The Mumbai Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has clarified that the essential ingredient necessary for invoking Section 111(m) of the Customs Act, 1962, namely a mis-declaration affecting revenue or assessment, is clearly absent when the declared transaction value stands accepted and there is no differential duty demand.
The CESTAT held that confiscation of goods under Section 111(m) is not sustainable for minor, inconsequential, or technical discrepancies regarding description or thickness that do not affect classification, duty, import policy, compliance, or assessment. Once the confiscation is held to be unsustainable, the consequential redemption fine and penalties imposed under Section 112(a) and Section 114AA of the Customs Act cannot survive.
A Single Bench of Ajay Sharma (Judicial Member) observed that the entire foundation of the adjudication order, including the confiscation and imposition of penalties, was premised on the allegation that the appellant had undervalued the goods and thereby attempted to evade customs duty. However, the Commissioner categorically set aside the rejection of the transaction value and accepted the value declared by the appellant, yet proceeded to uphold the confiscation of the goods and the consequential Redemption Fine and penalties.
The Tribunal noted that Section 111(m) provides for the confiscation of ‘any goods which do not correspond in respect of value or in any other particular with the entry made under this Act.’ It observed that various judicial precedents have settled that the discrepancy or mis-declaration must be material in nature, as the provision is intended primarily to prevent evasion of customs duty and to safeguard government revenue.
The Tribunal emphasized that the provision is not meant to penalise importers for minor, inconsequential, or technical discrepancies which do not result in causing any loss of revenue to the exchequer or violation of import policy. Discrepancies that do not affect duty, import policy, compliance, or assessment should not normally lead to confiscation; the misdeclaration must relate to a material particular which affects assessment or results in the loss of revenue.
Further, the Tribunal pointed out that every incorrect or imperfect declaration cannot automatically lead to confiscation under Section 111(m), especially when the Bill of Entry has been finalised at the declared value and there is no differential duty demand. The department miserably failed to establish any material mis-declaration regarding any material particular in the Bill of Entry, as the difference was only about the thickness or the description without there being any dispute about its classification or declared value.
Once the declared value stands accepted, the very basis of the allegation about material mis-declaration or attempt to evade customs duty disappears, and consequently, it cannot be said that there is any loss of revenue to the exchequer or any attempt to defraud the government of its legitimate dues, added the Tribunal.
Briefly, appellant imported ‘PU coated fabric’ vide Bill of Entry and requested for first check examination. During examination, the department noticed certain discrepancies regarding the description and the thickness of the imported goods, pursuant to which an inquiry was initiated. The appellant sought provisional release of the goods, which was allowed against the execution of a PD Bond and the furnishing of a 100% bank guarantee covering the differential duty.
Subsequently, the declared transaction value was rejected, and a Show Cause Notice was issued proposing the rejection of the declared assessable value/transactional value, re-determination of the same in accordance with the Customs Valuation Rules, 2007, final assessment of the Bill of Entry, confiscation of the goods, and imposition of redemption fine and penalties.
The Adjudicating Authority confirmed the rejection of the declared value and enhanced the same relying upon another Bill of Entry. The Adjudicating Authority held the goods liable for confiscation under Section 111(m) with the imposition of penalties under Section 112(a) and 114AA, recording a finding that the importer had resorted to mis-representation and suppression of facts with the intention ‘to defraud the government of its legitimate dues’.
Appearances:
H K Hirani, Consultant for the Appellant/ Taxpayer
Krishna Murari Azad, (AR) for the Respondent/ Revenue
