2017 (4) TMI 480 - AT - Customs

Classification of imported goods - Diakin Air Heat Pumps - importer claimed assessment under heading 8418.69 of the Customs Tariff read with N/N. 30/88 as amended - Revenue claimed the goods to to be air conditioning machines and not heat pumps as declared, classified under heading 8514 - the confiscation which related to licence issued by the licensing authority after the clearance of the imported goods - fine - penalty - Held that - Once the licence was validly issued and the same is in force the goods covered under the said licence is not liable for confiscation for want of licence. The Customs authority cannot raise any question on the valid licence issued by a licensing authority. Import without licence is a contravention to the terms of the foreign trade policy. If a licensing authority under foreign trade department issues a licence, then customs has no authority to raise any objection. If it is permissible to issue a licence at a later date after the import of the goods, the custom authorities cannot take any action holding that the goods are prohibited for want of licence - the confiscation held u/s 111 (d) of the CA is not correct and legal. Since the goods were not liable for confiscation u/s 111 (d) the redemption fine and penalty imposed by the adjudicating authority is on very higher side, which is required to be reduced - The redemption fine reduced from ₹ 30 lakhs to ₹ 15 lakhs - Penalty is reduced from ₹ 5 lakhs to ₹ 2 lakhs. Appeal allowed - decided partly in favor of appellant.

Issues Involved:
1. Classification of imported goods.
2. Eligibility for exemption under Notification No. 30/88.
3. Confiscation of goods under Section 111(d) and 111(m) of the Customs Act, 1962.
4. Imposition of redemption fine and penalty.

Issue-wise Detailed Analysis:

1. Classification of Imported Goods:
The appellant, M/s. Hotel Leela Venture Ltd., filed a Bill of Entry for 168 units declared as Daikin Air Heat Pumps. They claimed these were classifiable under heading 8418.69 of the Customs Tariff. However, upon detailed examination, the goods were found to be air conditioning machines and not heat pumps as declared. The Tribunal confirmed that the goods were classifiable under Chapter Heading 8415 of the Customs Tariff, based on the HSN Explanatory Notes, which describe air-conditioning machines as those incorporating a motor-driven fan and elements for changing temperature and humidity.

2. Eligibility for Exemption under Notification No. 30/88:
The appellant claimed exemption under Notification No. 30/88, which was applicable to heat pumps. However, since the goods were classified as air conditioning machines under Chapter Heading 8415, they were not eligible for the exemption under the said notification. This classification was upheld by both the Tribunal and the Hon’ble Supreme Court.

3. Confiscation of Goods under Section 111(d) and 111(m) of the Customs Act, 1962:
The goods were initially proposed to be confiscated under Section 111(d) for want of a valid import license and under Section 111(m) for mis-declaration. The Tribunal's earlier order, which was upheld by the Supreme Court, confirmed the confiscation under Section 111(m). The matter was remanded to the Commissioner to determine the applicability of Section 111(d) in light of a license issued post-import but with retrospective effect. The Commissioner upheld the confiscation under Section 111(d), but this was contested by the appellant, arguing that the retrospective license should validate the import.

4. Imposition of Redemption Fine and Penalty:
The adjudicating authority imposed a redemption fine of ?30 lakhs and a penalty of ?5 lakhs. The appellant argued that since the license was issued retrospectively, the confiscation under Section 111(d) was not justified. The Tribunal found merit in this argument, noting that once a valid license is issued, Customs authorities cannot question its validity. Consequently, the Tribunal set aside the confiscation under Section 111(d) and reduced the redemption fine from ?30 lakhs to ?15 lakhs and the penalty from ?5 lakhs to ?2 lakhs.

Conclusion:
The Tribunal concluded that the goods were correctly classified under Chapter Heading 8415 and not eligible for exemption under Notification No. 30/88. The confiscation under Section 111(m) was upheld, but the confiscation under Section 111(d) was set aside due to the retrospective license. The redemption fine and penalty were accordingly reduced. The appeal was partly allowed, modifying the impugned order to the extent of reducing the fine and penalty.

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