Wrong tariff classification of correctly declared imports does not justify penalty when duty and interest are paid voluntarily.

Penalty under Section 114 of the Customs Act was considered for a wrong tariff classification of reimported pharmaceutical goods, where the goods were otherwise correctly described in the bills of entry. The classification mistake was treated as a short-levy issue, but the importer later informed the department and voluntarily paid the duty with interest. Section 111(m) was found inapplicable because there was no material misdeclaration of the goods themselves, and voluntary discharge of the duty liability weighed against penal action. On that basis, the penalty was held not leviable and the impugned order was set aside.

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Issues: Whether penalty under Section 114 of the Customs Act, 1962 was leviable for the wrong tariff classification of reimported pharmaceutical goods when the importer had correctly described the goods and later tendered the duty with interest voluntarily.

Analysis: The goods were correctly declared as cefaclor pharmaceutical products, and the dispute arose only from an tariff classification in the Bills of Entry. The department itself treated the classification error as a basis for short levy, but the importer had subsequently informed the department of the mistake and paid the duty with interest on its own volition. The invocation of Section 111(m) was found inapplicable because there was no material misdeclaration of the goods themselves, and the record did not justify penal action where the duty liability was discharged voluntarily.

Conclusion: The penalty was not leviable and the impugned order was set aside in favour of the assessee.

Final Conclusion: The appeal succeeded and the penalty imposed by the Commissioner did not survive.

Ratio Decidendi: Penalty for import-related misdeclaration is not warranted where the goods are correctly described, the error is confined to classification, and the duty is voluntarily paid with interest before coercive action.

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