Madhav KRG HRC Pvt Ltd Vs Commissioner of Customs (CESTAT Chandigarh)
The appeal challenged the Order-in-Appeal dated 29.04.2026, whereby the Commissioner (Appeals) upheld the Order-in-Original confiscating imported Heavy Melting Scrap, permitting its redemption only for re-export on payment of redemption fine of ₹6,00,000, and imposing penalties of ₹3,00,000 each under Sections 112 and 114AA of the Customs Act, 1962.
The appellant had imported Heavy Melting Scrap under Bill of Entry dated 16.08.2025. During scrutiny, the Department found that the Pre-Shipment Inspection Certificate (PSIC) had been issued by M/s Asia Inspection Agency Ltd showing the place of inspection as Port Louis, Mauritius. According to DGFT Public Notice No. 48/2015-20 dated 05.01.2023 and paragraph 2.52(e) of the Handbook of Procedure, 2023, Mauritius did not fall within the notified area of operation of that inspection agency. The Department therefore treated the PSIC as invalid, concluded that the appellant had contravened Sections 46(4) and 46(4A) of the Customs Act, 1962 read with the relevant DGFT provisions, treated the imported goods as prohibited goods under Section 2(33), seized them under Section 110, and confiscated them under Section 111(d).
The appellant submitted that the PSIC had been issued by a DGFT-authorised Pre-Shipment Inspection Agency and that the imported scrap was found free from war material and other objectionable material. It contended that although the agency was not authorised for Mauritius during the relevant period, it remained an empanelled DGFT agency and no proceedings had been initiated against it for issuing the certificate. The appellant also submitted that the PSIC had been uploaded on the DGFT portal and accepted by DGFT. It argued that subsequent inspection in India found no objectionable material and therefore there was no violation of Customs law warranting confiscation or re-export. The appellant further submitted that the goods were at best restricted goods subject to regulatory compliance and not prohibited goods, and that penalties under Sections 112 and 114AA were unsustainable because there was no fault on its part.
The Department argued that production of a valid PSIC issued by an agency authorised for the specific country was a mandatory condition for import of metallic scrap. Since the certificate had been issued by an agency not authorised to operate in Mauritius, the PSIC was invalid. The Department also submitted that post-shipment inspection could not cure the defect in the PSIC and that the appellant was aware of the agency’s lack of authorisation for Mauritius. It therefore supported the confiscation, redemption fine and penalties.
After considering the submissions and the material on record, the Tribunal observed that the only deficiency was that the empanelled inspection agency was not authorised for Mauritius at the relevant time. It noted that post-shipment inspection was subsequently permitted at the appellant’s request and that the DGFT Policy did not prohibit such inspection. The post-shipment inspection revealed that the imported goods did not contain war material or any other objectionable material.
The Tribunal further observed that it was undisputed that the inspection had been carried out in Port Louis, Mauritius by an agency empanelled with DGFT and that the only lapse related to the territorial area of operation. It held that where an empanelled agency had inspected the goods and certified that they contained no objectionable material, there was substantial compliance with the DGFT Policy.
The Tribunal referred to the Ahmedabad Bench decision in Palco Recycle Exchange Limited vs. Commissioner of Customs, which held that where imported scrap underwent 100% examination in India and no incriminating material or excessive radiation was detected, non-compliance with import policy conditions could result in 100% inspection but would not amount to improper import liable to confiscation under Section 111 of the Customs Act. The Tribunal also relied on the Gujarat High Court decision in Commissioner of Customs vs. Senor Metals Pvt Ltd, which held that non-compliance with stipulated import conditions may require complete inspection of the consignment but would not constitute improper import under Section 111(d). It further referred to Moolchand Steels Pvt Ltd vs. Commissioner of Customs, where confiscation and penalty were set aside after 100% inspection revealed no objectionable material in the imported scrap.
Following these decisions and considering the facts of the present case, the Tribunal concluded that the impugned order imposing confiscation, redemption fine and penalties was not sustainable. It set aside the impugned order and allowed the appeal with consequential relief in accordance with law.
Cases Discussed
- Palco Recycle Exchange Limited vs. Commissioner of Customs(CESTAT Ahmedabad), 2026 (3) TMI 1094 – CESTAT Ahmedabad
- ARS Steels & Alloy International Pvt Ltd vs. CC, Chennai(Tri. Chennai), (2023) 4 Centax 316 (Tri. Chennai)
- CMA GGM Agencies (I) Pvt Ltd vs. CC(Tri. Chennai), 2016 (341) ELT 311 (Tri. Chennai)
- Bhushan Steel Ltd vs. CC, Visakhapatnam(Tri. Hyd.), 2016 (336) ELT 699 (Tri. Hyd.)
- Alang Meta Exim Pvt. Ltd Vs. CC(Tri. Ahmd.), 2015 (328) ELT 665 (Tri. Ahmd.)
- Shri Shakti Iron & Steel Rerolling Mill vs. CC, Kandla(Tri. Ahmd.), 2014 (304) ELT 279 (Tri. Ahmd.)
- NGA Steels Pvt Ltd vs. CC, Chennai(Tri. Chennai), 2010 (262) ELT 578 (Tri. Chennai)
- Sameer Industries vs. CC, Kandla(Tri. Ahmd.), 2010 (260) ELT 292 (Tri. Ahmd.)
- CC vs. Senor Metals Pvt Ltd(Guj.), 2009 (236) ELT 445 (Guj.)
- Commissioner of Customs vs. Moolchand Steels Pvt Ltd(Guj.), 2008 (221) ELT A118 (Guj.)
- Moolchand Steels Pvt Ltd vs. CC, Kandla(Tri. Del.), 2006 (206) ELT 793 (Tri. Del.)
FULL TEXT OF THE CESTAT CHANDIGARH ORDER
The present appeal is directed against the impugned Order-in-Appeal No. LUD-EXCUS-001-APP-46-2026 dated 29.04.2026 passed by the Commissioner (Appeals), CGST, Ludhiana, whereby the learned Commissioner (Appeals) has rejected the appeal of the Appellant and upheld the Order-in-Original.
2. Briefly stated facts of the present case are that the Appellant are engaged in importing of goods. In normal course of business, they imported Heavy Melting Scrap and filed Bill of Entry No. 3923622 dated 16.08.2025. The Department, after examining the documents, found that Pre-Shipment Inspection Certificate (‘PSIC’) uploaded by the Appellant had been issued by M/s Asia Inspection Agency Ltd. In the said PSIC, place of inspection was mentioned Port Louis, Mauritius. As per the DGFT Public Notice No. 48/2015-20 dated 05.01.2023, Mauritius is not mentioned anywhere in the area of operation of M/s Asia Inspection Agency Ltd. As per para 2.52(e) of the Hand-Book of Procedure, 2023, a Pre-Shipment Inspection Agency (‘PSIA’) can carry out inspection only in the countries which fall under its area of operations. It was observed that Mauritius country was not the notified area of operation of M/s Asia Inspection Agency Ltd and accordingly, the Department treated the said PSIC as invalid. On this basis, it appeared that the Appellant had contravened the provisions of Sections 46(4) and 46(4A) of the Customs Act, 1962, read with the relevant DGFT notifications and guidelines. Hence, according to the Department, the goods so imported fall under the category of restricted goods which fall under the definition of ‘prohibited goods’ as defined under Section 2(33) of the Act. Accordingly, the impugned goods were seized under Section 110 of the Act on the reasonable belief that the same appeared liable to confiscation under Section 111(d) of the Act, being treated as ‘prohibited goods’ on account of ‘invalid PSIC’. Thereafter, the Department issued a Show Cause Notice to the Appellant and after following the due process, the Adjudicating Authority passed the Order-in-Original dated 03.12.2025 and ordered for confiscating the goods under Section 111(d) of the Customs Act, 1962 treating the same as prohibited goods and also ordered to redeem the said goods for re-export on payment of redemption fine of Rs.6,00,000/-. Besides this, a penalty of Rs.3,00,000/- under Section 112 and a penalty of Rs.3,00,000/- under Section 114AA of the Act were also imposed. Aggrieved by the said Order-in-Original, the Appellant filed appeal before the Commissioner (Appeals), who vide the impugned Order-in-Appeal, has rejected their appeal. Hence, the present appeal.
3. Heard both the parties and perused the material on record.
4. Ms. Tanya Kumar, the learned Counsel for the Appellant submits that the impugned order is not sustainable in law as the same has been passed without properly appreciating the provisions of the Customs Act as well as binding judicial precedents.
4.1 She further submits that the imported goods were accompanied with PSIC issued by PSIA duly authorized by DGFT. She also submits that the imported goods comprising of Heavy Melting Scrap were found to be free from any kind of war material and in the absence of any objectionable material, the instant confiscation as ordered by the Customs Department is liable to be set aside.
4.2 She also submits that PSIA namely M/s Asia Inspection Agency Ltd was duly certified by DGFT, however the said agency was not having its area of operation in Mauritius during the interregnum period of import of goods. She also submits that no action has been initiated against the PSIA for issuing the PSIC beyond its jurisdiction. She further submits that the PSIC, along with relevant documents, was uploaded on the portal of DGFT and the same was duly accepted by the DGFT.
4.3 She further submits that once the goods have been examined by the inspecting agency in India and it has been found that there was no war material or any objectionable material in the imported goods, then there is no violation of the provisions of Customs Law.
4.4 She also submits that the Department has erred in ordering for re-export of goods wherein the imported goods are not the offending goods having been imported in compliance with the provisions of Customs Act. For any violation of Customs Law as well as DGFT notifications by an inspecting agency, the Appellant cannot be saddled with the deterrent consequences including the one of ‘re-export’.
4.5 She further submits that the Department has erred in invoking the provisions relating to ‘prohibited goods’ under Section 2(33) of the Customs Act without appreciating that the goods in question were at best restricted goods subject to regulatory compliance and not absolutely prohibited goods.
4.6 She further submits that the penalties imposed on the Appellant under Sections 112 & 114AA are also not legally sustainable because there is no fault at the end of the Importer-Appellant.
4.7 In support of her submissions, she places reliance on the following decisions:
- Moolchand Steels Pvt Ltd vs. CC, Kandla – [2006 (206) ELT 793 (Tri. Del.)] affirmed by the Hon’ble Gujarat High Court – [2008 (221) ELT A118 (Guj.)]
- CC vs. Senor Metals Pvt Ltd – [2009 (236) ELT 445 (Guj.)]
- NGA Steels Pvt Ltd vs. CC, Chennai – [2010 (262) ELT 578 (Tri. Chennai)
- Shri Shakti Iron & Steel Rerolling Mill vs. CC, Kandla – [2014 (304) ELT 279 (Tri. Ahmd.)]
- Sameer Industries vs. CC, Kandla – [2010 (260) ELT 292 (Tri. Ahmd.)]
- CMA GGM Agencies (I) Pvt Ltd vs. CC – [2016 (341) ELT 311 (Tri. Chennai)]
- Bhushan Steel Ltd vs. CC, Visakhapatnam – [2016 (336) ELT 699 (Tri. Hyd.)]
- ARS Steels & Alloy International Pvt Ltd vs. CC, Chennai – [(2023) 4 Centax 316 (Tri. Chennai)]
5. On the other hand, the learned Authorized Representative for the Department reiterates the findings of the impugned order and submits that the goods were rightly seized by the Department because the Appellant could not produce a valid PSIC and the PSIC uploaded by the Appellant was issued by M/s Asia Inspection Agency Ltd showing the place of inspection as Port Louis, Mauritius, which was not a notified area of the operation for the said agency. Consequently, the PSIC was held to be invalid and the imposition of fine and penalty is in accordance with the provisions of the Customs Act.
5.1 He further submits that the requirement of a valid PSIC from an agency authorized for the specific country is a mandatory pre-condition for import of metallic scrap and is not a mere formality.
5.2 He further submits that Post Shipment Inspection in India cannot cure a fundamental defect of the valid PSIC. He also submits that the Appellant had a knowledge that the said agency is not authorized for that area for issuing the PSIC and hence, penalties under the provisions of the Customs Act, have rightly been imposed.
5.3 He further tries to distinguish the decisions relied upon by the Appellant on the basis that the facts of those decisions are different than the facts of the present case.
6. We have considered the submissions made by both the parties and perused the material on record as well as the decisions relied upon by the Appellant. We find that in the present case, the Department has confiscated the impugned goods as ‘prohibited goods’ because the PSIC issued by the empanelled agency namely M/s Asia Inspection Agency Ltd is not notified for Mauritius and consequently, the Department has held the said PSIC as ‘invalid’ and confiscated the goods, but allowed the same to re-export on payment of redemption fine of Rs.6,00,000/- and penalty of Rs.3,00,000/- under Section 112 and penalty of Rs.3,00,000/- under Section 114AA of the Act. Further, we find that though the said agency was empanelled with the DGFT but the only lapse was that it was not authorized for that area where the inspection took place. But, subsequent, on the request of the Appellant, Post Shipment Inspection was allowed because the DGFT Policy nowhere prohibits the Post Shipment Inspection. On Post Shipment Inspection, nothing objectionable material was found in the impugned goods because the said goods did not contain any war material etc.
7. We also find that it is not disputed that the goods were inspected in Port Louis, Mauritius by the agency which is an empanelled agency of DGFT. The only lapse was that the said agency was not authorized to operate in Mauritius. Further, we find that when the local empanelled agency inspected the goods and issued the PSIC and did not find any objectionable material in the impugned goods, then it is a substantial compliance of the DGFT Policy.
8. We also find that this issue has been considered recently by the Ahmedabad Bench of this Tribunal in the case of Palco Recycle Exchange Limited vs. Commissioner of Customs [2026 (3) TMI 1094 – CESTAT Ahmedabad], wherein also similar violation was there and the goods were 100% re-examined at the local port when the goods arrived in India and it was held by the Tribunal that as no such incriminating material was found in the consignment and radiation level was not found in excess of neutral background, non- compliance of the condition of import policy may entail 100% inspection of goods but would not tantamount to improper import of goods liable to confiscation under Section 111 of the Customs Act, 1962. In this regard, it is pertinent to reproduced the relevant findings of the Tribunal, which are reproduced herein below:
“5.3 The appellant relied on the decision in the case of Alang Meta Exim Pvt. Ltd Vs. CC (2015 (328) ELT 665 (Tri. Ahmd.) wherein it is held that the importer have taken precaution and produced pre-shipment inspection certificate from authorised agency and copy of contract with foreign supplier as per procedure prescribed by DGFT. They are not required to take any further precaution. Confiscation of waste and scrap and imposition of penalty not sustainable. They also quoted the decision of Hon’ble Gujarat High Court in the case of Commissioner of Customs vs. Senor Metals Pvt. Limited – 2009 (236) ELT 445 (Guj.) wherein it was held that Section 111(d) of the Act permits confiscation of goods improperly imported, namely, any goods imported : (i) contrary to any prohibition imposed by or under the Act, or (ii) contrary to any prohibition imposed by any other law for the time being in force. The former is not the case of Revenue. In so far as the latter is concerned, there is no prohibition against import of the goods in question. ‘Paragraph No. 2.32 of the Handbook itself specifies this. Only, the import is subject to fulfilment of stipulated conditions which are to be complied with by the exporter. Non-compliance thereof may entail an importer to undergo 100% inspection of entire consignment. That would not tantamount to improper import of goods as required by Section 111 of Customs Act, 1962. Relying on the above decision of Hon’ble Gujarat High Court, CESTAT Chennai in the case of CMA CGM Agencies (I) Pvt. Ltd Vs. Commissioner of Customs (Port-Import), Chennai – 2016 (341) ELT 311 (Tri. Chennai) held that purpose of PSIC is to ensure that the consignment does not contain any types of arms, ammunition or other explosive material. As no such incriminating material was found in consignment, radiation level was not found in excess of neutral background, non-compliance of the condition of import policy may entail 100% inspection of goods but would not tantamount to improper import of goods liable to confiscation under Section 111 of the Customs Act, 1962. Abetment was also not proved. Imposition of penalty under Section 112(a) was set-aside.
5.4 In the factual matrix, there is no sufficient evidence that the appellants have abetted in production of invalid PSIC to make import of prohibited goods by contravening Foreign Trade Policy. Therefore, relying on the above decisions, we allow the appeals filed by M/s. Palco Recycle Exchange Limited, Shri Pramodkumar Ramanlal Agarwal, (Appellant 2) and Shri Vishal Gupta, Vice President of M/s. Vistas Trading, New Delhi (Appellant 3) and set-aside the impugned order to the extent of confiscation of seized goods, imposition of Redemption fine and penalty on the above three appellants.”
9. Further, we also find that in the case of Commissioner of Customs vs. Senor Metals Pvt Ltd (supra), the Hon’ble Gujarat High Court has held as under:
“10. Section 111(d) of the Act permits confiscation of goods improperly imported, namely, any goods imported : (i) contrary to any prohibition imposed by or under the Act, or (ii) contrary to any prohibition imposed by any other law for the time being in force. The former is not the case of revenue. In so far as the latter is concerned, there is no prohibition against import of the goods in question “Paragraph No. 2.32 of the Handbook itself specifies this. Only, the import is subject to fulfilment of stipulated conditions which are to be complied with by the exporter. Non-compliance thereof may entail an importer to undergo 100% inspection of the entire consignment. That would not tantamount to improper import of goods as required by Section 111 of the Act.”
10. Further, we find that the Tribunal in the case of Moolchand Steels Pvt Ltd vs. Commissioner of Customs (supra) has considered the similar issue and held as under:
“3. Considered the submissions made by both sides and perused records. I find that the appellant has produced a pre-inspection certificate by an agency having its branch in Abidjan, though the said branch is not mentioned in the list of the EXIM Policy. It is noteworthy to mention here that the 100% inspection of the consignment was undertaken and nothing objectionable was found in the consignment. To my mind if there is nothing objectionable in the consignment that would attract the provisions of the Customs Act, the confiscation and the imposition of the penalty is absolutely wrong and untenable.
4. Accordingly, the order of confiscation of the HMS and imposing penalty is liable to be set aside. Impugned order set aside and appeal allowed with consequential relief, if any to the appellant.”
Further, we note that the above said decision of the Tribunal has been upheld by the Hon’ble Gujarat High Court, titled as Commissioner of Customs vs. Moolchand Steels Pvt Ltd [2008 (221) ELT A118 (Guj.)].
11. By following the ratios of the above cited decisions and keeping in view the facts & circumstances of the case, we are of the considered opinion that the impugned order, imposing the fine and penalty, is not sustainable in law, therefore, we set aside the same by allowing the appeal of the Appellant with consequential relief, if any, as per law.
(Order pronounced in the open court on 30.06.2026)
