2024 (2) TMI 314 - AT - Customs

Classification of imported goods - Rubber Processing Oil - classifiable under Chapter Heading No. 27101990 as classified by the Appellants or under Chapter Heading No. 27079900 as classified by the Revenue? - enhancement of value of the imported RPO based on the consent letters given by the directors of the Appellants at the time of release of the goods, without following the due process of law as contemplated under Section 14 of the Customs Act read with Customs (Determination of Value of imported value) Rules, 2017 - mis-declaration of Country of Origin in the Bills of entry - quantum of penalties and redemption fine imposed disproportionate to differential duty. HELD THAT - It is settled that the test report can be applied only in respect of the samples tested. Since in the present case tests of all the goods were not carried out, the claim of the classification of the department is applicable only in respect of goods contained in the containers from which the samples were drawn and not for the other containers. Enhancement of the valuation - HELD THAT - The enhancement was made merely on the consent letters given by the directors of the appellant. In our view on hear say from director valuation cannot be decided if there is any doubt on the valuation, the due process of law as contemplated under Section 14 of the Customs Act read with Customs (Determination of Value of imported value) Rules, 2017 must be complied with. However, in the present case neither any contemporaneous value was adopted nor any method as prescribed under Section 14 read with Custom Valuation Rules, 2007 was followed. Therefore, merely on the basis of statements of director valuation cannot be enhanced. Therefore, the enhancement of the value is not sustainable in the facts of the present case. This issue has been considered in the case of Guru Rajendra Metal Alloy wherein the tribunal held that only on the basis of the consent letters of the importer enhancement of valuation cannot be made - the enhancement of the value by the lower authorities is without any legal basis. Hence, the same will not sustain and accordingly, the enhancement of the value done by the Revenue is set aside. Mis-declaration of Country of Origin in the bills of entry filed by the appellant - HELD THAT - Firstly the appellant have not been benefited by the incorrect declaration of country of origin, if any. Moreover, it is not the appellant who has wrongly mentioned the country of origin certificate. Therefore, if there is a mis-declaration of country of origin the appellant being not the party to make any incorrect declaration cannot be held responsible and no consequential penalty can be imposed on the appellant - in the case of Agarwal Industrial 2020 (2) TMI 235 - CESTAT BANGALORE it can be seen that in the identical circumstances, this Tribunal held that for incorrect mention of country of origin, the importer cannot be penalized. Accordingly, in the present case also considering overall facts and the fact of incorrect declaration, if any, regarding country of origin in the Country of Origin Certificate, the appellant is not liable for any penalty or fine. Since the impugned order against the main appellants is not sustainable, there is no reason to continue the personal penalty upon the individuals co-appellants. Appeal allowed.

Issues Involved:
1. Classification of Rubber Processing Oil (RPO).
2. Enhancement of the value of imported RPO.
3. Mis-declaration of the country of origin in the bills of entry.
4. Proportionality of penalties and redemption fines imposed.

Summary:

1. Classification of Rubber Processing Oil (RPO):
The primary issue was whether RPO should be classified under Chapter Heading 27101990 as claimed by the appellants or under Chapter Heading 27079900 as classified by the Revenue. The lower authorities based their decision on the test report from the Custom House Laboratory at Kandla, which showed non-aromatic constituents less than aromatic constituents. However, the method specified under BIS was not adopted, making the test report unreliable. The Tribunal referenced the case of Shah Petroleum Ltd. vs. Commissioner of Customs, where it was held that RPO should be classified under 2713. The Tribunal concluded that the department's claim to classify RPO under 27.07 fails, and the appellant's classification under 27101990 is correct.

2. Enhancement of the Value of Imported RPO:
The enhancement of the value was based on consent letters from the directors of the appellants. The Tribunal held that the burden lies upon the Revenue to show that the declared value is incorrect and that proper methodology under Section 14 of the Customs Act read with Customs (Determination of Value of Imported Goods) Rules, 2007 must be followed. Since no contemporaneous value was adopted nor any proper method followed, the enhancement of the value was deemed unsustainable. The Tribunal cited the case of Guru Rajendra Metal Alloys India Pvt Ltd vs. CC, reinforcing that valuation cannot be enhanced merely based on consent letters.

3. Mis-declaration of the Country of Origin:
Both lower authorities held that the appellants mis-declared the country of origin as UAE instead of Iran. The appellants argued that the declaration was based on documents received from the supplier and there was no deliberate intention to mis-declare. The Tribunal found that since the appellants did not benefit from the incorrect declaration and were not the party to make the incorrect declaration, they cannot be held responsible. This view was supported by the case of Agarwal Industrial Corporation Ltd vs. Commissioner of Customs, where penalties were set aside due to the lack of malafide intention.

4. Proportionality of Penalties and Redemption Fines:
The appellants argued that the penalties and redemption fines imposed were disproportionate to the differential duty involved. For instance, M/s. Rajkamal had to pay a differential duty of Rs. 7,78,683/- but faced a redemption fine of Rs. 22 Lacs and total penalties of approximately Rs. 47,79,422/-. The Tribunal, considering the overall facts and the lack of intention to evade duty, held that the penalties and fines were indeed disproportionate and thus unsustainable.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeals with consequential relief in accordance with the law. The decision was pronounced in the open court on 01.02.2024.

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