2019 (5) TMI 922 - AT - Customs

Classification of imported goods - Creative Toys Modelling Clay - whether classified under CTH 34070010 or under CTH 95030090? - Revenue was of the view because of misdeclaration of Classification to avoid CVD, the goods are liable for confiscation under Section 111(m) of the Customs Act, 1962 and appellants were liable to penalty under Section 112(a) of the Customs Act, 1962. HELD THAT - Heading 34070010 is more specific for modeling pastes which in our view will include the clays which are used for making models for amusement of children. Since this heading is more specific we are in agreement with the classification as has been held by the Commissioner (Appeal). Penalty - HELD THAT - The appellants have in the Bill Of Entry declared the goods by describing them correctly as per the import documents. Revenue has not disputed the description/ declaration in respect of the goods. Only dispute being with reference to classification of the goods. It has been held by various authorities that misclassification cannot be a reason for invoking penal provisions against the importer. The order of Commissioner (Appeal) classifying the imported goods under heading 34070010 is upheld, but the penalty imposed on the importer under Section 112(a) of the Customs Act, 1962 is set aside. Appeal allowed in part.

Summary

Issues: Classification of imported goods under CTH 34070010 or CTH 95030090, Penalty imposed on the importer

Classification Issue:
The appeal involved a dispute regarding the classification of imported goods as "Creative Toys Modelling Clay" under CTH 34070010 or CTH 95030090. The appellants claimed classification under CTH 95030090, while the revenue contended that the goods were misdeclared to avoid payment of CVD and should be classified under CTH 34070010. The original order reclassified the goods under CTH 96020090 and imposed a penalty on the importer.

The Commissioner (Appeal) upheld the reclassification under CTH 34070010, citing that modeling pastes, including those for children's amusement, fall under this heading. The Commissioner emphasized that modeling pastes are different from ordinary pastes used as adhesives and include materials used for making models, such as modeling clay. The Commissioner further referred to relevant case laws and HSN Explanatory Notes to support the classification under CTH 34070010.

The appellate tribunal agreed with the Commissioner's classification under CTH 34070010, considering it more specific for modeling pastes that include clays used for making models for children's amusement. The tribunal noted that the appellants correctly described the goods in the Bill of Entry, and misclassification alone cannot warrant penal provisions against the importer. Citing previous decisions, the tribunal set aside the penalty imposed under Section 112(a) of the Customs Act, 1962.

Penalty Issue:
Regarding the penalty imposed on the importer under Section 112(a) of the Customs Act, 1962, the tribunal found that misclassification alone should not lead to penal consequences. Relying on precedents, the tribunal concluded that the penalty was not justified and set it aside while upholding the reclassification of the imported goods under CTH 34070010. The appeal was partially allowed to the extent of setting aside the penalties, with the impugned order upheld in other aspects.