The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has directed the customs duty evader to pay a penalty as it was a bonafide mistake by the department to not impose mandatory penalty.
Sarvatra International, the appellant, was suspected of attempting to avoid customs duties by misclassifying and misdeclaring the item as “100% Polyester Knitted Fabric” in order to import the 100% polyester knitted cut pile fabric under two Bills of Entry.
Following an inspection by the SIIB personnel, samples were taken and forwarded for testing to the Textile Commission in New Delhi. Both consignments were confiscated on March 27, 2009, and April 30, 2009, respectively, based on the TTC investigation that revealed the cloth was 100% polyester cut pile fabric.
On July 27, 2009, the appellant issued a show-cause notice to reclassify the commodities, confiscate the goods, seek a discriminatory duty, and impose a penalty under Section 112/114A of the Customs Act, 1962. The adjudicating authority assessed a redemption fine of Rs. 1,50,857000 and a penalty of Rs. 47,89,393/-only under Section 114A of the Customs Act, and confirmed the duty of Rs. 47,89,393/- and Rs. 15,59,363/- with regard to the two Bills of Entry.
In addition to the department’s appeal against the non-imposition of the necessary penalty of Rs. 15,59,363 under Section 114A with regard to one Bill of Entry, the appellant has filed an appeal before this Tribunal. The primary question to be resolved is whether the appellant’s imported “100% Polyester Knitted Fabric” was misclassified and misdeclared under CTH60059000, resulting in customs duty at a rate of 10% Adv., or if it was classified similarly to “Polyester Cut Pile Fabric” under CTI 60019200, resulting in customs duty at a rate of 10% Adv. or 4 Rs. 100/-per KG, whichever is higher.
When the adjudicating authority offered opportunities for a personal hearing on February 24, 2010, March 3, 2010, and March 17, 2010, the appellant did not show up and instead requested an adjournment on the grounds that they needed to hear from the importer. The appellant had not responded to the show cause notice. As a result, the adjudicating body used the available record to make its decision.
Under section 111(m) of the Act, the goods may be seized in addition to a redemption fine because there appears to have been a misrepresentation in both the description and the value of the commodities. The proviso to paragraph (1) of section 28 of the Act provides for the recovery of duty based on the same logic and comparison. As a result, the adjudicating authority’s differential customs duty calculation for the two bills of entry is upheld. The application of the penalty under section 114A of the Act must be sustained since the appellant used fact suppression to avoid fulfilling his obligations.
Regarding one Bill of Entry, the adjudicating authority failed to apply the obligatory penalty under section 114A of the Customs Act, according to the two-member bench consisting of Binu Tamta (Judicial Member) and P.V. Subba Rao (Technical Member). The appellant was ordered to pay an equivalent penalty of Rs. 15,59,363 while the tribunal decided in favor of the department
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