In a significant case, the Chennai bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that penalty under section 112(a) of the Customs Act, 1962 is not imposable in the absence of misdeclaration of brand or country of origin on import document.
Mr Murugan K.S., the appellant has filed the Bill of Entry for the import of 1976.10 kgs of Polyester Nylon Warp Knitted Fabrics and 8511.90 kgs of Nylon Warp Knitted Fabrics which were purchased on “High Seas Sales” basis from M/s. Sainath Knitex Pvt. Ltd., Surat who originally purchased the said goods from M/s. J.S. Fashions (L.L.C), Dubai, UAE but supplied directly by M/s. Change Foreign Trade Corporation, Fujian, China, the manufacturer.
The said import consignment was suspected to be undervalued and was seized as the declared value at US$ 5.15 per Kg for Nylon Knitted Grey Fabrics, and at US$ 3.90 per Kg for Polyester Nylon Knitted Grey Fabrics was considered low compared to the contemporaneous imports. It was found that the imported consignment contained 1976.10 kgs of square net fabrics with a slip as “Semi Dull” and 8511.9 kgs of square net fabrics with a slip as “Bright”.
The appellant has put forth that the observation of adjudicating authority that they have not furnished the manufacturer’s invoice is factually incorrect as they produced the copies of the manufacturer’s invoice before the lower adjudicating authorities and the record of PH noted the submission of the manufacturer’s invoice.
The original adjudicating authority had imposed a redemption fine of Rs.20 lakhs and a penalty of Rs.13 lakhs on the appellant which is abnormally disproportionate to the allegation of mis-declaration of the value of the imported goods.
The appellant has put forth that he has amply demonstrated that the contemporaneous imports and the goods in the impugned consignment were not the same in quality or quantity and so the comparison is not by the law.
A two-member bench comprising of Mr P Dinesha, Member (Judicial)and Mr Vasa Seshagiri Rao, Member (Technical) viewed that the only reason for rejecting the transaction value is on account of noticing higher values of the contemporaneous imports. However, while determining a particular import to be considered as a contemporaneous import for enhancement, it is necessary to match all commercial-level details like quality, quantity, type whether under a contract, physical characteristics, brand, reputation, country of origin, time of import, stock lot sale, manufacturers sale, etc.
Further observed that there was no allegation that the importer has mis-declared the description of goods or whether any excess quantity was found or whether there is any mis-declaration of brand or country of origin or type or as to any other aspect about imported goods.
The CESTAT held that enhancement resorted to is not legally justified and so unsustainable. We also find that redemption fine and penalty imposed on the appellant are disproportionately high when compared to the declared value of the impugned goods at Rs.27,93,043/- which was enhanced to Rs.48,59,847/-.
While allowing the appeal, the Tribunal set aside the impugned order.
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