Commissioner of Cus. (Export), Mumbai vs Surbhit Impex Pvt. Ltd.

J.P. Devadhar, J.—Whether the CESTAT was justified in setting aside the confiscation, redemption fine and penalties imposed on the goods imported by the assessee even though the same were misdeclared and misclassified by the assessee, is the question raised in this appeal. Sometime in March, 2010 the respondent-assessee had imported certain textile goods valued at US $ 0.65 per metre. In the bills of entry filed for home consumption, the said textile goods were declared as "Polyester Fabrics" and classification of the said goods was claimed under Customs Tariff Heading (CTH for short) 5407 52 10/5407 52 20.

On first check, the Textile Committee after testing the goods reported that the sample has the characteristic as woven fabrics and the wrap and weft are polyester and pile are polyester plus polyamides.

According to the Revenue, since the test report referred to "pile", the goods in question would merit classification under CTH 58 and, therefore, sought retesting of the said goods. On retesting, the Textile Committee reported that the imported goods were "cut weft pile" called "corduroy".

On the basis of the said test report the adjudicating authority by an order-in-original dated 23rd August, 2010 classified the goods under CTH 5801 32 00. The adjudicating authority enhanced the declared value from Rs. 54.7 lakh (US $ 0.65 per metre) to Rs. 1,81,80,771/- (US $ 1.44/1.47 per metre) and determined the duty payable at Rs. 5,38,24,911/-. The Adjudicating Authority was further of the opinion that since the assessee had misdeclared the value of the goods and had misclassified the goods, the same were liable to be confiscated u/s 111(m) of the Customs Act, 1962. Accordingly, the goods in question were confiscated and allowed to be redeemed on payment of redemption fine and penalty. On appeal, the Tribunal by order dated 7th April, 2011 set aside the order-in-original dated 23rd August, 2010 passed by the Commissioner (Appeals) and remanded the matter for fresh adjudication.

On fresh adjudication, the Adjudicating Authority once again held that the goods were classifiable under CTH 5801 32 00 and determined the value of the goods at Rs. 1,81,80,771/- under Rule 6 r/w Rule 5 of the Customs (Valuation) Rules, 2007. As the declared classification and valuation was not accepted, the adjudicating authority confiscated the imported goods and gave an option to redeem the goods on payment of redemption fine of Rs. 35 lakhs u/s 125 of the Customs Act and imposed penalty of Rs. 20 lakhs each on the appellant and its director u/s 112(a) r/w Section 114A of the Customs Act.

In the appeal filed before the CESTAT, the assessee conceded that the goods may be classified under CTH 5801 32 00 but contested the enhancement of the valuation of the goods and also confiscation of the goods.

The Tribunal by the impugned order dated 5-1-2012 [2012 (283) E.L.T. 556 (Tri.-Mumbai)] held that in the absence of the contemporaneous imports of similar goods, the enhancement in the value of the goods imported by the assessee cannot be sustained. As regards the description of the imported goods, the Tribunal found that the description given in the bill of entry is in conformity with the description given in the various import documents, such as, invoice, packing list and bill of lading and therefore the decision relating to mis-declaration attracting Section 111(m) of the Customs Act cannot be sustained. As confiscation u/s 119(m) was not sustainable, it was held that the redemption fine and penalty imposed under the Customs Act cannot be sustained. Challenging the aforesaid order, the Revenue has filed the present appeal in so far as it relates to setting aside the confiscation/redemption fine and penalty.

Since the valuation of the goods declared by the assessee is ultimately accepted by the Revenue, the only question to be considered is, whether the Tribunal was justified in setting aside the confiscation even after holding that the classification of the goods declared by the assessee is erroneous.

The argument of Mr. Jetly, learned Counsel, for the Revenue is that once the Tribunal has upheld the assessment order to the effect that the imported goods are not polyester fabrics and hence, cannot be classified under CTH 5407 52 10/5407 52 20 as claimed by the assessee, but the goods are "cut weft pile" fabrics called "corduroy" classifiable under CTH 5801 32 00, it is evident that there is misdeclaration and misclassification of the goods and, therefore, confiscation with redemption fine and penalty ought to have been upheld. He further submits that the fact that the Tribunal has accepted the valuation of the goods declared by the assessee does not absolve the assessee from the offence of mis-classifying the goods especially when the wrong classification filed by the assessee if accepted would have resulted in a huge revenue loss amounting to more than Rs. 4.5 crores. In these circumstances, he submits that the decision of the Tribunal suffers from serious error and the same is liable to be quashed and set aside.

We see no merit in the above contention. CTH 5407 covers woven fabrics of synthetic filament yarn, including woven fabrics obtained from materials of heading 5404, whereas, CTH 5801 covers woven pile fabrics and chenille fabrics, other than fabrics of Heading 5802 or 5806. Thus, both the above tariff headings relate to different types of woven fabrics. There is nothing on record to suggest that the assessee had intended to import goods falling under CTH 5801 and deliberately sought to declare that the said goods fall under CTH 5407 with a view evade payment of duty. There is no allegation that the assessee has colluded with the foreign supplier either in relation to the description of the goods or in relation to the valuation of the goods. It is not the case of the revenue that all types of polyester fabrics are classifiable under CTH 5801. It is relevant to note that even after the first test report, the Revenue could not arrive at a conclusion that the goods are classifiable under CTH 5801. It is only after the second test report the Revenue could arrive at a conclusion that the goods are classifiable under CTH 5801. If there is no difference in the price of polyester fabrics and the price of corduroy, then in the absence of any evidence to show that the assessee was aware of the fact that the goods imported are corduroy, it cannot be said that the assessee had misclassified the goods with an intention to evade payment duty.

In these circumstances, the decision of the Tribunal that there was no mala fide intention on the part of the assessee in misdeclaring the goods and, therefore, even though the classification of the goods claimed by the assessee is not correct, it was not a case for confiscation/redemption cannot be faulted. In the result, we see no infirmity in the order of CESTAT. Accordingly, the appeal is dismissed with no orders as to costs.