2024 (4) TMI 918 - AT - Customs

Levy of penalty - mis-declaration of goods - unflavoured boiled supari - reduction of the penalty under section 112 by the Commissioner (Appeals) - according to Revenue reduction was very high and unwarranted and according to the respondent it was fair and proper - what does the expression shall be liable to , in section 112 (and 111, 113, 114, etc.) signify? Does it mean that a penalty shall be imposed or that a penalty can be imposed? - HELD THAT - A common misunderstanding of this expression is that the adjudicating authority has to only see if the goods fall under one of the clauses of Section 111 or 113 and if so, confiscate them and to see if the persons fall under section 112 or 114 and impose penalty. However, the expression is not shall be confiscated but it is shall be liable to confiscation . Similarly section 112 says shall be liable to penalty and NOT penalty shall be imposed . Liable to be means likely to be and not shall be . After finding if the goods fall under one of the clauses of the section, the adjudicating authority can exercise his discretion and decide not to confiscate them. If the violation is, for instance, a technical violation or a minor violation, the adjudicating authority has the discretion to NOT confiscate the goods although they are liable to confiscation. The High Court of Delhi has, in JAIN EXPORTS (P) LTD. VERSUS UNION OF INDIA 1988 (5) TMI 50 - SUPREME COURT held that not only does the adjudicating authority have the discretion to decide whether or not to confiscate but he has to exercise this discretion judicially and not arbitrarily. However, since the penalty under section 112 is based on the actions which rendered the goods liable to confiscation under section 111, it would be necessary to see how serious were these actions by the respondent. The Commissioner (Appeals) recorded that there was a reasonable cause for the respondent to classify the goods under CTI 2106 9030. He recorded that there were rulings by the Advance Ruling Authority that boiled areca nut does not fall under CTH 0802 at all - Merely because the importer s classification of the goods is different from that of the officer, the importer cannot be penalised. The Commissioner (Appeals) is fully agreed upon that the respondent had a reason to believe that the goods were classifiable under CTI 2106 9030 and this classification cannot be held against the respondent. Misdeclaration of nature of the goods - HELD THAT - The CRCL test report does not say what the imported goods were nor does it deny that the goods were unflavoured boiled supari . Secondly, it comments on the classification of the goods as per supplementary notes- Note 2 to Chapter 21 . Classification of the goods under Customs Tariff is the responsibility of the importer or the proper officer or any further appellate authority. The chemical examiner in CRCL has no role to play in the classification because classification is a part of assessment which is a quasi-judicial and appealable order. All that the chemical examiner should say is what the goods are, what is the purity, etc. It is thus found that the allegation of mis-declaration of the nature of goods is not very serious especially since it is based on a somewhat ambiguous test report of CRCL. There are no reason to interfere with the order of the Commissioner (Appeals) insofar as the reduction of penalty under section 112 is concerned - the impugned order is upheld - appeal dismissed.

Summary

Issues Involved:
1. Confiscation and Redemption of Imported Goods
2. Reduction of Penalty u/s 112 of the Customs Act, 1962

Summary:

Confiscation and Redemption of Imported Goods:

The respondent imported areca nuts under two Bills of Entry, describing them as 'unflavoured boiled supari (Betel nuts product)' and classified them under CTI 2106 90 30. The CRCL test report indicated that the goods were actually areca nuts falling under CTI 0802 80 10, which are prohibited for import unless the CIF value exceeds Rs. 251/- per kg. The goods were seized, and a Show Cause Notice (SCN) was issued for mis-declaration and mis-classification, proposing confiscation u/s 111(d), 111(l), and 111(m) and penalty u/s 112(a)(i). The Additional Commissioner confirmed the proposals, absolutely confiscating the goods and imposing a penalty of Rs. 82,77,132/-. The Commissioner (Appeals) upheld the confiscation but allowed redemption on payment of a fine of Rs. 8,00,000/- for re-export and reduced the penalty to Rs. 2,00,000/-. Revenue appealed, contesting the redemption and the reduced penalty. However, since the High Court ordered the export to be allowed, the redemption and export of the goods were permitted, rendering the issue of redemption moot.

Reduction of Penalty u/s 112 of the Customs Act, 1962:

The primary issue before the Tribunal was whether the penalty reduction from Rs. 82,77,132/- to Rs. 2,00,000/- by the Commissioner (Appeals) was appropriate. Revenue argued that the reduction was unwarranted and not proportionate to the gravity of the offense. The Tribunal noted that u/s 112, the penalty can be up to the value of the goods but does not prescribe a minimum penalty. The Tribunal emphasized the discretionary nature of the term "liable to" in sections 111 and 112, allowing the adjudicating authority to decide whether to impose a penalty and its quantum. The Tribunal found that the respondent had a reasonable cause to classify the goods under CTI 2106 9030 based on prior rulings and that the mis-declaration allegation was not severe due to the ambiguous CRCL report. Thus, the Tribunal upheld the order of the Commissioner (Appeals) regarding the penalty reduction, finding no reason to interfere. The appeal was dismissed.

(Order pronounced in open court on 23/04/2024.)