2024 (4) TMI 639 - AT - Customs

Penalties u/s 112 and section 114AA of Customs Act 1962 - classification of goods imported under duty exemption entitlement certificate (DEEC) scheme of the Foreign Trade Policy (FTP) and corresponding N/N. 93/2004-Cus dated 10th September 2004 - HELD THAT - The adjudicating authority appeared not have given credence to the revision accorded by Norms Committee; moreover the adjudicating authority appeared to have misconstrued the purpose of section 12 of Customs Act 1962 which has the sole reference to the First Schedule to Customs Tariff Act 1975 and scope for determining eligibility for exemption in a notification issued under section 25 of Customs Act 1962 intended to operationalise a scheme in the Foreign Trade Policy (FTP) with objectives of its own by visiting the declared classification intended for ascertaining rate of duty. Supplanting of the one by recourse to unconnected jurisdiction of the other deprives the impugned order of legal validity. Compounding this glaring lacunae in an adjudication exercise already compromised in the manner set out are the developments since its culmination. The amending of the licence by the competent authority and the issuing of export obligation discharge certificate (EODC) by the licencing authority may have given the adjudicating authority cause for pause had these been available then. In view of these several foundational lacunae the adjudicatory process found wanting as model of legality and propriety warrants appropriate rectification. To enable that the impugned order is set aside and the matter remanded to be heard afresh for disposal after affording opportunity to the notices to make oral and written submissions. Appeal allowed by way of remand.

Summary

Issues:
Classification of goods imported under DEEC scheme of FTP and corresponding notification, reclassification of goods as alloy steel, valuation of imported goods, misuse of duty exemption scheme, imposition of penalties.

Classification of Goods:
The appeal involved the classification of goods imported under the DEEC scheme of the FTP and corresponding notification. The dispute centered around the distinction between non-alloy steel and alloy steel, impacting the entitlement to duty exemption under the Customs Act, 1962. The reclassification of goods as alloy steel led to additional duties, raising questions about the application of mind by the adjudicating authority.

Valuation and Misuse of Duty Exemption Scheme:
The impugned order revalued the imported goods based on alleged discrepancies in the boron content, triggering a denial of duty exemption and the recovery of foregone duties. The use of alternative valuation rules and the invocation of the extended period of limitation were contested as lacking legal basis. The appellant's argument emphasized compliance with export obligations and challenged the revisiting of eligibility by customs authorities.

Penalties and Legal Validity:
The imposition of penalties on the appellants was a significant aspect of the case. The deliberate alteration of mill test certificates and alleged misleading actions by the importer were highlighted as justifying factors for the penalties. The legal validity of the impugned order was questioned based on misinterpretation of statutory provisions and failure to consider subsequent developments, such as the revision of the license and the issuance of an export obligation discharge certificate.

Decision:
The Tribunal set aside the impugned order due to foundational lacunae in the adjudicatory process, directing a fresh hearing to rectify the legal and procedural deficiencies. The decision to allow the appeals by way of remand was made to ensure a fair opportunity for all parties to present their case and for a proper disposal of the matter.