2015 (4) TMI 519 - AT - Customs

Penalty u/s 112 - Penalty on partner - Misdeclaration of goods - Held that - there was doubt and confusion not only by the importer but also with the department. That is why the matter was referred for the clarification of DGFT and DGFT has clarified what is the dried garlic and garlic other than dried garlic. The identical issue came up before the Larger Bench of the Tribunal in the case of DAB Exports (2004 (3) TMI 103 - CESTAT, NEW DELHI), wherein the Larger Bench referring the Apex Court judgment in case 2007 (1) TMI 4 - SUPREME COURT OF INDIA Suchitra Components Ltd has held that very circular dated 17/9/1999 is prospective and not retrospective therefore whatever goods imported prior to issuance of this Circular was held to be legal. Therefore in the present case also the import was made prior to issuance of circular i.e. on 3/8/1999. In the present case imposition of penalty on the partner and in the case of partnership firm, wherein confiscation of goods were ordered, the appeal of the partnership firm was allowed in previous order. Since a main proceeding against partnership firm has been dropped the penalty on partner cannot be sustained. - Decided in favour of assessee.

Summary

Issues:
1. Imposition of penalty under Section 112(a) of the Customs Act, 1962 on the partner of a firm for misdeclaration of imported goods.

Analysis:
1. The appeal was against the penalty imposed on the partner of a firm for importing 'Wet Garlic' instead of 'Dried Garlic' under a different tariff heading. The Commissioner proposed confiscation of the goods and imposed penalties under Sections 111(d) and (m) and Section 112(a) of the Customs Act, 1962. The appellant argued that there was confusion regarding the correct classification, and only after a clarification from DGFT, it was clear that the import was legal. Reference was made to a Larger Bench judgment supporting the retrospective nature of the clarification. The penalty on the partner was deemed consequential to the charges against the firm, which were dropped by a coordinate bench, leading to the argument that the penalty on the partner should not be sustained.

2. The Revenue reiterated the findings of the impugned order, emphasizing the misdeclaration and penalties imposed. The Tribunal considered the submissions and records, acknowledging the confusion surrounding the classification of the imported goods. Referring to a previous Larger Bench decision, it was established that the DGFT circular clarifying the classification was prospective, making imports before its issuance legal. As the import in question was made before the circular, the penalty on the partner was deemed unsustainable. Additionally, since the appeal of the partnership firm had been allowed and the main proceedings dropped, the penalty on the partner could not stand. Therefore, the Tribunal allowed the appeal with consequential relief, if any, in accordance with the law.

This detailed analysis highlights the legal arguments, interpretations, and precedents considered by the Tribunal in reaching its decision to overturn the penalty imposed on the partner of the importing firm.