2023 (8) TMI 1000 - AT - Customs

Customs Appeal Allowed: No Mis-declaration Found, Appellant Acted in Good Faith

Kalpataru Transmission Ltd. Versus C.C. -Mundra

Kalpataru Transmission Ltd. Versus C.C. -Mundra - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether an excess in actual weight over the invoiced weight - where invoicing is done on a standard/theoretical weight per plate - constitutes mis-declaration attracting confiscation under Section 111(m) of the Customs Act. 2. Whether imposition of penalty under Section 112(a) and redemption fine under Section 125 is justified where (a) the number of imported articles is undisputed, (b) invoicing is on theoretical standard weight, and (c) differential customs duty has been paid on the additional actual weight. 3. Whether absence of mala fide or intent to evade duty affects the applicability of confiscation and penal provisions in the circumstances described. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Legal framework: The matter engages the provision making goods liable to confiscation for mis-declaration of goods/quantity and the allied penal provisions for incorrect declaration. The Court focuses on the element of mis-declaration as the triggering fact for confiscation under Section 111(m). Issue 1 - Precedent Treatment: The Revenue relied on tribunal and supreme court decisions to support confiscation and penalty. The Tribunal reviewed those authorities but declined to follow the lower-authority outcome insofar as they supported confiscation on facts distinguishable from the present factual matrix. Issue 1 - Interpretation and reasoning: The Tribunal found the invoice expressly adopted a standard/theoretical weight per plate based on plate size; the number of plates matched the manifest and examination; only aggregate weight varied. The Tribunal reasoned that theoretical weight calculations necessarily yield discrepancies with actual weight; such variance, when the invoiced basis is known and consistent, does not ipso facto amount to a mis-declaration of quantity or value. The Tribunal placed weight on the undisputed fact that the importer paid the invoice value as billed and subsequently discharged the additional customs duty on the differential weight. Issue 1 - Ratio vs. Obiter: Ratio - Where invoicing is on a standard/theoretical weight and the number/identity of items is correct, a mere variance in actual weight does not constitute mis-declaration for purposes of confiscation under Section 111(m), absent other indicia of concealment or intent to evade duty. Obiter - Observations on the predictable nature of theoretical-versus-actual weight discrepancies and commercial invoicing practices. Issue 1 - Conclusion: The Tribunal concluded there was no mis-declaration of weight or value; confiscation under Section 111(m) was not sustainable on these facts. Issue 2 - Legal framework: Penalty under Section 112(a) and redemption fine under Section 125 are discretionary sanctions ordinarily contingent on culpability and the commission of a prohibited act (e.g., mis-declaration/evading duty). Issue 2 - Precedent Treatment: The Tribunal noted authorities cited by the Revenue but held that the circumstances in those authorities were distinguishable because they involved clear intent or mis-declaration not explained by invoicing practices; hence those authorities were not followed in their application to the present facts. Issue 2 - Interpretation and reasoning: The Tribunal emphasized absence of mens rea: the number of plates was correct, invoicing used theoretical weight as standard practice, the importer paid the invoice value, and the differential duty was cleared. Given the absence of mala fide and the voluntary discharge of additional duty, the Tribunal found imposition of redemption fine and penalty unjustified. The Tribunal expressly disagreed with the lower authorities' imposition of monetary penalties in these circumstances. Issue 2 - Ratio vs. Obiter: Ratio - In the absence of intent to evade duty, and where discrepancies arise from accepted theoretical weight invoicing and the importer has paid additional duty, imposition of penalty under Section 112(a) and redemption fine under Section 125 is not warranted. Obiter - The Tribunal's comments on discretionary exercise of penal provisions in cases of explained, commercial invoicing variances. Issue 2 - Conclusion: The Tribunal set aside the orders of confiscation, penalty, and redemption fine, holding that penal consequences could not be sustained given the factual matrix and absence of mala fide. Issue 3 - Legal framework: The concept of mens rea/mala fide is relevant to both confiscation and penalty; statutory provisions permit confiscation and penal consequences where mis-declaration or evasion is established. Issue 3 - Precedent Treatment: While precedents establish that mis-declaration can attract confiscation and penalty, the Tribunal treated those decisions as inapplicable where the discrepancy is satisfactorily explained and there is no intention to evade. Issue 3 - Interpretation and reasoning: The Tribunal found the absence of mala fide determinative: payment of invoice value, acceptance of theoretical-weight invoicing, and subsequent payment of differential duty collectively rebut the inference of intent to evade. The Tribunal held that penal consequences require more than a mere quantitative discrepancy; they require mis-declaration with culpable intent or other aggravating factors. Issue 3 - Ratio vs. Obiter: Ratio - Absence of mala fide and full payment (including differential duty) negates the basis for treating an explained variance as mis-declaration warranting confiscation or penalty. Obiter - General observations on commercial practices of theoretical weight calculation. Issue 3 - Conclusion: The Tribunal concluded that the lack of intent to evade duty, combined with corrective payment of duty, precluded the imposition of confiscation, redemption fine and penalty on the facts before it.