2024 (5) TMI 18 - AT - Customs

Re-classification of Thorn - Transaction value - Undervaluation and Mis-declaration - erroneous classification - ineligible exemption - demand duty - Confiscation - Penalty - Imports Aluminium scrap described as Thorn - Violation of import restrictions under the FTDR Act - FTDR Act has three categories of goods free , restricted and prohibited , the Customs Act has only prohibited goods and everything else is considered freely importable - HELD THAT - No dispute about the rejection of the classification of the imported Thorn under CTI 7602 00 10 and its reclassification under CTI 7602 00 90. The importer s only contention is that it had mistakenly classified it under CTI 7602 00 10. Therefore, the re-classification must be upheld. Transaction value under Valuation Rule 12 and re-determination of the value under Valuation Rule 9 - The Additional Commissioner recorded that since Thorn was a restricted item, there were no contemporaneous imports of identical or similar goods. Valuation Rule 6 is not a method of valuation and it only states that if the value cannot be determined under Valuation Rules 3,4 or 5, it shall be determined under Valuation Rule 7 or Valuation Rule 8 and at the request of the importer, Valuation Rule 8 can be applied without applying Valuation Rule 7 first. Valuation Rule 7 is a deductive method and it provides for determination of value based on the value of such goods sold in India and after making certain deductions. Valuation Rule 8 provides for computed value based on the cost of production of such goods in India. The Additional Commissioner, having recorded that these were not possible in this case, followed Valuation Rule 9 which is the residual method. He determined the value as per the method recommended by the Directorate General of Valuation in such cases based on the aluminum content of the imported scrap and the London Metal Exchange (LME) prices of the metal. We find that the method followed by the Additional Commissioner for determining the value is correct and proper and this decision has been correctly upheld by the Commissioner (Appeals) in the impugned order. We find no reason to interfere with the valuation. Absolute confiscation of the imported Thorn - We find that clause (d) makes the goods imported into India contrary to any prohibition under the Customs Act or under any other law for the time being in force. Import of Thorn was restricted under the FTP and therefore, it could not have been imported without a licence. Since Thorn was imported in violation of the prohibition under FTP, it was liable to confiscation u/s 111(d). The imported goods cannot be confiscated u/s 111(m) because of a wrong classification or claim of an ineligible exemption notification. In this case, the importer imported Thorn and entered an incorrect classification at the 8-digit level in the Bill of Entry and gave a value as per its transaction value. When examining the self-assessment, the incorrect classification was discovered. The importer declared the value as per its transaction value. This transaction value was rejected by the officer and its value was re-determined. Thus, the two deviations from the declaration of the importer in the Bill of Entry are- the change in classification and re-determination of value by the officer. Simply because the officer has changed the classification and the valuation, the goods do not become liable to confiscation u/s 111(m) because the goods did correspond to the declarations and only the classification and the valuation which are matters of opinion were changed by the officer . Thus, we find that the Thorn imported by the appellant was correctly confiscated u/s 111(d) and 111(o) but its confiscation u/s 111(m) was not correct. The question which arises is, if in this factual matrix, was the absolute confiscation of the imported Thorn correct or it could have been released on payment of redemption fine. We find no reason to believe that aluminium scrap with only 1.2% of other material such as iron, plastic, etc. will be hazardous to the society if released into the hands of a manufacturer of ingots. On the other hand, import of Thorn requires a licence which the importer did not have and hence it was confiscated. In the factual matrix of this case, considering all relevant factors, we find that it would meet the ends of justice if the confiscated Thorn valued at Rs. 27,48,405 is allowed to be redeemed by the importer u/s 125 on payment of a fine of Rs. 4,00,000/-. Penalties u/s 112(a) (i) and 114AA on the importer and Shri Jain - The importer imported Thorn without the required licence and therefore it is squarely covered by section 112(a). Penalty not exceeding the value of the goods could be imposed under this section. The value of the goods as determined by the impugned order is Rs. 27,48,405/- and therefore, a penalty of Rs. 4,00,000/- is within the limits and is in the factual matrix, in our opinion, just and proper. As far as the penalty on Shri Jain is concerned, we find that he was a partner of the importer and in that capacity, he played the role in importing the goods. We do not find sufficient justification to also impose penalty on Shri Jain u/s 112 (a) (i). We, therefore, set aside the penalty on Shri Jain under this section. The importer only made an erroneous classification which is not a declaration or document but is its self-assessment. The importer also declared the value as per its transaction value which the officer deemed it necessary to re-determine. The importer can only declare the value based on what he knows and there was no mis-declaration. Thus, we find that there is no mis-declaration, let alone, one with intent either by the importer or by Shri Jain. Therefore, the penalties imposed u/s 114AA on the importer and Shri Jain cannot be sustained and need to be set aside and we do so. Thus, both appeals are disposed of as below (a) CUSTOMS APPEAL filed by the importer is partly allowed and the impugned order is modified to the extent of allowing redemption of the confiscated goods on payment of redemption fine of Rs. 4,00,000/- u/s 125 and setting aside the penalty imposed u/s 114AA. (b) CUSTOMS APPEAL filed by Shri Jain is allowed and the penalties imposed on Shri Jain u/s 112 (a) (i) and 114AA are set aside.

Summary

Issues Involved:

1. Rejection of classification of Thorn under 76020010 and re-classification under 76020090.
2. Rejection of declared assessable value under Valuation Rule 12 and re-determination under Valuation Rule 9.
3. Absolute confiscation of imported Thorn under sections 111(d), (m), and (o).
4. Imposition of penalties under sections 112(a)(i) and 114AA on the importer and Shri Jain.

Summary:

Re-classification of Thorn:
The Tribunal upheld the re-classification of Thorn from CTI 76020010 to 76020090, noting that the importer admitted to mistakenly classifying it under CTI 76020010.

Rejection of Transaction Value and Re-determination:
The Tribunal found that the importer had accepted the re-determined value in writing, waiving the need for a show cause notice or a speaking order. The proper method for re-determining the value under Valuation Rule 9, based on the aluminium content and LME prices, was followed correctly.

Absolute Confiscation of Thorn:
The Tribunal examined the confiscation under sections 111(d), (m), and (o). It found that while the goods were correctly confiscated under sections 111(d) and 111(o) due to the lack of an import licence, the confiscation under section 111(m) was incorrect as it pertained to matters of opinion like classification and valuation. The Tribunal concluded that the confiscated Thorn should be allowed to be redeemed on payment of a fine of Rs. 4,00,000/- under section 125, considering it was not hazardous.

Penalties under Sections 112(a)(i) and 114AA:
The Tribunal upheld the penalty of Rs. 4,00,000/- on the importer under section 112(a)(i) but set aside the penalty on Shri Jain under the same section, finding insufficient justification. Penalties under section 114AA on both the importer and Shri Jain were set aside as there was no mis-declaration or false documentation.

Conclusion:
- Customs Appeal No. 51286 of 2023: Partly allowed, permitting redemption of the confiscated goods on payment of a fine and setting aside the penalty under section 114AA.
- Customs Appeal No. 51300 of 2023: Allowed, setting aside penalties under sections 112(a)(i) and 114AA on Shri Jain.
- Both appellants are entitled to consequential benefits.

(Order pronounced in open court on 29/04/2024.)