2024 (1) TMI 1220 - AT - Customs

CESTAT sets aside Rs.25,000 penalty for Match Skillets classification dispute under CBLR 2018 Regulation 18(1)

CESTAT Chennai set aside penalty of Rs.25,000 imposed under Regulation 18(1) of CBLR 2018 for alleged misclassification of Match Skillets under CTH ... Levy of penalty under Regulation 18 (1) of the CBLR 2018 - failure to comply with the obligations mandated under Regulation 10 (d) and 10 (e) of CBLR 2018 - misclassifying ‘Match Skillets’ exported by them under CTH 36050090 instead of under CTH 48192010 - HELD THAT:- The stand of the appellant from the very beginning was that CTH adopted by the appellant was based on the assessment practice for Match Skillets made out of white board. The appellant has also given justification for the said classification. Further, it is found that the assessing officers were well aware of the classification and they allowed the said classification without any objection. The respondent did not raise any objection to the adopted classification even though the description of the export goods was correctly declared. Further, it is not only the appellant who has followed this classification with regard to impugned goods rather other exporters were also adopting the same classification which was followed at Tuticorin port during the period from April 2015 to October 2020. The Commissioner in the impugned order has held that the appellants are not directly benefited by their contravention hence there is no mens rea on the part of the appellant and therefore the imposition of penalty on the appellant for violation of Regulation 10 (d) and 10 (e) of CBLR 2018 is not warranted. Further, it is settled law that the classification is a question of law and cannot be treated as misdeclaration or misstatement. Once it has been observed by the learned Commissioner that there is no mens rea on the part of the appellant then in that case imposition of penalty of Rs.25,000/- for violation of Regulation 10 (d) and 10(e) of CBLR 2018 is not sustainable in law. Therefore, the penalty imposed on the appellant is set aside - appeal allowed. Issues:The judgment involves the imposition of a penalty on the appellant under Regulation 18(1) of the CBLR 2018 for failure to comply with obligations mandated under Regulation 10(d) and 10(e) of CBLR 2018.Summary:The appellant, a holder of a Customs Broker License, filed shipping bills on behalf of an exporter who allegedly obtained excess MEIS benefits by misclassifying goods. The appellant was accused of colluding with the exporter to intentionally misclassify 'Match Skillets' under a higher MEIS rate. The Inquiry Officer found the appellant in contravention of Regulations 10(d) and 10(e) of CBLR 2018. The Commissioner imposed a penalty of Rs.25,000/- but refrained from revoking the license or forfeiting the security deposit. The appellant challenged this penalty through an appeal.The appellant argued that the classification under CTH 36050090 was justified due to the goods' characteristics and historical practices. They contended that no advice was needed as the classification was consistent with past practices and assessment officer approvals. The appellant highlighted that other exporters at the same port used the same classification without objections. They also emphasized that DGFT authorities approved the MEIS benefits claimed under the same HS code, supporting the classification's validity.The appellant further argued that there was no violation of Regulation 10(d) as there was no non-compliance with Customs Act provisions by the exporter. They cited an advisory advising against penalizing brokers in cases involving interpretative disputes. The appellant emphasized that classification is a legal question, not a misdeclaration. Legal precedents were cited to support their arguments.After considering the submissions, the Tribunal found that the appellant acted in good faith based on historical practices and approvals. The Tribunal noted that the appellant was not directly benefited by the alleged contravention, indicating no mens rea. Relying on legal precedents, the Tribunal concluded that the penalty was not sustainable in law and set it aside, allowing the appeal of the appellant.In conclusion, the Tribunal ruled in favor of the appellant, setting aside the penalty imposed under Regulation 18(1) of the CBLR 2018 for failure to comply with obligations under Regulation 10(d) and 10(e) of CBLR 2018.