2013 (10) TMI 35 - AT - Customs

Penalty on CHA for wrong declaration of Classification of Goods - Duty Drawback Interest Penalty u/s 114(iii) - Revenue was of the view that the goods under 830700 attracted a lower rate of drawback Held that - As per Central Excise invoices and ARE-1, the goods were classifiable under Chapter Heading 8307 whereas in the drawback shipping bill classification claimed is 7307 and/or 7222 which attracted a higher rate of drawback of 1 1/2 % /2% as against the eligible drawback of 1% - The exporter in the case had admitted to the wrong claim of drawback and had paid back the excess drawback along with interest - Section 114 of the Customs Act provides for penalty for attempt to export goods improperly. The section covered imposition of penalty without mens rea and also on mens rea - When the law provides that penalty shall be imposable for commission and/or omission of an act without any mens rea such shall be imposable irrespective of any mens rea as held by the hon ble apex Court in the case of Gujarat Travancore Agency, Cochin Vs. Commissioner of Income Tax Kerala, Ernakulam 1989 (5) TMI 1 - SUPREME Court - Penalties imposed for the omission on the part of the appellant in wrongly declaring the Chapter Heading under the drawback schedule which led to the claim of ineligible drawback, therefore, cannot be faulted. There was no deliberate attempt on the part of the appellant in violating the law; therefore penalty against the appellant herein is much on the higher side, especially considering the fact that the appellant was only a small time CHA - Taking into account the circumstances of the case penalty was reduced.

Summary

Issues:
1. Classification of goods for drawback claim under incorrect chapter heading.
2. Imposition of penalty under Section 114 of the Customs Act, 1962.

Issue 1: Classification of goods for drawback claim under incorrect chapter heading

The appellant, a Customs House Agent (CHA), filed a shipping bill on behalf of the exporter claiming drawback under Chapter Heading 7307 2900 and/or 7222 for stainless steel corrugated flexible hose pipes classified under Chapter Heading 8307. The discrepancy led to the recovery of drawback amount along with interest and imposition of a penalty of Rs. 50,000 on the appellant. The appellant contended that the misclassification was inadvertent, based on instructions from the exporter, and requested the penalty to be set aside. The Revenue argued that the appellant's failure to notice the correct classification in the export documents was a serious omission, justifying the penalty under Section 114 of the Customs Act, which does not require mens rea. The Tribunal observed the discrepancy and acknowledged the appellant's inadvertent error but upheld the penalty based on the strict liability under the Act.

Issue 2: Imposition of penalty under Section 114 of the Customs Act, 1962

The Tribunal analyzed Section 114 of the Customs Act, which provides for penalties without requiring mens rea for acts or omissions rendering goods liable to confiscation. Referring to legal precedents, the Tribunal emphasized that penalties may be imposed irrespective of mens rea, as established in relevant court cases. Despite recognizing the absence of deliberate intent on the appellant's part, the Tribunal upheld the penalty but considered it excessive, especially for a small-time CHA. Consequently, the Tribunal reduced the penalty from Rs. 50,000 to Rs. 5,000, deeming the lower amount sufficient to serve justice in the case. The Tribunal's decision highlighted the importance of adherence to correct classification in customs procedures while balancing penalties with the circumstances of the case.

In conclusion, the Appellate Tribunal CESTAT MUMBAI addressed the issues of misclassification for drawback claim and the imposition of penalty under Section 114 of the Customs Act, 1962. The judgment upheld the penalty due to the strict liability under the Act but reduced it from Rs. 50,000 to Rs. 5,000 considering the inadvertent nature of the error and the appellant's status as a small-time CHA. The case underscores the significance of accurate classification in customs declarations and the application of penalties under relevant statutory provisions.