2019 (2) TMI 31 - AT - Customs

Evasion of ADD - imports of Ceftriaxone Sodium Sterile - mis-declaration of description as well as country of origin of goods in order to avoid ADD - chemical formula was declared instead of the chemical name - N/N. 98/2008-Cus. - Held that - The Ld. Advocate has been at pains to contend that as far as MSK International is concerned, the full chemical name was declared in the Bill of Entry and only generic name was not mentioned, hence there cannot be any charge of misdeclaration. We are not enthused by this argument. When the import of Ceftriaxone Sodium was saddled with ADD when imported from China, it was obvious that no additional reference in such ADD notification or any alternative chemical name or formula of the said item. In any case, in the normal course of business and trade and especially imports, the goods are only known by the chemical name and certainly not by the chemical formula run into almost four lines. Then, there is no doubt in our mind that the chemical formula was declared instead of the chemical name only to trick the assessment system and to evade ADD which would have been otherwise imposable on its import. Penalty on Sujath Ali, Partner of K.S.R. Pharmacy - the entire exercise was planned and furthered by Sujath Ali - Held that - The duty / interest has not been demanded from Sujath Ali, Partner of K.S.R. Pharmacy and hence there cannot be any penalty on the said person under Section 114A ibid also. In the circumstances, the penalty of ₹ 1,47,28,161/- imposed on Sujath Ali cannot be sustained and will require to be set aside - penalty set aside. Penalty of ₹ 1 lac imposed on Shri K. Saravanan, Proprietor of MSK International - Held that - No doubt, Shri K. Saravanan had lent his IEC number and signed the import documents for the import and clearance of the impugned goods. But there is no evidence that he was aware of the fraud at any stage before or during the import - When the modus operandi of using the chemical formula name instead of the regular chemical name has fooled even the assessment system module of the customs authorities, it would be unjust to saddle K. Saravanan with a large penalty only for having lent IEC number - in the interests of justice the penalty of ₹ 1 lac imposed under Section 112 (b) ibid is reduced to ₹ 50,000/-. Appeal allowed in part.

Summary

Issues: Misdeclaration of goods, undervaluation, imposition of penalties

Misdeclaration of Goods:
The case involved the misdeclaration of goods by importing "Ceftriaxome Sterile" instead of "Cetriaxone Sodium" to evade Anti Dumping Duty. The importer, M/s. K.S.R Pharmacy, Chennai, imported goods under the name of M/s.MSK International, Chennai, with gross undervaluation. The investigation revealed that the importer, Shri Sujath Ali, imported the goods under the name of M/s.MSK International, using the IEC code of MSK International. The original authority re-determined the value of the goods and imposed Anti-Dumping Duty as per the relevant notification.

Undervaluation and Penalties:
The investigation found that the goods were undervalued, leading to the imposition of penalties, confiscation of goods, and demand of duty. The adjudicating authority confirmed a differential duty, appropriated the amount paid during investigation, and held the goods liable for confiscation under the relevant legal provisions. Penalties were imposed on Shri Sujath Ali and Shri K. Saravanan. The penalties were challenged by the appellants before the Tribunal.

Legal Analysis and Tribunal's Decision:
The Tribunal considered the arguments presented by both sides. It was argued that the full chemical name was declared in the Bill of Entry, but the Tribunal found that the misdeclaration was done to evade Anti Dumping Duty. The Tribunal set aside the penalty imposed on Shri Sujath Ali, as the penalty under Section 13 (b) of the Drugs and Cosmetics Act, 1940, could not be imposed by a customs authority. The penalty on Shri K. Saravanan was reduced from &8377; 1 lac to &8377; 50,000 as he was not directly involved in the fraudulent import activities. The Tribunal dismissed the appeal filed by MSK International as the penalty on its proprietor was reduced. The judgment highlighted the importance of following legal provisions and ensuring penalties are proportionate to the offense committed.

This detailed analysis of the judgment covers the issues of misdeclaration of goods, undervaluation, and imposition of penalties, providing a comprehensive understanding of the legal proceedings and the Tribunal's decision.