Whether misdeclaration tenable when imported goods were assessed on the basis of test report?

PJ/Case Law/2014-15/2124

Case:-PRASHANT FREIGHT FORWARDERS P. LTD. Versus C.C.(IMPORT), NHAVA SHEVA

Citation:-2014 (299) E.L.T. 365 (Tri. – Mumbai)

Brief fact:- M/s. Warren Trading Pvt. Ltd. is in appeal against the impugned order along with co-appellants for demand of duty, interest and penalties imposed under Sec. 112(a) of the Customs Act, 1962. The Revenue is also challenged the impugned order for imposing penalties on M/s. Warren Trading Pvt. Ltd. and Shri Harish C. Bulchandani an-der Sec. 114A.

The brief facts of the case are that M/s. Warren Trading Pvt. Ltd. imported a consignment of synthetic polyester fabrics and filed Bill of Entry as per the description shown in the invoice. The goods were examined on first check, sample was drawn which was sent to the Textile Committee Laboratory and as per the report of the Textile Committee, it was found that the goods are 100% non-texturised. On the basis of the test report, the goods were assessed on 13-2-200 and duty was paid accordingly. There was some investigation against one M/s. Mayur Impex as 14 consignments imported by M/s. Warren Trading Pvt. Ltd. were part of the consignment imported by M/s. Mayur Impex. Therefore, impugned show cause notice was issued on the ground that the appellants have misdeclared the goods as synthetic polyester fabrics (100% non-texturised). The matter was adjudicated by way of impugned order and differential duty was demanded from the appellants and goods were confiscated but allowed to be redeemed on payment of fine of Rs. 11,25,000/- and penalties were imposed on the Director and the transporters. Later on, a corrigendum was issued modifying the penalty imposed on Shri Harish C. Bulchandani from Rs. Three lakhs to Rs. One lakh and imposing penalty of Rs. Two lakhs on M/s. Warren Trading Pvt. Ltd. under Sec. 112 (a) of the Customs Act, 1962. Against this order, both Revenue as well as the assessees are before Tribunal.

Appellant’s contention:- The appellant submitted that the matter is not required to be remanded for fresh consideration as the order is a speaking one and the Commissioner has given his findings on merits of the case. He mainly stressed that the show cause notice issued is beyond the normal period of limitation. Therefore, the impugned proceedings initiated against the assessee are not warranted as there is no allegation of fraud, collusion, misrepresentation or suppression of facts against M/s. Warren Trading Pvt. Ltd. As the goods were examined on first check basis, thereafter sample was drawn and sent to the Textile Committee approved by the Government of India, Ministry of Textile and on the basis of report of the Textile Committee, goods were assessed on 13-2-2013 as per the Board's Circular No. 23/2004-Cus., dated 15-3-2004. Therefore, the allegation of misdeclaration or suppression of facts is not sustainable against the assessee. In these circumstances, the order is to be set aside. He further submitted that when the goods were examined and assessed on the basis of test report, extended period of limitation is not invokable. It is also an admitted Fact that the goods were never examined further. Therefore, proceedings initiated against Ws. Warren Trading Pvt. Ltd. and others are not sustainable.

Respondent’s contention:- The Addl. Commr. (A.R.) appearing on behalf of the Revenue submits that the impugned order is bad in the eyes of law as the same is non-speaking and penalties have been imposed by way of corrigendum under Sec. 112(a) of the Customs Act instead of imposing under Sec. 114A of the Customs Act, 1962. Therefore, the impugned order should be set aside and the matter should be remanded back to the adjudicating authority for fresh consideration.

Reasoning of judgment:-Having heard both sides in detail, the adjudicating authority find that in this case Bill of Entry was filed on 6-2-2003 and as per the description in the invoice and on first check, sample was drawn and sent to Textile Committee approved by the Government of India, Ministry of Textile. The test report was obtained and on the basis of test report, as the goods were 100% non-texturised the Bill of Entry was assessed and duty was paid accordingly. The test report was obtained as per the Circular No. 23/2004-Cus., dated 15-3-2004, which is reproduced below :-

Circular No. 23/ 2004-Cos., dated 15-3-2004 –

Subject : Testing of imported textile/textile articles for its composition and hazardous dyes Regarding.

I am directed to state that the trade has brought to the notice of the Board that some of the filed formations are sending samples of imported textile/textile articles for testing of hazardous dyes to Textiles Committee Laboratory under the Ministry of Commerce and for composition to Central Revenue Control Laboratory (CRCL) resulting in duplication of work and delay in clearance of cargo.

In this connection attention is invited to Notification No. 29/(RE2004)/ 2002-2007, dated 28-1-2004 issued by 1)GFT, Ministry of Commerce and Industry. As per para 2 of the said notification, the import consignment of textile/textile articles not accompanied with the pre-shipment certificate from notified agencies will be cleared after testing of the same from the notified agencies based on the following

(a) At least 25% of sample are drsawn for testing instead of 100%.

(14 While drawing the sample, it will be ensured by Customs that majority sample are drawn from consignments originating from countries where there is no legal prohibition on the use of harmful hazardous Dyes.

(c) The test report will be valid for a period of six months in cases where the textile/textile articles of the same specification/quality are imported and the importer, supplier and the country of origin are the same.

The matter has been examined by the Board and it has been derided that in all of the cases, where samples are required to be sent for testing hazardous dyes to Textiles Committee Laboratory under the Ministry of Commerce, the testing for composition, i.e. texturised/non-texturised, should also be done at Textiles Committee Laboratory to avoid duplication of work. I lowever, where no test for no-dyes are required as per the DGFT notification, the test for composition, i.e. texturised/non-texturised, shall be carried out at the CRCL in-house testing laboratory.

Kindly bring the above instructions to the knowledge of all concerned through appropriate Public Notice."

Thereafter, no test was conducted on the impugned goods. The goods were assessed on the basis of test report of the Textile Committee. In these circumstances, the allegation of misdeclaration or suppression of facts, fraud is not sustainable against the assessee. When the allegation of misdeclaration or suppression of facts, fraud is not sustainable against the assessee, the extended period of limitation is not invocable. In this case, admittedly, the goods were assessed on 13-2-2003 and show cause notice has been issued on 4-9-2003 which is beyond the normal period of limitation. Therefore, the impugned show cause notice is barred by limitation. As the proceedings against the assessee are barred by limitation, therefore, there is no question of demand of duty and penalties against the assessee. In these circumstances, they set aside the impugned order and allow the appeals of the assessee viz. M/s. Prashant Freight Forwarders P. Ltd., Warren Trading Pvt. Ltd. And Shri. Harish Bulchandani. The appeal filed by the Revenue is dismissed.

Decision:-Assessee’s appeal allowed/ Revenue’s appeal dismissed.

Comment:-The crux of the case is that as the imported goods were assessed on the basis of test conducted by recognised laboratory and the test report given by them, the allegation of mis-declaration or suppression of facts with intention to evade payment of duty are absent. Consequently, the extended period of limitation is not invokable and the appeal was allowed solely on the grounds of limitation.

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PJ/Case Law/2014-15/2124

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