In a significant case, the New Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) upheld the penalty imposed under section 112 of the Customs Act, 1962 as it was proven that the misdeclaration of nature of goods in bill of entry.
The order-in-appeal passed by Commissioner (Appeals) upholding the order-in-original passed by the Additional Commissioner of Customs is challenged by M/s. Sterling Impex, the appellant. The appellant filed Bill of Entry No. 3055415 dated 21.08.2013 through its Customs Broker to clear goods declared as Plain Polyester fabric with PVC Lamination of 0.30 mm‖.
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Officers of the Special Intelligence and Investigation Branch examined the consignment and found that the quantity of the goods was as declared but the fabric which was imported was of much higher thickness ranging from 0.38mm to 0.45 mm. Samples of the goods were sent for testing to the Central Revenue Control Laboratory who sent their test reports stating that the goods were of thickness 0.38 mm to 0.45 mm.
The imported goods were seized under section 110 of Customs Act, 1962 under the belief that the goods were liable for confiscation under section 111 of the Act and the statement of the owner of the importer was recorded and the matter was investigated. In his statements given under section 108 of the Act, Shri Shikhar Mahajan, owner of the appellant firm accepted the test report of CRCL and admitted their mistake and sought provisional release of the seized goods.
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The Bill of Entry, the invoice and other documents submitted by the appellant declared the goods to be of 0.3 mm while the goods which were imported were of much thicker varying from 0.38 mm to 0.45 mm. Therefore, the declared transaction value was rejected under Rule 12 of the Customs (Determination of Value of Imported Goods) Rules, 2007 and it was re-determined under Rule 5 of the Valuation Rules, i.e., based on the values of similar goods.
As requested by the appellant, the goods were released provisionally and the appellant paid the duty as re-determined. The SCN was issued proposing to rejected the transaction value under Rule 12 of the Valuation Rules and re-determine it under Rule 5 of the Valuation Rules and accordingly re-determine the value of the imported goods and the duty payable thereon.
After considering the submissions made by the appellant in defence, the Additional Commissioner passed the OIO by declaring assessable value of the goods imported vide Bill of Entry is rejected under Rule 12 of the CVR, 2007 and ordered to be re-determined as Rs. 98,83,894/- under Rule 5 of the VCR, 2007.
The AC imposed a fine in terms of section 125 (1) of the Customs Act, 1962. The Bill of Entry assessed provisionally is ordered to be assessed finally on redetermined value of Rs. 98,83,894/- under section 18 (2) of the Customs Act, 1962 and the duty already collected (in excess of Rs. 1,76,733/-) is ordered to be appropriated accordingly.
On appeal by the appellant, the Commissioner (Appeals) upheld the OIO. Shri Aman Ahluwalia, counsel for the appellant had placed an order for polyester fabric with PVC coating of thickness 0.3 mm only and therefore, all documents showed the same description. It had correctly described the same thickness in the Bill of Entry and therefore, there was no mis-declaration at all.
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It’s overseas supplier had wrongly sent to it goods of much higher thickness and the appellant cannot be penalized for that action of the overseas supplier. Therefore, the goods were wrongly confiscated under section 111(m) and penalty under section 112 was also wrongly imposed on the appellant.
Penalty under section 114AA is attracted only if there is intent. In this case, the appellant had declared in the Bill of Entry the goods which it had imported honestly and had no intent to mis-declare and therefore, penalty under section 114AA could not have been imposed.
Authorized representative for the Revenue vehemently supported the impugned order and asserted that it calls for no interference. It was held that the goods were examined and found to be different from those described in the Bill of Entry and the test report of CRCL confirmed it. They were therefore seized under section 110 of the Act since they were liable to confiscation under section 111(m) of the Act. The appellant was summoned and in his statement, the proprietor of the appellant admitted their mistake.
The undisputed facts are that the appellant had filed the Bill of Entry and produced invoices with goods of 0.3 mm thickness and on examination they were found to be of much higher thickness. It was submitted that although it ordered goods of only 0.3 mm thickness, the overseas supplier wrongly sent goods of greater thickness. Firstly, no businessman of any prudence will send thicker and more expensive goods after invoicing for thinner and less expensive goods. Secondly, if the appellant had any doubt about the nature of the goods which the supplier had sent, it could have asked to check them before filing the Bill of Entry.
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Thirdly, if the appellant had filed the Bill of Entry and only later, on examination, realized that its supplier had sent the wrong goods, the natural response of any buyer who receives wrong goods is to send them back. The appellant did not seek permission to re-export the goods.
The imported goods did not correspond in thickness with the description made in the Bill of Entry and therefore, they are squarely covered by section 111(m) of the Act and have been correctly confiscated by the adjudicating authority. Having confiscated the goods, he allowed their redemption on payment of the redemption fine of Rs. 6,50,000/-, which, in our opinion, is fair considering the value of the goods at Rs. 98,83,894/- .
Penalty under section 112 of the Act can be imposed for acts or omissions which rendered the goods liable to confiscation under section 111(m) of the Act. The appellant had, by mis-declaring the nature of the goods in the Bill of Entry, rendered them liable to confiscation and therefore, the penalty of Rs. 3,00,000/- imposed on the appellant under section 112 of the Act is fair and proper.
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The appellant had clearly made a declaration in the Bill of Entry which is false. The appellant’s contention is that it had no intention and it had actually ordered for goods of 0.3 mm thickness but its supplier had supplied goods of much higher thickness (and therefore of higher quality) but sent an invoice for goods of only 0.3 mm. This submission cannot be accepted. If anyone orders some goods and the seller delivers the wrong goods, one will naturally return them. Instead, in this case, the appellant accepted the mistake and sought provisional release of the goods which were actually imported.
A two member bench of Justice Mr. Dilip Gupta, President and P.V. Subba Rao, Member (Technical) observed that wrong goods were not sent by the supplier and it is the appellant who made the wrong statement in the Bill of Entry and produced an invoice for the wrong goods to evade duty. The intention of any person can only be inferred from the facts of the case and the behaviour of the person.
The bench held that the appellant had intentionally mis-declared the nature of the goods in the Bill of Entry. Therefore, the penalty of Rs. 3,00,000/- each was correctly imposed on the appellant under sections 114AA and 112 of the Act. While dismissing the appeal, the bench upheld the impugned order.
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