2012(01)LCX0131

IN THE CESTAT, WEST ZONAL BENCH, MUMBAI

S/Shri Ashok Jindal, Member (J) and P.R. Chandrasekharan, Member (T)

Surbhit Impex P. Ltd.

Versus

Commissioner of Customs (EP), Mumbai

Final Order Nos. A/22-23/2012-WZB/C-KCSTB) and Stay Order Nos. S/113-U4/2012-WZB/C-KCSTB), dated 5-1-2012 in Application Nos. C/Stay11744-1745/2011 in Appeal Nos. C/714-715/2011

Cases Quoted -

Bajaj Health and Nutrition Pvt. Ltd. v. Commissioner - 2004(01)LCX0380 Eq 2004 (166) ELT 0189 (Tribunal) - Relied on [Paras 3.3,6.2]

Commissioner v. Gaurav Enterprises - 2005(09)LCX0386 Eq 2006 (193) ELT 0532 (Bom.) - Referred [Para 3.3]

Jaramsons Plastic Industry v. Collector - 1992(02)LCX0082 Eq 1993 (063) ELT 0558 (Tribunal) - Referred [Para 3.3]

Mala Bhaktani v. Collector - 1992(02)LCX0085 Eq 1993 (063) ELT 0563 (Tribunal) - Referred [Para 3.3]

N.D. Metals Inds. Ltd. v. Commissioner - 2008(04)LCX0356 Eq 2009 (236) ELT 0083 (Tribunal) - Referred [Para 3.3]

Padmanabh Silk Mills v. Union of India - 2004(10)LCX0334 Eq 2006 (193) ELT 0536 (Guj.) - Referred [Para 3.3]

Advocated By -

Shri Anil Balani, Advocate, for the Appellant.
Shri Y.K. Agarwal, Addl. Commissioner (AR), for the Respondent.

[Order per : P.R. Chandrasekharan, Member (T)]. -

These appeals and stay applications are filed against Order-in-Original No. 68/2011-12/CAC/AK dated 30-9-2011 passed by the Commissioner of Customs (EP), Mumbai.


2. The facts arising for consideration in this case are as follows. The ap-pellant Surbhit Impex imported textile fabrics of various quantities under bills of entry numbers 940205 dated 22-3-2010, 940191 dated 22-3-2010, 938696 dated 10-3-2010 and 940190 dated 22-3-2010. They declared the description of goods under import as polyester fabrics. In respect of bill of entry no. 938696 dated 10-3-2010 they claimed classification under CTH No. 54075210 whereas for the other three bills of entry, classification was claimed under CTH 5407 5220. All the bills of entry were subjected to "first check examination" and samples were drawn from the consignment and forwarded to the textile committee for test. The textile committee after testing the fabrics reported that the sample characteristic as woven fabric and the warp and weft are polyester and pile are polyester plus polyamides vide test reports dated 26-3-2010 and 31-3-2010. The department was of the view that since there is a mention of 'pile', the product would merit classification under Chapter 58. Therefore, they sent the samples once again for retest-ing to the textile committee seeking clarification and to the nature of the pile on the fabric. On retesting the textile committee reported that the fabric is "cut weft pile" and the goods are called "corduroy". Accordingly the department sought reclassification of the product under CTH No. 5801 3200. The department also was of the view that the fabric was undervalued, as against the declared price of US$ 0.65 per metre, the value of the fabric should be of the order of US $1.44/1.47 per metre and accordingly, the department proposed to load the value of the goods under importation. According to the department, as against the total declared assessable value of Rs. 54.7 lakhs by the importer in respect of all the four bills of entry, the correct assessable value should be Rs. 1,81,80,771/- and the total duty involved amount to Rs. 5,38,24,911/-. After giving a personal hearing to the importer the case was adjudicated vide Order No. 74/2010/CAC/CC/SS dated 23-8-2010 classifying the goods under CTH 5801 3200 and the assessable value was determined at Rs. 1,81,80,771/-. The goods were also confiscated under Section lll(m) of the Customs Act and an option to redeem the same was given on payment of fine of Rs. 35 lakhs and a penalty of Rs. 20 lakhs was imposed on Shri Mahendra Jain, director of the appellant firm. The said order was contested before this appellate Tribunal and the Tribunal vide order dated 7-4-2011 remanded the case for de novo adjudication on the ground that the principles of natural justice were violated while adjudicating and the order was passed without putting the assessee to notice on the various issues. In compli-ance to the said order, a notice dated 5-5-2011 was issued to the appellant proposing - (i) to classify the goods under importation under CTH 5801 3200; (ii) to reject the declared value of imports under Rule 12 of the Custom Valuation Rules, 2007 and to redetermine the same under Rule 6 of the said rules; (iii) to confiscate the goods under Section lll(m) of the Customs Act, 1962; and (iv) penal action on the appellant under Section 112(a) of the Customs Act and also on the director Shri Mahendra Jain. The case was adjudicated vide impugned order and the proposals in the show-cause notice were confirmed. In other words, the order confirmed the classification of goods under CTH 5801 3200, determined the assessable value of the goods under importation at Rs. 1,81,80,771/- under Rule 6 read with Rule 5 of the Customs Valuation Rules, 2007 and a penalty of Rs. 20 lakhs-each was imposed on the appellant and its director Shri Mahendra Jain under Section 112(a) read with 114A of the Customs Act. The order also confirmed confiscation of the goods under importation under Section lll(m) of the Customs Act and an option to redeem the goods was given on payment of a fine of Rs. 35 lakhs under Section 125 of the Customs Act. Hence the appellants are before us.


3. The LD. advocate for the appellant submits that the classification of the goods under Chapter 58 is incorrect. As per the test reports, the fabrics are corduroy. Normally corduroy fabrics are all cotton and are not made of polyester. In the instant case, the fabrics consist of polyester and therefore, it cannot be classified as "corduroy fabric" under Chapter 58.

3.1 The appellant had challenged the test report given by the Textile Committee and had requested the Commissioner to conduct one more test of the goods by the Central Revenues Control Laboratory, Delhi and this was not acceded to. He also wanted department to give copies of the correspondence exchanged between the department and the textile committee and the various replies received from the Textile Committee.

3.2 The LD. counsel further argued that the value of the goods under importation is sought to be revised on the basis of a bill of entry no. 809005 dated 10-7-2009. In that case also the goods were imported declaring a value of US $0.65/mtr and not at US $1.4/mtr as alleged in the notice. The assessed value of US $1.4/mtr was arrived after loading the value of transaction value at US $0.65/mtr and this value corresponds to the value decjared by them in respect of the impugned goods. He also contended that they had also furnished NIDB data giving details of all the imports of similar goods during the material period and as per the data submitted by them, values ranged from 0.32/mtr to 0.51/mfr in respect of polyester corduroy fabrics. In view of the above position, the value adopted by the department of US $1.4/mtr is wrong.

3.3 The LD. advocate further submitted that in the instant case the goods were examined first before assessment by the customs and in the import documents, they had given the description correctly based on the invoices, packing lists and bills of lading and there was no misdeclaration on their part. Even if it is held that the goods are classifiable under Chapter 58 as against the classification Chapter 54 claimed by them, there cannot be any confiscation of the goods and imposition of penalty on the appellant and its director. He relied on the following judgments in support of the above contentions namely :-

(1) N.D. Metals Inds. Ltd. v. CC (Imp), Mumbai - 2009 (236) ELT 83 CC v. Gaurav Enterprises - 2006 (193) ELT 532
2012]
SURBHTT IMPEX P. LTD. v. COMMISSIONER OF CUSTOMS (EP), MUMBAI 559 Padmanabh Silk Mills v. UOI - 2004(10)LCX0334 Eq 2006 (193) ELT 0536 (Guj.)

(3) Jaramsons Plastic Industry v. CC -1993 (063) ELT 558

(4) Mala Bhaktani v. CC -1993 (063) ELT 563

(5) Bajaj Health & Nutrition P. Ltd. v. CC Chennai - 2004 (166) ELT 189


4. The LD. Additional Commissioner AR appearing for the revenue reit-erated the findings given by the adjudicating authority in the impugned order.


5. We have carefully considered the rival submissions. As the consign-ment is a live one, after granting stay, we take up the appeal itself for consideration and disposal.


6. During the course of hearing, a specific query was put to the appellant as to whether they would like to get the retest of the goods under import done as requested by them before the adjudicating authority. The LD. advocate submitted that they did not want any retest of the goods and would agree to the classification under CTH No. 5801 3200 as held in the impugned order. We have also perused the tariff entries and the test reports. As per the retest reports of the Textile Committee, the fabric consists of "cut weft pile" and is corduroy and it is a polyester fabric. CTH 5801 3200 covers cut corduroy of man made fibres where the weft is a pile. Therefore, the fabric under importation, as per the test report, conforms to the tariff description under CTH 5801 3200 and the goods are liable to duty at the rates applicable to the said CTH. The advocate for the appellant also conceded on this matter. In view of this, we hold the classification of the impugned goods under heading CTH 5801 3200 as found in the impugned order.

6.1 The next issue relates to valuation of the goods. In the show-cause notice dated 5-5-2011 the department has proposed to redetermine the value under Rule 6 of the Customs Valuation Rules, 2007 on the basis of contemporaneous imports of similar goods. In the order passed by the LD. adjudicating authority, the value has been determined under Rule 6 read with Rule 5 of the Customs Valuation Rules, 2007. The proposition in the show-cause notice and its confirmation in the order are totally wrong. As per Rule 6 "if the value of the imported goods cannot be determined under the provisions of Rules 3, 4 and 5, the value shall be determined under the provisions of Rule 7 or, when the value cannot be determined under that rule, under Rule 8 :

Provided that at the request of the importer, and with the approval of the proper officer, the order of application of Rules 7 and 8 shall be re-versed."

Rule 7 deals with Deductive Value and Rule 8 deals with Computed Value. In the instant case, the determination of value has not been done either under Rule 7 or Rule 8 as proposed in the show-cause notice but on the basis of transaction value of similar goods under Rule 5. In other words, the proposal in the show-cause notice and the redetermination of the adjudication order are completely contrary to the provisions of Customs Valuation Rules and on that ground alone, the redetermined value made by the adjudicating authority has to be set aside. Even under Rule 5, the redetermination made by the department will not sustain for following reasons. The imports in this case have been made in March, 2010. The value adopted for comparison relates to bill of entry no. 809005, dated 10-7-2009. The import made in July, 2009 cannot be said to be contemporaneous to the imports made in March, 2010. Further it is seen that in respect of the said bill of entry also, the importer had declared a unit price of US$ 0.65/mtr which was enhanced by the department to US$ 1.40/mtr. In other words, the value adopted is not a transaction value but a value which has been modified by the department for the purpose of assessment. On the contrary, in the instant case the importer has given details of 10 bills of entry wherein polyester corduroy fabrics have been imported at prices ranging from US$ 0.32/mtr to US$ 0.51 /mtr. Why these values were rejected by the adjudicating authority is not at all forth coming in the order. There is no other evidence adduced by the department to show that the value of US$ 0.65/mtr declared by the importer in the import documents is incorrect. In the absence of any evidence, the loading of value on the basis of an import which is not contemporaneous is not sustainable in law and accordingly, we set aside the redetermination of value as proposed in the impugned order.

6.2 The next issue relates to confiscation of the goods and imposition of penalty. In'the instant case the appellant had declared the goods under importation as polyester fabrics and the same description is given in all the import documents namely, invoices for the supply of the goods, packing list and the bill of lading, and therefore, it cannot be said that the appellant has misdeclared the description with an intent to evade duty. The appellant has claimed classification under Chapter 54 as against the classification under Chapter 58 made by the department. A wrong declaration of classification in the import document per se on the bona fide belief that the classification is correct cannot make the goods liable to confiscation and the appellant cannot be imposed with penalty on account of a bona fide conduct. In any case, the goods have been subjected to first check, i.e., before the assessment of the goods, the goods were subjected to examination by the department. As has been held by this Tribunal in the case of Bajaj Health & Nutrition (supra), merely because the appellant had claimed a wrong classification, it cannot be held that the appellant has misdeclared the goods, as it is for the customs authorities to assess the bill of entry and correctly classify the imported goods. In the instant case the description given in the bill of entry is in conformity with those given in the various import documents, namely, invoice, packing list and bill of lading. Therefore, it cannot be held that the appellant tried to mislead the department. In view of this position, we hold that the charge of misdeclaration attracting the provisions of Section lll(m) of the Customs Act does not sustain and consequently confiscation of the goods and imposition of fine in lieu of confiscation also do not sustain. When the goods are not liable to confiscation, the question of imposition of penalty under Section 112(a) read with 114 also cannot sustain. Liability to penalty arises when the goods are liable to confiscation and not otherwise. In the instant case, we have already held that there is no misdeclaration on the part of the appellant attracting the provisions of Section lll(m) of the Customs Act. Accordingly, we set aside the confiscation and fine of/on the goods, and penalties imposed on the appellant and its director in the impugned order.

6.3 In sum, we hold that the goods under importation are liable to clas-sification under CTH 5801 3200 and the duty needs to be requantified taking into account the classification as mentioned above. The revision of value, confiscation of goods and fine in lieu thereof and penalties imposed on the appellants are set aside.


7. The appeals are partly allowed on the above terms.

(Operative part pronounced in Court)

Equivalent 2012 (283) ELT 0556 (Tri. - Mumbai)