2022 (8) TMI 1061 - AT - Customs

Rate of duty - Confiscation of goods - base oil grade-12 - Import of high flash high speed diesel which is canalised - to be classified under tariff item 2710 1949 or under tariff item 2710 1971 of First Schedule to Customs Tariff Act, 1975? - HELD THAT - It is not in dispute that the impugned goods are high flash high speed diesel which is canalised for import and did not conform to declaration in the bill of entry; consequently, the application of the appropriate rate of duty cannot be cause of cavil. Though appellant did challenge the denial of effective rates of duty, that grievance is academic in the backdrop of intention to re-export which restricts the present proceedings to confiscability of the goods and imposition of penalty. The impugned goods are permitted to be imported only by specified agencies; this is not a measure of protection but is mere extension of the scheme of petroleum product distribution in India. It, therefore, begs the question of wherewithal available to the appellant to undertake storage and marketing of diesel. It is also less than certain that potential customers could be persuaded to procure a commodity, that is considered to be adulteration-prone, from an unknown entity - the failure to ascertain the market value is in breach of section 125 of Customs Act, 1962. The fine demanded for redemption must be set aside on that count alone. Furthermore, in the light of the peculiarity of petroleum marketing and consumption in the country, private imports, even at much lower rates of duty and reduced pricing, commercially lack feasibility enough to give credence to the claim of the appellant that goods had been mistakenly despatched. The confiscation of goods under section 111 of Customs Act, 1962 as well the penalties imposed under section 112 of Customs Act, 1962 is set aside - appeal allowed.

Summary

Issues:
1. Revision of duty liability on imported goods
2. Confiscation of goods under Customs Act, 1962
3. Imposition of penalty under Customs Act, 1962
4. Application of correct duty rates
5. Possibility of re-export of goods
6. Compliance with provisions of Customs Act, 1962

Analysis:

Revision of Duty Liability:
The appellant contested the revision of duty liability on imported goods by the original authority, which increased the duty from &8377;19,33,894 to &8377;92,29,248. The dispute arose from the application of a different tariff item rate than claimed by the appellant. The goods were initially cleared based on a specific description, but subsequent testing revealed discrepancies, leading to the revision of duty liability and confiscation of goods.

Confiscation of Goods and Imposition of Penalties:
The original authority confiscated the goods under sections 111(d) and 111(m) of the Customs Act, 1962, allowing redemption upon payment of a fine of &8377;80,00,000. Additionally, penalties of &8377;20,00,000 and &8377;7,00,000 were imposed under sections 112(i) and 112(ii) of the Customs Act, 1962. The appellant argued against the harsh terms for redemption and penalties, citing the circumstances of mistaken supply and the availability of a buyer in India.

Application of Correct Duty Rates:
The appellant raised concerns regarding the application of effective duty rates and the differential duty calculation. The dispute centered on the appropriateness of the duty rates applied and the lack of consideration for the circumstances surrounding the mistaken supply of goods.

Possibility of Re-Export:
The appellant contended that re-export was the only viable option due to the actions of the lower authorities. The appellant highlighted the provisions of section 125 of the Customs Act, 1962, emphasizing the market price limitation on fines for confiscated goods.

Compliance with Customs Act, 1962:
The Tribunal noted discrepancies in the evaluation of the goods and the failure to ascertain market value, breaching section 125 of the Customs Act, 1962. Considering the peculiarities of petroleum marketing in India, the Tribunal set aside the confiscation of goods and penalties, directing customs authorities to assess and permit the goods for export in compliance with the Customs Act, 1962.