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M/s. Novel Digital Electronics Versus The Commissioner Customs (Imports) , Customs House

Classification of goods - toys, viz., Talking Parrot - Wrong classification of goods - Imposition of penalty - Malafide intention or bonafide belief - Held that:- during the entire proceedings the assessee/importer was trying to prove the classification of goods imported in its favour. While the Commissioner (Appeals) differed with the finding of the adjudicating authority, the Tribunal also, initially, on its part, was not clear, as there were two different views and, therefore, the matter was .....

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matter under the bona fide belief that the classification offered by it is correct. In such circumstances, it cannot be said that the act of the assessee was wilful, deliberate and dishonest, in that he wanted to avoid payment of duty, thereby evading tax liability. The present case falls squarely within the parameters as propounded by the Supreme Court in Akbar Badurddin's case (1990 (2) TMI 50 - SUPREME COURT OF INDIA) - penalty, as imposed on the appellant/assessee is not justified in the fac .....

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s appeal by the assessee was admitted as early as on 07.02.07, no substantial question of law was framed. 3. The facts, in a nutshell, are as hereunder :- The appellant/assessee imported toys, viz., Talking Parrot classifying the goods under Bill of Entry No.28747 dated 3.6.97 under tariff heading 950380.01. The appraising group was of the view that the said goods is covered by Exim Code No.950349.09 and that it needed a Specific Import Licence. The plea of the appellant/importer is that the goo .....

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Notice issued. Since the importer did not produce a valid licence, it was held that the goods are liable for confiscation under Section 111 (d) of the Customs Act. Accordingly, the goods, valued at ₹ 3,42,882/- were confiscated invoking Section 111 (d) of the Customs Act read with Section 3 (3) of the Foreign Trade (Development & Regulation) Act, 1992 with liberty to the assessee/appellant to redeem the same on payment of fine of ₹ 6,80,000/- under Section 125 of the Customs Act .....

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he Department, aggrieved against such order, preferred appeal to the Tribunal. When the matter was taken up by the Tribunal for hearing, it appears that the issue on classification had been the subject matter of different views by the Tribunal and, therefore, the issue was referred to a Larger Bench in the case of Commissioner of Central Excise Vs Novel Digital Electronics (2006 (200) ELT 31 (Tri. LB)), wherein the Larger Bench of the Tribunal came to hold as under :- 9. It will be noticed from .....

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b-heading 950349.00 was also restricted. Import of other toys and models, incorporating a motor (950380.01) was made free. It appears that earlier such imports were allowed under SIL. 10. In the present case, the motorized 'talking parrot'toy was made of plastic which was covered by fabric. Therefore, it was a toy covered by plastic and fabric. That would bring the said toy in the category others under the sub-heading 950349.09. In our opinion, therefore, talking parrots imported by the .....

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.-Chennai), correctly classified the said goods, viz., 'talking parrot' toys incorporating motor under sub-heading 950349.09. The reference stands answered accordingly. 6. In view of the said decision of the Larger Bench, the Tribunal came to pass the following order :- The classification dispute in this appeal has been settled by the Tribunal Larger Bench as per Miscellaneous Order No.284/2006 dated 30.05.2006. Accordingly, the goods imported by the respondents, viz., a motorized toy ta .....

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ods under Section 111 (d) of the Customs Act with option for redemption on payment of fine of ₹ 6.80 Lakhs. The authority also imposed a penalty of ₹ 68,000/- on the party. This decision of the original authority was set aside by the learned Commissioner (Appeals), who chose to classify the goods under ITC (HS) Heading 9503 80.01, for which no import licence was required. Now that the decision of the original authority stands upheld, we set aside the appellate Commissioner's orde .....

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t he is not canvassing the plea on confiscation of the goods, but only pleads in respect of the penalty stating that the issue of classification was the subject matter of debate in the proceedings before the Commissioner (Appeals) as well as before the Tribunal and all along the appellant/assessee was pursuing the matter under the bona fide belief that the claim as made by it was correct and, therefore, the invocation of Section 112 of the Act for imposing penalty is not justified. To support th .....

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satisfied if the penalty is set aside. In view of the said statement, this Court is not considering those questions of law, but is deciding the issue only on the question of penalty. 10. In Akbar Badruddin's case (supra), the Supreme Court had occasion to consider the issue of penalty imposed in similar circumstances and in the said decision held as under :- Before we conclude it is relevant to mention in this connection that even if it is taken for argument s sake that the imported article .....

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in the light of this specific finding of the Customs, Excise & Gold (Control) Appellate Tribunal, the penalty and fine in lieu of confiscation require to be set aside and quashed. Moreover, the quantum of penalty and fine in lieu of confiscation are extremely harsh, excessive and unreasonable bearing in mind the bona fides of the appellant, as specifically found by the Appellate Tribunal. 61. We refer in this connection to the decision in Merck Spares v. Collector of Central Excise & Cu .....

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ance of law, or is guilty of contumacious or dishonest conduct, or acts in conscious disregard of its obligation; but not, in cases where there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. 11. Keeping the above principles as laid down by the Apex Court in mind, the only question that requires consideration by this Court in the present case is whether p .....

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he matter was referred to a Larger Bench, which came to decide the issue once and for all. Thereafter, the present order came to be passed. 13. Therefore, it is clear that the assessee was all along pursuing the matter diligently under the bona fide belief that the classification as made by it is correct. However, this aspect has been lost sight of by the Tribunal, while upholding the order of the original authority, whereby the penalty imposed on the assessee has also been confirmed. 14. As obs .....

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