Imported Goods cannot be Confiscated u/s 111(m) for Wrong Classification or Ineligible Exemption Claim: CESTAT [Read Order]

The Delhi bench of the Customs Excise and Service Tax Appellate Tribunal ( CESTAT ) ruled that imported goods cannot be confiscated under Section 111(m) of the Customs Act, 1962 for wrong classification or ineligible exemption claims.

The importer claims to be an actual user of aluminium scrap registered as such with the Rajasthan State Pollution Control Board for storing aluminum scrap and for manufacturing aluminium ingots. It imported aluminium scrap described as ‘Thorn’ and filed a Bill of Entry dated 30.12.2020 to clear it.

The Institute of Scrap Recycling Industries, Washington classifies various types of aluminium scrap and has a standard nomenclature for them. Generally, scrap of aluminium is traded using the terms prescribed by ISRI. Thorn ‘imported by the importer was one of the categories of aluminium prescribed by ISRI.

The Import of goods into India can be regulated under various laws but the primary regulation is by the Foreign Trade Policy formulated under the Foreign Trade ( Development and Regulation ) Act, 1992. As per this policy, goods are classified based on the HSN but further sub-classified up to 8 digit level and against each good, the policy is specified as free, there are no restrictions on import or restricted ‘which means the goods can be imported only if one has an import license from the DGFT or prohibited which means that the goods cannot be imported at all. Often any restrictions on imports under any other law is also indicated as policy notes ‘in the ITC (HS) classification published by the DGFT. These policy notes are not relevant for this appeal.

Section 11 of the Customs Act, also empowered the Central Government to prohibit imports either absolutely or conditionally. Regardless of under which law the imports are prohibited or regulated, it is enforced by the Customs under the Customs Act because Customs officers control the entry points for the goods.

Section 111 of the Customs Act provides for confiscation of goods for various violations including the violation of any prohibition on imports under the Customs Act or under any other law for the time being in force. For instance, if there is a violation of import restrictions under the FTDR Act, such imported goods become liable to confiscation under section 111 of the Customs Act and consequently, they can be seized under Section 110 of the Customs Act.

Section 111(m) makes any goods which did not correspond in value or in any other particular with the entry made under the Act. When goods are imported or have to be exported, some papers have to be submitted to the Customs for clearance and this process is called ‘making an entry ‘under the Customs Act. One makes an entry by filing the Bill of Entry under section 46 to clear imported goods and makes an entry by filing the Shipping Bill under section 50 to export goods. The importer is also required to self-assess the duty payable under section 17 (1) of the Customs Act and the proper officer can re-assess the duty.

The two member bench of the tribunal comprising Binu Tamta (Judicial member) and P.V Subba Rao (Technical member) observed that imported goods cannot be confiscated under Section 111(m) because of a wrong classification or claim of an ineligible exemption notification.

In this case, the importer imported thorn and entered an incorrect classification at the 8-digit level in the bill of entry and gave a value as per its transaction value. When examining the self-assessment, the incorrect classification was discovered.

Further found that the thorn imported by the appellant was correctly confiscated under section 111(d) and 111(o) but its confiscation under Section 111(m) was not correct. The question which arises is, if in this factual matrix, was the absolute confiscation of the imported thorn correct or it could have been released on payment of redemption fine.

CESTAT found that it would meet the ends of justice if the confiscated thorn valued at Rs. 27, 48,405 was allowed to be redeemed by the importer under Section 125 on payment of a fine of Rs. 4,00,000/-, and setting aside the penalty imposed under Section 114AA of the Customs Act 

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