Sweetener importer penalized for deliberate misclassification under CTH 2106 instead of CTH 2938

CESTAT Bangalore dismissed the appeal regarding misclassification of imported sweeteners used in chewing gum manufacturing. The appellant initially classified goods under CTH 2938 but department reclassified under CTH 2106, which appellant accepted. CESTAT found intentional mis-declaration as appellant deliberately avoided declaring true organic description and was aware supplier classified same goods under CTH 2106. CFTRI testing confirmed goods were food ingredients, not organic/inorganic chemicals as claimed. Extended limitation period invocation and equivalent penalty imposition were upheld due to deliberate misclassification.

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Issues involved: Misclassification of imported product, invocation of extended period for duty payment, imposition of penalty under Section 114A of the Customs Act, 1962.

Misclassification of imported product: The appellant imported a product classified under Customs Tariff Heading (CTH) 2938 9090, while the department classified it under 2106 9099 based on the supplier's invoice indicating HTS Code as 2106907090. The appellant admitted the correct classification under CTH 2106, used as an additive in chewing gum manufacture. The department alleged suppression of facts, invoking extended period for past clearances and confirmed differential duty for a specific period along with equivalent penalty.

Invocation of extended period for duty payment: The appellant argued that the show-cause notice did not allege suppression of facts nor invoke the extended period of limitation. Citing legal precedents and CBIC Circular, the appellant contended that the order cannot go beyond the notice if suppression is not alleged. However, the Authorized Representative justified invoking suppression and penalty due to mis-declaration by the appellant.

Imposition of penalty under Section 114A: The show-cause notice alleged willful mis-declaration and suppression by the importers to evade payment of duty, invoking Section 114A of the Customs Act, 1962. The notice highlighted deliberate mis-declaration of goods and failure to subscribe to the truth of the contents of Bills of Entry. The appellant's claim that the proceedings were beyond the scope of the notice was deemed unjustified by the Tribunal.

Decision: The Tribunal upheld the Commissioner's decision to invoke the extended period of limitation and impose an equivalent penalty, as the appellant had deliberately misclassified the goods, leading to intentional mis-declaration. The reclassification under CTH 2106 was deemed appropriate, considering the true nature of the imported products as food ingredients for chewing gum manufacture. The appeal was dismissed, affirming the imposition of penalty and differential duty for the specified period.

(Order pronounced in Open Court on 21.05.2024.)

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