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 36050090 instead of CTH 48192010. The tribunal found appellant had genuine belief in adopted classification based on assessment practice, with assessing officers' approval and no objection from respondent despite correct description. Other exporters at Tuticorin port followed same classification during April 2015-October 2020. Commissioner found no mens rea as appellant gained no direct benefit from contravention. Classification being question of law cannot constitute misdeclaration. Appeal allowed.

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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.

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