AI Drafter 
TaxTMI 
TaxTMI 
2025 (9) TMI 264
X X X X Extracts X X X X
X X X X Extracts X X X X
....and CVD. It was noticed that they had filed a Bill of Entry (BOE) No. 5993776 dated 14.2.2012 for clearance of 'Ascorbyl Poly Phosphate' by classifying it under Customs Tariff Heading (CTH) 2309 9010. The said goods were imported from China. As per Notification No. 67/2009-Cus dated 16.6.2009 in force, at the material time, anti-dumping duty was leviable on imports of "Vitamin C or its synonym" from China. A similar modus was also noticed in the import of other goods. The investigation was followed by the issue of a Show Cause Notice (SCN). After due process of law, the Ld. Commissioner passed the impugned order (OIO), the operative part of which is reproduced below:- (i) I hold that the goods covered by eight Bills of Entry mentioned at Sl. No. 1 to 8 of the Table at para 40 supra are Ascorbic Acid (Vitamin C) and are classifiable under CTH 29362700. (ii) I confiscate the goods imported vide BE No. 5993776 dated 14.02.2012 and 5809203 dated 23.01.2012 totally valued at Rs. 51,86,862/ under Section 111(m) of the Customs Act, 1962. However, I give the importer an option to redeem the same on payment of fine of Rs. 5,00,000/- (Rupees Five Lakhs only) under Section 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion liabilities ordered herein above. (xi) I impose penalty of Rs. 10,00,000/-(Rupees Ten Lakhs only) on Shri. S. Ramesh Babu, Director of M/s. M/s. Vital Therapeutics Pvt. Ltd., Secunderabad under Section 112(a) of Customs Act, 1962. (xii) I impose penalty of Rs. 10,00,000/- (Rupees Ten Lakhs only) on Shri. S. Venugopal Setty, Managing Director of M/s. M/s. Vital Therapeutics Pvt. Ltd., Secunderabad under Section 112(a) of Customs Act, 1962." Aggrieved by the order the appellant is before us in appeal. 3. Shri G. Vidyadhar Reddy, Ld. Counsel appeared for the appellant and Smt. O.M. Reena, Ld. Authorized Representative appeared for the respondent. 3.1 Shri G. Vidyadhar Reddy, the Ld. Counsel for the appellant submitted that the 'live' consignments which are ascertained as 'Ascorbic Acid' on chemical test are supplied by a trading firm. They had not ordered for the same as it was of no use for them. Out of the past clearances of six consignments of goods described as 'ascorbyl polyphosphate', which were cleared by them, five consignments were supplied by a manufacturer supplier and one by a trading company. That there is no evidence to contradict ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....porter to have mis-declared the past imports of Ascorbyl Polyphosphate, Amprolium HCL, Lincomycin 11% and Tiamulin Hydrogen Fumerate 20% also. Hence the extended period of time can be invoked in those cases. Statements recorded from the appellants show their involvement in the case and penalties against the company and its employees has been correctly imposed. The Ld. AR prayed that the appeals may be rejected. 4. We have gone through the appeal and have heard the rival parties. The issues involved are the import and clearance of goods by allegedly mis-declaring the description/ CTH and the claiming of ineligible duty exemption. The alleged violations invite action against both goods and persons under the Customs Act. In assessment proceedings, the primary concern is with the assessment of tax as authorised by law i.e. the correct quantification and computation of total tax due as per the provisions of the tax statute. Whereas in penalty proceedings, the primary concern is with the conduct of the assessee. In M/s. Valeo India Pvt. Ltd. Vs Commissioner of Customs, Chennai [Final Order No. 40393/2023, Dated: 10.04.2024], this Tribunal speaking through one of us [Member (Technical)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er penalties are imposable on the employees of the company (Director and Managing Director). D) Whether penalties are imposable on the appellant Company. We shall examine the issues sequentially. 6. Whether the 'live' consignments were mis-declared, and the outcome determined correctly in the impugned order. 6.1 The appellant had filed two BOE's No. 5993776 dated 14.02.2012 and No. 5809203 dated 23/1/2012, declaring them to be "Ascorbyl Poly Phosphate" with a claim for customs duty benefit under Sl.No. 52 of the Notification No. 21/2002-cus dated 01.03.2002. The BOE's were taken up for investigation by DRI, prior to clearance for home consumption. 6.2 Section 17(2) [section 18(b) in the case of provisional assessment], read with Section 144 of the Customs Act 1962 (CA 1962), allows imported goods to undergo chemical or other tests for duty assessment. Central Revenue Control Laboratories (CRCL) conduct these tests to ensure compliance with safety, quality, and classification standards. CRCL's expert opinions are generally to be relied upon, unless proven to be flawed or unsupported by evidence etc. In this case, the appellant did not challenge CRCL's findi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rt or export of which is subject to any prohibition under the Act or any other law for the time being in force but does not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with. This definition therefore, comes in two parts. The first part of the definition explains the term 'prohibited goods' as to mean those goods, import or export of which is subject to any prohibition under the law. The second part is exclusionary in nature and excludes from the term 'prohibited goods', in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with. From the definition of term 'prohibited goods', in case of goods, import of which is permitted would be excluded subject to satisfaction of the condition that conditions for export have been complied with. By necessary implication therefore in case of goods, import of which is conditional, would fall within the definition of prohibited goods if such conditions are not complied with." (emphasis added) Further the Hon'ble Apex Court, in Om Prakash Bhatia v. Commissioner of Customs,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s does not depend on clearance of the goods for home consumption or export, but on conditions enumerated under Sec. 111 of the Act. Hence since the goods, which were not freely importable and were restricted by conditions for import, were found mis-declared as per their description and classification, knowingly or un-knowingly, they have been correctly confiscated for a statutory breach / strict liability offence. 6.10 Further confiscation of goods is an action in rem while penalty against a person is a proceeding in personam. Action against the goods is independent of the action against an importer. A five Judge Bench of the Hon'ble Supreme Court Thomas Dana Vs The State Of Punjab [AIR 1959 SUPREME COURT 375 / 1959 MAD LJ (CRI) 474], held: "This distinction has been very clearly brought out in the recent judgment of this Court in the case of Sewpujanrai Indrasanrai Ltd. v. The Collector of Customs [AIR 1958 SUPREME COURT 845, 1958 SCJ 1199, 1958 MAD LJ(CRI) 929]. In that case, though the question of double jeopardy under Art. 20(2) of the Constitution, had not been raised, this Court has pointed out the difference in the nature of proceedings against offending ar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assified. The demands in these cases are within the normal period (para 49 of OIO). 7.2 In the case of past consignments of 'Ascorbyl Polyphosphate', listed at para 7.1(A), the samples were not tested and hence an expert opinion on the composition of the goods is not available. The COO Certificates attached to the consignments showing the HS code as 29.36/29362700. The OIO concludes that the goods were mis-declared based on the pattern seen in the two 'live' consignments and that the description of the colour of the powder, denotes the goods to be only Vitamin C (ascorbic acid) as at para 43.8 of the OIO. Per contra the appellant has denied having ordered Ascorbic acid/ Vitamin C and also referred to the no-objection given by the Asst. Drug Controller (ADC), before clearance of the goods for home consumption. However, the Ld. Adjudicating Authority has pointed out that the ADC clearance was granted without testing the goods and was based only on visual examination. 7.2.1 The presumption of innocence is a fundamental principle and background assumption of our legal system, meaning that reliance solely on COO Certificates or the alleged appearance of goods is insufficient to pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....emix" in varying proportions to serve a particular purpose. This supports the view in the OIO that separate chemically defined compounds as in the case of Amprolium HCL will not fall under CTH 2309 and will be classifiable under CTH 29339900. 7.3.2 The appellant states that they have imported Amprolium HCL as a feed additive and sold them to poultry feed manufacturers and hence the benefit of notification 21/2002 is available for the goods. The condition of the goods at the time of import is the relevant factor for determining the proper classification of the goods. We find that when a commodity falls within a tariff entry which does not refer to any end use, then the end use to which the product is put, cannot determine the classification of that product. [See State of Tamil Nadu Vs Vinyl Cable Industries - 1993 (88) S.T.C. 430 Mad HC; and Commissioner of Central Excise, Delhi Vs Carrier Aircon Ltd. - 2006 (199 E.L.T 577 (S.C.)]. The goods in pure form are not feed additives and hence are not covered under notification 21/2002. Hence the classification, demand for duty etc as made in the impugned order is upheld. 7.4 As per the composition of the goods in the suppliers certi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... liable unless it is shown that he had, by his commissions or omissions, let goods become liable for confiscation and that omissions/commissions leading to evasion of duty is required to be established for imposition of penalty under Sec 112(a). Imposition of penalty on the import company may not need mens rea, but the provisions of Sec 112(a) demands demonstration of specific role of the Managing Director as an individual, as to how he has committed or omitted any act, making the goods liable for confiscation. 8.4 Further the Hon'ble High Court of Gujarat in VENKATARAMAN T. PAI Vs. C.R. SHAH [1996 (81) E.L.T. 467 (Guj.)], in a matter under the Central Excises and Salt Act, 1944 held; "At this stage I would like to quote Section 9AA to appreciate the remaining contentions : Section 9AA : Offences by Companies. - (1) Where an offence under this Act has been committed by a Company, every person who at the time the offence was committed was in charge of, and was responsible to the Company for the conduct of the business of the Company, as well as the Company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mployees of the company with a penalty, apart from the company itself, for a willful misstatement of the classification or suppression of facts, it is essential to show a guilty mind. 8.5 The question then arises as to whether the SCN has disclosed sufficient evidence to show the active role of the appellants in the willful misdeclaration / misclassification of the goods involved in the 'live' BOE's pertaining to ascorbyl polyphosphate and those related to the clearance of amprolium HCL. We find that the SCN and the discussions in the OIO have not been able to show that the appellants (Director and Managing Director) were the directing minds of the company involved in the mis-declaration / misclassification of the goods. There is nothing to show that they deliberately imported ascorbic acid and knowingly declared it as ascorbyl polyphospahate or that Amprolium HCL although being in the pure form was deliberately mis-declared as a pre mix/animal feed. Both the appellants have protested their innocence and have stated that as per the business documents, they have contracted for the purchase of ascorbyl polyphospahate only and that declaration of Amprolium HCL as pre mix/animal fee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es of Interpretation of the Tariff, which a conscientious businessman would not have made. Such evidence is missing. 7.6 A charge of willfully mis-declaration and mis-classification should not be lightly made. It was held by the Hon'ble Supreme Court in Aban Loyd Chiles Offshore Limited and Ors. Vs Commissioner of Customs, Maharashtra [(2006) 6 SCC 482 / 2006 (200) E.L.T. 370 (S.C.)], that the word "willful" preceding the words "misstatement or suppression of facts" clearly spells out that there has to be an intention on the part of the assessee to evade the duty. The OIO is totally bereft of such a charge and hence the penalty imposed on the appellants must fail. (emphasis added). Merely because the goods were found to be ascorbic acid instead of ascorbyl polyphospahate as declared in the BOE or that Amprolium HCL although being in the pure form was deliberately mis-declared as a pre mix/animal feed, cannot be held against the appellants (company officials) without showing their active involvement in the blameworthy act. The penalty against them must hence fail. 9. Whether penalties are imposable on the appellant Company. 9.1 The Ld. Adjudicating Authority has im....