CESTAT Upholds Rs 19.5 Lakh Customs Penalty: Viscose Fabric Declared but Polyester Imported, Supplier Error Claim Rejected [Read Order]

The Principal Bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) at New Delhi, upheld a ₹19.53 lakh penalty for mis-declaration of imported fabric. The goods declared as viscose-polyamide fabric were found to be polyester filament yarn on laboratory testing. The Tribunal upheld rejection and re-determination of transaction value stated. It ruled that supplier error was no defense and mandatory penalty under Section 114A of the Customs Act, 1962 was correctly imposed.

The Appellant, M/s Artex Textile Pvt. Ltd., filed this appeal against the order-in-appeal dated 27.05.2021 passed by the Commissioner of Customs (Appeals), New Delhi, which upheld the Additional Commissioner's order dated 30.05.2019.

The Appellant filed a Bill of Entry dated 16.04.2019 declaring the goods as "Viscose Polyamide Woven Fabric" and classified them under CTI 5516 22 00. Based on specific intelligence, Customs Preventive officers examined the goods and sent samples to the Central Revenue Control Laboratory (CRCL).

The CRCL test report revealed the fabric was actually "Polyester Filament Yarn" (textured 34.8% and non-textured 62.7%), establishing mis-declaration. The appellant's Director, after viewing the test report, accepted re-classification under CTI 5407 72 00 and agreed to pay differential duty, claiming the error was based on information provided by the supplier.

Further, the transaction value was rejected under Rule 12 of the Customs Valuation Rules, 2007 and re-determined under Rule 5. Differential duty of Rs. 19,53,628/- was confirmed under Section 28, goods were confiscated under Section 111(m) but allowed redemption on payment of Rs. 2,00,000/- fine, and penalty of Rs. 19,53,628/- was imposed under Section 114A. The Commissioner (Appeals) upheld the Additional Commissioner's order, leading to this appeal before the Tribunal.

The Counsel for the Appellant, Prem Ranjan Kumar, submitted that the acceptance was coerced and the assessing officer must follow statutory procedure for valuation even if the appellant accepted enhancement.

Further, the Counsel stated that under Rule 5 of the Valuation Rules, the declared value and not the assessed value of contemporaneous imports should be applied, whereas the value was enhanced based on the assessed value of Bill of Entry No. 3164234 dated 05.05.2019 at ICD Ballabhgarh, the mis-declaration occurred due to the supplier's mistake and redemption fine equal to differential duty was unjustified as there was no intent to evade duty.

On the other hand, the Authorized Representative for the Respondent, Mukesh Kumar Shukla, supported the impugned order and relied on the Supreme Court decision in Commissioner of Central Excise, Madras versus Systems & Components Pvt. Ltd. 2004 (165) E.L.T. 136 (S.C.), what has been admitted need not be proved, and the appellant had admitted the mis-declaration and accepted re-classification and re-assessment of duty.

Further, the Counsel stated that the declared value was properly rejected under Rule 12 and re-determined under Rule 5 based on contemporaneous imports data; and the appeal should be dismissed and the impugned order upheld.

The Tribunal consisted of Justice Dilip Gupta, President and Technical Member, P. V Subba Rao, heard and reviewed the matter.

The Tribunal, after considering the submissions made, observed that the mis-declaration of goods was an undisputed fact. The goods declared as "Viscose Polyamide Woven Fabric" were actually "Polyester Filament Yarn" as confirmed by CRCL testing. The appellant accepted re-classification and re-determination of duty, attributing the error to the supplier's mistake.

Further, the Tribunal held that goods not corresponding with the Bill of Entry were rightly confiscated under Section 111(m). The redemption fine of Rs. 2,00,000/- (approximately 10% of goods value of Rs. 20,90,068/-) was fair and balanced. The mandatory penalty of Rs. 19,53,628/- under Section 114A, equal to the duty sought to be evaded, was correctly imposed.

Accordingly, the Tribunal upheld the impugned order and dismissed the appeal filed. The Order was pronounced in open court on 07/01/2026.

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