Legal principle

Where Customs itself obtained test reports on identical goods and consistently accepted the importer's declared classification, no deliberate or blameworthy conduct can be attributed to the importer, and the extended period of limitation, confiscation and penalties cannot be sustained.

Court decision

The Tribunal upheld the reclassification under CTH 5801, but only with respect to the seven 'live' (provisionally assessed) Bills of Entry; it set aside the demand for duty and interest for the extended period, held the goods not liable to confiscation and the appellants not liable to penalty, and remanded the alternative CVD/SAD exemption eligibility for the seven Bills of Entry to the Original Authority for fresh determination on merits within 90 days, with any duty and applicable interest for the normal period to be determined thereafter. The result was mixed: the Revenue obtained the classification on the live Bills of Entry, while the appellants obtained relief on limitation, confiscation and penalties and a remand on the exemption claim.

Facts

M/s Shri Grotex Trade Links Pvt Ltd and its Director imported fabrics of Art. No. 65111 from Chinese suppliers (Huzhou Jishuo Silk Trading and Zhejiang Cathaya International), declaring them as 'mulberry silk fabrics' under CTH 5007/5407/5408. Acting on DRI information that woven cut-pile fabrics had been mis-declared, the Textile Committee tested seven consignments imported on Bills of Entry dated 30.08.2011 and found them predominantly viscose (rayon over 75%) with polyamide (11-12%) and only 8-10% mulberry silk. A Show Cause Notice dated 06.05.2015 proposed reclassification under CTH 5801 3500 with differential duty of Rs.1,50,79,977 (Chennai) and Rs.8,61,295 (Mumbai), plus interest and penalties. The Principal Commissioner rejected the declared description, held the goods to be rayon-polyamide-silk warp cut pile fabric under CTI 5801 (5801 3500 up to 31.12.2011 and 5801 3720 from 01.01.2012), confirmed differential duty with interest, enforced bank guarantees, confiscated the goods, and imposed penalties.

Key provisions

• Section 46(4), Customs Act, 1962 — Entry of goods on importation
• Section 17, Customs Act, 1962 — Assessment of duty
• Section 28, Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded