2015 (7) TMI 179 - AT - Customs

Penalty u/s 114A - allegation of mis-declaring that export product - availing the benefit of export promotion scheme viz. Vishesh Krish & Gram Upaj Yojana Scheme (VKGUY) - export of Oil Cake Meal - Held that - There is no doubt that in the present proceedings, oil was extracted by a combination of both by expelling process and by solvent extraction. There was thus a bonafide opinion on the part of the Appellant, based on their understanding, that when both the processes of expelling and solvent extraction are used then the resultant meal will continue to be called as expeller variety of oil cake meal. Though the reasoning given by the Appellant was not accepted by the Adjudicating authority, while deciding the classification, but it cannot be said that there was a deliberate act of mis-declaring, knowingly and intentionally, while describing the export product. If an incorrect exemption is claimed by the Appellant, as a matter of belief then it cannot be considered as a declaration intentionally made to evade customs duty. The ratio of the above law laid down by Hon ble Apex Court will be applicable to the present facts & circumstances as the Appellant was holding a bonafide belief that so long as majority of the oil is extracted by expelling process, the resultant meal will continue to be classified as expeller variety of oil cake meal. In view of the above observations and settled proposition of law, there was no justification for imposing penalty upon the Appellant under Section 114AA of the Customs Act, 1962 - Decided in favour of assessee.

Summary

Issues involved:
1. Imposition of penalty under Section 114AA of the Customs Act, 1962 for mis-declaration of export product.
2. Jurisdiction of the Single Member Bench (SMB) to decide the appeal.
3. Classification of the product oil cake meal as expeller variety or not.

Analysis:

Issue 1: Imposition of penalty under Section 114AA
The Appellant argued that they had a bonafide belief that the oil cake meal exported by them should be classified as expeller variety, not solvent extracted variety, under the Vishesh Krish & Gram Upaj Yojana Scheme (VKGUY). The Appellant contended that the declaration made was not intentionally false or incorrect, citing the case law of Northern Plastic Ltd Vs Collr of Customs & Central Excise [1998 (101) ELT 549 (SC)]. The Appellant maintained that penalty under Section 114AA should not be imposed as there was no deliberate mis-declaration.

Issue 2: Jurisdiction of the Single Member Bench (SMB)
The Revenue raised a preliminary objection regarding the jurisdiction of the SMB to decide the appeal, arguing that the case involved the classification of the product oil cake meal, which should be decided by a Division Bench. However, it was determined that since the penalty imposed was less than Rs. 50 lakhs, the SMB had the jurisdiction to decide the appeal.

Issue 3: Classification of the product oil cake meal
The dispute centered around whether the oil cake meal exported by the Appellant should be classified as expeller variety or solvent extracted variety. The Appellant argued that when both physical extraction and solvent extraction processes were involved in making the oil cake, it should be considered as expeller variety. The Adjudicating authority contended that if even 10% of the oil was recovered by solvent extraction, the meal would not be considered expeller variety. The Appellant's belief was based on the understanding that as long as the majority of the oil was extracted by expelling, the meal should be classified as expeller variety. The case records confirmed that both expelling and solvent extraction processes were used in oil extraction.

In conclusion, the Tribunal held that the Appellant's belief was bonafide and there was no intentional mis-declaration to evade customs duty. Citing the case law precedent, the Tribunal found no justification for imposing a penalty under Section 114AA of the Customs Act, 1962. Therefore, the appeal was allowed, and the Original Order passed by the Adjudicating authority was set aside.