TaxTMI 
TaxTMI 
2026 (7) TMI 267
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....6 challenging the findings recorded in Order-in-Original No. KOL/CUS/PR.COMMISSIONER/PORT/ADJN/07/ 2025 dated 21.02.2025 passed by the Principal Commissioner of Customs, Port Commissionerate, Kolkata insofar as it upholds the re-classification of the goods imported under the eight live Bills of Entry, confirmed the demand of differential customs duty, ordered confiscation of the goods with an option of redemption on payment of fine, and imposed penalties upon the appellants/noticees. The Revenue has also preferred three separate appeals bearing Nos. C/75856/2025, C/75857/2025 and C/75858/2025, against the said order to the extent it dropped proceedings relating to 306 past Bills of Entry as initiated against the importer/noticees. The dispute relates to the importation of parts/components of Electric Tricycles (E-Rickshaws) by M/s. Zeniak Innovation India Ltd. during the material period. 3. The facts of the case are that M/s. Zeniak Innovation India Limited is engaged in the import of components such as chassis frames, body shells, structural assemblies, wiring harnesses, and other ancillary parts of e-rickshaws, which are then assembled with domestically procured propulsi....
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....ercepted, examined and seized by DRI, and 306 past Bills of Entry, which had already been assessed and cleared by Customs. The above Notice dated 21.09.2018 came to be issued to M/s. Zeniak Innovation India Ltd., its Directors, namely Shri Mazibur Biswas and Shri Golam Moinuddin, as well as certain co-noticees including M/s. M.N. Enterprises and M/s. Om Sai Clearing and Forwarding Agency. The notice alleged that the goods imported under 314 Bills of Entry had been deliberately mis-declared as "Spare Parts/Components of Electrical Tricycles" and incorrectly classified under Chapter Heading 8714, whereas they were, in fact, complete Electrical Tricycles imported in Completely Knocked Down (CKD) condition, classifiable under Customs Tariff Heading 87039010 (during 2016-17) and 87038040 (during 2017-18). It was accordingly proposed to reject the declared classification, reclassify the imported goods under the aforesaid tariff headings, reassess the said goods under Section 17(4) of the Customs Act, 1962 and demand differential customs duty, in respect of the eight live Bills of Entry as well as the 306 past Bills of Entry under Section 28(4) of the Act together with applicable interest....
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....novation India Ltd. and its Directors, Shri Mazibur Biswas and Shri Golam Moinuddin, clarifying that the earlier adjudication order would continue to operate in respect of the remaining noticees. Upon fresh adjudication, the Principal Commissioner of Customs (Port), Kolkata passed the impugned de novo Order-in-Original No. KOL/CUS/PR. COMMISSIONER/PORT/ADJN/07/2025 dated 21.02.2025, wherein separate findings were recorded in respect of the two categories of Bills of Entry. While the proceedings relating to the 306 past Bills of Entry were dropped, inter alia, on the reasoning that Rule 2(a) of the General Rules for Interpretation could not be invoked in respect of goods imported under different Bills of Entry at different points of time and in view of the exclusion of the statements of the eighteen witnesses pursuant to the directions of the Hon'ble Calcutta High Court, the adjudicating authority nevertheless confirmed the allegations in respect of the 8 intercepted live Bills of Entry by rejecting the classification of the goods imported under CTH 87141090 and CTH 87149990 and reclassifying the same under CTH 87039010 (during 2016-17) and CTH 87138040 (during 2017-18). Consequ....
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....Rule 2(a) is therefore not unlimited - it operates only when the incomplete goods, as imported, already possess the essential character of the finished product. (ii) The Adjudicating Authority has mechanically applied Rule 2(a) without conducting the necessary enquiry: do the eight consignments, as imported, possess the essential character of a complete E-rickshaw? The answer is emphatically in the negative, for the following reasons: (i) The electric motor and battery - which are the heart of an E-rickshaw and supply its sole motive power - were admittedly absent from all eight consignments. An E-rickshaw without a motor and battery is an inert assemblage of structural components - it cannot move, cannot function and cannot be operated. The "essential character" of a motor vehicle is its ability to propel itself under mechanical power. That character is entirely absent in the imported goods. (ii) The concept of a CKD kit, as understood in trade and in judicial precedents, requires the kit to be complete in all respects, i.e., containing all components necessary for assembly of the finished product. A kit that is missing the propulsion system is not a CKD....
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....ot be equated to, a mis-declaration of the goods. (iii) It is well settled that where there is no misdescription of the goods and the dispute is purely one of tariff classification, Section 111 cannot be invoked and confiscation cannot be ordered. (iv) The Adjudicating Authority's own finding that proceedings in respect of 306 prior consignments - where the same goods were imported, described in the same manner - are liable to be dropped, is wholly inconsistent with a finding of wilful mis-declaration in respect of the eight intercepted consignments. If there is no mis-declaration in 306 consignments, there cannot be a mis-declaration in the eight consignments, since the description is identical. (v) The Appellant submits that the confiscation ordered in the impugned order is legally bad and liable to be set aside, and consequently the redemption fine of Rs. 60,00,000/- also stands extinguished. C. PENALTY UNDER SECTION 114AA IS WHOLLY INAPPLICABLE ON THE FACTS OF THIS CASE (i) Section 114AA of the Customs Act, 1962, provides for a penalty where any person knowingly or intentionally makes, signs or uses any declaration, statement or ....
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.... E. THE IMPUGNED ORDER IS SELF-CONTRADICTORY AND LEGALLY UNTENABLE (i) The impugned order contains a fundamental and fatal self-contradiction. On the one hand, the Adjudicating Authority has dropped all proceedings in respect of 306 prior consignments on the grounds that Rule 2(a) cannot be applied to consignments filed at different points in time and that the statements of 18 persons cannot be relied upon. On the other hand, for the eight intercepted consignments, the very same Rule 2(a) - which was held inapplicable to 306 prior consignments - is now invoked to reclassify the goods, even though the goods, the description, the documentation and the importer are identical. (ii) This self-contradiction goes to the root of the impugned order and renders it legally untenable. A quasi-judicial authority cannot apply divergent standards to identical facts in the same proceeding. The impugned order lacks internal consistency and is liable to be set aside on this ground alone. The Hon'ble Tribunal may take note that a finding dropping charges in respect of 306 consignments for want of evidence virtually destroys the foundation upon which the charges in respec....
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....der the Companies Act for certain tax defaults), the Customs Act imposes penal liability on persons who commit or abet specific acts. The imposition of personal penalty upon a Director therefore requires evidence that the Director: (a) personally and knowingly made the false declaration, or abetted the making thereof; (b) personally directed or controlled the specific transaction giving rise to the alleged violation; or (c) was personally aware of and complicit in the alleged mis-declaration or documentary fraud. (iii) None of these elements are established in the Impugned Order in relation to the Appellant. The Adjudicating Authority has imposed the penalty on the Appellant by virtue of his directorial designation alone - which is entirely impermissible in law. (iv) It is settled law that criminal or penal liability of a company cannot automatically be visited upon its Directors or officers unless there is a specific allegation and finding that the individual officer personally committed the offending act, or that the act was performed at his direction or with his knowledge. (v) In the present case, the Appellant resides in a v....
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....s compelled the total dropping of proceedings for 306 Bills of Entry. Yet, for the 8 intercepted Bills of Entry representing eight separate, independent customs transactions, the Adjudicating Authority invokes Rule 2(a) GRI by treating the aggregate contents of eight separate Bills of Entry as a composite CKD kit. This is precisely the error he himself identified and rejected in respect of the 306 Bills of Entry. (iii) An order that reasons in a self-contradictory manner - holding a principle valid in one part and invalid in another part on identical facts - is not an order in accordance with law. The Impugned Order cannot be permitted to stand in a posture that is legally self-defeating. It must fail in its entirety on this ground alone. D. THE DISPUTE IS ONE OF TARIFF MISCLASSIFICATION, NOT MIS-DECLARATION: THE FOUNDATION FOR PENAL LIABILITY IS ABSENT (i) The Bills of Entry filed by M/s. Zeniak described the goods as 'Parts/Components of Electric Tricycles.' This description was factually accurate. The Department does not allege, nor does the Impugned Order find, that the goods physically imported were different from what was declared. The goods....
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....of a complete E-rickshaw, and Rule 2(a) GRI cannot legally apply. (iv) As the Adjudicating Authority himself conceded in respect of the 306 Bills of Entry, goods imported under different Bills of Entry cannot be aggregated for the purpose of applying Rule 2(a). Eight separate Bills of Entry represent eight distinct customs transactions. The goods in each Bill of Entry must be classified independently. Bundling the contents of eight separate Bills of Entry to construct a notional composite CKD kit is precisely the approach the authority acknowledged was impermissible - yet he employs it for the 8 intercepted transactions without any rational distinction. F. SECTION 114AA HAS NO APPLICATION: NO FABRICATED OR FORGED DOCUMENT HAS BEEN IDENTIFIED (i) Section 114AA of the Customs Act, 1962 is a provision targeted at a specific and aggravated form of conduct - the deliberate falsification, fabrication, or knowing use of false documents in the course of customs transactions. It was legislated as an anti-fraud measure to address cases involving forged certificates, counterfeit documents, and similar acts of documentary dishonesty. (ii) The imposition of a....
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....ntly unsustainable. (iii) Even if confiscation were to be upheld - which is denied - the personal penalty under Section 112(a) upon the Appellant as an individual Director requires the specific finding that he personally abetted the alleged violation. No such finding exists in the Impugned Order. H. THE IMPUGNED ORDER VIOLATES THE DIRECTIONS OF THE HON'BLE CALCUTTA HIGH COURT (i) The Hon'ble Division Bench of the Calcutta High Court directed that the de novo order be passed on merits without placing any reliance on the statements of the 18 witnesses. The Impugned Order, to the extent it attributes personal culpability to the Appellant on the basis of material gathered through the investigation - which was premised on and intertwined with those excluded statements - is in violation of the spirit and letter of the High Court's direction. (ii) An order passed in violation of a judicial direction is a jurisdictional infirmity of the most fundamental kind. This Tribunal, in the exercise of its appellate jurisdiction, is empowered and indeed duty-bound to correct such an order. (III) In respect of Shri Golam Moinuddin: A. ....
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....lete CKD E-rickshaw rather than as parts under CTH 8714. (iii) This is a question of classification and nothing else. Classification disputes arise where there is a legitimate difference of interpretation in applying tariff entries to correctly described goods. They do not give rise to findings of misdeclaration, suppression of facts, or documentary fraud. (iv) The entire foundation of the Impugned Order rests on classification, and the penal superstructure built upon it must collapse. C. RULE 2(a) GRI CANNOT APPLY TO THE IMPORTED GOODS: ABSENCE OF 'ESSENTIAL CHARACTER' (i) The invocation of Rule 2(a) of the General Rules for Interpretation is wholly misconceived in the facts of this case. Rule 2(a) provides that any reference in a heading to a complete article shall include that article when incomplete or unfinished - but only if, as imported, the incomplete or unfinished article has the essential character of the complete or finished article. (ii) The concept of "essential character" is decisive. An E-rickshaw is fundamentally defined by its propulsion system. It is a motorised three-wheeled vehicle, and without an electric mot....
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....document was fabricated. (iii) The classification of goods as parts (CTH 8714) rather than as CKD vehicles (CTH 87039010) represents a difference of legal opinion on the application of the tariff, not a statement of a false fact. It has been consistently held by the CESTAT and High Courts that a mere classification dispute, where the goods are accurately described, does not attract confiscation under Section 111. (iv) In the absence of a valid confiscation order, the entire penal scaffolding under Section 112 - which is parasitic upon confiscation - falls away. There can be no penalty under Section 112 where there is no valid confiscation, and there is no valid confiscation where there is no mis-declaration, prohibited import, or prohibited act. E. SECTION 114AA HAS NO APPLICATION IN THE FACTS OF THIS CASE (i) Section 114AA of the Customs Act, 1962 is a provision targeted at a specific and aggravated form of conduct - the deliberate falsification, fabrication, or use of false documents in the course of a customs transaction. It was introduced as a stringent anti-fraud measure to deal with cases involving forged invoices, counterfeit certificates ....
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.... act. (iv) The Impugned Order contains no specific finding that the Appellant personally directed the classification of goods, personally prepared or signed any allegedly false document, or was personally involved in any act of mis-declaration. The Appellant's statement recorded during investigation has been rendered inadmissible by the direction of the Hon'ble Division Bench of the Calcutta High Court. In the absence of any admissible evidence of personal culpability, the penalty imposed on the Appellant under Section 112(a) and Section 114AA cannot be sustained. G. THE IMPUGNED ORDER VIOLATES THE DIRECTIONS OF THE HON'BLE CALCUTTA HIGH COURT (i) The Hon'ble Division Bench of the Calcutta High Court, while upholding the remand, specifically directed that the de novo order shall be passed on merits without placing any reliance on the statements of the 18 witnesses. The Impugned Order, to the extent it adopts findings and conclusions that are derived, even indirectly, from the material gathered through those witnesses' statements and the investigation premised thereon, is in violation of the spirit and direction of the High Court. ....
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....g and the corresponding rate of customs duty. 10.1. Insofar as the Revenue's appeals are concerned, the Ld. Authorized Representative of the Revenue has assailed the impugned order to the extent it dropped the proceedings against in respect of the remaining 306 past Bills of Entry and modified the penalties imposed upon the assessees/notices; that the adjudicating authority was unjustified in disregarding the evidentiary value of the statements recorded under Section 108 of the Act and that the adjudicating authority's decision to drop the demand on past imports, despite identical modus operandi, goods description, and supplier documentation as established in live cases, amounts to inconsistency in adjudication and non-application of mind. He reiterated the grounds urged in the respective appeals filed by the Revenue, which are reproduced below for ease of reference: - 1. On Improper Reliance on Calcutta High Court Order dated 05.11.2019: (i) That the Adjudicating Authority (hereinafter referred to as "AA") has erroneously relied upon the Hon'ble Calcutta High Court's order dated 05.11.2019 as cited in Para 6.6.2 of the Order-in-Original (OIO), ....
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....a 1.7.12). (ii) That the AA has adopted an inconsistent adjudicatory approach by confirming allegations for live B/Es while dropping demand for past imports under identical facts, thus undermining the principle of parity in quasi-judicial determination. 4. On Non-Application of Rule 2(a) of the General Rules for Interpretation of the Tariff: (i) That the AA has completely failed to consider the applicability of Rule 2(a) of the General Rules for Interpretation of the Import Tariff. The CKD kits imported in split consignments across 309 B/Es (Para 1.2.3) had the essential character of fully assembled electric tricycles and were misclassified under CTH 87141090 or 87149990 instead of the appropriate Heading 8703. (ii) That the interpretation of Rule 2(a), as upheld in multiple decisions, mandates classification of incomplete or unassembled goods as complete articles where they possess the essential character of the latter. This principle squarely applies to the impugned consignments. 5. On Circumvention of Duty through Systematic Misdeclaration: (i) That the recovery of incriminating documents, identical pattern in supplier invoic....
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....er. The Ld. Commissioner (Appeals) has given a clear finding in the impugned order as to why the imported goods cannot be considered as a fully finished e-rickshaw. As per the reading of descriptions as provided under Import Tariff, Section Notes to Chapter XVII and Explanatory Notes to HSN/CTH 8703 and 8708, the goods imported will have the essential characteristic of e-rickshaw only when the same are assembled to create a T-shaped vehicle mounted on a chassis, whose two rear wheels are independently driven by separate battery-powered electric motors. Also, it is observed that the goods as imported by the Respondent fulfil the description as provide in explanatory notes to CTH 8708 as mentioned at Sl. Nos. (a) to (n). 6.2. Moreover, the lower authority in its findings has not adduced any evidence that the goods imported by the Respondent are in CKD condition and provides the essential characteristic of e- rickshaw. As per the terminology of CTH 8703 in order to have the essential characteristics of three wheeled vehicle the same has to be powered or there should be propulsion through a battery which provides the power to the motor in order to thrust a vehicle. It is on re....
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....not have all essential components for a fully finished e-rickshaw. 6.6. Regarding enhancement of value, we observe that the Ld. Commissioner (Appeals) has relied on the judgment of Commissioner of Customs (General & CFS) vs. Radhey Shyam Ratanlal reported in 2017 (358) E.L.T. 965 (Tri. Mumbai) and observed that the enhancement of values was done without providing any logical reasons. We agree with the findings of the Ld. Commissioner (Appeals) that the transaction value as declared by the respondent was rejected by the lower authority without application of valuation rules i.e., the CVR, 2007. Also, no reason for rejection were recorded in line with the procedure laid down in the said rules. Further, no evidence was provided to the respondent as to why the value as declared by the respondent was rejected by the lower authority. Accordingly, we hold that the enhancement of value without following the due process as laid down in the Act and CVR, 2007 and in violation of the principles of natural justice is not sustainable. 6.7. Since the mis-declaration of the description, classification and value as alleged by the Department has not been established, we hold that t....