Ponchos Classified As Capes, Not Scarves; CESTAT Chandigarh Upholds Customs Reclassification, Higher Duty Applicable
Pranav B Prem
The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has upheld the reclassification of imported ponchos as “capes” under Customs Tariff Heading (CTH) 6102, rejecting the importer’s claim that the goods were scarves or shawls classifiable under CTH 6117. While sustaining the classification and demand of differential duty, the Tribunal reduced the redemption fine and penalty imposed on the importer.
The Bench comprising S.S. Garg, Judicial Member, and P. Anjani Kumar, Technical Member, was hearing an appeal filed by Anil Kumar, Proprietor of Gajraj Hosiery Factory, challenging an order passed by the Commissioner of Customs, Ludhiana. The appeal arose from the import of a consignment declared as “Women Knitted Scarves, Shawl Assorted and others,” classified under CTH 61171040.
During examination of the consignment by the Special Intelligence and Investigation Branch (SIIB), Customs, Ludhiana, it was found that a substantial portion of the goods had been mis-declared. Out of the declared items, 5,896 pieces were identified as “ponchos” and 1,350 pieces as “capes,” though they had been declared as scarves or shawls. The goods were referred to the Textiles Committee, Ludhiana, an expert body under the Ministry of Textiles, which examined the consignment and confirmed through its report dated March 20, 2017, that the impugned goods were indeed ponchos and capes, and not shawls or scarves.
Based on the expert report, the goods were seized under Section 110 of the Customs Act, 1962, and a show cause notice was issued proposing confiscation under Section 111(m) for mis-declaration, reclassification of the goods under CTH 61023010/61023020, demand of differential duty amounting to ₹38,78,650, and imposition of penalty under Section 112(a). The Adjudicating Authority confirmed the proposed demand and imposed a redemption fine of ₹2,00,000 along with a penalty of ₹50,000.
Before the Tribunal, the appellant contended that the imported items were merely different styles of shawls and scarves and could not be treated as ponchos. It was argued that similar goods were being cleared as scarves at other customs stations under CTH 6117 and that the duty demanded was commercially unviable since the market price of the goods was much lower. Reliance was also placed on earlier proceedings before the Punjab and Haryana High Court and the Supreme Court relating to release of the goods.
The Department, on the other hand, supported the impugned order and submitted that the goods were clearly mis-declared. It was argued that the Textiles Committee is an expert body and its report categorically identified the goods as ponchos and capes. The Department pointed out that the Harmonised System of Nomenclature (HSN) Explanatory Notes and the Customs Tariff specifically include “ponchos” within the scope of “capes” under Heading 6102. It was further contended that reliance on trade parlance or clearance of goods at other ports was irrelevant when the tariff provided a specific statutory classification.
After examining the records, the Tribunal observed that the goods had been physically examined by the Textiles Committee in the presence of independent witnesses and a clear expert opinion had been rendered. The Bench held that “when the expert has given a report on the impugned goods, the same cannot be brushed aside without any substantial evidence to counter the same.” It noted that the appellant had failed to produce any substantiated material to discredit the expert report or to show that the classification adopted by the Department was incorrect. The Tribunal also observed that there was nothing on record to indicate that the appellant had ever challenged the Textile Committee’s report.
The Tribunal further examined the relevant chapter notes, HSN Explanatory Notes, and classification guidelines. It noted that Chapter Heading 6102 specifically covers women’s or girls’ overcoats, car-coats, capes, cloaks and similar articles, knitted or crocheted. The Bench accepted the Department’s submission that ponchos are a type of cape and fall squarely within this heading. It also recorded that the appellant had admitted that the goods were made of acrylic, a synthetic fibre, which further supported classification under CTH 6102.
Rejecting the contention that similar goods had been cleared elsewhere under a different heading, the Tribunal held that each import is an independent transaction and must be assessed on its own merits. It noted that the appellant had not produced any bills of entry or supporting reports to substantiate the claim of such clearances, particularly where an expert report existed contrary to the declaration.
On the issue of quantum of fine and penalty, however, the Tribunal took a lenient view. While upholding the classification and the demand of differential duty, it observed that considering the delay and hardship faced by the appellant, the ends of justice would be met by reducing the redemption fine from ₹2,00,000 to ₹20,000 and the penalty from ₹50,000 to ₹5,000. In conclusion, the CESTAT partly allowed the appeal by sustaining the reclassification of the impugned goods as capes under CTH 6102 and the consequential duty liability, while granting relief by substantially reducing the redemption fine and penalty imposed on the importer.
Appearance
Counsel for Appellant/ Assessee: Anil Kumar, Proprietor
Counsel for Respondent/ Department: Anurag Kumar
Cause Title: Anil Kumar, Proprietor of Gajraj Hosiery Factory v. Commissioner of Customs, Ludhiana
Case No: Customs Appeal No. 60100 of 2018
Coram: S.S. Garg, Judicial Member, P. Anjani Kumar, Technical Member
