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TMI Blog2025 (1) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 red ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine Lakh Seventy Eight Thousands Six Hundred Ninetry Six Only) respectively under Section 11 1(d) and 111(m) of the Customs Act, 1962. However, I gave an option to redeem the goods imported vide Bill of Entry No 2329397 dated 12.01.2021 and 2625658 dated 04,02.2021 for re-export on payment of fine of Rs 10,40,000/- (Rupees Ten Lakh F'orty Thousands Only) Rs 22,50,000/- (Rupees Twenty Two Lakch Fifty Thousands Only) respectively under section 125 of the Customs Act, 1962; iv. I impose penalty of Rs. 33,00,000/- (Rupees Thirty Three Lakh iv. Only) on M/s. Ananya Overseas under Section 112(a) of the Customs Act, 1962 v. I impose penalty of Rs. 2,00,000/- (Rupees Two Lakh Only) on V M/s. Rajesh Tripathi, the Customs Broker under Section 112(a) of the Customs Act, 1962. vi. I impose penalty of Rs. 4,50,000/- (Rupees Four Lakh Fifty Thousands Only) on M/s. Anubhay Cargo Movers, the Customs Broker under Section 112(a) of the Customs Act, 1962 vii. I order that Shipping Bill to be filed for re-export of the goods and export documents accompanying the said Shipping Bill to carry an endorsement that the goods were imported vide Bill of Entry No 2329397 dated 12.01.2021 and 2625658 dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02.2021 reported that sample is in form of brown coloured broken pieces of irregular shape and size arecanut along with some defective/ damaged pieces of arecanut. It does not contain any additive/ ingredients like catechu, tobacco, lime etc.. and it is other than Betel Nut Products known as Supari . 2.4 FSSAI vide their reports dated 28.01.2021 and 17.02.2021 confirmed that samples drawn by them conform to the specification s under FSS Act, 2006. 2.5 Appellant had declared the imported goods as Processed Betel Nuts, without specifying the processes which had been carried out. The classification claimed by the appellant under 21069030 is in respect of Betel Nut Products Known as Supari . The declaration made by the appellant was Process Betel Nuts and would not qualify to classification under Heading 21069030 as per supplementary note 2 to chapter 21. 2.6 As per note 3 to Chapter 8 and terms of heading in that chapter the goods would merit classification under heading 0802 8020. 2.7 As per DGFT Notification No 20/2015-2020 dated 25.07.2017 minimum import price of the good falling under EXIM Code 080280 of Chapter 8 of ITC (HS) was fixed at Rs 251 per kg. 2.8 Thus revenue was of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the where the goods are allowed for re-export redemption fine should not be imposed,- Siemens Limited [1999 (113) ELT 776 (SC)] SDS Ramdices Crop Science Pvt Ltd. [2018 (359) ELT 239 (T)] Central Marketing Agency [2004 (178) ELT 601 (T)] ABP Pvt Ltd. [2003 (151) ELT 705 (T)] HCL Hewlett Packard Ltd. [1997 (92) ELT 367 (T)] Lalkamal Enterprises [2018 (364) ELT 856 (T)] Penalty under Section 112 (a) is also not warranted in view of the following decisions: Health Caps India Ltd. [2018 (364) ELT 815 (T)] 3.3 Authorized Representative re-iterates the findings recorded in the impugned order. 4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments. 4.2 Impugned order records findings as follows: 16.2 The issue for determination before me are as to whether: (i) the importer has mis-classified the goods imported vide Bill of Entry No 2329397 dated 12.01.2021 and 2625658 dated 04.02.2021 namely Process Betel Nut under CTH 21069030 with sole intention to avoid payment of duty on Tariff Value and whether said goods are correctly classifiable under CTH 08028010: (ii) value is to be re-determined as per fixed Tariff Value when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 080280 is as under: 0802 80 - Areca nuts .. 0802 80 10 --- Whole 0802 80 20 --- Split 0802 80 30 --- Ground I observed that sub-heading 080280 describes item as Arecanuts . In this regard, I find that Arecanuts is botanical name of Betel Nuts. So there should not be any confusion. Betel Nut and Arecanuts are the same commodity. 17.3 I have gone through the Chapter Note 3 to the Chapter 8 of the Customs Tariff. find that the description of goods mentioned in CTH 21069030 as betel nut products known as supari . This clearly indicates that what is described therein is betel nut products and not betel nuts/ arecanuts as seen in Chapter 8. Chapter Note 2 to the Chapter 21 also speaks about Betel nut Product and not Betel Nuts . Further, I find that as per Chapter Note 2 to the Chapter 21 Betel Nut Products means any preparation containing betel nuts, but not containing lime, katha and tobacco. Since, in the present case, goods are basically Betel Nuts, whether boiled or flavored or both, whether whole or broken and not Betel Nut Product, I hold that present goods declared as Process Betel Nuts found as Split Arecanuts are not classifiable under CTH 21069030. 17.4 I further find that Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Co Vs Commissioner of Central Excise, Trichy reported in [2015 (324) ELT 30 (S.C.)] has held that crushing betel nuts into smaller pieces and sweetening the same with essential/non-essential oils, menthol, sweetening agents etc did not result in manufacturing of a new and distinct product. They set aside the Tribunal's order classifying the product Scented betel nuts under heading 2106. 17.7 I also find that Hon'ble Supreme Court in case of Crane Betel Nut Powder Works Vs CE Tirupati reported in [2007(210)ELT171 (SC)] after discussing the H Chapter Note to the Chapter 21 has held that crushing betel nuts into smaller pieces and adding essential/non-essential oils, menthol, sweetening agent etc. did not result in manufacture of new and distinct product having different character and use as end product continues to retain its original character though in a modified form. 17.8 I also find that Hon'ble Tribunal in the case of S. Krishna Co Vs Commissioner of Central Excise and Customs, Bolpur reported in [2015(321)ELT530(Tri Kol)] has held that imported split betel nuts merit classification under Tariff Item 08028020. 17.9 Now I proceed towards submission of the importer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escription of the goods as Process Betel Nut not as Betel Nut Products and as per Chapter Note 3 to the chapter 8, supplementary note 2 to the Chapter 21, findings during examination of the said goods and test report from CRCL, the said goods are classifiable under CTH 08028020 17.10 In view of above discussions I am of the view that goods namely Process Betel Nut imported vide Bill of Entry No 2329397 dated 12.01.2021 and 2625658 dated 04.02.2021 found as Split Arecanuts are correctly classifiable under CTH 08028020. 18. Now, I take up the issue related to valuation of the goods. In this regard I find that the Directorate General of Foreign Trade, vide Notification No 20/2015-2020 dated 25.07.2018 has fixed minimum import price for Arecanuts under Exim Code 080280 of Chapter 8 of ITC (HS) 2017 as Rs 251/- per kg. In this regard I have gone through the provisions contained in sub section (2) of Section 14 of Customs Act, 1962 which reads as under: Notwithstanding anything contained in sub-section (1), if the Board is satisfied that it is necessary or expedient so to do, it may, by notification in the Official Gazette, fix tariff values for any class of imported goods or export good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04.02.2021 having re-determined value as Rs. 69,12,310/ - and Rs1,49,78,696/- respectively are prohibited for import. 19.1 Further, I have gone through the provisions contained in section 111(d) of the Customs Act, 1962 which reads as any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force , are liable to confiscation In the present case, the said importer has imported goods below the MIP falling which are prohibited as per Notification No 20/2015-2020 dated 25.07.2018 Therefore, I hold that the said goods imported vide Bill of Entry No 2329397 dated 12.01.2021 and 2625658 dated 04.02.2021 having re-determined valuc as Rs. 69,12,310/- and Rs1,49,78,696/- respectively are liable to confiscation under section 111(d) of the Customs Act, 1962. 19.2 Further I find that the importer has not classified the goods correctly Even, describing the goods as Process Betel Nut the importer knowingly and willfully classified the goods under Chapter 21 instead of Chapter 8 whereas the Chapter 8 clearly mention desc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the goods as discussed above. Further, in the present case, I find that declared value was USD1121 per MT whereas MIP (Tariff Value) as fixed was USD 3695 per MT. Moreover, I also find that duty rate are much higher under CTH 08028020 than under CTH 21069030. I also find that the DGFT has fixed MIP as Rs 251/- per kg as discussed above and import below that price is prohibited. I find that importer deliberately and knowingly attempted to mis-classify the goods with sole intention to evade duty and circumvent ITC Policy 20.2 I find that the acts of the said importer, in relation to goods imported vide Bill of Entry No 2329397 dated 12.01.2021 and 2625658 dated 04.02.2021 have rendered the said goods liable to confiscation under section 111 (d) (m) and imported the goods improperly. I also find that the action of the importer was deliberate and intentional. Therefore, I hold that M/s. Ananya Overseas are liable to penalty under section 112 (a) of the Customs Act, 1962. 21. I also find that the said importer vide various submissions have submitted that they had already suffered heavy losses and clearing goods under Chapter 8 of Customs Tariff is not viable for them and as supplier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of confiscation such ine as authority thinks fit which are exercised under Section 125 of the Act. Relevant part of Section 112 reads thus: - 'Penalty for 112. Improper importation of goods, etc. - Any person, - (a) who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under Section 111, or abets the doing or omission of such an act, o- 'b) shall be liable. (i) in the case of goods in respect of which any prohibition is in force under this act or any other taw for the time being in force, to a penalty not exceeding the value of the goods or five thousand rupees 9. As against this, Section 125 empowers the concerned officer to confiscate the goods which are illegally cr improperly imported. After confiscation of the goods under the said section, -s Collector of Customs is empowered to give an option to the concerned party to get the same back after paying redemption fine. Section 125(1) reads thus : Option under Section 125.To pay fine in lieu of confiscation. - (1) Whenever confiscation of any goods is authorized by this Act, the officer adjudging it may, in the case of any goods, the importation or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. The issue to be decided is whether the impugned goods merit classification under CTH 2106 90 30 or CTH 0802 80 10. According to appellants the raw betel nut obtained from tree has been subjected to boiling and made ready for human consumption. By process of cleaning and boiling the nuts, the moisture content is reduced and are longer fresh and dry nuts so as to fall under Chapter 8. 10. Appellants have enclosed write up given by their supplier/exporter M/s. Nadaraj International Company Ltd., Yangon which reads as follows : We hereby confirm that we have rightly classified the exported goods called as betelnuts (Boiled Supari) in our country as common nomenclature to be under 2106 90 30 as it is manufactured product and not a raw product. The process behind its manufacture is highly scientific and complex. The process starts by taking raw dried betelnuts, a substance clearly classified under 0802 chapter. Then the large and visible impurities are removed labor and the non-visible impurities are removed by the De-stoner. This is followed by metal removal by deflectors of the metal. Then the product obtained is boiled in water for around 6 hours. The cleaned product is now polish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y contention is that nuts have been subjected to certain processes of manufacture and therefore would fall out of Chapter 8. Though several stages/process are claimed to be done in the write up given by supplier, during the argument the process undertaken was mainly confined to boiling in water and drying in sun light. It is argued that such processing of boiling is a stage of preparation in making betel nut product . That therefore the goods would merit classification under CTH 2106 90 30. Even if we assume that the impugned goods have undergone the stage of boiling or have been boiled in water and dried, we have to say that it does not take away the essential character of the betel nut being whole . 13. In this regard, Chapter Note 3 to Chapter 8 reads as under : Dried fruit or dried nuts of this Chapter may be partially rehydrated or treated for the following purposes :- (a) For additional preservation or stabilisation (for example, by moderated heat treatment, sulphuring, the addition of sorbic acid or potassium sorbate). (b) To improve or maintain their appearance (for example, by additional of vegetable oil or small quantities of glucose syrup). Provided that they retain the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gredients did not amount to manufacture . The Hon ble Apex Court reversed the Tribunal decision to hold that the said process would not amount to manufacture . The process involving manufacture does not always result in the creation of a new product and the classification was held to be under Chapter 8. 17. The said decision was followed by the Hon ble Supreme Court in the case of A.R.S. Co. v. CCE, Trichy - 2015 (324) E.L.T. 30 (S.C.). The very same view has been followed in Satnam Overseas Ltd. v. Commissioner - 2015 (318) E.L.T. 538 (S.C.) and in Servo-Med Industries Pvt. Ltd. - 2015 (319) E.L.T. 578 (S.C.). 18. The Ld. Counsel for appellants in para-8 of the synopsis has referred to the decision of the Hon ble Supreme Court. It is submitted by him that after the said judgment in M/s. Crane Betel Nut Powder Works (supra) an amendment was introduced in Chapter 21 whereby Supplementary Chapter Note 2 to Chapter 21 was introduced. Further, that product known as supari is excluded from Chapter 8. It is argued by him that in view of the above change in Chapter Notes, the judgment of the Hon ble Supreme Court does not have bearing to the present day classification of betel nut known a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imported is given in detail and includes boiled supari which is nothing but raw supari subject to boiling for 4 hours, removing the husk, boiling again for 2 hours, drying by hot air, sterilizing, sorting, polishing and packing. Further, in the said case though the department placed reliance on the decision of the Supreme Court in M/s. Crane Betel Nut Powder Works (supra), the Advance Ruling Authority held that after amendment by adding Chapter Note to Chapter 21 the decision of Hon ble Supreme Court would not apply and that the goods are classifiable under Chapter 21. The discussions made by the Advance Ruling Authority is as under : 10. It is noticed that in an identical case of M/s. Excellent Betel Nut Products Pvt. Ltd., Nagpur referred to above, this Authority inter alia observed that the contention of Revenue that in order to fit in chapter 21, supra, which is also known as betel nut should undergo a different character change, meaning it should not remain supari is incorrect due to the positive language of Supplementary Note No. 2 which does not require any such basic change in the character of the product like betel nut. Further, this Authority observed the reliance by Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sses in manufacture take place and liability to duty is attracted . In the present case, the impugned goods/betel nut whole cannot be said to be a new commodity having its own character, use and name in the market. The betel nut imported appears to be only more dried nuts than the ordinary dry betel nut fallen from trees after removing the husk. For these reasons, we cannot agree with the contention of the appellants that imported goods are product of betel nut/supari . 21. In the case of A.R.S. Company v. CCE, Trichy the Chennai Bench of the Tribunal vide Final Order No. 41961/2017, dated 29-8-2017 in Appeal No. E/492/2009 followed the judgment of the Hon ble Supreme Court in their own case reported in 2015 (324) E.L.T. 30 (S.C.). The Tribunal held that process of crushing betel nuts and sweetening the same with essential oils does not amount to manufacture. We do not find any reason to deviate from the view taken by the Chennai Bench in following the decision of Hon ble Apex Court. Though appellants herein contend that after the amendment by adding of Chapter Note 2 to Chapter 21 the position is changed, we do not think so. Even after such amendment, the position of law settled b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e consumption sought the re-export. In hs letter dated 08.04.2021 he stated as follows: As the goods are lying at the port for last three months and are perishable in nature, and we had already incurred heavy detention and demurrage charges and as the Custom authorities are proposing to assess the subject goods under CTH 8 wherein the duty structure is very high, we are not in position to the goods cleared as it would not be financially viable for us, since it would further incur heavy losses to us. Hence, under these circumstances, it is being requested that the goods may kindly be allowed for re-export. Our supplier also has no objection if the subject goods are re-exported and sent back to them and also they have agreed to take back the subject goods. Further the Supplier is willing to refund our payments. 4.6 Taking note of the request made Commissioner has allowed the re-export of the goods. 4.7 In their appeal appellant have challenged the imposition of redemption fine and penalties on them in case of re-export of the goods. However we do not find much merits in the said submissions. All the decisions referred by the appellant have been considered by the Chennai Bench in case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;absolutely' or 'subject to such conditions' to be fulfilled before or after clearance, as may be specified in the notification, the import or export of the goods of any specified description. The notification can be issued for the purposes specified in sub-section (2). Hence, prohibition of importation or exportation could be subject to certain prescribed conditions to be fulfilled before or after clearance of goods. If conditions are not fulfilled, it may amount to prohibited goods. This is also made clear by this Court in Sheikh Mohd. Omer v. Collector of Customs, Calcutta and Others [(1970) 2 SCC 728] wherein it was contended that the expression 'prohibition' used in section 111 (d) must be considered as a total prohibition and that the expression does not bring within its fold the restrictions imposed by clause (3) of the Import Control Order, 1955. The Court negatived the said contention and held thus: What clause (d) of Section 111 says is that any goods which are imported or attempted to be imported contrary to any 7 C/40256/2023 prohibition imposed by any law for the time being in force in this country is liable to be confiscated. Any prohibition refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his provision makes no such compulsion as regards the prohibited goods; and it is left to the discretion of the Adjudicating Authority that it may give an option for payment of fine in lieu of confiscation. It is innate in this provision that if the Adjudicating Authority does not choose to give such an option, the result would be of absolute confiscation . (emphasis added) Hence as stated by the Hon ble Supreme Court due to a distinction made between prohibited goods and other goods under Section 125(1) of the CA 1962, while confiscation was a requirement of section 111(d), there is no compulsion to allow redemption of prohibited goods. This means that it is left to the discretion of the Adjudicating Authority that it may give an option for payment of fine in lieu of confiscation or it may confiscate the goods absolutely. 12. The question raised by the appellant that when the goods have been re-exported, the question of confiscation of goods under Section 111(d) of the CA 1962 does not arise, is like putting the cart before the horse. Confiscation of offending goods under section 111(d) is an action precedent to allowing the same to be redeemed under section 125 of the CA 1962. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right there may be a duty cast upon the donee of the power to exercise it for the benefit of those who have that right when required on their behalf. (emphasis added) 13. When goods are imported in breach of statutory provisions, Section 111(d) of the CA 1962 squarely applies as the goods become offending goods liable for confiscation. Confiscation of goods in the situation of a statutory breach by imported prohibited goods , is not discretionary. Section 111(d) of the CA 1962 reads as under; 111. Confiscation of improperly imported goods, etc. - The following goods brought from a place outside India shall be liable to confiscation:- (d) any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force; In its judgment in Zunjarrao Bhikaji Nagarkar v. Union of India [1999 (112) E.L.T. 772 (S.C.)], the Hon ble Supreme Court examined the meaning of the word liable in the context of section 11AC of the Central Excise Act, 1944 ( the person who is liable to pay duty as determined under sub-section (2) of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply because the decision is bundled along with a quasi-judicial order will not change the sequence of events. This being so confiscation of goods under Section 111(d) of the CA 1962 is a must before the administrative permission for the export of the said goods is given at the administrative discretion of the Proper officer. Appellants averment in this regard are hence rejected. No redemption fine is imposable on the goods that are re-exported. 15. The appellant has stated that it is a settled position of law that no redemption fine is imposable on the goods that are re-exported. We find that once goods are imported in contravention of any provisions of the CA 1962 they are liable for confiscation. Any breach of a statutory obligation under the Customs Act is a blameworthy conduct by the assessee. In case the goods involved are prohibited goods it is within the discretion of the Proper Officer to absolutely confiscate the goods or to allow it to be redeemed on payment of a fine. To release prohibited goods without imposing a fine is not a valid option. After the appellant informed the Proper Officer that they were not in a position to fulfill the conditions of EPR 1986, it was incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d when goods are re-exported. 18. A penalty is the result of a breach of statutory duty. The main object behind the imposition of penalty is deterrence. Re-export of the goods does not cure the breach of statutory duty already committed. While a fine is imposed on the redemption of offending goods imported in breach of law, a penalty is levied on a person responsible for the breach of statutory duty. No interfere should ordinarily be made by an appellate body, in the discretionary order passed by a lower authority, just because another view might be possible, except on grounds of mala fides or extreme arbitrariness. No such ground has been made out in this case. Hence this plea also does not have any merit and is rejected. Judgments 19. We shall next examine the judgments cited by the appellant. Reliance is placed by them in this regard on the following judgments; (a) Siemens Limited v. Collector of Customs [1999 (113) E.L.T. 776 (S.C.)]. (b) Sankar Pandi v. Union of India [2002 (141) E.L.T. 635 (Mad.)], upheld by the Hon ble Supreme Court in Union of India v. Sankar Pandi [2018 (360) E.L.T. A214 (S.C.)]. (c) M.K.A. Chinnasamy Nadar Sons v. CC, Tuticorin [2021 (378) E.L.T. 511 (Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n permission is granted for re-exporting the goods. The reference is answered as above. Judicial discipline requires that we follow the judgment of the Larger Bench. The appellant s plea is hence rejected. 4.8 Having rejected the pleas advanced by the appellant in respect of confiscation of the goods permitted to be re-exported, imposition of redemption fine and penalties, we go further to examine the quantum of the fine and penalties imposed. Undisputedly impugned order records as follows: Bill Of Entry Declared Value Determined Value Redemption Fine RF as % of determined value 2329397 2120670 6912310 1040000 15.05 2625658 4514030 14978696 2250000 15.03 4.9 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 we are of the view that 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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