2025 (2) TMI 25 - AT - Customs

Re-classification of the goods - levy of differential customs duty along with confiscation redemption fine and penalty - non-levy of mandatory penalty u/s 114A of the Customs Act 1962 - misdeclaration of imported 100% Polyester Knitted Fabric - to be classified under CTH 60059000 or under CTI 60019200? - admissibility of statements - HELD THAT - The law on the admissibility of the statements recorded under Section 108 of the Act has been well established over the years. Reference is invited to the decision of the Apex Court in Surjeet Singh Chhabra versus Union of India 1996 (10) TMI 106 - SUPREME COURT holding that the customs officers are not police officers and therefore the confession is an admission and binds the petitioner. Similar view was taken by the Apex Court in Assistant Collector of Central Excise Rajamundri Versus Duncan Agro Industries Ltd. 2000 (8) TMI 87 - SUPREME COURT observing that a statement made by a witness or a party under Section 14 of Central Excise Act 1944 or section 108 of Customs Act 1962 is ex-facie admissible in evidence to sustain penalty. The proprietor of the firm having categorically accepted the test report and paid the entire duty amount is a clear admission on his part - there is no iota of doubt that the appellant had mis-declared the classification of the goods in question as 100% Polyester Knitted Fabric and classified the same under chapter heading 6005 9000 which actually covers warp knit fabrics . The matter was listed on 7.01.2025 when the applicant had once again chosen not to appear. Considering that the appeal is of the year 2010 we heard the learned Authorized Representative and after perusing the record had reserved the order granting two weeks time to file written submissions if any. Conclusion - Since there is apparent mis-declaration in the description of the goods as well as the value thereof the goods are liable to be confiscated under section 111(m) of the Act along with redemption fine. On the same reasoning and analogy duty is recoverable under the proviso to subsection (1) of section 28 of the Act. Consequently the differential customs duty calculated by the adjudicating authority in respect of the two bills of entry is affirmed. With regard to imposition of penalty under section 114A of the Act the same needs to be upheld as the appellant had resorted to suppression of facts resulting in evasion of duty. Appeal disposed off.

Summary

The judgment involves an appeal by M/s. Sarvatra International challenging the re-classification of imported goods, the levy of differential customs duty, and associated penalties. The Revenue also filed an appeal concerning the non-imposition of a mandatory penalty under Section 114A of the Customs Act, 1962. The Tribunal considered several core legal issues and provided a detailed analysis of each.

1. Issues Presented and Considered

The primary issues considered by the Tribunal were:

• Whether the imported goods, declared as "100% Polyester Knitted Fabric," were mis-declared and mis-classified under CTH 60059000, and whether they should be classified as "Polyester Cut Pile Fabric" under CTI 60019200.
• The applicability of the customs duty rate and the classification under the correct tariff heading.
• The imposition of penalties and fines, particularly the mandatory penalty under Section 114A of the Customs Act.
• The validity of the test reports and the appellant's acceptance of these reports.
• The conduct of the appellant in the proceedings and the implications of their non-appearance.

2. Issue-wise Detailed Analysis

Mis-declaration and Mis-classification of Goods

• Relevant Legal Framework and Precedents: The classification of goods under the Customs Tariff Act and the Customs Act, 1962, particularly the provisions relating to mis-declaration and penalties under Section 114A.
• Court's Interpretation and Reasoning: The Tribunal relied on the test reports from the Textile Commission, which identified the fabric as "100% Polyester Knitted Cut Pile Fabric," falling under chapter heading 6001. The classification under this heading attracted a higher duty rate.
• Key Evidence and Findings: The test reports were pivotal, indicating that the fabric was not as declared. The appellant's proprietor acknowledged these reports and agreed to pay the differential duty.
• Application of Law to Facts: The Tribunal found that the goods were mis-declared to evade higher customs duty. The correct classification under heading 6001 92 00 was affirmed, attracting a duty of 10% or Rs. 100 per KG, whichever was higher.
• Treatment of Competing Arguments: The appellant's claim of an error by the foreign supplier was unsupported by evidence. The Tribunal emphasized the lack of rebuttal evidence from the appellant.
• Conclusions: The Tribunal concluded that the goods were mis-declared and upheld the re-classification and duty demands.

Imposition of Penalties and Conduct of Appellant

• Relevant Legal Framework and Precedents: Section 114A of the Customs Act mandates penalties for duty evasion through suppression of facts.
• Court's Interpretation and Reasoning: The Tribunal noted the appellant's acceptance of the test reports and payment of duty as an admission of mis-declaration. The appellant's non-appearance and lack of response to the show cause notice were seen as attempts to evade proceedings.
• Key Evidence and Findings: The appellant's conduct, including failure to appear for hearings and lack of evidence to support their claims, was critical in the Tribunal's decision.
• Application of Law to Facts: The Tribunal applied the principle that admissions in statements under Section 108 of the Customs Act are binding. The appellant's actions were seen as suppression of facts warranting penalties.
• Treatment of Competing Arguments: The Tribunal dismissed the appellant's arguments due to lack of evidence and their conduct during the proceedings.
• Conclusions: The Tribunal upheld the penalties imposed and affirmed the appellant's liability for the differential duty and fines.

3. Significant Holdings

Core Principles Established

• The Tribunal reinforced the principle that admissions made under Section 108 of the Customs Act are binding and can be used to sustain penalties.
• The importance of accurate classification and declaration of goods to determine the correct duty liability was emphasized.
• The Tribunal highlighted the consequences of non-compliance with procedural requirements and the implications of non-appearance in legal proceedings.

Final Determinations on Each Issue

• The Tribunal dismissed the appeal by M/s. Sarvatra International, affirming the re-classification of goods and the associated duty and penalties.
• The Tribunal allowed the Revenue's appeal, imposing the mandatory penalty under Section 114A for the second Bill of Entry, which was initially omitted.

The judgment underscores the legal obligations of importers to accurately declare goods and the repercussions of failing to do so, including financial penalties and legal consequences. It also illustrates the Tribunal's reliance on expert evidence and the significance of procedural compliance in customs disputes.