2015 (4) TMI 347 - HC - Customs

Classification of goods - toys, viz., Talking Parrot - Wrong classification of goods - Imposition of penalty - Malafide intention or bonafide belief - Held that - during the entire proceedings the assessee/importer was trying to prove the classification of goods imported in its favour. While the Commissioner (Appeals) differed with the finding of the adjudicating authority, the Tribunal also, initially, on its part, was not clear, as there were two different views and, therefore, the matter was referred to a Larger Bench, which came to decide the issue once and for all. - Therefore, it is clear that the assessee was all along pursuing the matter diligently under the bona fide belief that the classification as made by it is correct. However, this aspect has been lost sight of by the Tribunal, while upholding the order of the original authority, whereby the penalty imposed on the assessee has also been confirmed. It is clear from the records that the assessee was pursuing the matter under the bona fide belief that the classification offered by it is correct. In such circumstances, it cannot be said that the act of the assessee was wilful, deliberate and dishonest, in that he wanted to avoid payment of duty, thereby evading tax liability. The present case falls squarely within the parameters as propounded by the Supreme Court in Akbar Badurddin s case (1990 (2) TMI 50 - SUPREME COURT OF INDIA) - penalty, as imposed on the appellant/assessee is not justified in the facts of the present case, which the Tribunal failed to set aside - Decided in favour of assessee.

Summary

Issues:
Classification of imported goods under tariff headings 950380.01 and 950349.09, Requirement of Specific Import Licence, Confiscation of goods under Section 111 (d) of the Customs Act, Imposition of penalty under Section 112 of the Act.

Classification of Goods:
The appellant imported toys, specifically a Talking Parrot, classified under tariff heading 950380.01. The Department argued that the goods fell under Exim Code No.950349.09, requiring a Specific Import Licence. The adjudicating authority held that the goods were restricted and required a special import licence, confiscating the goods under Section 111 (d) of the Customs Act. The Commissioner (Appeals) ruled in favor of the appellant's classification under tariff heading 950380.01. However, the Tribunal, following a decision by a Larger Bench, classified the goods under 950349.09, setting aside the Commissioner's order.

Penalty Imposition:
The Tribunal upheld the penalty imposed on the appellant under Section 112 of the Act. The appellant argued that the penalty was unjustified as they acted under a bona fide belief in the correctness of their classification. Citing the Supreme Court's decision in a similar case, the appellant contended that penalties should be imposed only in cases of deliberate defiance of the law, contumacious conduct, or dishonesty. The Court agreed with the appellant, finding that the penalty was not justified as the appellant acted in good faith throughout the proceedings.

Conclusion:
The Court modified the Tribunal's order, setting aside the penalty imposed on the appellant. The Court emphasized that penalties should be reserved for cases of deliberate misconduct, not for technical breaches made in good faith. The appellant's diligent pursuit of the correct classification under a genuine belief warranted leniency, leading to the Court's decision to remove the penalty.