2015 (9) TMI 1135 - AT - Customs

Imposition of penalty u/s 114A - MEPZ/SEZ unit - DTA clearance - appellant did not carry out sustained exports instead transferred about ₹ 1.62 crores worth of service to DTA without proper intimation to customs authorities and without payment of required duty - appellants cleared printed materials and chromatogram which are research papers are specifically covered under 49011010 of the CTA. Held that - Appellant having been registered as MEPZ/SEZ unit are covered under rules and regulations of the MEPZ / Customs Rules and Regulations. Even if the goods are exempted the appellants should have followed the procedure for clearing the goods to DTA which apparently they have not done. The appellants have not filed any shipping bill and no intimation was given to the Department and no procedure prescribed for SEZ and customs notifications are followed. They have not only violated FTP regulations for which the Development Commissioner has imposed a penalty of ₹ 5 lakhs but they have also violated the procedure and rules prescribed under the Customs Act. There is enough evidence for imposing penalty under Section 112(a) of the Customs Act, 1962 - appellants are liable for penalty for contravening the procedures prescribed for clearance to DTA. Accordingly, we impose penalty of ₹ 1,00,000 each on the appellants in respect of their appeals. - Decided partly in favour of assessee.

Issues Involved:
1. Classification of goods cleared from MEPZ/SEZ to DTA.
2. Demand of customs duty and penalty under Section 114A of the Customs Act, 1962.
3. Compliance with procedural requirements for clearance to DTA.
4. Imposition of penalty under Section 112(a) of the Customs Act, 1962.

Issue-wise Detailed Analysis:

1. Classification of Goods Cleared from MEPZ/SEZ to DTA:
The primary issue in these appeals was whether the goods cleared by the appellant from MEPZ/SEZ to DTA were classifiable under Chapter 4901 or Chapter 4911 of the Customs Tariff Act. The appellant argued that the goods were printed documents related to clinical data management services, falling under Chapter 4901, specifically 4901.1010, which includes printed books, brochures, leaflets, and similar printed matter. The adjudicating authority and the Commissioner (Appeals) had classified the goods under Chapter 4911, which covers other printed matter, including printed pictures and photographs. The Tribunal referred to the Hon'ble Supreme Court's decision in Commissioner of Customs Vs. Gujarat Perstorp Electronics Ltd., which held that specific entries (Chapter 4901) should prevail over residual entries (Chapter 4911). The Tribunal concluded that the goods were classifiable under Chapter 4901, thus setting aside the demand of customs duty.

2. Demand of Customs Duty and Penalty under Section 114A of the Customs Act, 1962:
The adjudicating authority had confirmed a demand of Rs. 24,48,632/- as customs duty and imposed an equal amount of penalty under Section 114A of the Customs Act, 1962. The Tribunal found that since the goods were classifiable under Chapter 4901, they were not chargeable to any duty. Consequently, the demand for customs duty and the penalty under Section 114A were not sustainable and were set aside.

3. Compliance with Procedural Requirements for Clearance to DTA:
Despite setting aside the customs duty and penalty, the Tribunal noted that the appellant had failed to follow the prescribed procedures for clearing goods to DTA. The appellant did not file any shipping bills or provide proper intimation to the customs authorities, violating the rules and regulations of MEPZ/SEZ and the Customs Act. The Tribunal acknowledged that the Development Commissioner had already imposed a penalty of Rs. 5 lakhs for violations of the Foreign Trade Policy (FTP) and that the appellant admitted to these procedural violations.

4. Imposition of Penalty under Section 112(a) of the Customs Act, 1962:
Given the procedural violations, the Tribunal imposed a penalty under Section 112(a) of the Customs Act, 1962. The Tribunal cited the Hon'ble Supreme Court's decisions in J.K. Steel Ltd. Vs. Union of India and Assistant Collector of Central Excise Vs. The Elphinestone Spinning and Weaving Mills P. Ltd., which held that citing the wrong rule would not vitiate the proceedings if the violations were admitted. The Tribunal imposed a penalty of Rs. 1,00,000/- each on the appellants for contravening the procedures prescribed for clearance to DTA.

Conclusion:
The appeals were allowed concerning the classification of goods and the demand for customs duty and penalty under Section 114A. However, a total penalty of Rs. 2,00,000/- was imposed for procedural violations under Section 112(a) of the Customs Act, 1962. The miscellaneous applications were disposed of accordingly.

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