2025 (12) TMI 717 - AT - Customs

Appeals dismissed in polyester fabric reclassification under CTI 6001 92 00; confiscation and penalties u/ss111,112,114A,114AA

CESTAT upheld reclassification of the imported goods as 100% polyester knitted cut fabric under CTI 6001 92 00 ('others - of man-made fibres'), rejecting ... Classification of imported - to be classified as 100% Polyester Knitted Cut Fabric under CTI 6001 92 00 or 100% Polyester Knitted Long Pile Fabric under CTI 6001 10 90? - mis-declaration of nature and quantity of goods with an intent to evade duty - import of goods not declared at all in the Bills of Entry - confiscation - penalties - HELD THAT:- The quantity of the goods was mis-declared in all three containers. In container NYKU 5843774 the declared weight was 7,124 kg while the actual weight was 19, 660 kg, i.e., more than twice the declared weight. Similarly in SEGU 5298849 the declared weight was 7,368 kg while the actual weight was 19, 930 kg-more than twice the declared weight. In both these containers while only long pile fabric was declared, there was also undeclared cut pile fabrics. Further, several undeclared items such as wall clock, mirrors, plush pillows were also found in SEGU 5298894. There is no dispute that the goods fall under the four-digit Customs Tariff Heading of 6001. Under this CTH, there are three sub-headings, long pile fabrics, looped pile fabrics and others. Cut pile fabrics imported by the appellant were as per the test reports, neither long pile fabrics nor looped pile fabrics and hence they fall under ‘others’. The ‘others’ are further sub-classified into ‘of cotton’ and ‘of man-made fibres’. Since the fabrics were made of polyester, they fall under CTI 6001 92 00 as those made of man-made fibres. Therefore, the demand consequent upon such re-classification must also be upheld - the impugned order needs to be upheld insofar as the classification of the goods and the consequential demand is concerned. Confiscation - HELD THAT:- Since the goods were vastly mis-declared in terms of quantities and type of goods, they were correctly confiscated by the Commissioner in the impugned order under section 111(l) and (m). Penalties on main partner of the appellant firm - HELD THAT:- The facts of the case show that the goods were mis-declared in terms of quantity and nature and some goods were not declared at all. The main partner of the appellant firm involved in the imports. The actions on the part of Stout and main partner rendered the goods liable to confiscation. Therefore, the penalties imposed on them under section 112 need to be upheld. Through the mis-declarations, duties were short paid and hence the mandatory penalty under section 114A on Stout, the importer, needs to be upheld. The main partner of Stout is involved in these importers and the mis-declarations. Therefore, penalty under section 114AA also needs to be upheld. The impugned order is upheld - both appeals are dismissed. 1. ISSUES PRESENTED AND CONSIDERED (1) Whether the imported goods were correctly reclassified from '100% Polyester Knitted Long Pile Fabric' under CTI 6001 10 90 to '100% Polyester Knitted Cut Pile Fabric' under CTI 6001 92 00 and whether the consequent demand of differential duty was sustainable. (2) Whether the imported goods were liable to confiscation under sections 111(l) and 111(m) of the Customs Act, 1962 on account of mis-declaration of description, quantity and non-declaration of certain goods. (3) Whether penalties imposed on the importing firm under sections 112(a) and 114A, and on its partner under sections 112(a) and 114AA of the Customs Act, 1962 were justified. (4) Whether the impugned order was vitiated for violation of principles of natural justice, including denial of cross-examination of Textile Committee experts. 2. ISSUE-WISE DETAILED ANALYSIS Issue (1): Reclassification of goods and demand of differential duty Interpretation and reasoning (a) The goods were declared in two containers as '100% Polyester Knitted Long Pile Fabric' under CTI 6001 10 90. On examination and testing by the Textile Committee, the goods were found to be '100% Polyester Knitted Cut Pile Fabric'. (b) The Customs Tariff Heading 6001 covers 'PILE FABRICS, INCLUDING LONG PILE FABRICS AND TERRY FABRICS, KNITTED OR CROCHETED' and is sub-classified into 'Long pile fabrics' (sub-heading 6001 10), 'Looped pile fabrics' (sub-heading 6001 21-29) and 'Other' (sub-heading 6001 91-92). (c) The Court noted that there was no dispute that the fabrics fall under heading 6001 at the four-digit level. Based on test reports, the fabrics were neither 'long pile' nor 'looped pile' fabrics but 'cut pile' fabrics, and hence fall under the residual 'other' category. (d) Within 'other', sub-classification is based on fibre composition, namely 'of cotton' and 'of man-made fibres'. As the fabrics were of polyester (man-made fibre), they were held to be classifiable under CTI 6001 92 00. Conclusions (e) The reclassification of the goods under CTI 6001 92 00 was upheld as correct. (f) The consequential demand of differential customs duty under section 28, along with interest under section 28AA, arising from such reclassification was upheld. Issue (2): Liability of goods to confiscation under sections 111(l) and 111(m) Legal framework (a) Section 111(l) provides for confiscation of dutiable or prohibited goods which are not included or are in excess of those included in the entry made under the Act. (b) Section 111(m) provides for confiscation of any goods which do not correspond in respect of value or in any other particular with the entry made under the Act. Interpretation and reasoning (c) In the first container, declared weight was 7,124 kg whereas the actual weight was 19,660 kg; in the second, declared weight was 7,368 kg whereas the actual weight was 19,930 kg-more than twice the declared quantity in both cases. (d) In both these containers, only 'long pile fabric' was declared, whereas undeclared 'cut pile fabrics' were also found. (e) Additional undeclared miscellaneous items, such as wall clocks, mirrors and plush pillows, were found in one of the containers. (f) In the third container, while both long pile and cut pile fabrics were declared, an excess weight of 665 kg over the declared quantity was found. (g) The Court held that such substantial mis-declaration of quantities and description of goods, as well as complete non-declaration of certain items, squarely attracted sections 111(l) and 111(m). Conclusions (h) The confiscation of the imported goods under sections 111(l) and 111(m) was upheld. (i) The option granted to redeem the goods on payment of redemption fine was implicitly affirmed as part of the valid confiscation order. (j) Confiscation of goods used for concealing smuggled goods under section 119, with option to redeem on payment of fine, was also sustained. Issue (3): Justification of penalties under sections 112(a), 114A and 114AA Legal framework (a) Section 112(a) prescribes penalty on any person who, in relation to any goods, does or omits to do any act rendering such goods liable to confiscation under section 111, or abets such act or omission. (b) Section 114A provides for mandatory penalty equal to the duty or interest determined under section 28(8), where non-levy or short-levy is by reason of collusion, wilful mis-statement or suppression of facts. (c) Section 114AA prescribes penalty where a person knowingly or intentionally makes, signs or uses any declaration, statement or document which is false or incorrect in any material particular in the transaction of any business for the purposes of the Act. Interpretation and reasoning (d) The Court found, on facts, that the goods were mis-declared in respect of both quantity and nature, with several goods not declared at all, leading to short payment of duty. (e) The importing firm's acts and omissions rendered the goods liable to confiscation under section 111, attracting liability under section 112(a). (f) The mis-declarations, resulting in short-levy of duty, were held to satisfy the conditions for imposition of mandatory penalty under section 114A on the importer. (g) The partner was identified as the main partner involved in the subject imports and mis-declarations. The Court held that his role in making/using false or incorrect declarations or documents in material particulars brought him within the scope of section 114AA. Conclusions (h) The penalty imposed on the importing firm under section 112(a) was upheld as the firm's actions rendered the goods liable to confiscation under section 111. (i) The mandatory penalty imposed on the importing firm under section 114A, equal to the duty short paid, was upheld. (j) The penalties imposed on the partner under section 112(a) and under section 114AA were upheld as justified in view of his role in the mis-declarations and use of false or incorrect material particulars. Issue (4): Alleged violation of principles of natural justice Interpretation and reasoning (a) The appellants, in their appeals, alleged violation of principles of natural justice and denial of cross-examination of Textile Committee experts. (b) The Court proceeded to examine the case on merits, after noting repeated unsuccessful attempts to serve notice and the non-appearance of the appellants at multiple hearings. (c) The Court relied on the test reports of the Textile Committee and other documentary and factual material on record to decide the issues of classification, confiscation and penalties. (d) No infirmity was found in relying on such test results and other evidence; the Court did not find any ground to hold the order vitiated on account of alleged denial of cross-examination or other breach of natural justice. Conclusions (e) The challenge to the impugned order on the ground of violation of principles of natural justice was rejected. (f) The impugned order was upheld in entirety and the appeals were dismissed.