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2024 (12) TMI 476 - AT - CustomsInadmissible export incentive under VKGUY scheme - misclassification of goods - mis-declaration of the export goods for the purpose of obtaining the VKGUY license - evasion of differential custom duty of 3 % of VKGUY license - Levy of penalties u/s 112(a) or under 114AA of CA, 1962. Evasion of differential custom duty of 3 % of VKGUY license - HELD THAT - It is found that appellant as per their belief declared the description of goods to the DGFT, the DGFT was free to arrive at a correct classification and could have objected description declared by the appellant. However, the DGFT also issued the license accepting the description declared by the appellant. In this case there is no mala fide intention, particularly on the part of the present appellant because the issue of classification of goods is a matter of interpretation and the same could have been detected and disputed while issuing the VKGUY license by DGFT. Moreover, in the present case, so far the license has not been cancelled by the DGFT. On this ground alone the penal provision cannot be invoked against the appellant. Levy of penalties u/s 112(a) or under 114AA of CA, 1962 - HELD THAT - The appellant is not liable for penalty either under Section 112(a) or under 114AA. Therefore, the penalties are set aside. Appeal allowed.
Issues:
Allegation of inadmissible export incentive under VKGUY scheme by misclassification of product. Imposition of penalties under Sections 112(a) and 114AA of Customs Act, 1962. Analysis: The judgment dealt with the issue of misclassification of goods by a company for obtaining an export incentive under the VKGUY scheme. The company was accused of misclassifying Soyabean Oil under the wrong chapter heading, leading to a higher incentive. The investigation revealed that the company had wrongly secured the duty paid credit scheme, resulting in the imposition of customs duty, interest, and penalties. The appellant, responsible for obtaining the VKGUY license, was penalized under Sections 112(a) and 114AA of the Customs Act, 1962. The appellant argued that since the DGFT had not canceled the license, the penalties imposed were not sustainable. The appellant cited various judgments to support the contention that a show cause notice can only be decided after the DGFT cancels the license. The appellant emphasized that the DGFT's inaction regarding the license cancellation was crucial in determining the validity of the penalties imposed. On the other hand, the Revenue contended that the penalties were rightly imposed on the appellant for misdeclaring the goods to obtain the VKGUY license. The Revenue cited relevant judgments to support their argument that the penalties under Sections 112(a) and 114AA were justified based on the appellant's actions in misclassifying the goods. The presiding member carefully considered the submissions from both sides and reviewed the records. It was observed that the main issue revolved around the misdeclaration of export goods by the company to obtain the VKGUY license, resulting in evasion of differential customs duty. The presiding member noted that the appellant had declared the goods' description to the DGFT, which subsequently issued the license without objection. It was highlighted that there was no mala fide intention on the part of the appellant, as the classification of goods is subject to interpretation. The presiding member concluded that since the DGFT had not canceled the license, the penal provisions could not be invoked against the appellant. The presiding member distinguished the judgments relied upon by the Revenue, stating that they were not applicable to the present case due to differing facts and issues. Consequently, the penalties imposed under Sections 112(a) and 114AA were set aside, and the appeal was allowed.
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