Customs Act | Wrong Classification Alone Cannot Trigger Section 111(o) Without Breach Of Exemption Conditions: CESTAT Delhi
The New Delhi Principal Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that mere denial of a customs exemption due to wrong classification of goods does not, by itself, render the goods liable to confiscation under Section 111(o) of the Customs Act, 1962, unless the exemption was conditional and such condition stood breached. The Tribunal clarified...
The New Delhi Principal Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that mere denial of a customs exemption due to wrong classification of goods does not, by itself, render the goods liable to confiscation under Section 111(o) of the Customs Act, 1962, unless the exemption was conditional and such condition stood breached. The Tribunal clarified that where the Revenue's case is that the importer was not entitled to the exemption at all, and not that any condition attached to the exemption was violated, the statutory requirements of Section 111(o) are not attracted.
A Bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) was hearing an appeal filed by the importer against an order of the Commissioner of Customs (Appeals), which had affirmed the demand of duty, confiscation of goods, and penalty.
The appellant had imported 50 GSM coated paper in rolls from South Korea and cleared the goods by classifying them under CTI 4810 19 90, claiming the benefit of Customs Exemption Notification No. 152/2009-Cus on the basis of a country-of-origin certificate.
Following an investigation by the Special Intelligence and Investigation Branch (SIIB), the Department alleged that the goods were misclassified and were correctly classifiable under CTI 4810 13 90 (coated paper in rolls), a classification not covered by the exemption.
A show cause notice was issued proposing reclassification, denial of exemption, recovery of differential duty of about ₹12.74 lakh with interest, confiscation under Section 111(o) of the Customs Act, and penalty under Section 112.
After examining the tariff structure under Heading 4810, the Tribunal held that since the imported goods were undisputedly in rolls, the correct sub-heading was CTSH 4810 13 and, as the goods were neither imitation art paper nor art paper nor chrome paper, they were rightly classifiable under CTI 4810 13 90. The alternative classification suggested by the importer under CTI 4810 29 00 was rejected as contradictory and unsustainable.
The Tribunal upheld the denial of exemption and confirmed the customs duty demand along with applicable interest, observing that Notification No. 152/2009 did not extend to goods falling under CTI 4810 13 90.
However, on the issue of confiscation, the Tribunal noted that Section 111(o) applies only where exemption is conditional and the conditions are not fulfilled. In the present case, the finding was that the importer was not entitled to the exemption at all, and not that any condition of the notification was violated. Consequently, the Bench held that the goods were not liable to confiscation under Section 111(o).
Since the foundation for confiscation failed, the penalty imposed under Section 112 was also set aside.
In view of the above, the Bench partly allowed the appeal, whereby the classification under CTI 4810 13 90 and the duty demand with interest were upheld, the confiscation of goods and penalty were quashed.
Case Title: M/s Kasturi International Private Limited Vs. Commissioner of Customs, ICS (Import)
Case No.: Customs Appeal No. 51553 of 2022
Appearance for Appellant: None.
Appearance for Department: Shri Mukesh Kumar Shukla, Authorised Representative