2023 (10) TMI 436 - AT - Customs

Levy of penalty - Classification of imported goods - import of areca nuts in guise of betel nut - Goods declared as scented sweet supari-Betel Nut - to be classified under CTH 08028090 or under 21069030? Whether the goods Scented Sweet Supari is classifiable under CTH 2106 9030 as claimed by the importer or under CTH 08028090, as per the Department and, therefore, would be entitle to the exemption of 100% BCD by virtue of the Notification No. 96 of 2008 or is entitle to exemption to only 60% BCD by virtue of the classification by the Revenue? HELD THAT - The Alert Circular No. 4 of 2022 dated 25.08.2022 issued by DRI, has been issued to overcome mis-declaration and mis-classification of areca nuts, which were being imported through several ports under Chapter 21 so as to pay customs duty at lesser rates and to avoid floor price restrictions imposed by DGFT vide notification No. 20/ 2015-2020 dated 25.07.2018 and in that backdrop, the field department was sensitized and asked to exercise due diligence while clearing the import of areca nuts. Referring to the decision of the Supreme Court in M/S AYUSH BUSINESS OVERSEAS ETC. VERSUS COMMISSIONER OF CUSTOMS (CHENNAI VII) 2021 (3) TMI 1285 - SC ORDER , it was stated that only the preparations of betel nuts would fall under Chapter 21 and the goods imported as boiled areca nut would merit classification under Chapter 8 of the Customs Tariff. It is not found that the said Circular, in any manner, supports the importer and, therefore, on that basis, no reliance can be placed in favour of the appellant. On examining the Advance Ruling relied upon by the Revenue in respect of the same product, i. e., Flavoured Supari classified under CTH 0802, it not only relates to identical goods and though it is in respect of a different company, M/s. Globe Impex being a proprietorship company owned by Shri Gagan Uppal and now it is a partnership company i.e., M/s. Globe Impex, however, the fact is that both the companies not only have the same 'name', M/s Globe Impex, where Shri Gagan Uppal is one of the partners and is responsible for the day-to-day working of the company and is, therefore, fully aware of the classification of the goods in terms of the Advance Ruling sought by him as the Proprietor of the company. The goods imported by the appellant are neither product of betel nut nor preparation containing betel nut but are only betel nuts in cut pieces and are excluded from Chapter Heading 2106 and the same are classifiable under chapter Heading 0802. Consequently, the benefit of Notification No 96/2008 dated 13.8.2008 of 100% exemption from BCD is not available to the appellant. Similarly, in terms of Notification No.20/2015-2020 dated 25.07.2018, the import of areca nuts at less than the minimum price of Rs.251/- per kg. are prohibited goods - the appellant had attempted to import areca nuts in guise of betel nut products by mis-declaring and mis-classifying under Chapter 21 so as to avail the benefit of 100% exemption of BCD and thereby evade payment of legitimate customs duty. In view thereof, M/s. Globe Impex and also Shri Gagan Uppal are liable to penalty under Section 112(a)(i) of the Act. Appeal dismissed.

Summary

Issues Involved:
1. Classification of imported goods.
2. Applicability of exemption notifications.
3. Compliance with Food Safety Standards.
4. Validity of prior assessments and show cause notices.
5. Penalty and confiscation of goods.

Summary:

1. Classification of Imported Goods:
The primary issue was whether the imported "Scented Sweet Supari" should be classified under CTH 21069030 as claimed by the importer or under CTH 08028090 as per the Department. The Tribunal held that the goods are not "preparation" but merely betel nuts in cut pieces, thus classifiable under CTH 08028090. The process of breaking/cutting and adding menthol does not change the basic character of betel nuts.

2. Applicability of Exemption Notifications:
The importer claimed 100% exemption from BCD under Notification No. 96/2008 for goods under Heading 2106. However, the Tribunal concluded that the goods fall under Heading 0802, which only allows a 60% exemption. Consequently, the benefit of 100% exemption was not available.

3. Compliance with Food Safety Standards:
The FSSAI reports indicated the presence of fungus hyphae and non-compliance with safety standards. Thus, the goods were deemed unsafe under Section 3(1)(zz)(x) of the FSSAI Act, 2006, and did not conform to the Food Safety and Standard Regulations, 2011. As a result, the goods were liable for absolute confiscation.

4. Validity of Prior Assessments and Show Cause Notices:
The appellant argued that the previous consignment was assessed and duty paid, thus should not be re-assessed. However, the Tribunal upheld the issuance of a show cause notice under Section 28(4) of the Customs Act, allowing the department to review and modify the assessment.

5. Penalty and Confiscation of Goods:
The Tribunal agreed with the Adjudicating Authority that the importer mis-declared and mis-classified the goods to evade customs duty. Consequently, the goods were liable for confiscation under Sections 111(d), 111(m), and 111(o) of the Customs Act. Both M/s. Globe Impex and Shri Gagan Uppal were held liable for penalties under Section 112(a)(i).

Conclusion:
The appeals were dismissed, affirming that the goods are classifiable under Chapter Heading 0802, not eligible for 100% BCD exemption, and liable for confiscation and penalties due to non-compliance with safety standards and mis-declaration.