2024 (9) TMI 124 - AT - Customs

Alleged misdeclaration of value of zinc ash - restricted in the Foreign Trade Policy (FTP), required licence for import - hazardous waste, liable to be returned to country of despatch in terms of rule 17(2) of Hazardous Waste (Management, Handling Transboundary Movement) Rules, 2008 - Imposition of fine u/s 125 of Customs Act, 1962, in lieu of confiscation ordered u/s 111(d) and section 111(m) of Customs Act, 1962, and imposition of penalty of ₹ 1,50,000 u/s 112 of Customs Act, 1962 - HELD THAT - There is no ground to sustain recourse to section 111(m) of Customs Act, 1962 on account of value enhanced by recourse to computation that is not in conformity with Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. As far as description is concerned, the goods had not yet undergone clearance for home consumption and the impugned order has not made out a case that the mistake which occurred at end of the supplier was the outcome of a conspiracy between the two. Hence, that, too, is no ground for invoking of section 111(m) of Customs Act, 1962. It would appear that the re-export of goods had not been ordered either as alternative to clearance for home consumption or in exercise of discretion under any provision of Customs Act, 1962. Instead the mandate of rule 17 of Hazardous Waste (Management, Handling Transboundary Movement) Rules, 2008 is held as the final word in that particular enforcement of law. In similar circumstances of mandate to prevent entry contrary to restrictions on drugs and cosmetics into India, it was held in re Siddiq Yusuf Merchant 2022 (5) TMI 1318 - CESTAT MUMBAI that ' it is a statutory right available to an importer which cannot be overlooked by the department; the importer should have been allowed to exercise the option to re-export the goods, as prayed for. It would sound more logical and legal to follow the said procedure prescribed under Rule 131(3) of the Drugs and Cosmetics Rules,1945, in absence of any contrary provisions under the Customs Act, 1962, which has not been cited before us. At the cost of repetition, it appears that the imported cosmetics are considered as prohibited at the threshold of its import, being not supported by the Registration Certificate issued under Drugs and Cosmetics Act, 1940 and the rules made thereunder. Therefore, the issue of under valuation of the goods and contravention of other provision of Customs Act,1962 would arise thereafter, to dispose the goods accordingly.' There are no reason to sustain redemption fine under section 125 of Customs Act, 1962 and of imposition of penalty under section 112 of Customs Act, 1962. Accordingly, the impugned order is set aside - appeal allowed.

Summary

Issues:
Imposition of fine under section 125 of Customs Act, 1962 in lieu of confiscation, Penalty under section 112 of Customs Act, 1962, Misdeclaration of 'zinc ash' as 'zinc dust', Rejection of declared value, Re-determination of value, Confiscation under section 111(d) and section 111(m) of Customs Act, 1962, Appeal against the order of Commissioner of Customs, Inland Container Depot (ICD), Mulund.

Analysis:

The appeal in this case concerns the imposition of a fine of &8377; 3,50,000 under section 125 of Customs Act, 1962, in place of confiscation, and a penalty of &8377; 1,50,000 under section 112 of the same Act due to the alleged misdeclaration of 'zinc ash' as 'zinc dust'. The appellant contested the circumstances leading to the determination of the fine and the existence of grounds for invoking section 112. The dispute primarily revolves around the classification and declaration of the imported goods, which were found to be 'zinc ash' instead of 'zinc dust', requiring a license for import under the Foreign Trade Policy. The appellant's argument rested on the assertion that the goods were wrongly shipped and that they had no motive to import hazardous waste without the necessary permits.

The facts of the case reveal that the goods, initially declared as 'zinc dust', were later identified as 'zinc ash' during testing. The classification was not disputed, and it was established that the goods required a license for import due to their hazardous nature. The appellant's defense centered on the supplier's error in shipping the goods and their lack of intent to import prohibited items. The impugned order justified the revision of valuation and confiscation under section 111(m) based on the knowledge of the importer regarding the nature of the goods and the absence of required permits.

The appellant relied on previous tribunal decisions to argue against the confiscation under section 111 and the imposition of fines and penalties. The Authorized Representative contended that the confiscation was justified due to the breach of licensing regulations. The order invoked section 111(m) for misdeclaration of value, but the higher valuation upon re-export negated any duty implications. The order's reliance on value enhancement for confiscation was deemed inappropriate as the goods had not undergone clearance for home consumption, and there was no evidence of a conspiracy between the parties.

The judgment highlighted the importance of following statutory procedures in cases involving the import of prohibited goods. Citing precedents, the tribunal emphasized the right of importers to re-export goods in such situations, rather than imposing fines and penalties. The decision ultimately set aside the redemption fine under section 125 and the penalty under section 112, overturning the impugned order in favor of the appellant.

In conclusion, the tribunal's analysis focused on the correct classification of imported goods, compliance with licensing requirements, and the application of statutory provisions regarding confiscation and penalties. The judgment underscored the need for procedural adherence and the statutory rights of importers in cases involving the importation of restricted or hazardous items.