2014 (3) TMI 641 - HC - Customs

Nature of assessment duty demand penalty u/s 114A - Misdeclaration of goods - Confiscation of goods Redemption fine - Tribunal deleted penalty - Held that - no exception can be taken to the finding that since there was no demand under section 28(8) of the Customs Act for duty, no penalty could have been imposed under that provision and consequently the penalty under section 114A was not sustainable. The further reasoning that there could have been penalty under section 112 but since that provision was not invoked, the direction to pay penalty at ₹ 2.34 crores was not warranted in the circumstances, does not appear to be in error of law - Decided against Revenue.

Summary

Issues:
1. Classification of imported medical equipment and duty implications.
2. Confiscation of goods and imposition of penalties under Customs Act.
3. Interpretation of penalty provisions under sections 112 and 114A of the Customs Act.

Issue 1: Classification of imported medical equipment and duty implications:
The case involved an appeal by the revenue against an order of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) regarding the classification of imported medical equipment by the Care Foundation. The Foundation imported a surgical system, declared as "Da Vinci Surgical System (Endoscope System)" for concessional duty. The customs department initiated proceedings as they believed the goods were actually a surgical robotic system with endoscopy. The Collector of Customs confirmed the duty demand, confiscated the goods, and imposed penalties. The Tribunal imposed penalties on J. Mitra but canceled the penalty on the Care Foundation. The revenue contested the cancellation of the penalty, arguing that the Tribunal erred in its interpretation of the Customs Act.

Issue 2: Confiscation of goods and imposition of penalties under Customs Act:
The Tribunal upheld the confiscation of goods under section 111(m) of the Customs Act, stating that deliberate misdeclaration made the goods liable to confiscation. However, considering the nature of the equipment and the misdeclaration, the redemption fine was reduced. The Tribunal also imposed penalties under section 112 on individuals involved but reduced the amount. The Court agreed with the Tribunal's decision on confiscation and penalties, stating that the misdeclaration made the goods liable to confiscation and penalties under section 112 were justified for those involved.

Issue 3: Interpretation of penalty provisions under sections 112 and 114A of the Customs Act:
The Tribunal found that since there was no demand for duty under section 28(8) of the Customs Act, the penalty under section 114A was not sustainable. The Tribunal did not impose penalties under section 112, leading to the cancellation of the penalty on the Care Foundation. The Court agreed with this interpretation, stating that no penalty could be imposed under section 114A without a demand for duty under section 28(8). The Court dismissed the appeal, upholding the Tribunal's decision on penalties and confiscation.

In conclusion, the judgment addressed issues related to the classification of imported medical equipment, confiscation of goods, and interpretation of penalty provisions under the Customs Act. The Court upheld the Tribunal's decision on penalties and confiscation, emphasizing the importance of accurate declaration and compliance with customs regulations.