2024 (9) TMI 1326 - AT - Customs

Levy of penalty u/s 114(iii) of the Customs Act, 1962 - Customs Broker - Mis-classification of goods with an aim to get higher MEIS benefit for the exporter - safety matches - to be classified under CTH 36050090 or under CTH 36050010? - HELD THAT - The charge against the appellant is that even though they knew the classification of the goods they did not advice the exporter to classify the goods correctly, facilitating the exporter to get undue higher MEIS benefits. Firstly, it is found that the matter pertains to the period 2018-19 to 2020-21, covering a large number of Shipping Bills as seen from the Annexure to the SCN dated 25/05/2022. It hence shows that there was a practice in the Custom House to classify safety matches under CTH 3605.0090. In such a situation it would have been highly unusual for a Customs Broker to seek to change a long-followed classification and advice the exporter to file a classification of the impugned goods under CTH 3605.0010. Secondly as pointed out by the Apex Court in NORTHERN PLASTIC LTD. VERSUS COLLECTOR OF CUSTOMS CENTRAL EXCISE 1998 (7) TMI 91 - SUPREME COURT and also by a Co-ordinate Bench of this Tribunal in HIM LOGISTICS PVT. LTD. VERSUS CC, NEW DELHI 2016 (4) TMI 1153 - CESTAT, NEW DELHI , classification of goods being complex, it is declared as a matter of belief of an assessee and does not on its own amount to mis-declaration. Further it is not for CHA to have opinion on how the goods are to be classified. It was for Customs Authorities to correctly classify goods. Hence, there cannot be a dilution of the statutory responsibility of the Customs Officers in ensuring correctness classification / assessment and payment of duty by putting the responsibility of classification on the CHA, without proving any blame worthy action willfully done by him impacting the classification done. Thirdly there is no iota of proof in the impugned order of the CHA colluding with the exporter or illegally benefiting from the export of goods. Assumptions and presumptions or bald statements do not make for proof. Hence as pointed out by the Hon ble Madras High Court in M/S. NOVEL DIGITAL ELECTRONICS VERSUS THE COMMISSIONER CUSTOMS (IMPORTS) , CUSTOMS HOUSE 2015 (4) TMI 347 - MADRAS HIGH COURT in such circumstances, it cannot be said that the act was wilful, deliberate and dishonest, in that he wanted to avoid payment of duty, thereby evading tax liability and is not a case where penalty could have been imposed. Fourthly when action is proposed to be initiated against Custom Brokers for lapses on their part for their duties to be performed as a Customs Broker and not for any other blame worthy act under the Customs Act 1962, then the matter should be examined under the Customs Brokers Licensing Regulations, 2018 (CBLR, 2018) which regulates the working of Customs Brokers and contains provisions for action to be initiated against them for lapses on their part. There are no grounds for imposition of penalty has been made out and hence the impugned order is set aside - appeal allowed.

Summary

Issues: Alleged misclassification of goods for MEIS benefit leading to penalty under Customs Act, 1962.

In the case before the Appellate Tribunal CESTAT Chennai, the appellant, a Customs Broker, was accused of colluding with an exporter to misclassify safety matches under CTH 36050090 instead of the correct classification under CTH 36050010, resulting in the exporter availing higher MEIS benefits. The appellant was issued a Show Cause Notice proposing a penalty under sec. 114(iii) of the Customs Act, 1962. The Adjudicating Authority imposed a penalty of Rs.25,000/-, which the appellant challenged before the Tribunal. The appellant argued that the Customs officers and DGFT authorities had allowed the classification and benefits claimed, citing past practices and judgments favoring their position. The appellant also contended that the responsibility for correct classification lies with the Customs Authorities, not the Customs Broker. The Tribunal analyzed the case considering the complexity of classification, lack of proof of collusion, and absence of willful intent to evade duty. The Tribunal referred to relevant judgments supporting the appellant's arguments and set aside the penalty, emphasizing that Customs Brokers' actions should be examined under the Customs Brokers Licensing Regulations, 2018, for lapses in their duties. The impugned order was overturned, granting the appellant consequential relief as per the law.

This judgment addresses the issue of alleged misclassification of goods for MEIS benefit leading to a penalty under the Customs Act, 1962. The Tribunal examined the appellant's role as a Customs Broker, the long-standing practice of classification in the Custom House, and the statutory responsibility of Customs Officers in ensuring correct classification. The Tribunal emphasized that classification of goods is complex and based on the belief of the assessee, not constituting misdeclaration on its own. The absence of proof of collusion between the Customs Broker and exporter, coupled with the lack of willful intent to evade duty, led the Tribunal to set aside the penalty. The Tribunal highlighted the need to differentiate between lapses in Customs Brokers' duties and other blame-worthy acts under the Customs Act, suggesting examination under the Customs Brokers Licensing Regulations, 2018 for such cases. Ultimately, the Tribunal ruled in favor of the appellant, overturning the penalty and providing consequential relief as per the law.