2016 (3) TMI 295 - AT - Customs

Extended period of limitation - Classification of goods - Plant Bio Fertilizer or Pesticides - Goods imported and declared as Bio-Fertilizer alleged as misdeclaration and suppression of facts to evade customs duty. - Held that - the composition of the imported goods is a mixture containing matrine (oxymatrine) 0.36%, Nitrogen 2369.9 5g/g, Phosphorous 1389.3 5g/g and Potassium 18491 5g/g, Magnesium 858 5g/g , Manganese 10.2 5g/g and also contains Iron, Zinc, Copper, Calcium, Silicon and other minerals. The classification and assessment of imported goods as Plant Bio-Fertilizer was done based on the Test Reports and goods were cleared during the relevant period, so, the question of alleging misdeclaration or suppression of facts by the appellant does not arise. The revenue has not adduced any evidence that the said goods imported as Bio-Fertilizer were sold or marketed as Pesticides as no farmer or cultivator will ever buy the product which is described as Bio-Fertilizer but use it for Pesticides purpose. Therefore, in the absence of any evidence contrary to the declared goods cleared in the past by the appellants, it cannot be said that the appellants have suppressed the facts or misdeclared the goods merely based on the report of live consignment and on the basis of the CRCL report of Customs the goods were rightly classified as Plant Bio-Fertilizer . Confiscation and Imposition of Redemption fine in respect of live consignment - Sections 111 (d), (m) and (o) of the Customs Act, 1962 read with Section 3 (3) of the Foreign Trade (Development and Regulation) Act 1992 and Section 17 of the Insecticides Act, 1968 - Held that based on the test reports, the adjudicating authority classified the goods as Pesticides and the appellants have not contested the classification of the goods covered in the live consignment. As the import of Pesticides are prohibited under Section 17 (1) (a) of Insecticides Act, 1968 and the appellants have not obtained registration from the Central Insecticide Board (CIB) for the import of Pesticides, therefore, the goods are liable to be confiscated under Section 111 (d) of Customs Act, 1962. Also as the goods are not re-exported and they have abandoned the goods and the goods are still with Customs custody , the goods are allowed for re-export on imposition of Redemption fine of ₹ 5 Lakh. Confiscation and Confirmation of Differential duty - In respect of past 16 consignment - Held that - by following the Hon ble Supreme Court decision in the case of Sab Nife Power Systems Ltd. 1999 (12) TMI 410 - CEGAT, MADRAS , the goods imported in the past were correctly and fully declared in the Bill of Entries as per the invoice and as per the analysis certificate of the supplier which is confirmed by the CRCL test report and there is no misdeclaration or suppression with intent to evade duty. Therefore, there is no requirement of re-classification of the goods for the past 16 consignments and demand of differential duty under Section 28 of the Customs Act. Imposition of penalty - Under Section 112(a) of the Customs Act, 1962 for live consignment and under Section 114/114A ibid for the past consignment - Held that the penalty to be imposed on the importer and its Managing Partner under Section 112(a) ibid and not to be imposed under Section 114/114A ibid. - Decided partly in favour of appellant

Summary

Issues Involved
1. Classification of imported goods under appropriate Chapter Heading.
2. Liability of imported goods to confiscation under relevant sections of the Customs Act and other applicable laws.
3. Demand of differential duty and applicability of extended period of limitation.
4. Imposition of penalties under relevant sections of the Customs Act.

Detailed Analysis

Issue 1: Classification of Imported Goods
The primary issue was whether the imported goods should be classified under Chapter Heading 31010099 as "Plant Bio-Fertilizer" or under Chapter Heading 38089910 as "Pesticides." The appellants declared the goods as "Plant Bio-Fertilizer" based on the supplier's test analysis certificate, which indicated the presence of Oxymatrine at 0.36%. However, the test report dated 27.11.2009 revealed the Oxymatrine content to be 0.41%, leading to the conclusion that the goods should be treated as "Pesticides." The adjudicating authority reclassified the goods under CTH 38089910. The appellants admitted the classification for the live consignment but contested the past clearances.

Issue 2: Liability to Confiscation
The goods imported under live Bill of Entry No. 331475 dated 12.10.2009 and 16 past Bills of Entry were subject to confiscation under Sections 111 (d), (m), and (o) of the Customs Act. The adjudicating authority ordered the confiscation of 16,000 Kgs of goods under the live Bill of Entry and allowed re-export on payment of a redemption fine of Rs. 5 lakhs. Additionally, penalties of Rs. 2.50 lakhs each were imposed on the appellant and the Managing Director under Section 112 (a) of the Customs Act. The adjudicating authority's decision was upheld, considering the goods were classified as "Pesticides" and the import of pesticides without proper registration is prohibited under Section 17 (1) (a) of the Insecticides Act, 1968.

Issue 3: Demand of Differential Duty and Limitation
The adjudicating authority confirmed the differential duty of Rs. 70,45,440/- for the past consignments under Section 28 (1) of the Customs Act, invoking the extended period of limitation. The appellants argued that the demand was hit by limitation as they had declared the goods accurately in the Bills of Entry and provided analysis certificates with each consignment. The Tribunal found that the past consignments were correctly classified as "Plant Bio-Fertilizer" based on the CRCL test reports, which confirmed the presence of essential fertilizing elements. Therefore, the charge of misdeclaration or suppression of facts was not sustainable, and the demand for differential duty was set aside on merits and limitation.

Issue 4: Imposition of Penalties
Penalties under Sections 114A and 114AA were imposed on the appellant and the Managing Director for the past consignments. However, the Tribunal set aside these penalties, finding no evidence of misdeclaration or suppression with the intent to evade duty. The penalties imposed under Section 112 (a) for the live consignment were upheld, considering the value of the confiscated goods.

Conclusion
The Tribunal upheld the confiscation and penalties for the live consignment under Bill of Entry No. 331475 dated 12.10.2009 but set aside the order of confiscation, differential duty, and penalties for the past consignments on merits and limitation. The appeal was partly allowed in these terms.