2024 (5) TMI 1350 - AT - Customs

Demand - Misclassification of imported product - invocation of extended period for duty payment - mis-declaration of facts - imposition of penalty - Imports Big Fib and Mast Free Comen (sweetner) for manufacture of chewing gum of various flavors - HELD THAT - The goods were classified under CTH 2938 by the appellant and the same was reclassified by the department under CTH 2106 and this classification has been accepted by the appellant. As rightly observed by the revenue the appellant had deliberately avoided declaring the true organic description of the products and declared them as Big Fib Mast free comen etc.; where it would be difficult to arrive at the correct classification. The fact that the above products were not organic or inorganic chemicals as claimed by the appellant but edible material having food ingredients came to be known only after the samples were tested and a certificate was issued by Central Food Technological Research Institute (CFTRI) Mysore certifying that the sample were found to be food ingredient. The supplier of the impugned goods who is the sister concern of the appellant had also classified the items under CTH 2106. Since the appellant was aware of the fact that the goods were classified by their supplier under CTH 2106 and they are nothing but food edible ingredients to be used in the manufacture of chewing gums there was intentional mis-declaration by classifying them under CTH 2938. Thus the Commissioner (A) was justified in invoking the extended period of limitation and imposing equivalent penalty. Therefore the impugned order is upheld and the appeal is dismissed.

Summary

Issues involved: Misclassification of imported product, invocation of extended period for duty payment, imposition of penalty under Section 114A of the Customs Act, 1962.

Misclassification of imported product: The appellant imported a product classified under Customs Tariff Heading (CTH) 2938 9090, while the department classified it under 2106 9099 based on the supplier's invoice indicating HTS Code as 2106907090. The appellant admitted the correct classification under CTH 2106, used as an additive in chewing gum manufacture. The department alleged suppression of facts, invoking extended period for past clearances and confirmed differential duty for a specific period along with equivalent penalty.

Invocation of extended period for duty payment: The appellant argued that the show-cause notice did not allege suppression of facts nor invoke the extended period of limitation. Citing legal precedents and CBIC Circular, the appellant contended that the order cannot go beyond the notice if suppression is not alleged. However, the Authorized Representative justified invoking suppression and penalty due to mis-declaration by the appellant.

Imposition of penalty under Section 114A: The show-cause notice alleged willful mis-declaration and suppression by the importers to evade payment of duty, invoking Section 114A of the Customs Act, 1962. The notice highlighted deliberate mis-declaration of goods and failure to subscribe to the truth of the contents of Bills of Entry. The appellant's claim that the proceedings were beyond the scope of the notice was deemed unjustified by the Tribunal.

Decision: The Tribunal upheld the Commissioner's decision to invoke the extended period of limitation and impose an equivalent penalty, as the appellant had deliberately misclassified the goods, leading to intentional mis-declaration. The reclassification under CTH 2106 was deemed appropriate, considering the true nature of the imported products as food ingredients for chewing gum manufacture. The appeal was dismissed, affirming the imposition of penalty and differential duty for the specified period.

(Order pronounced in Open Court on 21.05.2024.)