2017 (11) TMI 1344 - AT - Customs

Penalty on CHA u/s 112 (a) of CHA - classification of imported goods - Rudraksh - Chapter 44 or Chapter 14? - classification as declared in the Bill of Entry was not accepted and it was found that the goods are rightly classifiable under Chapter 14 - case of Revenue is that CHA is obligated to file a Bill of Entry based on correct classification and in case he is aware of different classification being adopted by the importer, he is duty bound to inform the Customs about the wrong classification as advised by the importer - Held that - the goods were imported and the Bill of Entry was filed for warehousing. Warehoused goods will be in control of the Customs authorities. Classification of the product is claimed under a particular heading. The nature of product for classification could be more appropriately arrived at by physical examination only. Prima facie, Rudraksh classification, as a product of the particular chapter is to be examined with reference to the nature and the manner in which it is imported, whether it is plant product, for use or worked upon product or any declared other purposes. In such situation, it will not be correct to take a penal action against the Appellant who is director of the CHA for filing a classification under a particular chapter. Penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Penalty imposition on the Director of a Customs House Agent (CHA) company for misclassification of imported goods under the Customs Act, 1962.

Detailed Analysis:

Issue 1: Penalty Imposed on the Appellant
The case involved a penalty of ?6,00,000 imposed on the appellant, who is the Director of a CHA company, for misclassification of imported goods. The original authority held that the goods were to be classified under Chapter 14 instead of Chapter 44, resulting in a Customs duty of ?2,72,43,529 and a penalty equal to the duty amount. The appellant argued that the penalty was unjust as he acted based on the importer's instructions and no proceedings were initiated against him under CHALR. The appellant contended that as a CHA, he filed the bill of entry as per the importer's instructions and should not be penalized for abetment of an offense. The appellant highlighted that the suspension of his license was revoked, and there were no pending proceedings against him under CHALR.

Issue 2: Duty of CHA in Correct Classification
The appellant's counsel argued that the CHA is obligated to file a bill of entry based on correct classification and should inform Customs authorities if aware of any incorrect classification by the importer. The appellant was accused of knowing the correct classification under Chapter 14 but filing under Chapter 44, as evidenced by checklists at the time of filing. The appellant was found liable for penalty under Section 112 (a) for not informing Customs about the correct classification, as per the evidences appreciated by the original authority.

Judgment Analysis:
The Tribunal noted that the goods imported were Rudraksha, products of plant origin, with disputed classifications under Chapter 44 and Chapter 14. The Tribunal refrained from deciding the correct classification but focused on whether filing a bill of entry claiming a particular classification amounted to abetting a violation of Customs Act provisions. The Tribunal disagreed with the original authority's reasoning for imposing a penalty on the appellant, emphasizing that in the self-assessment era, a CHA is responsible for determining the correct classification. The Tribunal found no justifiable reason for the penalty imposition under Section 112 (a) and set aside the impugned order, allowing the appeal.

In conclusion, the Tribunal ruled in favor of the appellant, stating that the penalty imposed on the Director of the CHA company was unwarranted in the circumstances of the case, as the appellant acted based on the importer's instructions and the nature of the product required physical examination for accurate classification.