2016 (11) TMI 173 - AT - Customs

Enhancements of fine and penalties - import of consignments of Hot Rolled Coils - whether goods are of prime quality or are defectives, hereby losing eligibility for duty free clearance under the DFRC licenses? - Held that - the IIT report itself shows that the compositions of the goods are in order. It is only the physical appearance of goods is of non-prime quality. In our view, quality of goods particularly steel items can be correctly ascertained only on the basis of composition of goods. Therefore only because on physical examination it appears to be non-prime material cannot be concluded that the goods are of other than prime quality. We further observed that in the DFRC license the tariff description is given as appearing in the tariff heading No. 72082790, the goods imported by the assessee is undisputedly falls in the same tariff heading and the description of goods was also given as hot rolled coils from stock . We therefore find that there is no mis-declaration in the bill of entry vis-a-vis description given in the DFRC license. So long both the description falls under the same tariff heading number, it cannot be said that two different descriptions were declared under DFRC and in the Bill of Entry. Moreover, the composition is matching but on the physical examination the goods found to be non-prime quality. This cannot be the reason to allege that there is a mis-declaration. No different treatment is given to prime quality and nonprime quality material either in the Customs Tariff or in the DFRC Licences. Therefore even if it is admitted that the part of the imported goods is on non-prime quality material the goods are neither liable for confiscation nor the DFRC benefit can be denied - Revenue s appeal of enhancement of fines and penalties set aside - appeal disposed off - decided against Revenue.

Summary

Issues:
Appeals against orders passed by the Commissioner of Customs (Export) Mumbai regarding classification of imported goods under DFRC licenses and subsequent confiscation.

Analysis:
1. Classification of Imported Goods:
The appellants imported Hot Rolled Coils classified under Customs Tariff Heading No. 72082790 against DFRC licenses. The goods were assessed by the customs officer under the same heading and granted duty-free clearance. However, the SIIB detained part of the consignment due to suspected defects. Subsequent investigations revealed some non-prime quality goods, leading to a show cause notice for confiscation under Section 111(m) of the Customs Act, 1962. The adjudicating authority ordered confiscation with an option for redemption on payment of fines and imposed penalties under Section 112(a).

2. Arguments by Appellant:
The appellant argued that despite minor defects, the goods fell under the same tariff entry and item as declared in the DFRC licenses. They contended that the quality discrepancy did not constitute mis-declaration as the goods' chemical composition met the required parameters. Citing various judgments, the appellant emphasized that minor defects did not warrant confiscation or denial of DFRC benefits.

3. Revenue's Position:
The Revenue contended that the goods' non-prime quality constituted mis-declaration, making them liable for confiscation and ineligible for DFRC clearance. They argued for enhanced redemption fines and penalties based on the entire consignment's value.

4. Tribunal's Decision:
The Tribunal analyzed the case, noting that while some goods were non-prime quality on physical examination, their chemical composition matched the required standards. As the goods fell under the same tariff heading as per DFRC licenses, there was no mis-declaration. The Tribunal ruled that minor defects did not warrant confiscation or denial of DFRC benefits. Consequently, the impugned order was set aside, and the appeals of the appellants were allowed. The Revenue's appeals for enhanced fines and penalties were dismissed.

In conclusion, the Tribunal's decision clarified the classification of imported goods under DFRC licenses, emphasizing that minor quality discrepancies did not constitute mis-declaration warranting confiscation or denial of benefits. The judgment provided a nuanced analysis of the case law and statutory provisions, leading to a favorable outcome for the appellants.