2015 (2) TMI 175 - AT - Customs

Wrong classification of goods - Mis declaratio of goods - Imposition of penalty - Held that - According to Note 2(b) of Section XVI of Customs Tariff Act, 1975, parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading, they are to be classified under the heading of the same machines. However, in this case, many of the items were found to be of general use and not found suitable for use solely or principally with the machines manufactured and sold by the appellants. The learned counsel fairly agreed that the investigating officers had considered this aspect and had omitted several items while issuing show cause notice which were actually solely or principally used with the machines manufactured by them. Under these circumstances, the appellants clearly have no case on merits at all. Further the observations of the Commissioner reproduced above and not contested by the learned counsel or by the appellants at any stage and coupled with the description of the inputs and Bills of Entry would clearly show that there was a misdeclaration of the goods in the classification. If the appellants were not to mention the machine number/machine description with the items imported which amounted to stating that they were proposed to be used or useful solely or principally with the machine manufactured by them, if the items were of general use, this claim clearly is a misdeclaration. Provisions of Section 28 which provides for non-issue of show cause notice wherein the importer pays the entire amount of duty with interest would not be applicable to the appellants at all. Therefore, this claim of the appellant s counsel that no proceedings should have been initiated cannot be accepted and is denied. Similarly the duty demand and the interest thereon also has to be upheld as not contested. - Since the misdeclaration has been established and appellant is not eligible for the benefit claimed by them, it is clearly a case of misstatement of facts and as a result appellant is liable to penalty under Section 114A of the Customs Act, 1962 and therefore, penalty imposed is upheld. - there is no allegation of any activity covered by Section 114AA which is actually not covered by Section 114A. Therefore, in our opinion, under the facts and circumstances of this case, penalty under Section 114AA need not be imposed. - penalty under Section 114AA is set aside and in respect of all other issues, appeal is rejected - Decided partly in favour of assessee.

Summary

Issues involved:
1. Classification of imported goods under the Customs Tariff Act, 1975.
2. Allegations of misdeclaration and evasion of customs duty.
3. Applicability of penalties under Sections 114A and 114AA of the Customs Act, 1962.

Detailed Analysis:

1. Classification of imported goods:
The appellants, engaged in manufacturing food processing machines, imported various goods but classified them incorrectly under CTH 8437 90 10/8437 90 20/8437 90 90, claiming nil rate of Additional duty. However, upon investigation, it was found that the goods were wrongly classified under headings of Chapters 39, 40, 73, 84, and 85 as per the Customs Tariff Act, 1975. The goods were found to be of general use and not solely or principally suitable for the machines manufactured by the appellants. The misclassification led to the short payment of customs duties, prompting a detailed investigation by the Air Cargo Complex.

2. Allegations of misdeclaration and evasion:
The investigation resulted in a demand for customs duty of &8377; 76,88,454/- along with interest and penalties under Sections 114A and 114AA of the Customs Act, 1962. The appellants paid the entire duty and interest before the show cause notice was issued. The appellants contended that they did not indulge in misdeclaration and had paid the correct amount. However, the Commissioner found discrepancies in the classification and upheld the duty demand and penalties, stating that misdeclaration had occurred, leading to evasion of duty.

3. Applicability of penalties:
The Commissioner concluded that there was a misdeclaration of goods and upheld the penalties under Section 114A for misstatement of facts. The appellants were found liable for penalty under Section 114A due to the misdeclaration. However, the Tribunal set aside the penalty under Section 114AA, reasoning that imposing penalties under both sections for the same offense was not warranted. The Tribunal rejected the appeal on all other issues, confirming the duty demand and interest payments.

In summary, the judgment addressed the misclassification of imported goods, allegations of misdeclaration and evasion of customs duty, and the applicability of penalties under Sections 114A and 114AA of the Customs Act, 1962. The Tribunal upheld the duty demand and penalties under Section 114A, while setting aside the penalty under Section 114AA.