2024 (5) TMI 573 - AT - Customs

Appellate Tribunal Rules in Favor of Importer; Dismisses Revenue's Appeal Due to Insignificant Impact on Duty Rate.

The appellate tribunal allowed the importer's appeal, dismissing the Revenue's appeal. The tribunal ruled that the importer was not liable for the ... Classification of goods - Valuation - liability to pay duty - Import of ‘non-alloy steel slabs-seconds and defectives’ - confiscation of ‘alloy steel’ - Penalty - dissonance with description of goods as ‘slabs’, classifiable against tariff item 7207 1990 - HELD THAT:- According to Learned Counsel for appellant, the sole relief sought for in appeal of jurisdictional Commissioner of Customs is levy of differential duty for goods having been, as set out in impugned order, mis-declared, at least, as far as presence of ‘alloy’ is concerned but that, notwithstanding the vigorous defence by Learned AR, the claim for ₹ 22,52,521 was below the threshold prescribed for pursuit of litigation by the Central Government in instruction dated 2nd November 2023 of CBIC from file of Judicial Cell to subordinate offices. Learned AR urged us to disregard this ground as one of the exceptions is an aspect of the appeal. Though the order impugned did take note of misdeclaration of ‘alloy steel’ articles as those of ‘non-alloy steel’, the appeal of Revenue refers to descriptional deviation solely to reinstate the upward valuation that had been resorted to by the original authority. Thus, we find that the exception in the instructions supra does not guide the handling of this appeal. The appeal of Commissioner of Customs is dismissed for not being in compliance with threshold qualification in the litigation policy of the Central Government. The finding on confiscability is limited to ‘alloy steel’ articles lying uncleared. That these were liable to confiscation is based on test report of sample which was extrapolated to the entirety of the consignment. The extent of misdeclaration has, thus, not been quantified. It is conceded in the impugned order that the goods are only ‘technically’ offending. It is also clear that the extent of alleged misdeclaration is limited and, with no consequence to value or rate of duty, hardly qualifies to be of relevance in disposal of the declaration u/s 46 of Customs Act, 1962. We see no reason to sustain the confiscation. Appeal of importer-appellant is allowed. Appeal of Revenue is dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the appeal by the Revenue challenging the appellate order absolving the importer from liability to differential duty under Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 is maintainable in light of the Central Government's litigation threshold instruction. 2. Whether the seized consignments, declared as non-alloy steel slabs but tested to contain alloy steel in part, were correctly subjected to confiscation under section 111(m) of the Customs Act, 1962 and penalty under section 112, having regard to reliance on sample test reports and extrapolation to the whole consignment. 3. Whether mis-declaration limited to technical non-conformity (alloy content) that does not affect value or rate of duty justifies re-determination of declared value under section 46 and consequent differential duty liability. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Maintainability of Revenue's appeal under Government litigation threshold Legal framework: Instruction of the Central Board of Indirect Taxes & Customs (CBIC) prescribing a monetary threshold for initiation or pursuit of litigation by the Central Government (instruction dated 2nd November 2023). Precedent Treatment: No prior judicial authorities cited or relied upon in the judgment; the Tribunal applied the instruction directly to facts. Interpretation and reasoning: The Tribunal examined the Revenue's challenge which sought reinstatement of upward valuation and recovery of differential duty of Rs. 22,52,521. It found that the Revenue's appeal fell below the monetary threshold set out in the CBIC instruction and therefore did not qualify for pursuit by the Government. The Tribunal noted an exception in the instruction but concluded that the exception did not apply to the Revenue's stated grievance (which concerned valuation/differential duty rather than an aspect falling within the exception). Ratio vs. Obiter: Ratio - the instruction forms an applicable administrative constraint that can render a Government-initiated appeal non-maintainable where the claimed amount is below the prescribed threshold and no exception applies; Obiter - none recorded. Conclusions: The Revenue's appeal was dismissed for non-compliance with the litigation threshold instruction; the Tribunal declined to entertain the valuation/differential duty challenge on that ground. Issue 2 - Confiscation and penalty based on sample testing and extrapolation Legal framework: Section 111(m) (confiscation) and section 112 (penalty) of the Customs Act, 1962; reliance on laboratory test reports (National Metallurgical Laboratory) and customs testing/examination procedures; principles of provisional assessment and adjudication. Precedent Treatment: No specific precedents identified or distinguished in the judgment; the Tribunal assessed reliability and sufficiency of the test-based extrapolation on the facts. Interpretation and reasoning: The Tribunal reviewed the sequence: provisional clearance of most pieces, testing of two out of 87 examined pieces by the NML, the original authority's extrapolation that parts of consignment were alloy (liable to confiscation) and non-alloy slabs/sheets classification issues. The first appellate authority had treated confiscation as unconscionable for non-alloy plates/sheets because test reports did not reliably distinguish between slab/plate classifications, but upheld a technical liability to confiscation limited to 122.42 metric tons of uncleared alloy steel with reduced fine. The Tribunal observed (a) the test report basis was a sample extrapolated to the whole consignment, (b) the impugned order itself characterised the offending goods as only 'technically' offending, (c) the extent of misdeclaration was not quantified, and (d) the misdeclaration did not affect value or duty rate. On these bases, the Tribunal found no reason to sustain confiscation of the goods. Ratio vs. Obiter: Ratio - confiscation founded solely on limited sample testing and extrapolation, where misdeclaration is technical and unquantified and does not affect value or duty rate, should not be sustained; Obiter - comments on unconscionability of confiscating non-alloy plates/sheets where testing is inconclusive. Conclusions: Confiscation under section 111(m) and related penalty were not sustained; the Tribunal set aside confiscation based on insufficiency of test-extrapolation and limited/technical nature of misdeclaration. Issue 3 - Re-determination of declared value under section 46 where misdeclaration is technical Legal framework: Section 46 of the Customs Act, 1962 (disposal of declaration and re-determination of value) and Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (basis for differential duty claims). Precedent Treatment: No authorities cited; Tribunal applied statutory purpose and factual matrix. Interpretation and reasoning: The Tribunal recognised that the original authority re-determined value for 979.349 metric tons based on finding that declared value was not acceptable given alleged misdeclaration. However, the Tribunal emphasised that the alleged misdeclaration related to alloy content and classification shifting between slabs and plates/sheets but was limited in extent, characterised as 'technical', and had no impact on the declared value or applicable duty rate. Given that the misdeclaration did not alter the quantitative valuation basis under the Valuation Rules and section 46 disposal, the Tribunal saw no justification for sustaining re-determination and differential-duty recovery. Ratio vs. Obiter: Ratio - where misdeclaration is limited to technical non-conformity that neither affects the taxable value nor the applicable rate of duty, re-determination under section 46 and pursuit of differential duty under the Valuation Rules is unwarranted; Obiter - remarks on the importance of quantification of extent of misdeclaration before re-determination. Conclusions: The Tribunal concluded that the misdeclaration did not justify re-determination of declared value or recovery of the asserted differential duty; accordingly, the importer's appeal was allowed on this point. Interrelationship and final disposition Cross-reference: Issues 2 and 3 are interlinked - the inadequacy of sample-based extrapolation (Issue 2) informed the finding that misdeclaration was technical and non-value-impacting (Issue 3); Issue 1 independently disposed of the Revenue's valuation challenge on administrative-threshold grounds. Final conclusions: The appeal by the importer was allowed (confiscation and related penalties not sustained); the Revenue's appeal was dismissed for non-compliance with the Government litigation threshold instruction. The Tribunal found the limited, technical misdeclaration insufficient to sustain confiscation or re-determination of value leading to differential duty recovery.