2025 (2) TMI 485 - AT - Customs

Classification of imported goods - Worn clothing and other worn articles - Rejection of classification of goods declared as CTH 62099090/62044990/62114990 and re-classification under 63090000 - restricted goods or not - Rejection of the declared assessable value of the goods - redetermination of value under Rule 5 of the Customs Valuation (Determination of value of imported goods) Rules 2007 - Absolute confiscation - penalty u/s 112(a)(i) and/ or 114(A) and 114AA of the Customs Act 1962. HELD THAT - The appellant was never in direct contact with the importer. The G-card holder of the appellant was contacted by one Shri Nikhil Kumar. Admittedly no authorization of importer in favour of Shri Nikhil Kumar nor in favour of the present appellant is on record. The impugned consignment is a high value consignment. Much more due diligence was required on part of the Custom Broker in which the appellant has miserably failed. His statement rather reveals that the appellant per se was unaware about the true nature of the import. Since the importer was not found at the given address and the appellant was acting without any proper consultation and authorization it can readily be held that the appellant was intentionally shirking his liability. The goods in question were restricted under Indian law requiring authorization from DGFT. Admittedly the said authorization was not obtained and the appellant did not bother to check for that authorization. Time limitation - HELD THAT - Though appellant has taken the plea that the show cause notice vide Corrigendum dated 16.11.2023 was much beyond the show cause notice dated 28.11.2022 as was served upon the importer the show cause notice is alleged to be barred by time. However it is apparent on record that the delay had occurred due to the time taken for securing the presence of the importer and their representative/key person by the appellant himself. One of them had never joined the investigation. The appellant himself was maid to serve the summons to the importers. Penalty under Section 112(a)(i) of Customs Act 1962 - HELD THAT - The appellant had admitted the goods to be torn old clothes as against the declaration about new women garments. The appellant did not exercise any diligence despite the consignment under suspension was diverted to warehousing and was put on alert. The appellant rather submitted a false report. All such acts and that the goods became liable for confiscation. Resultantly appellant has committed such acts which have rendered the impugned goods liable for confiscation. Resultantly the penalty under Section 112(a)(i) of the Customs Act 1962 has rightly been imposed upon the appellant. There are no infirmity in the order under challenge. Conclusion - The appellant s lack of due diligence and reliance on unauthorized representatives contributed to the import of misdeclared and overvalued goods justifying the penalties imposed. Appeal dismissed.

Summary

ISSUES PRESENTED and CONSIDERED

The primary issues considered in this judgment include:

• Whether the classification and valuation of goods declared by the importer were correct and lawful under the Customs Act, 1962.
• The legality of the seizure and confiscation of goods under Sections 110 and 111 of the Customs Act, 1962.
• Whether the appellant, acting as the Customs Broker, was complicit in the alleged misdeclaration and overvaluation of the imported goods.
• The appropriateness of penalties imposed under Sections 112(a)(i), 114(A), and 114AA of the Customs Act, 1962, on the appellant.
• Whether the show cause notice issued to the appellant was valid and within the statutory period.

ISSUE-WISE DETAILED ANALYSIS

Classification and Valuation of Goods

• Legal Framework: The Customs Act, 1962, and the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, were applied to determine the correct classification and valuation of the goods.
• Court's Interpretation: The Tribunal found that the goods declared as readymade garments were, in fact, old and worn clothes, which are restricted under Indian law. The declared value was found to be grossly inflated.
• Key Evidence: Physical examination revealed the goods to be old clothes without tags, contradicting the declared description and value.
• Application of Law to Facts: The Tribunal upheld the reclassification to CTH 63090000 and the reassessment of value to Rs. 71,065/-, aligning with the contemporary value of similar goods.
• Conclusions: The Tribunal confirmed the rejection of the original classification and value, supporting the reclassification and revaluation.

Seizure and Confiscation of Goods

• Legal Framework: Sections 110 and 111 of the Customs Act, 1962, provide for the seizure and confiscation of goods liable for misdeclaration.
• Court's Interpretation: The Tribunal found the seizure justified based on the reasonable belief of misdeclaration and overvaluation.
• Key Evidence: The absence of tags and the poor quality of goods supported the suspicion of misdeclaration.
• Conclusions: The Tribunal upheld the confiscation of goods under Sections 111(d) and 111(l).

Complicity of the Customs Broker

• Legal Framework: Section 146 of the Customs Act and the Customs Brokers Licensing Regulations, 2018, outline the responsibilities of Customs Brokers.
• Court's Interpretation: The Tribunal found the appellant failed to exercise due diligence, implicating him in the misdeclaration.
• Key Evidence: The appellant did not verify the importer's credentials and relied on unauthorized representatives.
• Conclusions: The Tribunal held the appellant liable for failing to fulfill his obligations, contributing to the import of restricted goods.

Imposition of Penalties

• Legal Framework: Sections 112(a)(i), 114(A), and 114AA of the Customs Act, 1962, prescribe penalties for acts leading to confiscation.
• Court's Interpretation: The Tribunal found sufficient grounds for imposing penalties due to the appellant's failure to exercise due diligence.
• Conclusions: The penalties were upheld as the appellant's actions rendered the goods liable for confiscation.

Validity of Show Cause Notice

• Legal Framework: The Customs Act requires timely issuance of show cause notices.
• Court's Interpretation: The Tribunal found the delay justified due to the appellant's involvement in serving summons and the challenges in securing the importer's presence.
• Conclusions: The notice was deemed valid, and the appeal on this ground was dismissed.

SIGNIFICANT HOLDINGS

• The Tribunal emphasized the responsibility of Customs Brokers to verify the credentials of importers and exercise due diligence, as outlined in the Customs Brokers Licensing Regulations, 2018.
• The judgment reinforced the principle that failure to fulfill these obligations could result in penalties under Sections 112(a)(i), 114(A), and 114AA of the Customs Act, 1962.
• The Tribunal concluded that the appellant's lack of due diligence and reliance on unauthorized representatives contributed to the import of misdeclared and overvalued goods, justifying the penalties imposed.

The Tribunal upheld the order under challenge, dismissing the appeal and affirming the penalties imposed on the appellant for his role in the importation of restricted goods.