2025 (3) TMI 978 - AT - Customs

Classification of imported goods - to be classified as Polystyrene GPPS 1450 in powder form under CTH 39031910 or if they should be reclassified as Polystyrene in granular form under CTH 39031990? - exemption form BCD under N/N. 10/2008-CUS dated 15.01.2008 as amended by N/N. 53/2015-CUS dated 23.11.2015 - levy of penalty on Director of the appellant-company under Section 114AA of the Act - time limitation - suppression of facts or not - Confiscation - interest and penalty - HELD THAT - When suppression clause is invoked the Show Cause Notice is to be adjudicated within a period of one year from the date of issue of the notice. In this case the Notice was issued on 05.07.2018. It was adjudicated within one year. The submission of the appellant in this regard is that there is no suppression of fact established against them in this case and hence the notice should have been adjudicated within 6 months from the date of issue of the notice. It is found that the said notice has been issued by invoking extended period of limitation. The appellant had enjoyed BCD exemption provided under Notification No. 10/2008- Cus. dated 15.01.2008 on the imported goods Polystyrene GPPS 1450 based on the Certificate of Origin issued by the designated authority of the Country of export i.e. Singapore in respect of the earlier 17 Bills of Entry. However in respect of the last Bill of Entry No. 4199210 dated 29.11.2017 the sample was tested and found to be in Granular Form - the Department has applied the test report received in respect of the goods imported vide Bill of Entry No. 4199210 dated 29.11.2017 for all the previous imports and charged Customs duty on all the 18 Bills of Entry which is legally not sustainable. It is observed that the test report received in respect of the goods imported vide Bill of Entry No. 4199210 dated 29.11.2017 is applicable only for that Bill of Entry and the same cannot be applied to all previous imports. The test report in respect of the goods imported vide Bill of Entry 4199210 dated 29.11.2017 cannot be applied to the goods imported earlier under the 17 Bills of Entry as no samples have been drawn in respect of the said Bills of Entry. In these circumstances we hold that the demand of Customs duty confirmed in the impugned order in respect of the past imports vide 17 Bills of Entry is not sustainable. Accordingly the same is set aside. Interest and penalty - Confiscation - HELD THAT - Since the demand of Customs duty in respect of the 17 Bills of Entry pertaining to past imports is found to be not sustainable the demand of interest and imposition of penalty on the differential duty confirmed on this count against the appellant-company is also not sustainable and accordingly the same are set aside. Since the mis declaration alleged in the previous 17 imports is not established it is also held that the said goods imported vide those 17 Bills of Entry are not liable for confiscation. Penalty on Director of the Appellant-Company under Section 114AA of the Customs Act 1962 - HELD THAT - Mis-declaration with intention to evade Customs duty has been established in this case in respect of the goods imported vide Bill of Entry No. 4199210 dated 29.11.2017. Hence penalty u/s 114AA of the Act is liable to be imposed on the Director of the Appellant- Company but the penalty imposed should commensurate with the duty involved in the said Bill of Entry. In these circumstances the penalty imposed on Shri Rushab Thakker Director of the Appellant-Company u/s 114AA of the Act is reduced from Rs.10 00 000/- to Rs.1 00 000/-. Conclusion - i) The demand of Customs duty for the past 17 imports is set aside due to lack of evidence of mis-declaration. ii) The demand for the goods under Bill of Entry No. 4199210 dated 29.11.2017 is upheld with penalties for mis-declaration. iii) The penalty on the Director is reduced reflecting the lack of evidence of intentional evasion for past imports. Appeal disposed off.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

Whether the classification of imported goods as 'Polystyrene GPPS 1450' in powder form under CTH 39031910 was correct, or if they should be reclassified as 'Polystyrene in granular form' under CTH 39031990, attracting a higher Basic Customs Duty (BCD).
Whether the invocation of the extended period for demand under Section 28(4) of the Customs Act, 1962, was justified.
Whether the Show Cause Notice (SCN) was valid, given the alleged lack of pre-notice consultation under the Customs Act, 1962.
Whether the findings of the test report for the goods imported under Bill of Entry No. 4199210 dated 29.11.2017 could be applied to the previous 17 imports.
Whether the penalties imposed on the appellant-company and its Director under Sections 114A and 114AA of the Customs Act, 1962, were justified.

ISSUE-WISE DETAILED ANALYSIS

1. Classification of Imported Goods

Legal Framework and Precedents: The classification of goods under the Customs Tariff Act is pivotal in determining the applicable duty rates. The appellant classified the goods under CTH 39031910, claiming an exemption under Notification No. 10/2008-CUS, as amended, which was contested by the department.
Court's Interpretation and Reasoning: The Tribunal observed that the classification should be based on the physical form of the goods. The test report indicated the goods were in 'granular form', which falls under CTH 39031990.
Key Evidence and Findings: The test report from the Central Institute of Plastics Engineering & Technology confirmed the goods were in granular form.
Application of Law to Facts: The Tribunal upheld the reclassification of goods under CTH 39031990 for the Bill of Entry No. 4199210 dated 29.11.2017, but not for the previous imports due to lack of individual testing.

2. Invocation of Extended Period for Demand

Legal Framework and Precedents: Section 28(4) of the Customs Act allows for an extended period of demand if there is suppression of facts.
Court's Interpretation and Reasoning: The Tribunal found that the extended period was invoked based on the department's belief of mis-declaration. However, it was not justified for the past imports as no suppression was established.
Key Evidence and Findings: The appellant had relied on the classification provided by the exporting country.

3. Validity of Show Cause Notice

Legal Framework and Precedents: The Customs Act requires pre-notice consultation in certain cases.
Court's Interpretation and Reasoning: The Tribunal noted the absence of pre-notice consultation but focused on the merits of the classification issue.

4. Application of Test Report to Previous Imports

Legal Framework and Precedents: Test reports should be specific to the samples tested.
Court's Interpretation and Reasoning: The Tribunal held that the test report for the goods under one Bill of Entry could not be generalized to previous imports without individual testing.
Key Evidence and Findings: No samples were drawn for the previous imports.

5. Imposition of Penalties

Legal Framework and Precedents: Sections 114A and 114AA of the Customs Act pertain to penalties for duty evasion and mis-declaration.
Court's Interpretation and Reasoning: The Tribunal found mis-declaration for the goods under Bill of Entry No. 4199210 dated 29.11.2017, justifying penalties, but reduced the penalty on the Director due to lack of evidence of intentional evasion for past imports.

SIGNIFICANT HOLDINGS

Core Principles Established: The Tribunal emphasized the necessity of individual testing for each import to substantiate claims of mis-declaration and duty evasion.
Final Determinations on Each Issue:
- The demand of Customs duty for the past 17 imports was set aside due to lack of evidence of mis-declaration.
- The demand for the goods under Bill of Entry No. 4199210 dated 29.11.2017 was upheld, with penalties for mis-declaration.
- The penalty on the Director was reduced, reflecting the lack of evidence of intentional evasion for past imports.