2026-VIL-1869-CESTAT-CHE-CU
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  2. 2026-VIL-1869-CESTAT-CHE-CU

CUSTOMS CESTAT Cases

Customs - Confiscation and redemption fine - Section 111(m) of Customs Act, 1962 - Appellant imported LED strips and classified them under different tariff items at different ports. On DRI intelligence, SCN was issued proposing reclassification under CTI 8512 2010 or 8512 2020, demand of differential duty for the extended period, confiscation and penalties. The Commissioner confirmed the demand, held the goods liable to confiscation and imposed redemption fine although the goods had been cleared. The Appellant did not contest the classification - Whether the goods were liable to confiscation under Section 111(m) and whether the redemption fine is sustainable - HELD - Section 111(m) applies to goods which do not correspond in respect of value or in any other particular with the entry made under the Act. The Commissioner did not find that any Bill of Entry misdescribed the goods or misstated their value, quantity or origin. The Revenue's case was only that the Appellant claimed the wrong tariff item. A classification adopted on the importer's understanding, with the goods correctly described, is a claim and not a misdeclaration. Self assessment does not convert the choice of a tariff item into a particular of the goods merely because the proper officer later reaches a different conclusion. The goods were not liable to confiscation, so the redemption fine under Section 125, which presupposes goods liable to confiscation, cannot survive. The fine was also imposed on goods cleared years earlier, without reasoning on its quantum and without determining the market price which fixes the ceiling under the proviso to Section 125(1) - The confiscation and redemption fine are set aside - Interest and penalty on IGST component - Section 3(12) of Customs Tariff Act, 1975 - The demand for imports made between October 2017 and January 2021 included integrated tax, with interest and penalty levied on that component - Whether interest and penalty can be levied on the IGST component for the period in dispute - HELD - Integrated tax on imported goods is levied under Section 3(7) of the Customs Tariff Act, 1975 and not under Section 12 of the Customs Act, 1962. During the period in dispute, Section 3(12) applied the provisions of the Customs Act relating to drawbacks, refunds and exemption from duties to the tax chargeable under that section. It did not borrow the provisions relating to interest, penalty or confiscation, which were added only with effect from 16.08.2024 and prospectively. Interest and penalty are substantive liabilities which can be levied only if the statute that charges the tax makes a substantive provision for them - The interest on the IGST component cannot be sustained, the amount paid is refundable subject to verification, and any penalty referable to IGST also fails - Clearances from Special Economic Zone to Domestic Tariff Area - Section 30 of SEZ Act, 2005 and Rule 47(5) of SEZ Rules, 2006 - In two later appeals, the Appellant cleared goods from a Free Trade and Warehousing Zone into the Domestic Tariff Area. Audit took the view that the goods were parts under CTI 8512 9000 to which the preferential notification did not extend. Demands under Section 28(1) with interest, confiscation, redemption fine and penalty were confirmed and upheld by the FAA - Whether duty, interest, confiscation, redemption fine and penalty can be demanded under the Customs Act on goods cleared from a Special Economic Zone to the Domestic Tariff Area - HELD - Section 30 of the SEZ Act makes goods removed to the Domestic Tariff Area chargeable to duties of customs, but it provides no mechanism for collection since the SEZ Act does not borrow the relevant provisions of the Customs Act. Rule 47(5) is limited to refund, demand, adjudication, review and appeal in matters relating to authorised operations. It confers no power to recover duty short levied in the manner set out in Section 28. The SEZ Act does not provide for interest, penalty or confiscation. This rests on the absence of machinery in the statute, so it applies equally to the importer in the Domestic Tariff Area. As the proceedings fail for want of authority of law, the contentions on classification are left open - The demands, interest, confiscation, redemption fines and penalties cannot be sustained, and the appeals are allowed - Extended period of limitation - Section 28(4) of Customs Act, 1962 - The Commissioner held that the Appellant had deliberately suppressed the true classification and invoked the extended period. The Appellant had furnished documents when asked by DRI and paid differential duty with interest more than two and a half years before the SCN - Whether the extended period of limitation under Section 28(4) was validly invoked - HELD - Section 28(4) permits a demand within five years only where the short levy is by reason of collusion, wilful misstatement or suppression of facts. Misstatement or suppression must be wilful, that is, with intent to evade duty, and mere non payment of duty is not equivalent to it. The burden of proving mala fides lies on the Revenue. The findings of the Commissioner were mere conclusions, as the foundational facts must be evident from the notice itself. No fact that was concealed was identified, since the Bills of Entry disclosed the goods by part number, description, value and origin. The classification was reached by applying GRI 2(a) and the test of essential character, which is an exercise of interpretation on which reasonable minds differ. Use of different tariff items at different times and ports does not, without more, establish intent to evade. The Revenue's own authorities later held identical goods to be parts under CTI 8512 9000, which is the Appellant's position, and such a view cannot be a wilful misstatement. Payment of differential duty with interest on being asked is the antithesis of intent to evade - The extended period was not validly invoked. Under Section 28(10B), the notice is deemed to be issued under Section 28(1), and the demand is sustainable only for Bills of Entry whose relevant date falls within two years preceding the SCN, with interest under Section 28AA excluding the IGST component. The matter is remanded for quantification - Penalty - Section 114A of Customs Act, 1962 - Penalty equal to the differential duty with interest was imposed on the Appellant, who paid twenty five per cent of it within thirty days - Whether the penalty under Section 114A is sustainable - HELD - Penalty under Section 114A is attracted only where the short levy is by reason of collusion, wilful misstatement or suppression of facts. Since the extended period was not validly invoked, the foundation of the penalty is removed. Penalty is not to be imposed on conduct that flows from a bona fide belief. The alternative submissions on the extent of penalty and waiver of the balance do not arise - The penalty under Section 114A, including the amount paid, cannot survive. The appeal is partly allowed, the demand within the normal period is upheld, and the matter is remanded for quantification and consequential refund in accordance with law.
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