2019 (2) TMI 1052 - HC - Customs

Penalty - the appellants were not aware of the export restrictions and further they have not chosen to redeem the goods of value of ₹ 51,60,400/- - technical violation of wrong declaration of the products sought to be exported - Held that - They provided the bills in the name of M/s.Raj Oil Traders and have shipped 250 MTs of Industrial salt chemical grade to Malaysia till date. Further, in the reply to the show cause notice also, the appellant had pointed out that they never contested the allegations of the Department about the non-existence of the companies, which are said to have supplied the goods. Even at the time of examination also, it was not disputed about the technical nature of the classification and till such time, the appellant was not of the concrete opinion that it was only industrial salt. Furthermore, the appellant pointed out that as per the Fertilizer Control Order, 1985, the Test Report by the customs was not an authenticated one and the test was not conducted properly as per the specification under the said control order. The Tribunal took note of the fact that the appellant has not redeemed the goods which are valued nearly at ₹ 52,00,000/-, thus, the penalty can be reduced - the penalty imposed on the appellant at ₹ 7,00,000/- is reduced to ₹ 2,00,000/- - Appeal allowed in part.

Summary

Issues:
Challenge to order passed by Customs, Excise and Service Tax Appellate Tribunal under Section 130A of the Customs Act, 1962. Substantial questions of law raised regarding the imposition of penalty for misdeclaration of export goods and failure to redeem the goods.

Analysis:
The appeal challenges the correctness of the order passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai. The substantial questions of law raised include whether it is legal for the Tribunal to confirm substantial penalties when the appellants were unaware of export restrictions and did not redeem the goods. The core issue is whether the appellant is entitled to any indulgence in redeeming the penalty imposed under Section 114(i) of the Customs Act, 1962.

The facts of the case involve an assessee engaged in logistics and forwarding business who exported Industrial Salt misdeclared as Sodium Chloride. The customs authorities detained the consignment, tested samples, and found the goods to be Potassium Chloride, not Sodium Chloride as declared. The appellant admitted to misclassification and lack of awareness about the restricted nature of the goods.

A show cause notice was issued, leading to an Order-in-Original enhancing the value of the goods, confiscating them, and imposing penalties under Sections 113(d), 113(i), 114(i), and 114AA of the Act. The Tribunal set aside some penalties but reduced the penalty on the appellant from ?10,00,000 to ?7,00,000. The appellant appealed seeking further reduction based on lack of awareness and failure to redeem the goods.

The High Court noted that the Tribunal disbelieved the appellant's claim of unawareness but considered the failure to redeem the goods valued at ?51,60,400. The Court reviewed the facts, including statements from the Managing Director and technical aspects of the classification. It found grounds for reducing the penalty due to factors such as non-contestation of allegations, technical nature of classification, and doubts regarding the test report's authenticity.

Consequently, the High Court partially allowed the appeal, reducing the penalty imposed on the appellant from ?7,00,000 to ?2,00,000. The Tribunal's order was confirmed in all other respects. No costs were awarded, and the connected miscellaneous petition was closed.