TaxTMI 
TaxTMI 
2024 (7) TMI 326
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....ng Company [Sahi] to assail the confirmation of demand with interest and imposition of redemption fine and penalties on it. 3. Customs Appeal No. 52470 of 2019 is filed by M/s. Kay Pee Enterprises [Kay Pee] to assail the confirmation of demand with interest and imposition of redemption fine and penalties on it. 4. Customs Appeal No. 52482 of 2019 is filed by M/s. Universal Impex [Universal] to assail the confirmation of demand with interest and imposition of redemption fine and penalties on it. 5. Customs Appeal No. 52481 of 2019 is filed by M/s. S P Enterprises [SP] to assail the confirmation of demand with interest and imposition of redemption fine and penalties on it. 6. Customs Appeal No. 52479 of 2019 is filed by M/s. Goodluck Trading Co. [Goodluck] to assail the confirmation of demand with interest and imposition of redemption fine and penalties on it. 7. Customs Appeal No. 52474 of 2019 is filed by Shri Sanjay Puri [Sanjay] to assail the penalty of Rs. 5,80,000/- imposed on him. 8. Customs Appeal No. 52472 of 2019 is filed by Shri Amit Malhotra [Amit] to assail the penalty of Rs. 3,00,000/- imposed on him. 9. Customs Appeal No. 52471 of 2019 is filed by ....
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.... were two varieties of goods viz., "MNS-LBK" and "HQ-Z" series. The Textile Committee gave its reports according to which the HQ-Z series goods declared as 'polyester knitted 'girls pyjamas' or leggies were made of woven viscose fabrics. 'MNS-LBK' variety was made of Polyester/polyurethane knitted fabrics and that 'HQ-Z' series was made of woven viscose fabrics. Further, as per the reports of the Textile Committee, goods described as 'girls' pyjamas' in the test memo were 'Polyester/polyurethane knitted 'girls trousers' classifiable under Harmonised System of Classification [HS] 6104 63 and that goods described as 'girls leggies' in the test memo were 'Viscose woven 'girls trousers' classifiable under HS 6204 69. 19. The imported goods were therefore, seized but major portion of the goods were subsequently released. Show Cause Notice [SCN] dated 9.6.2017 was issued by the DRI to the importers, their partners and proprietors proposing to hold that the imported goods were polyester knitted trousers for girls classifiable under CTI 6104 30 00 and Viscose Woven Trousers classifiable under CTI 6204 69 90. It was proposed to recover the differential duty, confiscate the seized goods a....
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...., New Delhi-110041 for classification of "Viscose woven trousers" imported by them as "Polyester knitted leggies" under CTH No. 61159990 and order to re-classify the same under CTH No. 62046990 of the Customs Tariff Act, 1975; (ii) I confirm the demand of differential customs duty of Rs. 12,77,696/- as per details mentioned in Annexure-B of this order under section 28 of the Customs Act, 1962 and order that the same be recovered from M/s Sahi Trading Company, New Delhi along with the interest at the appropriate rates under section 28AA of the Act ibid be recovered from M/s Sahi Trading Company, New Delhi on the above amount of short payment of customs duty; (iii) I impose a penalty of Rs. 12,77,696/- on M/s Kay Pee Enterprises, New Delhi under Section 114A of the Customs Act, 1962 for the contraventions mentioned above. Under first proviso to section 114A, they may avall the benefit of reduced penalty to the tune of 25% of the penalty amount if the entire amount of duty along with interest is paid within a period of 30 days from the date of communication of this order, then the penalty amount under Section 114A of the Act ibid shall be reduced to 25% provided the ....
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.... customs duty of Rs. 23,81,648/ as per details mentioned in Annexure-D of this order under section 28 of the Act ibid and order for its recovery from M/s S.P. Enterprises, Plot No. 649, Part-A, Bahadurgarh, Jhajjar-124507 (Haryana) alongwith interest at the appropriate rates under section 28AA of the Act ibid. (ii) (iii) I impose a penalty of Rs. 23,81,648/- on M/s S.P. Enterprises, Plot No. 649, Part-A, Bahadurgarh, Jhajjar-124507 (Haryana) under Section 114A of the Customs Act, 1962 for the contraventions discussed above refrain from imposing any separate penalty on them under Section 112 of the Customs Act, 1962 as penalty under section 114A of the Act ibid has been imposed upon them. Under first proviso to Section 114A of the Act ibid, I give M/s S.P. Enterprises, Plot No. 649, Part-A, Bahadurgarh, Jhajjar-124507 (Haryana) an option to avail the benefit of reduced penalty to the extent of 25% of the penalty amount if the entire amount of duty along with interest is paid within a period of 30 days from the date of communication of this order. (E) M/s Goodluck Trading Company, Shop No. 7, B-7, Inderlok, New Delhi-110035: (i) reject claim of M/s Goodluck....
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....,000/- 3 Shri Sanjay Malhotra Partner M/s S P Enterprises 1,20,000/- 4 Ms. Kiran Puri Partner M/s Sahi Trading Co. M/s Universal Impex 3,00,000/- 5 Ms. Ashu Chopra Partner M/s S P Enterprises 1,20,000/- 6 Ms. Tripta Thapar Partner M/s Good Luck Trading Co. 2,30,000/- 7 Shri Vinod Kumar Thapar - - 15,00,000/ I refrain from imposing separate penalty on the above persons under Section 114A & 114AA of the Customs Act, 1962 for the reasons mentioned above;" 21. Aggrieved, the importers and their partners and proprietors filed these appeals. Revenue was also aggrieved by the impugned order as no penalties were imposed under sections 114A and 114AA of the Customs Act. Hence, Revenue filed these appeals. Submissions on behalf of the importers and their partners/proprietors 22. Learned counsel for the importers, their partners and proprietors made the following submissions: (i) The Bills of Entry were filed by the appellants classifying the imported goods as per their understanding and the goods were cleared after verification and examination by the proper officers. Therefore, the import....
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....Enterprises and Goodluck Trading Co. in respect of whose imports there is not even any test report on record; (xii) Even if the department wishes to change the classification, it can only do so prospectively and not for goods which had already been cleared; (xiii) Demands have been made and confirmed on the basis of these test reports on consignments which were cleared in the past. Neither were any samples drawn nor were they tested nor was any expert opinion sought in respect of those goods. Therefore, the demand is not sustainable; (xiv) Even if the classification is decided against the importers, there is no reason to impose penalties or confiscate goods or impose redemption fines; (xv) Learned counsel submitted for our perusal samples of the imported goods. Submissions on behalf of Revenue 23. Learned Special Counsel assisted by the learned authorised representative for the Revenue made the following submissions. (i) While learned counsel for the importers submitted samples for perusal of the bench, it is not clear as to how and when they were drawn. Extra copies of the samples drawn and sealed by the officers along with signat....
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....y demand within normal time is Rs.47.98 Lakhs, that for Kay Pee Enterprises is Rs.12.78 Lakhs and that for Good Luck Trading is Rs. 22.87 Lakhs. These amounts are any way recoverable as they within the normal period of limitation; (viii) Statements given by Shri Sanjay Puri, the mastermind of the operations and other partners, particularly Shri Amit Malhotra indicated that the samples examined were representative of the goods imported by the aforesaid five firms and that Shri Puri was looking after the import work for all the firms. Shri Puri refused to comment about the reports of the Committee. Statements of Shri Sanjay Puri have been corroborated by all others. However, he also routinely retracted some of his statements 2 to 4 months after they were recorded. Such retractions were investigated and found to be baseless. Nevertheless, he had confirmed the averments made earlier even after the retraction; (ix) Scrutiny of the records and investigations carried out indicated that the said importers had been importing Polyester Knitted Trousers and Viscose Woven Trousers under various consignments declared as Polyester Knitted Leggies/Pyjamas in the past; (....
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....the aforesaid 5 firms, the Commissioner was in error in not imposing penalties; (xvii) The material disclosed in Paragraphs 10.2 and 10.3 of the SCN was sufficient to impose penalty under section 114AA of the Act on all the 5 entities and their partners and proprietor as also Shri Sanjay Puri and Shri. V.K. Thapar. Findings 24. We find that the following questions need to be answered in these appeals: (a) Based on the available information and evidence, did the Revenue establish that the imported goods were girls trousers and not girls pyjamas? (b) What is the nature of the classification of the imported goods and who can do it? Can an expert determine the classification of the goods under the Customs Tariff? (c) Were the goods liable for confiscation under section 111(m)? If so, were the redemption fines imposed fair? (d) Were the penalties imposed correct and fair? (e) Did the Commissioner err in not imposing certain additional penalties under certain sections as indicated in Revenue's appeals? Pyjamas or trousers and what is the correct classification? 25. According to the declaration by the importers, the goods w....
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.... lab on 8.7.2016. The first test report dated 30.8.2016 indicates that the test was performed from 8.7.2016 to 30.8.2016 and gives the composition of the fabric but against 'HS Classification of Garment' it states "It is not possible to ascertain the correct measurement of the garment as during the testing procedure the sample got de-shaped and destructed; Hence cannot assess the HS Classification." Their report also has a remark that this parameter was subcontracted to EP&QA, Naraina (New Delhi). The additional test report dated 21.9.2016, signed by the same Assistant Director (Laboratory) refers to the same sample received on the same date with the same Test Memo and the covering letter of DRI but states that it was tested from 8.7.2016 to 21.9.2016 but gives a different report of the same parameter HS Classification of Garment and it says "In our opinion the submitted garment may be classified as "Polyester/Polyurethane Knitted Girls Trouser" under HS code 61.04.63". This report also remarks that this parameter was subcontracted to EP&QA, Naraina (New Delhi). 28. Thus, according to the above test report and additional test report, the sample received on 8.7.2016 was tested fr....
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....instead girls trousers and what is the difference between the two. Even for this reason, we find that no reliance can be placed on such opinions. 32. The disputed garments were not 'girls trousers' according to the import documents, invoices, etc. There is nothing on record to show that any investigation was conducted to ascertain how those goods were sold by the importer after import. The packings of individual garments as per the samples presented before us by both sides also do not indicate anywhere that they are 'girls trousers'. Thus, the they are not being sold as 'girls trousers' to the ultimate consumers. Thus, they are not 'girls trousers' as per trade parlance. As per the original test reports also, this parameter could not be determined. It is only the additional test reports submitted on the basis of the same samples which were already destroyed during testing, that the expert from the Textile Committee formed an opinion that they were 'girls trousers'. 33. In view of the above, the finding in the impugned order that that the garments in question were 'girls trousers' cannot be sustained and needs to be set aside as it is primarily based on the revised subjective ....
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....hich the duty assessed is nil; 36. Clearly, classification is a part of assessment and therefore, the person who is required to do the assessment is required to classify the goods. As per section 17 of the Customs Act, duty on imported goods must be self-assessed by the importer and then it can be re-assessed by the proper officer. Thereafter, if there is any appeal or a demand under section 28, the adjudicating authority or the appellate authority, tribunal or the courts determine the duty payable. Thus, classification of the goods must be done by the importer and can also be done by the proper officer, adjudicating authority, appellate authorities or courts. It is the considered opinion of the person classifying the goods and is not a matter of fact. It is a quasi-judicial decision and is appealable. 37. Classification of goods has to be done as per the Customs Tariff. The General Rules of Interpretation [GRI] help in classifying the goods. Classification is not a matter of fact to be determined by an expert but a quasi-judicial matter to be decided as per the law. 38. The subjective opinion of the experts from the Textile Committee regarding the correct harmonised syste....
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....ods which do not correspond in respect of value or in any other particular with the entry made under this Act or in the case of baggage with the declaration made under section 77 in respect thereof, or in the case of goods under transhipment, with the declaration for transhipment referred to in the proviso to sub-section (1) of section 54; 43. The impugned order holds that the imported goods were liable for confiscation under Section 111(m) and consequently, imposed penalty on the appellant under Section 112. According to the learned counsel for the appellant, even if the classification of the goods is decided against the appellant, it cannot be said that the goods were liable for confiscation under Section 111(m) because the appellant self-assessed the goods classifying them under the Customs Tariff Heading, which, according to it, was correct. Since the goods were not liable to confiscation, no penalty could have been imposed under Section 112. 44. According to the Revenue, classification of goods by the appellant importer is part of the entry made under Section 46 of the Customs Act, i.e., the Bill of Entry and since the goods did not match this part of the Bill of Entry, ....
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....nd what value the officer will fix. Nothing in the law requires an importer to anticipate what classification the proper officer will find proper for the goods and classify the goods or anticipate if the proper officer will reject the transaction value and anticipate what value he will determine and assess duty accordingly. In these appeals, even the proper officer did not dispute the classification. It is only the officers of DRI who disputed it based on the intelligence which they had collected and the subjective opinion of the Textile Committee. 48. If Section 111(m) of the Customs Act is read to mean that goods can be confiscated if the classification of the goods and the exemption notifications claimed by the importer self-assessing the duty under Section 17 and indicated in the Bill of Entry do not match the classification of the goods or the exemption notifications which the proper officer may apply during re-assessment or some post clearance opinion of DRI or Audit, it would result in absurd results. The importer cannot predict the mind of the proper officer much less, the minds of any DRI officers after the goods are cleared, and self-assess duty so as to conform to it.....
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....der section 111(m). 50. We therefore, find that the confiscation of the goods under section 111(m) is not sustainable and needs to be set aside. The option of redeeming the goods on payment of redemption fines is redundant. 51. Penalty under section 112 can be imposed for any action which renders the goods liable to confiscation under section 111. It reads as follows: "112. Penalty for improper importation of goods, etc. - Any person,- (a)who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 111, or abets the doing or omission of such an act, or (b)who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under section 111, shall be liable,- (i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty [not exceeding the value of the goods or five thousand rupees] w....
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....own as or were being sold as 'girls trousers'. The goods imported under the Bills of Entry were cleared at least in some cases after examination. The Textile Committee reports nowhere indicate as to why they were not 'girls pyjamas' or 'girls leggings' as evidenced from the documents but were 'girls trousers'. Thus, these are not cases of false declarations but merely cases where DRI and the Textile Committee hold a different opinion. Penalty under section 114AA cannot be imposed because the importers' declarations do not match with the subsequent opinions of DRI and the Textile Committee. 55. In the appeals filed by the Revenue, non-imposition of penalty under section 114A in the impugned order has been assailed. This section reads as follows: "114A. Penalty for short-levy or non-levy of duty in certain cases.-Where the duty has not been levied or has been short-levied or the interest has not been charged or paid or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts, the person who is liable to pay the duty or interest, as the case may be, as determined under sub-section (8....
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....roviso shall be adjusted against the total amount due from such person." 56. As we have already held in favour of the importers on merits regarding the declaration of the nature of the goods and their classification, there is no non-payment or short payment of duty. Consequently, no penalty can be imposed under section 114A. 57. To sum up: (a) There is no evidence on record whatsoever that disputed goods were being sold or were sold or were known in trade parlance as "girls trousers". The intelligence received by DRI and the unsubstantiated subjective opinion of the Textile Committee after testing the samples which had already been destroyed are not sufficient to classify the goods as "girls trousers" as held in the impugned order. (b) Classification of the goods is a part of assessment and is a quasi-judicial function to be performed by the importer, proper officers, adjudicating authority and appellate authorities as per the Customs Tariff read with the General Rules of Interpretation. While expert opinion may be sought on the nature of the goods, classification cannot be based on the opinion of the expert. The GRI do not provide for classification based o....