Custom, Excise & Service Tax Tribunal
Challenger Cargo Carriers Pvt Ltd vs Principal Commissioner, Customs ... on 1 December, 2022
Author: Dilip Gupta
Bench: Dilip Gupta
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
PRINCIPAL BENCH-COURT NO. 1
CUSTOMS APPEAL NO. 50980 OF 2021
[Arising out of Order-in-Original No. 11/2020/MKS/Pr. Commr./ICD-
Import/TKD dated 21.05.2020 passed by the Principal Commissioner of
Customs, Tughlakabad, New Delhi]
Challenger Cargo Carriers Pvt Ltd. Appellant
B-67,(Near Panchsheel Park Metro
Stn, Gate No. 2),
Soami Nagar (North) New Delhi-110017
Vs.
Principal Commissioner of Customs Respondent
(Import) Inland Container Depot,
Tughlakabad, New Delhi
Appearance
Shri Srinivas Kotni and Ms. Urvashi Kalra, Advocates for the appellant
Shri Vishwajeet Saharan, Authorised Representative for the
Department
CORAM:
HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT
HON'BLE MR. P V SUBBA RAO, MEMBER (TECHNICAL)
FINAL ORDER NO. 51168 /2022
DATE OF HEARING/ DECISION: 01.12.2022
P V SUBBA RAO
M/s. Challenger Cargo Carriers Pvt. Ltd.1 , a licensed Customs
Broker, has filed this appeal to assail the Order in Original2 dated
21.5.2020 passed by the Principal Commissioner of Customs
(Imports) ICD, Tughlakabad, New Delhi whereby he imposed a
penalty of Rs. 5,00,000/- under Section 112(a) (ii) and a penalty of
Rs 5,00,000/- under section 114AA upon the appellant.
1
Appellant
2
Impugned order
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2. The undisputed facts of the case are that the appellant filed
Bills of Entry from time to time on behalf of its client M/s.Daxen
Agritech(India) Pvt. Ltd.3 for consignments of 'Bulk Reishi Gano
Powder-100% Ganoderma and Bulk Ganocelium Powder-100% and
Gano Mycelium' imported by it. The appellant filed the Bills of Entry
classifying this good under Customs Tariff Heading4 30039011. The
Assistant Commissioner re-assessed it under CTH 21069099 and on
an appeal by the importer, Commissioner (Appeals), by order dated
17.2.2014 upheld the classification by the importer and set aside
the order of the Assistant Commissioner. Revenue's appeal against
the order of the Commissioner (Appeals) was decided by this
Tribunal by Final Order dated 10.1.2018 upholding the classification
of the goods in favour of the Revenue and set aside the order of
the Commissioner (Appeals). Meanwhile, the appellant continued to
file Bills of Entry on behalf of the importer for the goods under CTH
30039011 as upheld by the Commissioner (Appeals) and orders for
clearance of the goods for home consumption were given by the
officers under Section 47 in all the Bills of Entry.
3. The present proceedings were initiated after the Final Order
of this Tribunal dated 10.1.2018 was passed. A Show Cause Notice5
dated 2.7.2018 was issued to the importer and to the appellant
invoking extended period of limitation. A supplementary SCN dated
21.10.2019 was also issued but the proceedings in pursuance of it
were dropped in the impugned order and there is no appeal against
3
Importer
4
CTH
5
SCN
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it. The SCN dated 2.7.2018 culminated in the issue of the
impugned order rejecting the classification of the goods under CTH
30039011 and re-classifying them under CTH 21069099,
confirming a demand of differential duty amounting to Rs.
8,42,43,922/- along with interest under Section 28AA in respect of
10 Bills of Entry filed between 3.7.2015 to 23.3.2018.
4. The Principal Commissioner further held the goods imported
and cleared through the aforesaid 10 Bills of Entry valued at Rs.
17,15,88,470 were liable to confiscation under section 111(m) and
111(o). However, as the goods were already cleared and were no
longer available, the Principal Commissioner did not impose any
redemption fine. He, however, imposed fine of Rs. 8,42,43,922/-
under section 114A and fine of Rs. 25,00,000/- under section
114AA on the importer.
5. He also imposed fine of Rs. 5,00,000/- on the appellant under
section 112(a)(ii) and fine of Rs. 5,00,000/- under section 114AA
on the appellant. In this appeal, we are concerned with only these
two fines imposed on the appellant.
6. Learned Counsel for the appellant submits that the appellant
has been working as a Customs Broker for several decades with an
unblemished record. These penalties on the appellant are not legal
or proper and they unnecessarily sully the record of the appellant.
He submits that there was a difference of opinion between the
importer and the department regarding the classification of the
imported goods - the importer claimed CTH 30039011 while the
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C/50980/2021
Assistant Commissioner classified it under CTH 21069099. On
appeal, Commissioner (Appeals) decided the classification in favour
of the importer. Thereafter, both the importer and the officers were
following the order of the Commissioner (Appeals) while Revenue's
appeal against the Commissioner (Appeals) was pending before the
Tribunal. The appellant filed the ten Bills of Entry on behalf of the
importer as per the decision of the Commissioner (Appeals) and the
officers have cleared the goods for home consumption as such.
Neither the appellant nor the officers could anticipate what the
decision of the Tribunal would be nor could they have acted on it.
All but one of the ten Bills of Entry listed in paragraph 3 of the
impugned order were filed before the Final Order of this Tribunal.
The last Bill of Entry dated 23.3.2018 was filed shortly after the
Final Order when the appellant was not aware of the Final Order,
not being a party to the appeal. There is nothing on record to show
that a copy of the Final Order was served on the appellant.
Therefore, even in this Bill of Entry, the goods were classified as
per the order of the Commissioner (Appeals).
7. Learned counsel further submits that the classification of the
goods in the Bill of Entry is a part of self-assessment under Section
17(1) which is subject to re-assessment by the officers under
section 17(4). Thereafter, the goods are given 'out of charge' (are
cleared for home consumption under section 47). The
Commissioner has ignored the fact that no re-assessment was done
by officers in any of these Bills of Entry and all the goods were
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cleared for home consumption by the officers correctly following the
order for the Commissioner (Appeals).
8. Therefore, the appellant has committed no error, let alone,
committed an act which will attract penalties. This appeal may,
therefore, be allowed and the impugned order insofar as it pertains
to the penalty against the appellant be set aside.
9. Learned authorised representative reiterates the findings in
the impugned order and submits that it calls for no interference.
10. We have considered the submissions on both sides and
perused the records. The Principal Commissioner's finding insofar
as the appellant is concerned is that it filed Bills of Entry on behalf
of the importer classifying the goods contrary to the Final Order of
this Tribunal.
11. In the impugned order the Principal Commissioner obfuscated
the fact that the Final Order of this Tribunal was passed on an
appeal by the Revenue as the Commissioner (Appeals) had decided
the classification in favour of the importer. Until the Final Order was
passed by this Tribunal on 10.1.2018, the order of the
Commissioner (Appeals) was binding on both sides. Of the Bills of
Entry listed in the impugned order, all except one were filed before
the Final Order was passed by this Tribunal. The last one was filed
soon after the Final Order was passed. There is nothing on record
to show that the appellant was made aware of this order by the
Revenue and told to classify the goods accordingly. It is not
unlikely that it took some time for the appellant to come to know
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about the final order. It may be pointed out that the SCN dated
2.7.2018 was issued in the present proceedings six months after
the final order. Therefore, in respect of nine Bills of Entry, the
importer and the appellant were correct in classifying the goods as
per order of the Commissioner (Appeals) and the officers were
correct in clearing the goods for home consumption accordingly.
The Principal Commissioner is in error in holding in the impugned
order that the importer and the appellant (on importer's behalf)
should have filed Bills of Entry contrary to the order of the
Commissioner (Appeals). The tenth Bill of Entry appears to have
been filed in good faith.
12. There is a well-established practice in the department to deal
with cases where the order which holds the field is against the
Revenue and an appeal is pending with a superior court/Tribunal.
SCNs are issued periodically to protect Revenue's interest and they
are transferred to the call book which are then decided after the
order of the superior court or tribunal is received. In these Bills of
Entry also, after the order of the Commissioner (Appeals), SCNs
could have been issued and transferred to call book and decided
after this Tribunal passed the Final Order. However, until the Final
Order of this Tribunal was issued, the order of Commissioner
(Appeals) was binding both on the importer and the officers.
13. It would be worthwhile to examine the relevant legal
provisions. Section 46 requires the importer (or his agent) to make
an entry in respect of the goods imported into the country and
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further requires the importer to declare that the contents of the Bill
of Entry are true. Section 17 requires the importer to self-assess
duty and empowers the officer to re-assess the duty so self-
assessed by the importer. There is no separate mechanism or
procedure or form in which the importer can self-assess duty. It is
part of the Bill of Entry itself. Assessment of Customs duty involves
classification of the goods under the CTH, their valuation as per
Section 14 and Customs Valuation Rules and application of the
exemption notifications. These fields, when filled in the Bill of Entry
filed under section 46 by the importer (or his agent) complete the
self-assessment of duty. Evidently, these are not facts but are
views. While the importer is required to subscribe to the truth of
the contents of the Bill of Entry, it refers to facts and not opinions.
There cannot be any absolute true or false views. The importer may
self-assess the duty under a particular tariff heading as per its view
and understanding, the officer re-assessing the Bill of Entry may
take hold a different view. In the subsequent chain of appeals
through Commissioner (Appeals), Tribunal and Supreme Court,
different views may be taken and at any point of time, the view of
the higher judicial/ quasi-judicial authority prevails over the view of
the lower authority. There could be some situations, where the re-
assessment of duty by the officer is necessitated not just because
he is of a different view but because the facts disclosed in the Bill of
Entry were not correct - such as the quantity or description or the
specifications of the imported goods being found on examination or
testing to be different from what is declared or the actual
transaction value is more than what is declared, etc. However, as
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far as mere classification, exemption notifications, etc. are
concerned, they are just matters of self-assessment by the
importer. We reproduce below the relevant provisions of the Act.
"Clearance of Imported goods :
Section 46. Entry of goods on importation. -
(1) The importer of any goods, other than goods intended for
transit or transhipment, shall make entry thereof by
presenting electronically on the customs automated system to
the proper officer a bill of entry for home consumption or
warehousing in such form and manner as may be prescribed:
*********
(4) The importer while presenting a bill of entry shall make and subscribe to a declaration as to the truth of the contents of such bill of entry and shall, in support of such declaration, produce to the proper officer the invoice, if any, and such other documents relating to the imported goods as may be prescribed.
******** Section 17. Assessment of duty. -
(1) An importer entering any imported goods under section 46, or an exporter entering any export goods under section 50, shall, save as otherwise provided in section 85, self-assess the duty, if any, leviable on such goods.
******** (4) Where it is found on verification, examination or testing of the goods or otherwise that the self- assessment is not done correctly, the proper officer may, without prejudice to any other action which may be taken under this Act, re-assess the duty leviable on such goods.
(5) Where any re-assessment done under sub-section (4) is contrary to the self-assessment done by the importer or exporter and in cases other than those where the importer or exporter, as the case may be, confirms his acceptance of the said re- assessment in writing, the proper officer shall pass a speaking order on the re-assessment, within fifteen days from the date of re-assessment of the bill of entry or the shipping bill, as the case may be.
*******"
14. The importer, or on its behalf, the customs broker, only self- assesses duty just as one self-assesses income tax liability and files an return for tax on Personal income. Self-assessment does not make the appellant a quasi-judicial authority or any authority in any sense of the term. Self-assessment is subject to any re- assessment by the proper officer. Self-assessment can also be 9 C/50980/2021 appealed against to the Commissioner (Appeals). They can assess duty as per their understanding and the officers are free to re- assess it as per Section 17(4). Mis-classification or incorrect assessment of duty does not amount to mis-declaration in the Bill of Entry nor does it attract any penalty.
15. We understand that the Risk Management System6 of the Customs Electronic Data Interchange7system selects only some Bills of Entry for assessment by the proper officer and allows clearance of other Bills of Entry based on self-assessment only. However, this system also does not change the legal position as discussed above. We understand that if Bills of Entry are cleared on the basis of self-assessment, they are subjected to post clearance audit. If so, it gives sufficient time to the officers to find if any duty has escaped assessment and issue a demand under section
28. However, there can be no penalty for wrong self- assessment by the importer.
16. The finding of the Principal Commissioner that the goods were misclassified and his findings regarding the role of the appellant are as follows:
20. I find that in their own case, the issue of classification of the said products for the past imports has been raised and decided against them at the initial adjudication stage. The said decision was contested before Commissioner (Appeals) by the importer and thereafter, before CESTAT by the Department. Hon'ble CESTAT in this case vide Final Order No. 50102/2018 dated 10.1.2018 in appeal No. C/53498/2014 has held as under:
7. On careful consideration of the impugned order, we note that impugned order distinguished the decision of 6 RMS 7 EDI 10 C/50980/2021 the Tribunal, Chennai passed in the first round of litigation. We note that based on the direction of the Apex Court, the Tribunal, Chennai went into the dispute in much more elaborate manner with all the evidences placed before them and we have no reason to differ from the ratio and finding arrived by the Tribunal, Chennai.
Accordingly, following the same, we hold that the impugned order has erred in classifying the product as Ayurvedic medicine and it should have been correctly classified as food supplement as pleaded by the Revenue. Accordingly, impugned order is set aside. Appeal by the Revenue is allowed.
30. As regards penal action against M/s. Challenger Cargo, Customs Broker, I find that they were clearly aware of the classification issue. Even after being aware about the nature of the goods and previous decisions on classification, they continued to mis-classify the subject goods under CTH 3003 in subsequent Bills of Entry mis-declaring the goods as Ayurvedic Proprietary medicines. Thus, they were involved in wrong submission of the documents for clearance of the goods and were dealing with the goods which they knew were liable to confiscation under section 111(d) and (m) of the Customs Act, 1962. I also find that the intention/ mens rea to evade duty is not a relevant factor for the penalty proposed under section 112
(a) of the Customs Act, 1962. Section 112(a) of the Act consists of two parts viz., (i) liability to confiscation and (ii) abetting the act or omission rendering the goods liable to confiscation. In such cases, it has nothing to do with mens rea. The Apex Court in Chairman SEBI v Shriram Mutual Fund (2006) 5.SCC has held that mens rea is not an essential ingredient for contravention of the provisions of the Civil Act, unless......... Thus, M/s. Challenger Cargo for their aforesaid acts of omission and commission and for submitting wrong declaration in the Bills of Entry, are liabel to penalty under section 112(a)(ii) and 114AA of the Customs Act, 1962. ...
17. Thus, in the impugned order, the Principal Commissioner found that:
a) the appellant was aware of the classification issue;
b) despite being aware of the classification issue, the appellant continued to file Bills of entry classifying the goods under CTH 3003 in subsequent bills of entry mis-declaring them as Ayurvedic proprietary medicines;
c) the appellant was involved in wrong submission of document for clearance of goods;
d) that the appellant was aware that the goods were liable for confiscation under section 111(d) and 111(m); 11
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e) Mens rea to evade payment of duty for imposing penalty under section 112 and the liability to confiscation and abetting the acts of omission or commission rendering the goods liable to confiscation is sufficient.
18. The appellant does not dispute that there was as a classification issue but during the relevant time the issue was decided by the Commissioner (Appeals) in favour of the importer that the goods were classifiable as ayurvedic medicines under CTH 3003. It would not have been correct if the appellant had filed Bills of Entry classifying the goods under any other CTH including the CTH claimed by the revenue and subsequently upheld by this Tribunal in the final order. If self-assessing the goods as per the order of the Commissioner (Appeals) makes the importer or the appellant guilty, the officers who had not re-assessed such Bills of Entry and the officers who cleared the goods for home consumption and the officers who had conducted post clearance audit and the officers who had not raised demands within time must share the guilt in a much greater measure. As far as the allegation of 'wrong submission of document' is concerned, it is not a ground on which either goods can be confiscated or penalty can be imposed.
19. As far as the liability of confiscation under section 111(d) is concerned, it need not be examined because the Principal Commissioner, himself, has, in the same order, not confiscated the goods under section 111(d). As far as the Principal Commissioner holding the goods liable for confiscation under section 111(m) and 12 C/50980/2021 consequently, the appellant is liable for penalty under section 112 are concerned, these section read as follows:
Section 111. Confiscation of improperly imported goods, etc. The following goods brought from a place outside India shall be liable to confiscation:
(a) ....
(m) any goods which do not correspond in respect of value or in any other particular with the entry made under this Act or in the case of baggage with the declaration made under section 77 in respect thereof, or in the case of goods under trans-shipment, with the declaration for trans-
shipment referred to in the proviso to sub-section (1) of section 54;
...
SECTION 112. Penalty for 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, ...
shall be liable, -
(i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty not exceeding the value of the goods or five thousand rupees, whichever is the greater;
(ii) in the case of dutiable goods, other than prohibited goods, subject to the provisions of section 114A, to a penalty not exceeding ten per cent. of the duty sought to be evaded or five thousand rupees, whichever is higher :
20. Section 111(m) does not provide for confiscation of goods if the importer or on his behalf, the Customs Broker claims any wrong classification in the Bill of Entry. It only provides for confiscation if there is mis-declaration of goods. Even if the goods are mis- classified or duty is otherwise wrongly self-assessed by the importer, the goods do not become liable for confiscation. The remedy against wrong assessment is re-assessment by the officer 13 C/50980/2021 under Section 17(4). The dispute between the Revenue and the importer was with respect to the classification. At the time the Bills of Entry were filed, the Commissioner (Appeals) order held the field according to which the appellant filed the Bills of Entry. Therefore, the Principal Commissioner has erred in holding that the goods were liable for confiscation under section 111(m) and consequently, the appellant was liable for penalty under section 112.
21. To sum up:
a) Self-assessment of duty (including classification of goods) under section 17 (1) by the importer or on its behalf by the Customs Broker is subject to re-assessment by the proper officer under section 17(4) and incorrect self-assessment is not mis-declaration.
b) The fact that the Customs RMS cleared the goods without passing the Bill of Entry through the proper officer for re-
assessment makes no difference to this legal position. As the name suggests, through RMS, Revenue takes a calculated risk of some duty escaping assessment while balancing between facilitation and ensuring compliance. Even when the goods are cleared based on self-assessment, the Bills of Entry are subject to post-clearance audit and if self-assessment is found to be not correct, Revenue can appeal against the self- assessment before Commissioner (Appeals) or issue an SCN demanding duty under section 28.
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c) In this case, nine of the ten Bills of Entry in dispute were filed before the Final Order of this Tribunal as per the order of the Commissioner (Appeals) which was holding the field at that relevant time. The last one was filed after the Final Order of this Tribunal and there is no evidence that the Customs Broker was made aware of the Final Order during those few days. Therefore, the self-assessment of duty (including classification of the imported goods) in the Bills of Entry was correct and proper and so was the clearance of the goods for home consumption by the proper officer in the ten Bills of Entry.
d) Penalty under section 112 (a) (ii) is imposable on any person for acts or omissions which render any goods liable to confiscation under section 111. The finding in the impugned order that the goods cleared through the ten Bills of Entry were liable to confiscation under section 111(d) and 111(m) is not correct. The goods were not confiscated even in the impugned order under section 111(d). Section 111(m) applies if goods do not correspond to an entry made under section 46 and there is no allegation, let alone evidence in this case that the goods were not as per declaration. The allegation of mis-classification of goods, even if it is true, will not attract 111(m). Therefore, the penalty under section 112 imposed on the appellant is not sustainable and needs to be set aside.
e) Penalty under section 114AA is imposable if a person knowingly or intentionally makes, signs or uses, or causes to 15 C/50980/2021 be made, signed or used, any declaration, statement or document which is false or incorrect in any material particular, in the transaction of any business under the Act. There is no allegation or evidence that the goods were wrongly declared and the allegation of mis-classification or incorrect assessment of duty, even if it is true, will not attract penalty under section 114AA. Therefore, penalty under section 114AA imposed on the appellant is not sustainable and needs to be set aside.
22. For all the above reasons, the appeal is allowed and the penalties under section 112 and 114AA imposed on the appellant in the impugned order are set aside.
(Order pronounced in open court) (JUSTICE DILIP GUPTA) PRESIDENT (P V SUBBA RAO) MEMBER (TECHNICAL) Tejo