2017 (2) TMI 49 - AT - Customs

Classification - valuation - import of old and used tyres - classified under CTH 40122090 or CTH 40122010? - whether the repairs made after clearance would effect the classification of goods? - Held that - we are not concerned that after the clearance, the importers would make repairs on the tyres or get them retreaded. We cannot force the importers to do repairs or retreading on the same; therefore, the right classification for the remaining category of tyres, which cannot be used as such on the vehicles/autovehicles considering their current condition, would be under CTH No. 40122090, which is in the category of Other - there is no requirement of any import license for their import. The Customs (Revenue), therefore, cannot have Import Policy Objection for their clearance for home consumption. Valuation - rejection of transaction value - the goods have been purchased aboard, mainly as scrap - Held that - where these goods are usable as such, there is clear-cut contravention of Import Policy issued by DGFT, Ministry of Commerce, Government Of India, but where the goods are non usable as such and finding classification in the category of Other under CTH No. 40122090, they do not contravene the Import Policy and are allowed import freely. However, both categories of these goods have been imported in all respective consignments, so these factors are to be given due weightage when the valuation is to be decided by the original adjudicating authority, as the matter deserves to be remanded to the original adjudicating authority for this purpose - matter on remand. Imposition of penalty - Held that - the adjudicating authority has to keep the objective in mind that quantum of penalties and fines are imposed to such an extent so that in future such imports are strictly and seriously discouraged - separate penalties on partners or authorised signatories are not warranted, when penalties have been imposed on the appellant partnership/proprietor firms. In this regard, the original adjudicating authority is to decide on the quantum of penalties on the partners and authorised signatories after giving due consideration to the facts on record. Appeal allowed by way of remand.

Issues Involved:
1. Classification of import goods
2. Valuation of import goods
3. Imposition of penalties

Issue-wise Detailed Analysis:

1. Classification of Import Goods:
The primary issue revolves around the classification of old and used tyres imported by the appellants. The appellants argued that the tyres should be classified under Chapter 40122090, as these tyres, due to their condition, are not suitable for use on commercial or passenger vehicles. They contended that the tyres were discarded and had significant wear and tear, making them suitable for non-commercial uses such as hand carts and animal-driven vehicles. The appellants cited the decision in the case of M.U. Traders vs. C.C, Jamnagar to support their claim.

On the other hand, the Revenue argued that the tyres, despite needing retreading or repairs, remained suitable for use on buses, trucks, and other vehicles, thus falling under Chapter Heading Nos. 40122010 and 40122020. The Tribunal concluded that the classification should be based on the condition of the goods at the time of import. Tyres that could not be used as such for vehicles should be classified under CTH No. 40122090, which does not require an import license, while tyres usable as such should be classified under CTH Nos. 40122010 and 40122020, requiring an import license.

2. Valuation of Import Goods:
The appellants argued that the transaction value of the tyres was unjustly rejected by the Revenue, and the enhancement of value was not supported by reliable evidence. They claimed that the tyres were purchased as stock lots, often treated as scrap, and the transaction value should have been accepted. The Revenue, however, contended that the classification misdeclaration warranted the rejection of the transaction value and that the valuation was determined based on expert assessment and contemporaneous NIDB data.

The Tribunal directed that the valuation issue be reconsidered by the original adjudicating authority, taking into account all evidence, including market inquiry data. The authority is to consider the nature of the goods being purchased as stock lots and their condition at the time of import.

3. Imposition of Penalties:
The Revenue argued for harsh penalties due to the clear violation of the Import Policy, while the appellants contended that the penalties imposed were excessive. The Tribunal acknowledged the gross violation of the Import Policy and stated that goods classified under restricted categories should be confiscated, with appropriate redemption fines imposed. For goods classified under CTH No. 40122090, penalties should consider their potential use after repairs or retreading.

The Tribunal also addressed the issue of penalties on partners or authorized signatories, directing the adjudicating authority to decide on the quantum of penalties after considering relevant facts and case laws.

Conclusion:
The Tribunal set aside the orders of the lower Revenue authorities and remanded the matters for a de novo decision by the original adjudicating authorities. The authorities were directed to decide the cases within four months, considering the Tribunal's findings and providing the appellants with an opportunity for a hearing and submission of documents.

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