1987 (12) TMI 157 - AT - Customs

Summary

Issues Involved:

1. Classification of the imported goods.
2. Levy of auxiliary duty at 40% ad valorem.
3. Confiscation of goods under Section 111(m) of the Customs Act.
4. Imposition of penalty under Section 112 of the Customs Act.
5. Proceedings against the Custom House Agent.

Issue-wise Detailed Analysis:

1. Classification of the Imported Goods:

The appellants, M/s. Hunsur Plywood Works Ltd., imported a consignment described as "Teak wood roughly squared and half squared but not further manufactured" and claimed preferential concessional duty under Customs Notification No. 280/76 and No. 311/86. The Customs authorities classified the goods under Heading No. 44.21 of the First Schedule to the Customs Tariff Act, 1975, as "Other articles of wood," subjecting them to auxiliary duty at 40% ad valorem. The appellants argued that the goods should be classified under Heading No. 44.03 as "Wood in the rough," which would exempt them from auxiliary duty.

2. Levy of Auxiliary Duty at 40% Ad Valorem:

The appellants disputed the levy of auxiliary duty at 40% ad valorem, contending that auxiliary duty should have been levied at 'nil' rate in accordance with S. No. 23(2) of the Table annexed to Customs Notification No. 311/86. The Customs authorities based their classification on the examination report which described the goods as "dressed squares," implying further manufacturing beyond rough squaring.

3. Confiscation of Goods under Section 111(m) of the Customs Act:

The Additional Collector of Customs confiscated the goods under Section 111(m) of the Customs Act, alleging mis-declaration with intent to evade auxiliary duty. The appellants were given an option to redeem the goods on payment of a fine of Rs. 3 lakhs.

4. Imposition of Penalty under Section 112 of the Customs Act:

A penalty of Rs. 2,50,000/- was imposed on the appellants under Section 112 of the Customs Act for the alleged mis-declaration of the goods.

5. Proceedings Against the Custom House Agent:

The proceedings against the Custom House Agent, M/s. Clifford D'Souza, were dropped by the Additional Collector.

Judgment:

Classification and Levy of Auxiliary Duty:

The Tribunal held that the goods could not be classified under Heading No. 44.21 as "articles of wood" because even if the goods were planed on all six sides, they were not fabricated or made out of wood. The proper classification for the goods was under Heading No. 44.03 as "Wood in the rough," which includes wood roughly squared but not further manufactured. The Tribunal noted that the term "dressed timber" implies timber that has been worked to the exact required condition, which was not the case with the imported goods. The certificates from the Deputy Conservator of Forests and the Indian Plywood Industries Research Institute supported the appellants' claim that the goods were roughly squared and not dressed timber. The Tribunal concluded that the goods were eligible for exemption from auxiliary duty under Customs Notification No. 311/86.

Confiscation and Penalty:

The Tribunal set aside the confiscation order and the penalty imposed on the appellants, directing that the goods be assessed free of auxiliary duty and released without payment of redemption fine.

Conclusion:

The appeal was allowed, and the impugned order was set aside. The goods were directed to be assessed free of auxiliary duty and released without payment of redemption fine. The penalty imposed on the appellants was also set aside.