2006 (7) TMI 384 - AT - Customs

Confiscation of goods - Misdeclaration - Rubber coated fabric - Expert opinion - Valuation - Misdeclaration of goods

Issues Involved:
1. Confiscation of goods under Section 111(m) of the Customs Act, 1962.
2. Classification of imported goods under Chapter Tariff Heading No. 4016 versus 59069990.
3. Rejection and re-determination of the declared value under Rule 10A and Rule 8 of the Valuation Rules.
4. Imposition of penalty under Section 112 of the Customs Act, 1962.

Detailed Analysis:

1. Confiscation of Goods under Section 111(m) of the Customs Act, 1962:
The Commissioner of Customs (Port) Kolkata confiscated a consignment of rubber-coated fabrics imported by the appellant from UAE under Section 111(m) of the Customs Act, 1962, but allowed redemption upon payment of a fine of Rs. 25,00,000/-. The appellant argued that the confiscation was wrongful and illegal as the declaration and classification of goods were made in bona fide belief based on the shipping documents provided by the overseas supplier. The Tribunal found that the mere claim of a classification based on bona fide reasons cannot be considered a deliberate act of misdeclaration as per the Supreme Court's ruling in Northern Plastics case 1998 (101) E.L.T. 549 (S.C.). Therefore, the confiscation liability under Section 111(m) could not be upheld.

2. Classification of Imported Goods under Chapter Tariff Heading No. 4016 versus 59069990:
The Commissioner classified the imported goods under Chapter Tariff Heading No. 4016 instead of the appellant's declared Tariff Heading No. 59069990. The Commissioner concluded that the goods were "rubber blankets" with rubber content exceeding 50% by weight, thus falling under Chapter 40. However, the Tribunal noted that neither the examination nor the re-examination reports, nor the Chartered Engineer's report, supported this finding. The Tribunal held that the classification under Tariff Heading No. 4016 was based on non-existent grounds and thus invalid and unsustainable.

3. Rejection and Re-determination of the Declared Value under Rule 10A and Rule 8 of the Valuation Rules:
The Commissioner rejected the declared value of Rs. 6,77,944.32 and re-determined it at Rs. 95,46,096/- under Rule 8 of the Valuation Rules. The appellant argued that the re-determination was based on incorrect premises and unsupported by evidence. The Tribunal found that the Commissioner had failed to provide any material evidence to reject the declared value and that the Chartered Engineer's report supported the declared value. The Tribunal also noted that the Commissioner had not followed the sequential procedure mandated under the Valuation Rules, specifically Rules 5 to 7, before resorting to Rule 8. Therefore, the valuation determined by the Commissioner was deemed contrary to law and unsustainable.

4. Imposition of Penalty under Section 112 of the Customs Act, 1962:
The Commissioner imposed a penalty of Rs. 10 lakhs under Section 112 without specifying the particular sub-clause. The Tribunal held that since the classification and valuation misdeclarations were not upheld, the penalty under Section 112(a) and 112(b) could not be imposed. The Tribunal referenced the Supreme Court decision in Amrit Foods v. Commissioner of Central Excise, 2005 (190) E.L.T. 433 (S.C.), which requires specific mention of the sub-clause under which the penalty is imposed. Therefore, the penalty was set aside.

Conclusion:
The Tribunal set aside the impugned order of the Commissioner, directed the Customs Authorities to release the goods upon assessment at the declared value and classification, and granted other consequential reliefs. The appeal was allowed in the terms mentioned above.

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