2009 (11) TMI 324 - AT - Customs

Tyres- show cause notice was issued and the impugned order has been passed by the Commissioner, confiscating the tyres and allowing the same on payment of fine of Rs. 10 lakhs in lieu of confiscation, rejecting the transaction value declared by the appellant determining the same as Rs. 34,77,937/- as against Rs. 10,05,258/- declared and imposition of penalty of Rs. 3 lakhs against the appellant. Held that- Further, redemption fine in lieu of confiscation on the ground of mis-declaration of classification also cannot be upheld and no penalty under Customs Act on this ground, can be upheld. However, in respect of 3142 tyres, violation of EXIM Policy provisions has to be upheld. Therefore, a very nominal penalty and fine, if at all is required to be imposed, may be imposed. Accordingly, we set aside the impugned order and remand the matter to the original adjudicating authority who shall decide the duty payable on 3142 tyres. Further, exact number of tyres which are found to be usable as per panchnama is required to be verified by the Commissioner since our observations are based on the submissions made during the hearing. Accordingly, we remand the matter to the Commissioner to verify the correct number of usable tyres, determine the duty liability thereon and consider whether penalty is required to be imposed for violation of provisions of foreign trade policy.

Issues Involved:
1. Classification of imported tyres.
2. Valuation of imported tyres.
3. Alleged mis-declaration by the importer.
4. Imposition of penalty and fine.

Issue-wise Detailed Analysis:

1. Classification of Imported Tyres:
The appellants imported old and used rubber tyres, declaring them as "old and used, discarded rubber tyres for ADV tractor trolley." The Department found the tyres to be in good condition and suitable for use in different types of motor vehicles, contrary to the declaration. The Commissioner rejected the classification claimed by the appellants under heading 40122090, concluding that 33,186 tyres could be used in passenger/commercial vehicles and should be classified under headings claimed by the Department. The Tribunal noted that the figure of 33,186 tyres suitable for passenger/commercial vehicles did not emerge from any records and relied on the panchnama, which indicated that out of 35,643 tyres, only 3,142 could be used directly without re-treading. The Tribunal upheld the classification of these 3,142 tyres under the heading claimed by the Department, while the remaining tyres, which could not be used directly, were not classified under the same heading.

2. Valuation of Imported Tyres:
The Commissioner enhanced the value of the tyres from the declared Rs. 10,05,258/- to Rs. 34,77,937/- based on the opinion of expert re-treaders. The Tribunal found this enhancement to be against the procedure contemplated under the Customs Act, as the transaction value was rejected without providing details of contemporaneous imports from the same country and size. The Tribunal concluded that the re-treaders did not have the expertise to determine the value of secondhand tyres and that the enhancement of value could not be upheld.

3. Alleged Mis-declaration by the Importer:
The Department alleged that the importer intentionally misdeclared the classification of the tyres. The Tribunal found that less than 10% of the tyres were usable, indicating that the appellants did not intentionally misdeclare the classification. The Tribunal noted that the purchase appeared to be a stocklot, where some good quality tyres would always be found, and thus, the finding of misdeclaration could not be upheld.

4. Imposition of Penalty and Fine:
The Commissioner imposed a penalty of Rs. 3 lakhs and a fine of Rs. 10 lakhs in lieu of confiscation. The Tribunal set aside the penalty and fine, stating that the small quantity of usable tyres did not justify intentional misdeclaration. However, for the 3,142 tyres classified as usable and restricted under the EXIM policy, the Tribunal held that a nominal penalty and fine might be imposed. The Tribunal remanded the matter to the original adjudicating authority to verify the correct number of usable tyres, determine the duty liability, and consider whether a penalty was required for violating the provisions of the foreign trade policy.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter to the Commissioner for verification of the correct number of usable tyres, determination of duty liability, and consideration of penalty imposition for violating the foreign trade policy provisions.

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