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of <h1>Misdeclaration and tariff classification in customs imports: incorrect classification alone cannot justify extended limitation or penalties</h1> Misdeclaration, tariff classification and invocation of extended limitation are analysed. The note reasons that where an importer furnishes full and ... Misdeclaration - Classification of goods - invocation of the extended period of limitation - imposition of penalties under Sections 112(a) and 114AA - Self-assessment / Accredited Client Programme (ACP) / RMS - Bona fide belief - Appropriation of duty - HELD THAT:- On going through the sample Bill of Entry for the relevant period enclosed with the paper book, we find that the appellant had declared the description of the product as ‘BT.00603.041 BTY PACK LI+6C Sanyo (Battery), (computer parts)’ and the commercial invoice enclosed at page 53 of the paper book conforms to the battery reference number indicating that there is no misdeclaration as far as the description of the imported goods are concerned. In these circumstances, we find that the ratio laid down by the Hon’ble Supreme Court in the case of Northern Plastic Ltd. [1998 (7) TMI 91 - SUPREME COURT] is squarely applicable to the facts of the present case. Their Lordships held that when an appellant provides full and correct particulars as regards the nature and size of the goods, it is difficult to believe that they have misdeclared with a dishonest intention for evading payment of CVD. Consequently, their Lordships held that the appellant had not misdeclared the imported goods either by making a wrong declaration as regards to the correct classification of the goods or by claiming benefit of an exemption which are not found to be applicable to the imported goods. Thus, we are of the view that the correct classification of the impugned goods is CTH 85076000 / 85078000; however, invocation of extended period of limitation is bad in law in absence of misdeclaration of the description of the goods; merely declaring classification under incorrect heading of the Customs Tariff Act, later changed by the Department would not invite penal provision. Consequently, imposition of penalty under Section 112(a) and Section 114AA of the Customs Act, 1962 also cannot be sustained, which are set aside. Appeal is disposed of accordingly. Issues: Whether invocation of the extended period of limitation and imposition of penalties under Sections 112(a) and 114AA of the Customs Act, 1962 is sustainable where the importer correctly described the imported goods in the Bills of Entry but claimed an incorrect tariff classification in bona fide belief, and whether such conduct amounts to misdeclaration attracting retrospective duty and penalties.Analysis: The Tribunal examined the sample Bills of Entry, commercial invoice and accompanying documents and found that the description of the goods as lithium-ion battery (reference number BT.00603.041 BTY PACK LI+6C Sanyo (Battery), (computer parts)) was correctly and fully disclosed. Applying the established legal principle that where full and correct particulars as to the nature of goods are disclosed, a mistaken classification made in bona fide belief does not constitute misdeclaration warranting invocation of the extended period, the Tribunal relied on precedents which hold that wrong classification alone, without suppression or dishonest intention, cannot sustain extended period demands or penalties. The Tribunal also considered the impact of self-assessment/ACP/RMS procedures and held that mere facilitation under such schemes does not, by itself, convert a bona fide classification error into suppression or misdeclaration capable of attracting extended limitation or penal provisions.Conclusion: Invocation of the extended period of limitation and imposition of penalties under Section 112(a) and Section 114AA are not sustainable in the present case; the goods were correctly described and the classification error was bona fide, therefore the demand under extended period and penalties are set aside and the appeal is allowed in favour of the appellant.
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