2025 (1) TMI 360 - AT - Customs

Classification of imported goods - Process Betel Nuts - to be classified under CTH as 21069030 or under CTH 08028020 - rejection of declared value - redetermination of value based on the fixed Tariff Value as per the Customs Act, 1962 - confiscation - penalties - permission to re-export the goods. Classification of goods - HELD THAT - All the arguments advanced by the appellant in respect of the classification have been considered by Chennai Bench in case of M/S. S.T. ENTERPRISES AND M/S. AYUSH BUSINESS OVERSEAS VERSUS COMMISSIONER OF CUSTOMS (CHENNAI VII) 2021 (3) TMI 27 - CESTAT CHENNAI and rejected observing ' since the import goods are betel nuts whole , these would merit classification under Chapter 8 and specifically under Chapter 0802 80 10 as classified by the department.' This decision of Chennai Bench ahs been affirmed by Hon ble Supreme Court in M/S AYUSH BUSINESS OVERSEAS ETC. VERSUS COMMISSIONER OF CUSTOMS (CHENNAI VII) 2021 (3) TMI 1285 - SC ORDER . Thus, the goods imported by the appellant have been rightly held to be classifiable under the heading 0802 8030. Valuation of goods - HELD THAT - The impugned order relies on the Notification of the DGFT fixing the minimum import price for the import of the areca nuts classifiable under Chapter 0802. The minimum import price fixed by the DGFT could not be called the tariff value as has been done by the impugned order. The Tariff Value as defined by the Custom Act, 1962 is the value of the good fixed by the Board and could not have been fixed by any DGFT. Minimum Import Price fixed by the DGFT is an indicative minimum price of the goods imported and the goods if imported below this price could not have been allowed clearance for home consumption. However this price could not have been basis for rejection of the transaction value declared by the importer. Appellant has for this reason instead of clearing the goods for home consumption sought the re-export. Appellant has in his submissions made before the adjudicating authority has submitted that the redemption fine be imposed on @ of 5%. Agreeing to the submission made, the end of justice will be met if we reduce the redemption fine to 5 of the value determined in the impugned order on the basis of minimum import price fixed by the DGFT. Thus redemption fine in case of goods imported as per B/E No 2329397 is reduced to Rs.3,45,000/- and goods imported as per B/E No.2625658 to Rs.7,50,000/-. Thus the total redemption fine is reduced to Rs.10,95,000/- - the penalty imposed on the appellant under Section 112 (a) of the Customs Act, 1962 reduced to Rs.5,00,000/-. Conclusion - The goods were correctly classified under CTH 08028020. The confiscation and penalties were justified, and re-export is allowed with a reduced redemption fine. Appeal allowed in part.

1. ISSUES PRESENTED and CONSIDERED

The judgment primarily revolves around the following legal questions:

Whether the importer misclassified the goods as "Processed Betel Nuts" under CTH 21069030 instead of the correct classification under CTH 08028020.
Whether the declared value of the goods should be rejected and re-determined based on the fixed Tariff Value as per the Customs Act, 1962.
Whether the goods are liable for confiscation under Section 111(d) and 111(m) of the Customs Act, 1962.
Whether penalties under Section 112(a) of the Customs Act, 1962, should be imposed on the importing firm and associated customs brokers.
Whether the importer is entitled to re-export the goods and the implications of such re-export on the imposition of redemption fines and penalties.

2. ISSUE-WISE DETAILED ANALYSIS

Misclassification of Goods

Legal Framework and Precedents: The classification of goods is governed by the Customs Tariff Act, 1975, and relevant chapter notes. The court referred to Chapter 8 and Chapter 21 notes, as well as previous decisions, including those of the Supreme Court, to determine the correct classification.
Court's Interpretation and Reasoning: The court found that the goods, described as "Processed Betel Nuts," were essentially "Split Arecanuts" and should be classified under CTH 08028020. The court relied on the CRCL report, which stated that the goods were not "Betel Nut Products" but rather split arecanuts.
Key Evidence and Findings: The CRCL report and FSSAI findings were crucial, indicating that the goods did not contain any additives that would qualify them as "Betel Nut Products" under Chapter 21.
Application of Law to Facts: The court applied Chapter Note 3 to Chapter 8, which allows for certain treatments of dried nuts, and concluded that the goods retained their character as dried nuts.
Treatment of Competing Arguments: The appellant's argument that the goods underwent processes qualifying them for Chapter 21 was rejected, as the processes did not alter the essential character of the nuts.
Conclusions: The court upheld the classification under CTH 08028020.

Valuation of Goods

Legal Framework and Precedents: The valuation is guided by Section 14 of the Customs Act, 1962, and relevant notifications fixing minimum import prices.
Court's Interpretation and Reasoning: The court determined that the declared value was below the minimum import price, justifying the rejection of the declared value and re-determination based on fixed Tariff Value.
Key Evidence and Findings: The DGFT Notification fixing the minimum import price was pivotal in the court's decision to reject the declared value.
Application of Law to Facts: The court applied Section 14(2) of the Customs Act, which allows for tariff value fixation when necessary.
Treatment of Competing Arguments: The appellant's contention that the declared value should not be rejected was dismissed, as the goods were imported below the minimum import price.
Conclusions: The court upheld the re-determined value based on the fixed Tariff Value.

Confiscation and Penalties

Legal Framework and Precedents: Sections 111(d), 111(m), and 112(a) of the Customs Act, 1962, govern the confiscation and imposition of penalties for improper importation.
Court's Interpretation and Reasoning: The court found that the goods were liable for confiscation due to misclassification and undervaluation, warranting penalties under Section 112(a).
Key Evidence and Findings: The misclassification and undervaluation were central to the court's decision to impose penalties.
Application of Law to Facts: The court applied the relevant sections of the Customs Act to determine the liability for confiscation and penalties.
Treatment of Competing Arguments: The court rejected the appellant's argument against penalties, citing deliberate misclassification and undervaluation.
Conclusions: The court upheld the confiscation and penalties imposed.

Re-export and Redemption Fine

Legal Framework and Precedents: Section 125 of the Customs Act, 1962, allows for redemption fines in lieu of confiscation, even when re-export is permitted.
Court's Interpretation and Reasoning: The court allowed re-export but upheld the imposition of redemption fines, citing precedents that support fines even when goods are re-exported.
Key Evidence and Findings: The appellant's request for re-export and the supplier's willingness to accept the goods back were considered.
Application of Law to Facts: The court applied Section 125, allowing re-export with a redemption fine.
Treatment of Competing Arguments: The appellant's argument against redemption fines was rejected, as fines are permissible even with re-export.
Conclusions: The court upheld the redemption fine but reduced it to 5% of the re-determined value.

3. SIGNIFICANT HOLDINGS

Core Principles Established: The court reaffirmed that misclassification and undervaluation justify confiscation and penalties under the Customs Act. Re-export does not negate the imposition of redemption fines.
Final Determinations on Each Issue: The goods were correctly classified under CTH 08028020, the re-determined value was upheld, confiscation and penalties were justified, and re-export was allowed with a reduced redemption fine.
Verbatim Quotes of Crucial Legal Reasoning: "In view of above discussions I am of the view that goods namely 'Process Betel Nut' imported... are correctly classifiable under CTH 08028020." "The minimum import price fixed by the DGFT could not be called the tariff value as has been done by the impugned order... However this price could not have been basis for rejection of the transaction value declared by the importer."

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