2024 (3) TMI 1188 - AT - Customs

Classification of imported goods - Agricultural Reaper - Spare parts of Reaper - classifiable under CTH 84672900 and 84679900 respectively (Revenue) or under CTH 84331190 and 84339000 respectively? - Levy of penalty under Section 114A of the Customs Act - HELD THAT - Being a matter of classification of goods the burden of proof is on Revenue to show that the particular case or item in question is taxable in the manner claimed by them. The correct manner of classifying imported goods under the Customs Tariff, is by interpreting the headings and notes etc. as per the Rules for the Interpretation of the Schedule to the Customs Tariff Act, 1985 - It is not dispute that the Schedule to the Customs Tariff in itself does not contain a specific heading for Agricultural Reaper and its parts. There is also no dispute that though different models of goods have been imported all are sought to be classified under one heading. Finally, it is also not disputed that the impugned goods are marketed and known in the trade as brush cutters as also seen from the product literature and the tender notices etc. enclosed with the appeal. In INDO-INTERNATIONAL INDUSTRIES VERSUS COMMISSIONER OF SALES TAX, UP. 1981 (3) TMI 77 - SUPREME COURT , it has been held by the Apex Court that if any term or expression has been defined in the enactment then it must be understood in the sense in which it is defined but in the absence of any definition being given in the enactment the meaning of the term in common parlance or commercial parlance has to be adopted . The Appellant has stated that as per Note 4 to Section XVI, which covers chapter 84, for machines with a clearly defined function by one of the headings in Chapter 84 or 85, the whole falls to be classified in the heading appropriate to that function. It is found that both the disputed heading fall under chapter 84 and as per the discussions have been found to have a clearly defined function covered by CTH 8467. Revenue has thus been able to discharge its burden and the impugned orders merit to be upheld - Since the classification of the goods is found to be falling under CTH 8467, hence in terms of Note 2(b) of Section XVI, parts of brush cutter will be classifiable under CTH 84679900. Levy of penalty under Section 114A of the Customs Act - HELD THAT - As far as the description of the goods, quantity, classification etc. are concerned, the importer is bound to state the truth in the Bill of Entry. As per section 46(4) of the Customs Act, 1962, the importer while presenting the Bill of Entry shall make and subscribe to a declaration as to the truth of such Bill of Entry. Further, Section 114A does not incorporate intention to evade payment of duty . This is because while mens rea is an essential or sine qua non for criminal offence it is not an essential element for imposing penalty for breach of civil obligations or liabilities, unless specifically stated so in the statute. Similarly, the importer is required to make a true declaration of the description and quantity of goods etc which have actually been imported and not just the goods as declared in the import documents. Thus, if the goods actually imported are more in number or the actual description or CTH as determined by an order under the Act is different from what is declared in the Bill of Entry, the importer would have made a mis-declaration. If this is done knowingly it s a willful misstatement. Even if a matter is under appeal it does not mean that the legal stand of the importer which has been defeated in quasi-judicial proceeding can continue to be recognized as legitimate and duty short paid. A valid order determining the CTH of the imported goods and a statutory document filed for the same goods knowingly misstating the CTH cannot coexist legally and be recognised in law to be valid. It cannot be said that ordinary prudence has been exercised by the importer-appellant according to the standards of a compliant tax payer or even a reasonable person - The undertaking is meant to carry out the intent of the statute and accomplish the reasonable objectives for which it was passed and thus cannot be brushed off as being merely procedural. Hence if an order or judgment has been passed on a lis between the department and an assessee, he is bound to follow that order, until it is upset in appeal by a higher judicial forum. The responsibility is more when the tax is self-assessed. This is not a mere failure to pay duty. It is something more. The Appellant has deliberately sought to defeat the provisions of law. Thereby contravening the provisions of Section 46(4) ibid. Further there is nothing in the section to mean that because there is knowledge by the Department of the earlier mis-classification of the goods by the Appellant the willful misstatement in the Bill of Entry subsequently which stands established disappears. The Hon ble High Court of Madras in M/S. KING BELL APPARELS VERSUS THE COMMISSIONER OF CENTRAL EXCISE 2018 (10) TMI 267 - MADRAS HIGH COURT held that the contention that once knowledge has been acquired by the department, there is no suppression and the ordinary statutory period of limitation would be applicable was rejected as a fallacious argument inasmuch as once the suppression is established, merely because the department acquires knowledge of the irregularity, the suppression would not be obliterated. A statutory penalty flows from a disregard of statutory provisions. With relaxation in procedure in the clearance of goods comes greater responsibility on the part of importers. This responsibility has not been discharged and the impugned order hence merits to be upheld on this score. Further it is seen that interest is necessarily linked to the duty payable, such liability arises automatically by operation of law. As per the Hon ble Supreme Court's judgment in COMMISSIONER OF CENTRAL EXCISE, PUNE VERSUS M/S SKF INDIA LTD. 2009 (7) TMI 6 - SUPREME COURT interest is leviable on delayed or deferred payment of duty for whatever reasons. The impugned order upheld - appeal disposed off.

Summary

Issues Involved:
1. Classification of imported goods.
2. Imposition of penalty u/s 114A of the Customs Act, 1962.

Summary:

Issue 1: Classification of Imported Goods

The primary dispute is whether the imported goods declared as "Agriculture Reaper" and "Spare parts of Reaper" are classifiable under CTH 84672900 and 84679900 (Revenue) or under CTH 84331190 and 84339000 (Appellant). The Revenue argued that the goods, marketed as "Brush Cutters," are used for trimming or cutting rather than reaping and should be classified under CTH 8467, which attracts CVD at 12.5%. The Appellant contended that the goods fall under CTH 8433, covering agricultural machinery. The Tribunal examined the classification rules and HSN Explanatory Notes, concluding that the goods, known in trade as "brush cutters," are handheld machines suitable for classification under CTH 8467. The Tribunal noted that the goods' description, weight, and use align with the specifications under CTH 8467, making them tools for working in the hand rather than agricultural machinery. Therefore, the goods are classifiable under CTH 8467, and parts thereof under CTH 84679900.

Issue 2: Imposition of Penalty u/s 114A of the Customs Act, 1962

The Appellant challenged the imposition of a penalty u/s 114A, arguing that the matter had been in dispute since 2012 and that they had paid tax "under protest" under CTH 8467. The Tribunal found that the Appellant had willfully misclassified the goods as "agricultural reapers" in the Bills of Entry despite marketing them as "brush cutters." The Tribunal emphasized that the Appellant continued to misclassify the goods even after the Department had settled the classification issue, leading to a deliberate short payment of duty. The Tribunal upheld the penalty u/s 114A, stating that the Appellant's actions violated the self-assessment procedure and the declaration requirements under Section 46(4) of the Customs Act, 1962. The Tribunal also upheld the interest liability on the delayed payment of duty.

Conclusion:

The Tribunal upheld the impugned orders, confirming the classification of the goods under CTH 8467 and the imposition of penalties and interest u/s 114A of the Customs Act, 1962. The appeals were disposed of accordingly.

(Order pronounced in open court on 22.03.2024)