - Since we have already dealt the above reports of Textile Committee and ATIRA which are truly identical in nature, we find no reason to change our findings on the basis of the above reports as no new facts have been brought to our attention which warrants such a change. Since the revenue has not been able to discharge their burden of proof hence the classification of goods declared by the appellants cannot be disturbed. Forgery of the textile committee report - HELD THAT:- There are no reason to go into the detail as the fact that reports were forged does not impact the classification assuming the reports relied upon by the department are the original one as was held in Sunrise Trader case. Personal penalty on the charge of forgery of Textile Committee report, Mumbai on Bajrang Sharma, Amit Momamya and Mahesh Bhanushali - HELD THAT:- It is found that forgery is a very serious charge which should be proved by clear and cogent evidence which seems to be missing in the present case as two of them have retracted their statement and the statement of Mahesh Bhansuhali is the one left for which both the appellants have asked for cross examination which was denied by the lower authorities, which should have been given since other confessional statements were retracted. In our view imposition of penalty only on the basis of Mahesh Bhanushali is not tenable, hence set aside. Moreover, when department’s claim of change of classification failed, the personal penalties being consequential to the main case of classification would also not sustain. Appeal allowed - decided in favor of appellant. Issues Involved:Classification of imported goods as Polyester Bed Cover or Polyester Fabric under Custom Tariff Heading 63041930 or 54075490, Burden of proof on department, Imposition of personal penalties on CHA and others based on forged reports.Analysis:Classification of Goods:The appellants imported goods declaring them as Polyester Bed Cover under CTH 63041930. Textile Committee reports conflicted, with one indicating the goods as 'made ups' and the other report being inconclusive. Show Cause Notices were issued based on the reports, leading to the imposition of duties and penalties. The main contention was whether the impugned goods were correctly classified under chapter 54. The department argued that the goods were conclusively proven to be polyester fabric, relying on test reports. The tribunal analyzed previous orders and emphasized that the burden of proof lies with the taxing authorities. Since the department failed to discharge this burden, the classification declared by the appellants could not be disturbed.Imposition of Personal Penalties:Personal penalties were imposed on CHA and others for allegedly forging the textile committee reports. The tribunal noted that the basis for imposing penalties relied on retracted statements and lacked clear evidence. The appellants were denied the opportunity for cross-examination, which was deemed essential. As two individuals retracted their statements, the imposition of penalties solely based on one person's statement was deemed untenable. The tribunal set aside the penalties as they were consequential to the failed classification claim by the department.Conclusion:The tribunal found the impugned orders unsustainable and set them aside, allowing the appeals with consequential relief in accordance with the law. The judgment highlighted the importance of discharging the burden of proof in classification disputes and ensuring proper procedures in imposing personal penalties. The decision was pronounced on 27.06.2022 by the tribunal members.