2024 (6) TMI 1336 - AT - Customs

Valuation/undervaluation - ship spares received through the courier mode - eligibility for exemption from duty as per N/N. 12/2012 - Confiscation - redemption fine - penalty - HELD THAT - This case relates to the low valuation of ship spares received through the courier mode, in the name of the appellant who was the Agent for the vessel, during a breakdown of the vessel MV Samsun which required urgent repairs. When Customs asked for a commercial invoice the same was subsequently submitted by the appellant. It is found that though there was a technical breach of the Act and Rules there was no intention to evade payment of duty. Nor was the appellant involved in any fraudulent activity that invited harsh penalties. The goods were also statedly exempt from payment of duty as per Notification 12/2012, as the vessel carrying a foreign flag was registered in India during its contract period as per the tender conditions issued by the Directorate of Shipping. Confiscation of goods - imposition of a personal penalty - HELD THAT - Confiscation of goods and imposition of a personal penalty is meant to be remedial and hence coercive in its nature so as to serve as a deterrent. It can be imposed for a tax delinquency. However, the amounts imposed in this case are not commensurate with the degree of contravention of law involved. The charge is for a procedural lapse which is technical in nature and happened during an emergency which does not involve an act of intentional duty evasion. The ends of justice will be served after this long period, by setting aside the fine and penalties imposed by the impugned order - The eligibility of the goods for clearance free of duty as per the conditional exemption, if desired by the importer or his agent, may be verified by the proper officer and decided on merits - Appeal disposed off.

Summary

Issues:
- Valuation of goods for customs purposes
- Confiscation of goods and imposition of penalties
- Applicability of exemption notification
- Discretionary imposition of penalties

Valuation of goods for customs purposes:
The appellant filed a Courier Bill of Entry declaring goods as 'Impeller wheel, bearings etc. - ship spares' valued at EURO 700, but the actual invoice showed EURO 5807.70. The customs authorities initiated adjudication proceedings due to the discrepancy. The appellant explained the situation, stating the low value was based on information from the principal. The original authority confiscated the goods under Sec. 111 [m] of the Customs Act, enhancing its value and imposing penalties. The appellant argued the misdeclaration was unintentional, and the goods were exempt from duty under Notification No. 12/2012.

Confiscation of goods and imposition of penalties:
The appellant's appeal against the confiscation and penalties was rejected by the 1st Appellate Authority. The appellant contended that the penalties were unjustified as the import was for emergency repairs of an Indian-registered vessel, exempt from duty. The Revenue representative argued that the vessel's foreign flag made it ineligible for duty exemption, justifying the confiscation and penalties. The Tribunal noted that while there was a technical breach, there was no intent to evade duty or fraudulent activity.

Applicability of exemption notification:
The Tribunal considered the provisions of Notification No. 12/2012, which exempted ship spares from duty under certain conditions. The appellant argued that the goods qualified for exemption as the vessel was registered in India during the contract period, as per tender conditions. The Tribunal found that the penalties imposed were not commensurate with the technical breach, especially considering the goods' exemption eligibility.

Discretionary imposition of penalties:
Referring to the Hindustan Steel Ltd. case, the Tribunal highlighted that penalties should not be imposed merely because it is lawful to do so. It emphasized that penalties should be imposed judiciously, considering all relevant circumstances. The Tribunal, after considering the facts and circumstances, decided to set aside the fines and penalties imposed by the impugned order, aligning with the principles laid down by the Hon'ble Supreme Court.

In conclusion, the Tribunal modified the impugned order, setting aside the fines and penalties imposed. It directed verification of the goods' eligibility for duty exemption and granted the appellant consequential relief as per the law. The appeal was disposed of accordingly.