Non-release of goods confiscated due to mis-declaration but Appellate Order favouring Importer passed- whether sustainable?

PJ/Case Laws/2012-13/1087

Case: M/S SUPRA BIO-TECH, HYDERABAD V/S THE CHIEF COMMISSIONER OF CUSTOMS, CHENNAI

Citation: 2012-TIOL-203-HC-MAD-CUS

Issue:- Mis-declaration of imported goods and confiscation – Order of First Appellate authority favouring importer – Non-release of confiscated goods with any sufficient reasons as no stay granted by the Tribunal in appeal – not sustainable.

Brief Facts:- Petitioner is a partnership firm engaged in production of beneficial micro organisms used in agriculture, as bio fertilizer since 2005. For production of beneficial micro organisms, the petitioner has been procuring Stains from Chandigarh and Biological Growth Medium from various states, including Pune and Mumbai. It has been procuring peptone, beef and yeast extracts from Hyderabad and Mumbai. It has been further stated that the petitioner also produces Herbal extracts from Karanjin seeds and custard apples for the agriculture purposes. The alkaloids extracted from the Herbs are added to the plant leaf extract imported from foreign countries majorly from China.

In the course of its business, the petitioner had imported 15000 kilograms of plant leaf extract from M/s.Zhejiang Topc Chemical Industry Company Limited, China, under the Bills of Entry No.607283, 607285 and 608204, dated 25.8.2010. The imports of plant leaf extract have been made through the Chennai Seaport. The goods supplied by the foreign supplier, valued at US$78,000 had arrived at Chennai Seaport in the month of August, 2010. The bills of entry for the goods concerned had been filed and the said goods had been assessed to duty at the hands of the second and the third respondents. The total duty payable, in respect of the goods, amounted to Rs.6,45,438/-. The said amount had been paid using DEPB scripts and credits, on the strength of the transferrable licenses purchased in the open market. The debits of scripts for duty amount had been made. However, the goods had not been released.

Further, the imported items had been taken up for investigation, by office of the Directorate of Revenue Intelligence, Zonal Unit, Chennai. Pursuant to the said investigation, the goods had been detained and had been taken up for examination. The goods were destuffed and kept in the custody of the container freight station. Samples had been drawn from the consignments of the imported goods, by officers of DRI. However, the investigating agency had alleged that there has been a mis-declaration of the cargo, as it has been declared as plant leaf extract, (Bio-fertilizers). As the goods imported are insecticides, the importation of such goods requires registration from the Central Insecticide Board, in terms of Section 9 of the Insecticides Act, 1968, read with the relevant provisions of the Foreign Trade Policy, 2010.

It was further stated that the samples drawn from the imported goods were tested by the Department of Agriculture and Cooperation, Regional Centre of Organic Farming, Bangalore, to test as to whether the items imported by petitioner was Bio-fertilizer, as claimed by petitioner, or as to whether the said samples contained Biocide in general and oxymatrine in particular. Vide its test report, dated 14.12.2010, the agency had found that supplied samples were not Biofertilizers. Further, testing of samples were undertaken by the National Centre for Mass Spectrometry, Indian Institute of Technology, Hyderabad, at the instance of the investigating agency.

A further proposal had been made to confiscate the goods, in terms of Section 111(d) (m) and (o) of the Customs Act, 1962, read with Section 3(3) of the Foreign Trade (Development and Regulation) Act, 1992, and Section 17 of the Insecticides Act, 1968. Consequently, a show cause notice was also issued proposing to levy penalties on petitioner, in terms of Section 112(a) and 114AA of the Customs Act, 1962. The said proposal had been contested. However, vide order, dated 1.8.2011, the third respondent (Adjudicating Authority) confirmed the allegations made in show cause notice and held that the goods are matrine compound insecticides, classifiable under tariff heading 3808 9199 of the Customs Tariff Act, 1975. Goods were held liable for confiscation and redemption of goods was allowed on payment of fine of Rs. 2, 00, 000/- under Section 125 of the Customs Act, 1962 and a sum of Rs. 5 lakhs is imposed on petitioner and 1 lakh on deponent.

In appeals, the Commissioner (Appeals), Chennai concluded that the goods imported are Plant Leaf Extracts, as declared by petitioner, and that the goods ought to be classified only under the Customs Tariff Heading 1302 1990. It had categorically rejected the claim of investigating agency that imported goods are Insecticides/Pesticides, classifiable under the Customs Tariff Heading 3808 9199.

The order of the Commissioner (Appeals) was made available to petitioner on 21.9.2011. On receipt of the same, petitioner had furnished a copy of the said order, to the second respondent therein, under letter dated 23.9.2011, received and acknowledged by the second respondent, on 26.9.2011.

Thereafter, petitioner had sent a further communication dated 10.10.2011, requesting the respondents to act, as per the order of the appellate authority and to cause the release of the imported consignments and to issue the Detention Certificate, for the waiver of rent and demurrage charges, in terms of Regulation 6(1) of Handling of Cargo and Customs Areas Regulations, 2009, as the goods were pending clearance, for more than a year, for no fault of the petitioner.

However, no action had been taken by the respondents and therefore, the petitioner were constrained to prefer writ petition before the High Court under Article 226 of the Constitution of India.

Petitioner’s Contention:- Petitioner submitted that the Department concerned should give effect to the orders of the higher appellate authorities, which are binding on them, by paying utmost regard to judicial discipline, unless such orders are suspended by a competent Court. It had been further stated that the mere fact of the filing of an appeal against such orders and the pendency of such an appeal cannot be shown as a sufficient reason for not following the orders of the higher appellate authorities. They have relied on the following decisions in support of their contentions:

- UNION OF INDIA Vs. KAMLAKSHI FINANCE CORPORATION LTD (1991 (55) E.L.T. 433 (S.C.) =(2002-TIOL-484-SC-CX-LB).

- MAHENDRA ENGINEERING WORKS Vs. COLLECTOR OF CENTRAL EXCISE (1992) (60) E.L.T. 199 (MAD.)

- VEENA COMMERCIAL CORPORATION Vs. UNION OF INDIA (1993 (68) E.L.T.569 (BOM.)

- GRASIM INDUSTRIES LTD. Vs. COLLECTOR OF CENTRAL EXCISE, MADRAS (1996 (82) E.L.T. 457
(MAD.)

Respondent’s Contention:- In the counter affidavit, Revenue stated that the order passed by the Commissioner (Appeals), Chennai is erroneous and unsustainable in the eye of law. The Appellate Authority had failed to take into consideration the misdeclaration made by the petitioner, as the importer had declared the goods, as 'Plant Leaf Extract', in the bills of entry and in the accompanying invoices the goods had been described as 'Plant Leaf Extract (Bio-Fertilizer).'

Reasoning of Judgment:- It was noted that the Commissioner (A) has not taken into consideration the report of the Department of Agriculture & Cooperation, Regional centre of organic farming, Bangalore dated 14.12.2010 wherein it was stated that the samples were not bio-fertilizers. The National Centre for Mass Spectrometry, Indian Institute of Chemical Technology, Hyderabad in their communication dated 05.01.2011 has stated that traces of “Matrine’ had been found in the samples sent for testing. This information reveals that it is an insecticide and that it is highly potent, even in very small concentrations. Thus, it is seen that importer had attempted to import unregistered pesticides in the guise of ‘Plant Leave Extract (Bio-Fertilizer)’ by misdeclaration of goods and in such a case, an appeal before the Tribunal had been filed by the Department with stay application.

The High Court held that the Respondent-authorities ought to have given effect to the order of the Commissioner (Appeal) in order to maintain judicial discipline as laid down in cited judgments. Merely because appeal was pending before the Tribunal is not a sufficient ground for not giving effect to Commissioner (Appeals) order. Non-release of goods by respondent is not valid in the eye of law. Petitioner cannot be made to suffer due to detention of goods in question imported by them without
proper reasons to do so.

It was noted that a long delay in release of goods would, no doubt, reduce its potency, as pointed out by the petitioner, and its market value would deteriorate to the detriment of petitioner. The respondents ought to have taken urgent steps to obtain a stay order against the order of Commissioner (Appeals), Chennai, dated 16.9.2011, if they had intended to detain the goods in question. However, in the present case, nothing has been shown on behalf of respondents to substantiate their claim that necessary steps had been taken to obtain the interim order of stay against the order of the appellate authority, dated 16.9.2011.

As such, the prolonged detention of goods in question can only be held to be arbitrary and illegal. It is also noted that an amount of Rs.12,00,000 had already been paid by petitioner, as duty, in respect of goods in question. In such circumstances, respondents are directed to release the goods in question, by following the necessary procedures, in view of the order of the Commissioner (Appeals) as expeditiously as possible, not later than ten days from the date of receipt of a copy of this order.

It is also made clear that it would be open to petitioner to make a representation to the appropriate authority, with regard to issuance of a Detention Certificate, for the waiver of the demurrage and detention charges relating to the detained goods and on such request being made, the authority concerned is expected to consider the same and to pass appropriate orders thereon, as per law.

Decision:- Petition disposed off.

Comment:- Normally, the detention of goods is done by the department without any reason and the party has to incur demurrage charges. When the order of the commissioner (A) is in favour of assessee, the department should have followed and released the goods. There is no reason to withhold them. Hope this verdict will open the eyes of the department.

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PJ/Case Laws/2012-13/1087

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