2018 (3) TMI 515 - AT - Customs

Misdeclaration of imported goods - it was alleged that the appellant had not declared the actual GSM of the fabrics - Confiscation - penalty u/s 112 (a) (ii) of the Customs Act - Held that - there is variance in respect of at least around 40% of the goods imported, which cannot be considered to be negligible - Appellant cannot therefore get away without any imposition of penalty since there has been misdeclaration of the GSM in respect of such large quantity of the goods imported. A reduced penalty of ₹ 1,00,000/- u/s 112 (a) (ii) of the Customs Act would meet the ends of justice - appeal allowed in part.

Summary

Issues:
Import of fabrics with incorrect GSM declaration, denial of notification benefit, reclassification of fabrics, confiscation of goods, recovery of differential duty, imposition of penalty under Customs Act.

Analysis:
The case involved the import of woven cotton yarn dyed fabrics with a declared value of &8377; 1,52,59,728 claiming 0% duty under a specific license. However, upon examination, it was discovered that the actual GSM of the fabrics was not accurately declared, with a considerable quantity not meeting the GSM limits specified in the licenses. This led to a show cause notice proposing denial of notification benefit, reclassification of fabrics with over 200 GSM, confiscation of goods, recovery of differential duty, and imposition of penalty under the Customs Act. The adjudicating authority confirmed a duty liability of &8377; 41,85,184 and ordered reclassification of fabrics over 200 GSM, rejecting the licenses but dropping confiscation and penalty proceedings. On appeal by the department, the lower appellate authority set aside the order dropping confiscation and penalty, imposing a penalty of &8377; 8 lakhs under Section 112 (a) of the Customs Act.

During the hearing, the appellant's counsel argued that misclassification does not imply misstatement or suppression, emphasizing the absence of intent to circumvent the law. It was contended that without misdeclaration of material particulars, penalties under specific sections of the Act were unwarranted. Conversely, the department's representative asserted that around 40% of the goods did not match the declared GSM, indicating intentional misdeclaration to benefit from notifications. The correct classification and exemption under the notification were deemed dependent on GSM, justifying the penalty imposed by the lower appellate authority.

After considering both arguments and the facts, the Tribunal acknowledged the significant variance in the imported goods' GSM, deeming it non-negligible. While the appellant's purchase of licenses from the open market and declaration of GSM as per invoices were mitigating factors, a penalty was deemed necessary due to the misdeclaration. Consequently, a reduced penalty of &8377; 1,00,000 under Section 112 (a) (ii) of the Customs Act was imposed to serve justice, modifying the impugned order accordingly. The appeal was partly allowed on these terms.