2024 (10) TMI 159 - AT - Customs

Importer's good faith misclassification of LC PUFA Mix Oil leads to penalty waiver under sections 112B and 114AA

M/s. A.V. Global Corporation Pvt. Ltd. Versus Commissioner of Customs, New Delhi (Import & General)

The CESTAT New Delhi ruled on the classification of imported LC PUFA Mix Oil with Sofinol, finding the importer had misclassified goods but acted in good ... Classification of imported goods - LC PUFA Mix Oil with Sofinol (edible grade) - to be classified under CTH 15079010 or under CTH 15179090? - confiscation - penalty - HELD THAT:- The importer M/s. Nestle India vide their technical writeup dated 10.05.2013 and 15.05.2013 had conveyed to the Department that they have imported a number of items for manufacture of their final products. Since the product imported was composed of 3 vegetable oils and was of food grade suitable for application in nutritional products that the importer was under bonafide impression that the product imported is classifiable under 1507. However, on being pointed out the importer initiated the process of re-considering the classification not only this had voluntarily deposited the differential duty of Rs.38,43,921/- with respect to the past 6 bills of entry as brought to notice by the Department. These facts are sufficient for us to hold that the importer had misclassified the goods to be imported. But penalties are not imposable in every case of mis-declaration. Law has been settled that mis-classification is different from mis-declaration. This Tribunal Calcutta Bench in the case of Unique Plastic Industries vs. Commissioner of Central Excise Calcutta reported in [2002 (6) TMI 273 - CEGAT, KOLKATA] has held that wrong claim of classification or availing wrong benefit of exemption Notification by itself does not amount to suppression or mis-declaration unless there are certain facts which were required to be disclosed by the assessee but have not been disclosed. The Delhi Bench of this Tribunal also in the case of KIRTI SALES CORPN. VERSUS COMMR. OF CUS., FARIDABAD [2008 (5) TMI 555 - CESTAT, NEW DELHI] has held that to constitute “misdeclaration” the declaration must be intentional. Misdeclaration cannot be understood as same as wrong declaration. The imposition of penalty cannot be automatic. It has to pass the test of mens-rea as has been held by Hon’ble High Court of Punjab and Haryana in the case of COMMISSIONER OF CUSTOMS, AMRITSAR VERSUS KAMAL KAPOOR [2006 (12) TMI 152 - HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH]. There are no evidence of presence of mens-rea at-least with the appellant CHA to deliberately and intentionally mention the wrong classification with an intent to evade the Customs Duty - It cannot be imposed in the cases where there is a technical or venial breach of the provisions of act or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute. Hon’ble Court also clarified that the discretion to impose a penalty must be exercised judicially. Penalty u/s 112 B of the Customs Act, 1962 - HELD THAT:- The main argument of the department that the appellant has violated the provisions of CBLR is denied to be the sole ground for imposing penalty upon appellant CHA under section 112 B of the Customs Act, 1962. The order imposing penalty is therefore liable to be set aside for the said reason. Also for the reason that the Show Cause Notice has not invoked the specific sub clause of section 112B - The Apex Court in the case of AMRIT FOODS VERSUS COMMISSIONER OF CENTRAL EXCISE, UP. [2005 (10) TMI 96 - SUPREME COURT] has held that when a particular clause of the provision has not been invoked in the Show Cause Notice nor has been specified in the adjudication order. The order imposing penalty is waived and is liable to be set aside. Penalty imposed under 114 AA - HELD THAT:- Since provision 114 AA is against the fraudulent exporters we hold that the same is wrongly invoked for penalizing the Customs House Agent - penalty even under 114AA has wrongly been imposed upon the appellant-CHA, same is liable to be set aside. The impugned order is set aside - appeal allowed. Issues:Classification of goods under Customs Act 1962, Allegations against Customs House Agent (CHA), Imposition of penalty under sections 112(b) and 114AA of the Customs Act 1962.Analysis:1. Classification of Goods under Customs Act 1962:The appeal challenged the Order-in-Original No.15/2015 dated 09.11.2015, which involved the incorrect classification of goods declared by the importer. The Department seized the goods under section 110 of the Customs Act 1962, suspecting them to be liable for confiscation under section 111 of the Act. The importer had wrongly classified the goods under CTH 15079010 instead of CTH 15179090, leading to the imposition of penalties.2. Allegations against Customs House Agent (CHA):The appellant, a Customs House Agent (CHA), was accused of being an interested party in the clearance of goods under the wrong classification. The Department issued a Show Cause Notice proposing penalties under sections 112(b) and 114AA of the Customs Act 1962. The appellant argued that they acted based on the importer's instructions and documents, denying any deliberate wrongdoing on their part.3. Imposition of Penalty under Sections 112(b) and 114AA:The Department argued that the CHA failed to exercise due diligence and advised the importer incorrectly, leading to the evasion of Customs Duty. However, the Tribunal found no evidence of mens rea or deliberate intention on the part of the CHA to evade Customs Duty. The penalties imposed under sections 112(b) and 114AA were deemed unsustainable and set aside based on legal precedents and the lack of evidence supporting the allegations.4. Burden of Proof and Judicial Review:The Tribunal emphasized that the burden of proof regarding the classification of goods lies with the Revenue, and penalties cannot be imposed without evidence of intentional wrongdoing. The Tribunal cited legal precedents and parliamentary committee reports to support its decision to set aside the penalties imposed on the CHA. The order under challenge was ultimately set aside, and the appeal was allowed on 01-10-2024.In conclusion, the Tribunal's decision focused on the lack of evidence of intentional wrongdoing by the CHA and emphasized the importance of proving mens rea for the imposition of penalties under the Customs Act 1962. The legal analysis highlighted the burden of proof on the Revenue, the distinction between misclassification and misdeclaration, and the need for judicial review in penalty proceedings.