(Prayer: CMA filed under Section 130 of the Customs Act, 1962 to set aside the impugned Final Order No.40180/2013 (CMA.Nos.3231 & 3295/2013) and Final Order No.40182/2013) dated 08.05.2013 of the Customs, Excise and Service Tax Appellate Tribunal, Chennai.)

Chitra Venkataraman, J.

Following is the question of law raised by the assessee seeking admission of the above Civil Miscellaneous Appeals.

1. Whether the imposition of penalty of Rs.1,00,000/- on the appellant is legally sustainable in the absence of any mensrea and especially when the imported gas was reclassified after testing the goods twice and without affording an opportunity of cross-examination

At the time of admission, this Court ordered notice to the other side. After hearing both sides, the present order is passed.

2. The assessee herein imported 5 containers declaring them to contain HCFC R-401A refrigerant gas under bills of entry for warehousing bearing Nos.134045, 133036, 134047, 134048 and 134049 dated 30.11.2010 imported from China falling under Customs Tariff Heading (CTH) 29034990 which covers "other

Halogenated derivatives of cyclanic, cyclenic or cycloterpenic hydrocarbons". The containers lying in M/s.Binny CFS, Perambur, Chennai were detained for examination by the Officers of DRI. On an investigation, on random drawing of gas samples of about 5 grams each, it was found that all the samples were 100% R22 Refrigerant gas. It was found that the imported refrigerant gas was an item falling under R22, which was a restricted item. The Adjudicating Authority held that the imported item Refrigerant gas was an Ozone Depleting Substance, a prohibited item for import in India and that the importer had misdeclared the description in order to cater to the customer in the indigenous market, consequently, held that the same was classifiable under Tariff Heading 2903 49 10 of the Customs Tariff Act, 1975. The Adjudicating Authority re-determined the total value of the goods from US Dollars 1.70 per kg.(CIF) to US Dollars Rs.61,50,012/-.

3. The Adjudicating Authority pointed out that one of the Directors of the Company viz., M/s.CMTPL, Chennai was present during the proceedings dated 07.12.2010 and made a voluntary statement before the Senior Intelligence Officer, DRI under Section 108 of the Customs Act, 1962 that the consignment declared to be HCFC R-401A imported by them were actually found to be R22, a refrigerant gas. Shri.Rajesh Mehra, one of the Directors also gave a voluntary statement on 08.12.2010 before the Senior Intelligence Officer, DRI, Chennai that they were engaged in import and trading of refrigeration gases like Hydro Chloro Fluoro Carbon (HCFC) 134a, R401, R404 and R22. It was stated that they had not tested the imported item and that after testing the same, the imported gases are refilled into smaller cylinders. On being asked about the misdeclaration of description as found during the examination of the import consignments of M/s.CMTPL, he stated that one of their Directors was present during the said examination and concurred with the Mahazar proceedings dated 07.12.2010 too.

4. A search was conducted on 08.12.2010 at the residential premises of one of the Directors of CMTPL, Chennai viz., Shri.Khatri Khushiram Pirumal; simultaneously, search was conducted on 08.12.2010 at the office cum factory premises and certain documents were recovered. Shri.Mohamed GawherRauf alias Sanjay, one of the Directors in M/s.CMTPL, Chennai admitted in his voluntary statement dated 09.12.2010 given before the Senior Intelligence Officer, DRI, Chennai under Section 108 of the Customs Act, 1962 that they have mis-declared the import consignment as HCFC R-401A instead of R22 refrigerant gas.

5. On the submissions made and tests reports available, the Adjudicating Authority held that the imported item was nothing but R-22 refrigerant gas, consequently, proceedings were initiated for misdeclaration on the imported prohibited item. Enclosing the technical details, the assessee was asked to show cause on the proceedings taken, the assessee requested re-testing to ascertain the correct composition and also to ensure that the gas imported was HCFC R-401A and not R22 that the kit used by DRI was capable of testing only R.22, R.12 and R.134a. Considering the specific objection taken, a retesting was also done through IIT, Chennai. A copy of the test report dated 02.05.2012 received from IIT, Chennai was given to the assessee, in letter dated 19.05.2012, the assessee sought for cross examination of the expert and further submitted that if the same was not feasible, to adjudicate the case without further hearing, based on the oral and written submissions already made by them. It is also stated that importer being a small scale industry, they could not afford to lose precious time by cross-examining the expert, as the consignments were losing the shelf life.

6. Going through the objections, the Adjudicating Authority, ultimately came to the conclusion that there was misdeclaration of the item imported and it was R22 refrigerant gas classifiable under Tariff item 2903 4910 of the Customs Tariff Act, 1975. Apart from misdeclaration, there was misdeclaration in terms of value and quantity too.

7. The Adjudicating Authority, however, allowed the redemption on payment of fine of Rs.10,00,000/- (Rupees Ten Lakhs only) only for the purpose of re-export. The Adjudicating Authority also imposed penalty of Rs.6,00,000/- (Rupees Six Lakh only) on the importer M/s.Chennai Maraine Trading Pvt. Ltd., Chennai under Section 112(a) of the Customs Act, 1962.

8. Aggrieved by this, the assessee/importer went on appeal before the Customs, Excise and Service Tax Appellate Tribunal. The assessee reiterated the grounds taken before the Adjudicating Authority and further contended that there was no proper opportunity granted to cross-examine the scientist on the sample test and hence, there was gross violation of principles of natural justice.

9. As regards the redemption fine, on re-export, the assessee relied on the decision of the Apex Court reported in 1999(113)ELT 776 in the case of Siemens Ltd., V. Commissioner and contended that the redemption fine of Rs.10,00,000/- on re-export was totally contrary to Section 125 of the Customs Act on the above said decision of the Apex Court.

10. In considering the plea taken by the assessee, the Customs, Excise and Service Tax Appellate Tribunal adverted its attention to the question of cross-examination alone and pointed out that letter dated 19.05.2012 from the assessee showed that even though the assessee sought for cross-examination of the expert, it, however, prayed for lenient view to be taken, it being a small scale industry. Further referring to the statement made by the various Directors of the Company, the Customs, Excise and Service Tax Appellate Tribunal, ultimately held that there was no infirmity in the order of Adjudicating Authority. On the refusal of the request of the importer in its letter dated 19.05.2012 for cross-examination, the Customs, Excise and Service Tax Appellate Tribunal further pointed out that no material was placed by the importer to show that it was not R22-refrigerant gas before the Commissioner too; however, the request of the assessee to allow re-export was allowed. The CESTAT confirmed the order of the Commissioner allowing re-export upon payment of redemption fine and penalty. Aggrieved by this, the present Civil Miscellaneous Appeal by the importer.

11. Learned counsel appearing for the importer/assessee strenuously contended that when the assessee sought for cross-examination of the expert from IIT on the test report given, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) was not correct in confirming the order of the Adjudicating Authority, thereby, rejecting the prayer for cross examination; in any event, when the assessee had offered to re-export the imported item, the question of payment of redemption of fine under Section 125 does not arise. In this regard, he placed reliance on the decision of this Court reported in 2002 (141) ELT 635 (Mad) in the case of Sankar Pandi Vs. Union of India as confirmed by the Division Bench of this Court inW.A.No.400 of 2003 dated 06.03.2003 (The Union of India Vs. Sankar Pandi) as well as the decision of the Supreme Court reported in 1999 (113) ELT 776 (SC) [LQ/SC/1999/730] in the case of Siemens Limited Vs. Collector of Customs. He submitted that under similar circumstances, the Supreme Court has held that on re-export of the goods, there could not be a levy of redemption of fine.

12. Learned Standing Counsel appearing for the Revenue, however, supported the order of the Customs, Excise and Service Tax Appellate Tribunal.

13. Heard learned counsel appearing on either side and perused the materials placed on record.

14. A reading of the proceedings of the authorities below show that there was no dispute as to the fact R-22 refrigerant gas is a restricted item for import.

15. The assessee is a trader. The facts found at the time of intelligence investigation show that the assessee imported R-22 refrigerant gas, which is an ozone depleting substance. As per the policy decision taken by the Ministry of Environment & Forests (MoEF) in 1997, import of ozone depleting substance is restricted in India. The Import Policy for the item is restricted and subject to condition of Import Licensing Note No.1 mentioned at the end of Chapter 29 of ITC (HS), the same could be imported.

16. A reading of the findings of the Customs, Excise and Service Tax Appellate Tribunal, particularly, in paragraph 7 show that in the past, many consignment had been imported and were mis-declared be to R401A, to enhance sales to various repair service centres to boost sales and improve profitability. The test conducted by the DRI officers on the sample drawn showed that what was imported was an item falling under R-22. At the request of the importer, a second re-test was also done through IIT, Chennai and the sample was drawn in the presence of qualified technical persons as well as investigating agency and the importer. The test report dated 02.05.2012 from IIT, Chennai confirming the earlier finding was given to the assessee, which was acknowledged by letter dated 19.05.2012.

17. As is evident from the reading of the order of the Adjudicating Authority in paragraph 33, the assessee no doubt asked for permission to cross examine the expert, however, it further added that if the same was not feasible, it sought for adjudication based on oral and written submissions already made by them and they further stated, being a Small Scale Industry Unit, "they could not afford to waste time by cross-examination as the consignment were losing shelf life". The Customs, Excise and Service Tax Appellate Tribunal looked into these letters as well as the DRI officials inspection report and the statement recorded and ultimately came to the conclusion that there was no straight jacket formula to allow cross-examination in all the cases, consequently, there was no violation of principles of natural justice. In the background of the findings based on materials, which was concurred by the CESTAT below, we do not find any justifiable ground to take a different view to agree with the assessees plea that the order of the said authorities has to fail on account of failure to observe the principles of natural justice.

18. As regards the question of redemption fine and penalty levied in the face of the undertaking given by the assessee for re-export, we find that the Adjudicating Authority levied fine under Section 125 of the Customs Act. After considering the Bills of Entry and the submissions made by the Directors of the Company, the Investigating Agency found that the imported item was R-22 refrigerant gas and not HCFC R-401A. The Adjudicating Authority further pointed out that the supplier had exported the impugned consignment as only R-22 refrigerant gas and that the assessees Directors also confirmed this as R-22 refrigerant gas and the violations thus admitted, the Adjudicating Authority came to the conclusion that imported items was mis-declared, both on the description and quantity as well as on the value, consequently, he rejected the case of the assessee on all fronts. The value was re-determined under the Customs Valuation (Determination of Price of Imported Goods) Rules, 2007, by going sequentially from Rule 4 to Rule 9 as mentioned in Sub clause (4) of Rule 3. The Adjudicating Authority further arrived at the conclusion that there was a conscious evasion in importing the prohibited item on the misdeclaration of the quantity, description as well as the value. The reasons given for misdeclaration were rightly rejected by the Revenue stating that if the misdeclaration had not been detected by the Department, the assessee would have defrauded the Government in succeeding the import of the restricted item apart from defrauding the Government of its due huge revenue. In the face of the findings thus arrived at, the Adjudicating Authority held that the assessees imported items were liable to be confiscated under Section 111(d), 111(l) and 111(m) of the Customs Act, 1962 read with Section 3(3) of the Foreign Trade (Development and Regulation) Act 1992 read with Ozone Depleting Substances (Regulation and Control) Rules, 2000 and also liable to penal consequences as per Section 112(a) of the Customs Act, 1962, however, allowed the said goods to be redeemed on payment of redemption fine under Section 125 of Customs Act, 1962. So holding, the Adjudicating Authority redeemed the goods only for the purpose of re-export.

19. The Customs, Excise and Service Tax Appellate Tribunal confirmed the said view in paragraph 12 of the order and held that there was no case for interference.

20. A reading of Section 125 of the Customs Act, 1962 shows that whenever confiscation is authorised by the Customs Act in the case of goods which are prohibited under the Act or under any law for the time being in force, the Authority may give the owner of the goods an option to pay such fine in lieu of confiscation as the said officer thinks fit. The proviso to Section 125 of the Customs Act, 1962, however, states that the fine imposable under Section 125 of the Customs Act shall not exceed the market price of the goods confiscated, less in the case of imported goods the duty chargeable thereon. Apart from that, the owner of the goods shall be liable to any duty and charges payable in respect of such goods. On confiscation, the goods vest in the Central Government. Thus, in the face of misdescription found on the inspection and testing report, the Adjudicating Authority as well as the Customs, Excise and Service tax Appellate Tribunal justified the levy of fine in lieu of confiscation.

21. Learned counsel for the assessee has raised serious dispute that when the importer had offered to re-export, which was also accepted to by the Adjudicating Authority, the question of levy of penalty in this case did not arise. In this connection, the decision relied on by learned counsel for the importer reported in 1999 (113) ELT 776 [LQ/SC/1999/730] in the case of Siemens Ltd., Vs. Commissioner, merits to be considered. Referring to the order of the Adjudicating Authority ordering confiscation of one unit Laser Imager, the said Authority gave an option to the Company of redeeming the same on appropriate duty of the Customs leviable thereon. The Adjudicating Authority further gave the company an option to re-export the Laser Imager to Germany within 3 months from the date of receipt of the order, in which case, no duty will be chargeable. On appeal, the Tribunal held that if the assessee wanted to re-export, it was entitled to duty drawback in terms of Section 74 of the Customs Act. Though the assessee paid redemption fine of Rupees Six Lakhs, it was unable to re-export the goods within the three months time granted on account of certain reasons. On the appeal moved before the Apex Court and in the interim application made, the Apex Court extended the period of three months for re-export, in which event neither redemption fine nor duty were paid. In the background of this, the Apex Court allowed the appeal and directed the respondents to refund to the assessee the redemption fine paid by the assessee. This decision was followed by this Court in yet another case reported in 2002(141) E.L.T.635 (Mad.) in the case of Sankar Pandi Vs. Union of India. This Court confirmed the order of the learned Single Judge that the imposition of fine was grossly high and in the interest of justice the penalty was to be reduced to Rs.15,000/-. It was pointed out that the only fault committed by the assessee was to walk through the green channel instead of red channel, for which, the penalty was paid. This Court held that penalty being disproportionate, rightly the single Judge reduced it to Rs.15,000/-.

22. The decision relied on by learned counsel for the assessee rests on the facts and thus on the facts found, we do not find that on the mere score of re-export of the prohibited goods, no redemption fine was payable under Section 125 of the Customs Act. In fact, Section 125 of the Customs Act does not calls for proposition of law that on the re-export of goods there could be no redemption fine or duty leviable.

23. In the decision reported in 2003 (152) ELT 257 (S.C.) in the case ofCollector of Customs, Bombay Vs. M/s.Elephanta Oil & Industries, the Apex Court pointed out that merely because permission was granted to the assessee to re-export the goods, the same would not mean Sub Clause (a) of Section 112 of the Customs Act, 1962 would not stand attracted. Section 112 of the Customs Act is different from the confiscation of the goods under Section 125 of the Customs Act. The Apex Court further pointed out that the facility to re-export does not, in any manner, take the case out of purview of Section 125 to levy redemption of fine.

24. In the background of the said decision as well as on the facts, we do not find any justifiable ground to interfere with the order of Customs, Excise and Service Tax Appellate Tribunal.

25. Learned counsel appearing for the assessee prayed for reduction on the fine levied in this case. As to the imposition of fine on the assessee as well as the penalty levied on the Directors of M/s.CMTPL, we do not find there exists any good ground justifying any reduction, particularly, in the context of the statement made by the Directors indicating the awareness of import of R-22 refrigerant gas and the goods imported were misdeclared on the quantity as well as on the value assigned to them. The Customs, Excise and Service Tax Appellate Tribunal had found as a matter of fact that the Directors had admitted their knowledge about misdeclaration and that they had consciously imported the said goods as R-22 refrigerant gas only. As pointed out by the Adjudicating Authority, but for the intelligence Officers investigation undertaken, the entire import would have gone unnoticed, leading not only to evasion of duty but also importing the restricted item. Consequently, we reject the Civil Miscellaneous Appeal. No costs.