TaxTMI 
TaxTMI 
2024 (3) TMI 293
X X X X Extracts X X X X
X X X X Extracts X X X X
....Scrips/licenses by mis-classification of their export goods in contravention of the relevant provisions of Foreign Trade Policy and the Customs Act, 1962. Accordingly, the Deputy Director General of Foreign Trade, DGFT, New Delhi too issued Show Cause Notice bearing F. No. 5/MISC-1/ AM22/EPS-I/LA dated 25/8 / 2021 under Section, 9, 11(2), 11(3) read with Section 13, 14 and 17 of Foreign Trade (Development & Regulation) Act, 1992 to M/s. FASHION ACCESSORIES which was adjudicated vide DGFT order dated 12.04.2023 against the party, but it is stated to have been reversed in appeal under that Act. 2. In the instant case, it is not disputed that the exporter M/s. FASHION ACCESSORIES had themselves classified the same goods i.e., Quilts fitted with cotton/polyester exported by them under two different eight digit HS codes 94049019" & 94049099". It is pertinent to mention that the Shipping Bills filed by the said exporter are self-assessed and therefore, the classification of the goods exported had also been assessed by them under two different HS codes, "94049019" & "94049099". The contention of the exporter that they had inadvertently classified the goods under wrong CTH 94049099 in r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....". But, the declaration made by the Exporter in the MEIS application was apparently false, as per the department which amounted to wilful misstatement since the exported goods were correctly classifiable under CTH 94049019, where MEIS benefit is less as compared to CTH 94049099 (mis-declared), as per Appendix 3B of Handbook of Procedures. Therefore, it appeared that the Exporter availed MEIS Scrip by way of wilful misstatement in the documents submitted to both, Customs and DGFT authorities in contravention to the provisions of Customs Act, 1962 and the Foreign Trade (Development and Regulation) Act, 1992. 5. A wilful "decision" to misclassify the goods with intent to wrongfully avail undue MEIS benefit was as per the department a wilful misstatement for invoking provisions of Section 28AAA of the Customs Act, 1962. 6. Vide Finance Act, 2011 with effect from 08.04.2011 "Self-Assessment has been introduced under the Customs Act, 1962. Section 17 of the said Act provides for self-assessment of duty on import and export goods by the importer or the exporter by filing a bill of entry or shipping bill as the case may be, in the electronic form, as per Section 46 or 50 respectively....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lassification of the exported goods, and have therefore rendered themselves liable for penalty under section 114AA of the Customs Act, 1962. It further appeared to the department that Shri Anoop Thatai, partner, Shri Jile Singh, Manager (Export) and Shri Pradeep Arora, Manager (Shipping & Logistic) of M/s. Fashion Accessories, Gurgaon had consciously and deliberately dealt with the goods which they knew or had reasons to believe were liable to confiscation under the provisions of Section 113(i) of the Customs Act, 1962 in respect of the exported goods and Section 111(m) and 111(o) of the Customs Act, 1962 in respect of the goods imported by availing the exemption under MEIS Scheme and such acts &omissions on the part of Shri Anoop Thatai, partner, Shri Jile Singh, Manager (Export) and Shri Pradeep Arora, Manager (Shipping & Logistic) of M/s Fashion Accessories, Gurgaon rendered themselves liable for penal action under the provisions of Section 112(a) & (b), 114(iii) and 114AA of the Customs Act, 1962. Since Shri Anoop Thatai, partner, Shri Jile Singh, Manager (Export) and Shri Pradeep Arora, Manager (Shipping & Logistic) of M/s. Fashion Accessories, Gurgaon had allegedly also viola....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d that when Quilts fitted with Cotton /Polyester were exported from Nhava Sheva Port, M/s FA correctly classified the Quilts under Customs Tariff Sub-Heading 94049019. Whereas, when the same product Quilts fitted with Cotton/Polyester were exported from the ports other than Nhava Sheva Sea Port, they mis-classified the same product under Customs Tariff Sub-Heading 94049099. Hence, M/s. FASHION ACCESSORIES deliberately utilized two different CTH for export of the same product Quilts for different ports of export. In their statement, they have also admitted this fact of classifying same product i.e., Quilts fitted with Cotton, polyester under two different CTH from different ports, for exports. Hence, M/s. FASHION ACCESSORIES at the time of exports had mis-classified the product i.e., Quilts fitted with cotton/polyester under CTH 9404 9099 to avail higher MEIS @ 5% & 7% of the FOB value as against actual entitlement @ 3% under correct CTH 94049019, by deliberate mis-representation and willful mis-statement. (ii) The Noticee submits that they had bonafidely classified the Quilts and believed and still believe that the same are classifiable under Tariff Item 94049099 of the Cu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pex Court held "that description of goods given correctly and fully in Bill of Entry/classification declaration and the appellant laying claim to some exemption, whether admissible or not, is a matter of belief of assessee and does not amount to mis-declaration". On going through the said judgment, I found that the said case was actually not of any mis-declaration and at the initial stage, it was found that the importer of the said case correctly classified the goods. Thus, facts of the said case is different from the facts of the present case. In view of this, I find the said judgment not relevant for the present case. (vi) Further, M/s. FASHION ACCESSORIES relied upon the case of CCE Vs Pioneer Scientific Glass Works 2006 (197) ELT 308 (SC), wherein the Hon'ble Supreme Court noted that while exporting the goods, all the relevant facts are known both to the exporter and the department regarding the classification of the exported goods unless and until proved contrary. The Hon'ble Court held that "when assessee disclosed all relevant facts and where facts are already known to both parties, omission by one to do what he might have done by itself does not render or a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... immediately changed their classification and paid the excess amount availed due to the mis-classification. (ix) As per the export documents, M/s FA defined their goods as: "Quilt: two layers of cloth filled with padding/filling-cotton fill, polyester fill, etc. held in place by functioned stitched. It does not have any opening." (x) Further, the Customs Tariff Heading 9404 reads as under: TABLE-A Tariff Item Description of Goods Unit Rate of duty Standard Preferential Area 9404 Mattress supports; articles of bedding and similar furnishing (for example, mattresses, quilts, eiderdowns, cushions, puffes and pillows) fitted with springs or stuffed or internally fitted with any material or of cellular rubber or plastics, whether or not covered 94041000 -Mattress supports Kg 20% - -Mattresses: 940421 -- Of cellular rubber or plastics, whether or not covered Of rubber 94042110 --- Of rubber U 20% - 94042190 ----Of plastic U 20% 940429 -- Of other materials  ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....CESSORIES have indulged in fraudulent export of goods by mis-declaring the actual classification of goods so exported, squarely falls within the ambit of illegal export' as defined in section 11(H)(a) of the Customs Act, 1962 in as much as the same was done in contravention of various provisions of Customs Act, 1962, Foreign Trade (Development and Regulation) Act, 1992, Foreign Trade (Regulation) Rules 1993 and Foreign Trade Policy. The goods have been exported to various countries by mis-classifying the products exported in Shipping Bills by way of willful mis-statement and suppression of facts with an intent to avail fraudulent benefit of MEIS at higher rates, whereas Rule 14 (2) of Foreign Trade (Regulation) Rules, 1993 clearly prohibits for employing any corrupt or fraudulent practice for the purpose of exporting any goods for obtaining any license. Hence, the said goods fall within the definition of illegal legal export' as per section 11(H)(a) of the Customs Act, 1962. Since, M/s. FASHION ACCESSORIES entered into improper exportation, I hold the exported goods as detailed in Table-D liable for confiscation under Section 113(i) of the Customs Act, 1962. As the goods ar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te penal provision is provided for violation of the Customs Act, 1962. Since M/s FA stands liable for penalty under Section 114(iii) and Section 114AA, I will not impose penalty under Section 117 of the Customs Act, 1962. Duty demand against the duty exemption availed on import made by M/s FA: (i) It is alleged in the Show Cause Notice that M/s FA had imported goods availing duty exemption Notification No. 24/2015 Customs dated 08/04/2015, as amended, by debiting scrips fraudulently availed by themselves, which is required to be recovered under section 28(4) of the Customs Act, 1962. Further, the scrips which are utilized by themselves by importing goods having assessable value of Rs. 52,09,020/- are required to held liable for confiscation under Section 111(m) and 111(0) of the Customs Act, 1962. Therefore, also liable for penalty under Section 112,114A, 114AA, 114AB and 117 of the Customs Act, 1962. (ii) As regards the duty demand of Rs. 7,66,729/ under Section 28(4) of the Customs Act, 1962, the noticee M/s. FASHION ACCESSORIES objected the same relying upon the judgment of Sirthai Superware India Ltd Vs Commissioner of Customs, Nhava Sheva-III, reported in 2020 (371) E....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stries 1989 (39) ELT 175 (S.C.), where it is held that classification under a particular tariff entry is the responsibility of the Revenue. Therefore, if Department does not find the classification given by the appellant appropriate, no fine and penalty can be imposed on it. I find that as per the said judgment party should have asked the department to provide the correct classification for the goods. Rather than asking from the department they used two different CTH for the same products at the time of exports to obtain license having higher amount of incentive. Further, after fraudulently obtaining of scrips, they utilized the same for the import availing duty exemption by way of Notification No. 24/2015 Customs dated 08.04.2015, as amended. As they tried to evade customs duty by wrongly availment of benefit through the said notification and made the import improper, M/s FA rendered the goods having assessable value of Rs. 52,09,020/- liable for confiscation. Accordingly, I hold the goods imported by M/s FA by utilizing scrips they fraudulently availed, liable for confiscation under Section 111(m) and 111(0) of the Customs Act, 1962. Since the goods are not available for confisca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rate penal provision is provided for violation of the Customs Act, 1962. Accordingly, I will not impose penalty under Section 117 of the Customs Act, 1962. Demand of Custom Duty in respect of scrips utilized by others who purchased the scrips obtained fraudulently by M/s. FA (i) It is alleged in the show cause notice that M/s Fashion Accessories obtained the MEIS scrips fraudulently by way of mis-classification of their goods at the time of export in order to avail higher amount of incentive. The scrips so obtained were further sold/transferred to others and utilized by them by debiting such scrips at the time of import. I find that the allegation made against M/s FA have already been proved and discussed in para supra and as per Section 28AAA of the Customs Act, 1962, custom duty to the tune of Rs. 3,77,53,455/ is required to be recovered from them along with interest. (ii) As regards the confiscability of goods having assessable value of Rs. 820,92,30,497/-, imported by the others who purchased the above said scrips from M/s FA, I find that confiscation of the said goods has been proposed under Section 111(m) and 111(o) of the Customs Act, 1962 upon M/s. FA as well as up....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ken by the Partner of the firm to avail higher MEIS benefit, which clearly indicates that it is not due to lack of knowledge or unintentional mistake, but was a willful "decision to misclassify the goods with intent to wrongfully avail undue MEIS benefit. I find that both Shri Jile Singh, Manager (Export) and Shri Pradeep Arora, Manager (Shipping & Logistics) accepted the fact that Shri Anoop Thatai, Partner of M/s. FASHION ACCESSORIES knowingly and intentionally adopted the method of dubious and incorrect classification in order to get higher incentive amount scrips, hence, I agree with the proposal made in the show cause notice regarding penalty under section 114(iii), 112(a) and 114AA of the Customs Act, 1962, for their active involvement in improper exportation and improper importation and also producing/signing the documents which were false or incorrect. Accordingly, I am imposing the penalty under Section 114 and Section 112, I am not going to impose penalty under Section 117 of the Customs Act, 1962. (vii) As regards penalty upon managers Shri Jile Singh and Shri Pradeep Arora, 1 find that no concrete evidences have been produced in the Show Cause Notice which proves tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s Fashion Accessories, Gurgaon under Section 114AA of the Customs Act, 1962 for goods mentioned at (ii) above. (v) I do not impose penalty under section 117 of the Customs Act, 1962 upon M/s Fashion Accessories, Gurgaon. B. Import by M/s FA against MEIS (i) I order to recover Customs duty (equal to ineligible MEIS benefits availed and utilized for discharged of customs duty) of Rs * 0.7,66,729/. as mentioned in column 4 of Table -E above, under Section 28(8) of the Customs Act, 1962 along with applicable interest u/s 28AA of the Customs Act, 1962. (ii) I hold the goods having total Assessable value of Rs. 52 ,09,020/- as mentioned in column 3 of Table -E above, imported against Bills of Entry mentioned in Annexure-B and summarized at TABLE-E above, imported by them by wrongly availing Customs duty exemption, liable for confiscation under Section 111(m) and 111(o) of the Customs Act, 1962. As the same are not available for confiscation, I do not impose any redemption fine. (iii) I impose penalty equal to duty confirmed at para B(i) above plus interest thereon, under Section 114A of the Customs Act, 1962. If the duty and interest as confirmed above is paid within 30 da....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at (ii). (v) I impose penalty of Rs. 10,00,000/- (Rupees Ten Lakhs Only) upon M/s. Fashion Accessories, Gurgaon under Section 114AB of the Customs Act, 1962 for goods mentioned at above (ii). (vi) I do not impose penalty under section 117 of the Customs Act, 1962 upon M/s Fashion Accessories, Gurgaon. (vii) I order to appropriate / adjust the duty liability confirmed at C(i) above along with interest, from the total amount of Customs duty of Rs. 3,90,40,394/- along with interest of Rs. 1,14,56,140/- already paid by them as discussed in Para 61 above. D. Goods imported by other importers who purchased the scrips from M/ s. Fashion Accessories, Gurgaon: (i) I do not hold the goods pertaining to importers who filed Bills of Entry/ MEIS Scrips referred in Annexure-C attached to the notices, liable for confiscation under Section 111(m) and 111(o) of the Customs Act, 1962. E. Penalty on associates: (i) I impose penalty of Rs. 10,00,000/- Rupees Ten Lakhs Only) upon Shri Anoop Thatai, Partner of M/s Fashion Accessories, Gurgaon under Section 114 (m) of the Customs Act, 1962 for goods exported improperly as mentioned at para 60 above. (ii) I impose penalty of Rs. 10....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... M/s Vedika Metals Pvt. Ltd. passed by the CESTAT, Kolkata in Customs Appeal No. 75085 of 2017 on 26th June 2023, wherein it was held that the penalties cannot be levied on the Appellant and its Directors separately for the same offence where DOPT has already initiated action and imposed a penalty for the same offence. "14........... (c) Penalties under Section 114 and 114AA cannot be imposed on the Appellant and its Director separately for the same offence, since DGFT has already initiated action and imposed penalty for the same offence. 15. In view of the above discussion, we modify the order to the extent of setting aside the penalties imposed on the Appellant and its Director under section 114 and 114AA of the Customs Act, 1962........" * Reliance is also placed on the judgment passed in case of Gayson & Company (P) Ltd. Vs. Commissioner of Cus. (Port), Kolkata 2019 (370) ELT 1026 (Tri. - Kolkata) "........ 9. However, taking into consideration of the fact that the DGFT authorities had already imposed penalty upon the appellant, the penalty imposed on the appellant company is not warranted. Regarding imposition of penalty on the Appe....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of mis-classification and not mis-declaration thereby making the penalty imposed u/s 114 AA of the Customs Act, 1962 is unreasonable. It was therefore prayed to set aside the impugned order. * Shri. Anoop Thatai was the partner in the enterprise and Shri. Jile Singh and Pardeep Arora, were the employer have also appealed against the penalties. Discussion and Findings: 12. Considered, we find that in the instant case, penalties have been imposed against M/s FASHION ACCESSORIES and other appellants on the ground that export of quilt by M/s FASHION ACCESSORIES was done by mis-classifying the goods and fraudulently availing benefit of licence/scrips and therefore reversal of benefit was done and penalties thereof were imposed on persons involved.. The penalties on M/s FASHION ACCESSORIES as well as his partner Shri. Anoop Thatai were imposed. Manager Shri. Jile Singh and Pardeep Arora Manager shipping and logistic were also subjected to the penalties to the extent of Rs. 2 Lakh each under Section 117. The appellant M/s. FASHION ACCESSORIES has already deposited the duty/ credit availed demanded by the department and is contesting various penalties in appeals before us. ....