Legality of Detention Order - when rliance placed on test report from unapproved Laboratoies

Case: Stephen Stanislaus Rosario V/s State of Tamil Nadu

Citation: 2011 (270) E.L.T. 180 (Mad.)

Issue:- Whether the testing report relied by department has to be done as approved laboratories? The demand based on testing report from unapproved laboratories is liable to be set aside?

Brief Facts:- Petitioner was running a business in the name and style of M/s. Zandra Trading Company as a sole Proprietorship concern. He had also got an Import and Export Code number and the said business concern was also registered with DGFT.

Pursuant to an intelligence information that fertilizer grade Potassium Chloride (Muriate of Potash) was being smuggled out of the country in the guise of Industrial Salt, Customs Department issued instructions to all Container Freight Stations directing them to detain all export consignments bearing the description Industrial Salt. Pursuant to same, on 28-7-2009, representative samples were drawn from the goods meant for export by M/s. Zandra Trading Company covered by Shipping Bill Nos. 3439419, 3439432, 3439395, 3439421 and 3439424 dated 23-7-2009, under a mahazar at the export godown of M/s. A.S. Shipping Container Freight Station, Numbal Village, Maduravoyal, Chennai. The samples thus drawn were sent to M/s. Coramandel Fertilizers Limited, Ennore, Chennai.

After analysis, it gave a Report dated 3-8-2009 that the samples contained not less than 60% of water soluble potash showing samples to be Potassium Chloride (Muriate of Potash). Pursuant to the receipt of the said Analysis Report, the Customs officials attached to Docks Intelligence Unit, Customs House, Chennai seized the consignment of 2500 bags of Muriate of Potash, totally weighing 125 MTs covered by Shipping Bill Nos. 3439419, 3439432, 3439395, 3439421 and 3439424 dated 23-7-2009 from M/s. A.S. Shipping Container Freight Station, Chennai, belonging to M/s. Zandra Trading Company of the petitioner, which had been consigned to Malaysia.

Similarly, on 5-8-2009 samples were drawn from goods available at export godown of M/s. Viking Warehousing Container Freight Station, Chennai covered under the Shipping Bill No. 3429962 dated 14-7-2009, which consignment also had been declared as Industrial Salt-Technical Grade 'Drilling Chemical', since the same was suspected to be Potassiurn Chloride (Muriate of Potash). The said consignment for export had also been declared as Industrial Salt-Technical Grade ‘Drilling Chemical'.

As per certificate of analysis produced by the Export Manager of detenu to Customs officials, the same also conformed to the specifications of Potassium Chloride (Muriate of Potash) mentioned in the Fertilizer (Control) Order, 1985. Therefore the export consignment of 50 MTs, which had been declared by the exporter as Industrial Salt was seized from the M/s. Viking Ware-housing Container Freight Station under a mahazar on 6-8-2009.

Subsequently, premises of M/s. Zandra Trading Company were searched and certain incriminating documents found therein were seized. Petitioner also gave voluntary confessional statement on 12-8-2009 and the same was recorded under Section 108 of the Customs Act, 1962, which disclosed that M/s. Zandra Trading Company was run by him as a sole Proprietorship concern from the year 2007 with its IE Code No. 2506000879. The samples drawn from the consignments were also sent to Customs House laboratory for analysis.

The Joint Director of Customs House laboratory after analyzing the samples gave report that the samples contained composition of Potassium Chloride and small amounts of compounds of Sodium, Calcium, Magnesium and Iron. In the said report it was also stated that an expert opinion from the Dy. Director, Regional Fertilizer Control Laboratory at Madhavaram Milk Colony, Chennai should be obtained. Accordingly samples were sent to the Regional Fertilizer Control Laboratory, Madhavaram, Chennai. But the Deputy Director, Fertilizer Control Laboratory, Madhavaram Chennai returned the sample without any opinion stating that the samples could not be tested in the said laboratory since they were not drawn in accordance with the Fertilizer Control Order, 1985.

Meanwhile, detenu was arrested on 12-8-2009 and produced before the Additional Chief Metropolitan Magistrate and was remanded to judicial custody. On a petition filed for his release on bail, the Additional Chief Metropolitan Magistrate passed an order on 18-8-2009 directing his release on bail and he was released on bail with a condition to stay at Chennai and sign before the Superintendent of Customs daily. Subsequently, the said condition was also relaxed and modified by an order dated 1-9-2009 replacing the said condition with a new condition that detenu should appear before the Superintendent of Customs, Chennai, whenever required and should extend co-operation for further investigation of the case.

Thereafter, relying on the test report of the Coromandel Fertilizers Limited and also the report of the Customs House laboratory, a proposal was made to the first respondent for detaining the detenu under COFEPOSA Act in order to prevent him from smuggling of goods in future. Based on such proposal the first respondent passed the impugned order of detention in G.O. No. SR.I/535-4/2009 dated 8-10-2009. However, the detention order was served on the detenu only on 9-8-2010 and he was confined in the Central Prison, Puzhal, Chennai. The grounds of detention and documents were served on him on 13-8-2010.

Appellant has filed Habeas Corpus Petition challenging the order of detention and sought his release.

Appellant’s Contention:- Appellant contended as following contentions: -

1. Though three test reports were placed before the Detaining Authority, one of them, namely the report of the Dy. Director, Regional Fertilizer Control Laboratory is inconclusive, since he declined the analysis of samples on the ground that they were not drawn by the Fertilizer Inspectors in accordance with statutory rules. If report of the Dy. Director, Regional Fertilizer Control Laboratory, Madhavaram, Chennai is excluded, as it does not give any clear cut opinion as to whether the contraband was Potassium Chloride (Muriate of Potash), the other two reports, one from the Coromandel Fertilizers Limited and the other from the Customs House laboratory, could not be relied on, as none of the laboratories was a notified laboratory on the relevant date. Even among the test reports of the said institutions, the report of Coromandel Fertilizer Limited simply states the percentage of elements and the same does not give a concrete opinion as to whether representative samples are Potassium Chloride (Muriate of Potash) or Industrial Salt. The report of Customs House laboratory is also inconclusive in so far as it directs further reference to Dy. Director, Regional Fertilizer Control laboratory for an expert opinion as to whether contraband is Muriate of Potash. In this regard, the first respondent has acted based on inconclusive reports that have been given by the laboratories not notified as per rules and on that ground alone detention order is liable to be vitiated.

2. The total quantity of contraband seized by the Customs Authorities, namely 175 MTs, was valued at Rs. 62,72,000/-, whereas the value declared in shipping bills by exporter was only Rs. 30,72,197.50P. The valuation was not done in accordance with the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. The Detaining Authority failed to note that none of the three types of valuation provided under Rule 4 to 6 of the said rules had been followed and consequently, failed to seek clarification from the sponsoring authority regarding the same. The grounds of detention also reveals absence of awareness of the detaining authority as to he declared value of the goods. As such there is non-application of mind on the part of the Detaining Authority which will vitiate detention order. There was delay in passing the detention order and also a huge delay in executing the order of detention.

The order of detention was clamped on the detenu based on a solitary instance.

Reasoning of Judgement:- The High Court examined the facts and noted that though samples were drawn from consignments found at M/s. Viking Warehousing Container Freight Station, there is nothing on record to show that samples were tested in any laboratory and there are communications to the effect that the customs authorities simply relied on the alleged certificate of analysis produced by the Export Manager. Samples drawn from consignments found at M/s. A.S. Shipping Container Freight Station terminal alone were tested in the laboratory attached to Coromandel Fertilizers Limited and also in the Customs House laboratory, Chennai. But a perusal of the reports of Customs House laboratory, Chennai makes it clear that the Joint Director of Customs House laboratory has not given any definite opinion as to whether the samples conformed to the definition of Muriate of Potash and on the other hand, they wanted the sponsoring authority to get an expert opinion from the Dy. Director of Regional Fertilizer Control Laboratory, Madhavaram, Chennai. It seems, pursuant to the report of the Joint Director of Customs House laboratory, Chennai, the samples were referred to the Dy. Director of Regional Fertilizer Control Laboratory, Chennai to find out whether the representative samples could be termed as fertilizer Trade Muriate of Potash (MOP). When the samples were thus sent to the Dy. Director of Regional Fertilizer Control laboratory, Chennai they were returned without being analysed in the said laboratory stating that the samples declared as Industrial Salt were not drawn by the Fertilizer Inspector of the said Institute in accordance with the Statutory Rules i.e. Clause 29 of the Fertilizer (Control) Order, 1985.

Admittedly, neither Coramandel Fertilizers Limited nor the Customs House laboratory was one of the testing institutes named in Clause 29 of the Fertilizer Control Order, 1985. None of the said laboratories come under the notified laboratories for the purpose of Fertilizer (Control) Order, 1985. In the list of the laboratories notified under Clause 29 of the Fertilizer (Control) Order, 1985 relating to Tamil Nadu, only 14 laboratories are found and the name of the Coromandel Fertilizer Limited and Customs House laboratory are not found. Therefore, apart from the fact that the reports are inconclusive, they are also of the report of laboratories neither named in Clause 29 of the Fertilizer Control Order, 1985 nor notified under Clause 29 of the Fertilizer (Control) Order, 1985 and hence they are unreliable.

It was held that the Detaining Authority has failed to advert to the said fact that the Dy. Director of the authorised laboratory has declined analysis of the contraband and the reports produced by the Sponsoring Authority were of the reports of laboratories, which are not mentioned in or notified under Clause 29 of the Fertilizer (Control) Order, 1985. Therefore, the subjective satisfaction of the Detaining Authority that the consignments sought to be exported were fertiliser grade Muriate of Potash is based on materials, which cannot be relied on and to the said extent there is non-application of mind on the part of Detaining Authority. It was also noted that samples drawn from the consignments at M/s. Viking Warehousing Container Freight Station, Chennai, was not sent for test to any laboratory and the Detaining Authority has omitted to notice the same and the same will also exhibit non-application of mind on part of the Detaining Authority.

With regard to second ground which pertains to valuation of consignment as determined by the Customs Authorities, it was noted that the detenu had declared the value of consignments as Rs. 30,72,197.50P but the Sponsoring Authority have valued the consignment at Rs. 62,72,000/-.

With regard to contention based on delay in clamping the order of detention, it was held that factually the last of the reports, namely the report of the Dy. Director of Regional Fertilizer Control Laboratory was obtained on 3-8-2009. Thereafter, proposal was placed before the Detaining Authority and the Detaining Authority passed the impugned order of detention on 8-10-2009. Therefore, the contention that the order of detention stands vitiated on the ground of delay in clamping the order of detention is not well founded and the same deserves to be rejected.

So far as the other part of the delay, namely the execution of the order of the detention is concerned, it took about 10 months to effect execution of the order of detention. It is obvious from records that the detenu was at large after having been released on bail initially with a condition directing him to appear before the Superintendent of Customs daily and the condition was subsequently relaxed with a direction to appear before the Superintendent of Customs as and when required and cooperate for the enquiry. It is obvious that after the condition was relaxed, the detenu was at large and he was not available for service of the order of detention and the order was executed only on arrest based on the warrant issued. Therefore, the attack made on the order of detention on the ground of the said delay also cannot be countenanced.

The other contention is that the order of detention based on solitary instance is unsustainable. Admittedly, there was no other past activity on the part of the detenu to come to a reasonable conclusion that he was regularly indulging in smuggling activities. However, the law in this regard is well settled that, even on the basis of a solitary instance, if sufficient materials are available and the Detaining Authority subjectively satisfy that the detenu is indulging in smuggling activities detrimental to the national economy, an order of detention under COFEPOSA Act can be clamped. It was held so in Attorney General for India and Others v. Amratlal Prajivandas and Others [(1994) SCC (Cri) 1325] (Constitution Bench) and in Union of India and Another v. Chaya Ghoshal (Smt.) and Another [(2006) 1 SCC (Cri) 257].

In view of settled proposition declared by the highest court of this country, which is that law of the land, we are not inclined to accept the contention of the Petitioner that the impugned order of detention based on solitary instance is unsustainable. Impugned order cannot be set aside on the said score alone and the arguments advanced in this regard on behalf of the detenu has got to be discountenanced.

In the end, it was held that the impugned order of detention dated 8-10-2009 passed by the first respondent in G.O. No. SR.I/535-4/2009 stands vitiated on the ground of non-application of mind since the subjective satisfaction of the detaining authority regarding the description of the contraband is based on inconclusive test report and on reports obtained from laboratories, which are not notified and also on the ground that the valuation was not made as per Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and that on the above grounds alone the order of detention is liable to set aside. Impugned order set aside. Detenu to be set to liberty.

Decision:- Habeas Corpus Petition allowed.

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PJ/Case Laws/2011-12/1332

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