Case Law Details
Mondelez India Foods Ltd. Vs Commissioner of Customs (CESTAT Bangalore)
CESTAT Bangalore held that imported coco beans which didn’t satisfied the quality standards were permitted to re-export and accordingly, redemption fine and penalty imposed on the same reduced.
Facts- The appellant imported ‘Cocoa Beans’ from Indonesia. The Authorized Officer subjected the Cocoa Beans to test under Clause 2.2 of the Food Safety and Standards (Contaminants, Toxins and Residues) Regulations, 2011 and a further test was conducted under the category of ‘Dry Fruits and Nuts’ under Clause 2.3.47.5 of the Food Safety and Standards (Food Product Standards and Food Additives) Regulations 2011.
Basing on the result of the EIA Test report, the Authorised Officer vide letter 24.04.2015 issued a notice for recalling of all the products on the ground that the samples do not conform to the requirements laid down in IS 8865:2003. Show Cause Notices were issued u/s. 124 of the Customs Act, 1962 by the Customs for the impugned imports. On adjudication, the Adjudicating Authority passed the impugned order dated 08.07.2015, confirmed the allegations made in both the Show Cause Notices and ordered confiscation of imported ‘Cocoa Beans’ and imposed redemption fine of Rs. 15,00,000/- and penalty of Rs. 5,00,000/-
Conclusion- Held that on recall of the goods, i.e. cocoa beans not qualifying the quality standards, by the Authorised Officer and after the issue of the show cause notice, the Adjudicating Authority as per the request of the appellant permitted re-export of the impugned goods on payment of redemption fine and penalty. Accordingly, redemption fine is reduced to Rs. 5,00,000/- (Rupees Five lakhs) and penalty to Rs. 2,00,000/- (Rupees Two lakhs).
FULL TEXT OF THE CESTAT BANGALORE ORDER
M/s. Mondelez India Foods Limited, the appellant is engaged in the manufacture of chocolates confectionaries, beverages, etc., and for the manufacture of the above items, imported ‘Fermented and Dried Processed Sumatra Cocoa Beans'(Dead Beans)’ which are the essential raw materials for the manufacture of chocolates, classifiable under Customs Tariff Item Entry 18010000.
2. The brief facts are the appellant imported ‘Cocoa Beans’ from Indonesia and filed 2 (two) Bills of Entry dated 21.05.2014 along with the certificates of quality and test reports from the foreign suppliers indicating various characteristics along with grade limits. The test reports show that the imported ‘Cocoa Beans’ met the standards prescribed in Indonesia, which is “SNI 2323:2008 for Grade: I-B”. SNI is the Indonesian National standards for products, which are manufactured or imported into Indonesia. On import the Department issued an examination order directing to produce clearance under FSS Act or Regulations, or a no objection certificate (NOC) from the Authorized officer, FSSAI, Cochin.
3. The Authorized Officer subjected the Cocoa Beans to test under Clause 2.2 of the Food Safety and Standards (Contaminants, Toxins and Residues) Regulations, 2011 and a further test was conducted under the category of ‘Dry Fruits and Nuts’ under Clause 2.3.47.5 of the Food Safety and Standards (Food Product Standards and Food Additives) Regulations 2011. The Test Report was issued that the ‘cocoa bean’ does not satisfy the specification of the approved standards. Contending that no standard has been fixed under FSS Act or Regulations for the ‘cocoa beans’, the only standard available is under BIS, the test report was challenged by the Appellant in Writ Petition No. 22987/2014 before the Hon’ble High Court of Kerala. In the said writ petition, the Learned Single Judge of the Hon’ble High Court passed the judgment on 03.09.2014 by issuing the following directions:
i) The imported goods shall be released to the petitioner forthwith
ii) In the absence of standards, I am of the view, the sample shall be sent to analysis by the Bureau of Indian Standards.
iii) The petitioner shall not use the Cocoa Bean released to him for human consumption without report obtained as indicated above.
iv) The petitioner shall pay such cost as may be required for the purpose of analysis
4. The appellant imported 2(two) more consignments and for clearance filed 2(two) Bills of Entry dated 11.09.2014. They also filed a Writ Petition before the Hon’ble High Court of Kerala in respect of imports dated 11.09.2014. The Hon’ble High court disposed the matter in the light of judgment in Writ Petition No. 22987/2014. The Authorized officer of FSSAI filed Writ Appeal No. 1317/2014 against the judgment in Writ Petition No. 22987/2014. The Hon’ble Division Bench in the above Writ Appeal vide order dated 04.02.2015 held that;
“i) The appellant is directed to examine the product from the place where it is stored by the petitioner and the samples shall be tested to ensure that it is neither substandard nor unsafe for human consumption taking into consideration the standards prescribed by BIS as well.
ii) If the goods are found to be substandard or unsafe, appropriate steps shall be taken in accoradance with law. Such a procedure shall be adopted after giving notice to the petitioner.”
5. The Authorized officer vide letter 16.03.2015 informed the appellant for drawing samples from the premises of the appellant on 19.03.2015 in compliance of the Division Bench judgment of the Hon’ble High Court of Kerala. Vide Letter No. CS/(Seaport)FSSAI-CO/2015-16, the Export Inspection Agency (EIA) issued Analysis Report wherein the samples were tested with regard to IS 8865:2003 which shows:- i) Moisture-6.88% (not more than 7.5%), ii) Mouldy-32.9% (max-4.4%), iii)Slaty-17.5%(max-8%) iv) Insect damaged germinated or flat-41.1% (Max-6%). v) Aflatoxin-BLD (Not more than 30 micro gram per kilo gram, as per FSSAI) and the opinion of the test report was the sample cocoa beans does not conform the requirement as laid down in “IS 8865:2003 for the above listed parameters.
6. Basing on the result of the EIA Test report the Authorised Officer vide letter 24.04.2015 issued a notice for recalling of all the products covered under the 4(four) Bills of entry on the ground that the samples do not conform to the requirements laid down in IS 8865:2003. Show Cause Notices were issued under Section 124 of the Customs Act, 1962 by the Customs for the impugned imports. On adjudication, the Adjudicating Authority passed the impugned order dated 08.07.2015, confirmed the allegations made in both the Show Cause Notices and ordered confiscation of imported ‘Cocoa Beans’ and imposed redemption fine of Rs. 15,00,000/- and penalty of Rs. 5,00,000/- on the following grounds.
i. The High Court, while accepting the contention that no standard has been prescribed for Cocoa Beans under the FSS Act, also upheld the authority of the Authorized Officer to ensure that the goods were not unsafe/substandard.
ii. There is no allegation in both the SCNs that the Cocoa Beans did not conform to the standards of the FSS Act. It only states that clearance from Authorized officer is mandatory. Accordingly, the contention that SCN would not sustain as no standards have been fixed by the FSS Act is accordingly, rejected.
iii. The fact that the Authorized Officer had not taken cognizance of the Foreign Supplier’s test report and accepted the contents thereof indicate that the said report did not meet with the approval of the said Authority. The Hon’ble High Court of Kerala also had not directed to consider the said reports.
iv. Quality parameters of goods imported have to be determined after their arrival in India and closer to the time of their removal to the DTA and not at the point of purchase in the country of export.
v. Imported Cocoa Beans can be confiscated under the Customs Act and it would not amount to contravention of the provisions of the FSS Act so long as the option is given to return them to the Appellant on levy of fine under Section 125 of the Customs Act.
vi. The re-export can be done only on payment of redemption fine.
7. Accordingly, the goods imported by the Appellants have been re-exported on the payment of redemption fine and penalty.
8. Aggrieved by the aforesaid order in so far as it relates to imposition of redemption fine and penalty, the Appellant filed the present appeal before this Tribunal.
9. The Learned counsel during the hearing has submitted that; the very basis of impugned order is that they did not produce clearance from the Authorised officer; the judgment of the High Court was wrongly interpreted, wherein the Hon’ble High Court directed to take steps according to law, which in the present case is FSS Act, 2006; the Hon’ble High Court recognized the fact that the ‘cocoa beans’ are not covered by any standards prescribed under FSS Act, 2006 and the rules framed thereunder; therefore, the court has prescribed analysis should be based on BIS standards; there are no standards prescribed for the ‘cocoa beans’ under the said act or rules for the imported goods as held by Hon’ble High Court; when no such standards are not available or prescribed for the impugned goods and this fact having not been disputed by the Authorised Officer and Customs, the finding in the impugned Order for violation of non-existent standards is clearly untenable; the impugned Order has imposed redemption fine on the goods on the ground that “import of goods which do not conform to the standards laid under the Food Safety and Standards Act, 2006 and the Rules framed thereunder is a violation of Foreign Trade Policy; however, as stated supra, there are no standards existing for ‘Cocoa Beans’ in the FSS Act or the Rules framed thereunder; in this regard, the law has very clearly laid down that “Lex Non Cogit Ad Impossibila” or that the law does not compel a man to do that which is impossible as held in State of Rajasthan Vs. Shamsher Singh, 1985 AIR 1082 and in M/s. Raj Traders Vs. CC, Mumbai, 2023 (1) TMI 395-CESTAT MUMBAI. (see); the Cocoa Beans were in conformity with BIS standards at the time of import and hence there is no violation of any provision of law; confiscation under Section 111 (d) of the Customs Act is only applicable, if the importer has violated any prohibition at the time of importation’, this has been made clear by the Hon’ble Supreme Court in the case of Union of India Vs. Sampat Raj Dugar, 1992 (58) E.L.T. 163 (S.C.); in the said case, the Hon’ble Apex Court held that where the import license was cancelled only subsequent to the import, confiscation under Section 111 (d) will not apply.
10. The learned counsel further submitted that; according to The Plants, Fruits and Seeds (Regulation of Import into India) Order, 1989, Cocoa Beans being agricultural seed must be imported with a valid permit under, Regulation 3 (1); Reliance is to be placed on the Foreign Supplier’s Test Report and not the EIA Test Reports; the Authorised Officer had issued the Recall Notice dated 24.04.2015 on the ground that the impugned goods failed to conform to the BIS standards under IS 8865:2003 and therefore the impugned goods were deemed to be sub-standard or unsafe; it is therefore the case of Customs that the impugned goods did not meet the requirements of Section 25 of FSS Act, 2006; the Foreign Supplier’s Test Reports submitted by the Appellants at the time of import covered all the parameters covered by the EIA Test report and the test results for all the parameters were well within the prescribed limits even considering the BIS standards IS 8865:2003 applied by FSSAI; the Cocoa Beans were imported on 21.05.2014 and 11.09.2014, prior to the import, the samples were duly tested during March and April 2014 in the case of the imports made on 21.05.2014 by the foreign Supplier and in August 2014 in the case of the imports made on 11.09.2014. According to the Foreign Supplier’s Test Reports, the Cocoa Beans were fully compliant with the BIS standards prescribed under IS 8865:2003; On the other hand, post the import of the Cocoa Beans, the EIA Test Report was issued by the Export Inspection Agency-Kochi (Laboratory) on 16.04.2015 that is approximately 11(eleven) months after the date of the first testing by the foreign supplier, stating that the Cocoa Beans had failed the test and did not conform to the requirements laid down in IS 8865: 2003; it is pertinent to note that for the goods imported in May 2014, the tests were conducted from 06.04.2015 to 13.04.2015, almost a year after the date of import; reliance cannot be placed on the EIA Test Report as Cocoa Beans being perishable items would have naturally deteriorated and hence any such test conducted on the said ‘Cocoa Beans’ much belatedly would not reflect the true characteristics that prevailed on the date of import; test report therefore is inaccurate and incorrect; the Hon’ble Tribunal has held in several cases that Foreign Supplier’s Test Reports may be relied on in cases, where the testing done by Customs is not accurate; reliance is placed on the case of Adani Exports Ltd., Vs. Commr. Of Cus., Jamnagar, 2010 (249) E.L.T. 93 (Tri. Ahmd.), which was taken by the Revenue to the Hon’ble Gujarat High Court, which was dismissed reported as, CC Preventive Vs. Adani Exports Ltd., 2013 (295) E.L.T. 678 (Guj.); Reliance is also placed on the following decisions;
(a) Saurashtra Chemicals Vs. CC, Jamnagar, 2023 (8) TMI 1101- CESTAT (b) Sandur Manganese Vs. CC, Goa, 2014 (310) E.L.T. 412 (Tri. – Mumbai)
(c) JSW Steel Lid., Vs. CCE 2015 (10) TMI-189-CESTAT
(d) Uttam Galva Metallics Ltd. Vs. CCE-2019(4) TMI 1703-CESTAT
11. The learned counsel further submitted that; though the EIA test reports were conducted on the specific directions of the High Court of Kerala in their order dated 04 February 2015, there is no denying the fact that the impugned goods fully met the BIS standards prescribed under IS8865:2003 even at the time of import. The deterioration in quality was directly due to the delay of 11 months in testing the impugned goods and the responsibility for the delay should be of the Authorized Officer; as the impugned goods were fully compliant with the BIS standards at the time of import the impugned goods were not tainted with any prohibition at the time of import and therefore there is no case for confiscation under Section 111(d) of the Customs Act. reliance in this regard is placed on:
(a) Baby Marine Seafood Vs. CC Cochin, 2021 (377) E.LT. 872 (Tri-Bang).
(b) Jhunjhunwała Vanaspati Vs. CC Kolkata, 2019 (369) E.L.T. 776 (Tri. – Kolkata)
(c) Health Caps India Ltd., Vs. Commissioner, 2018 (364) Ε.Ι.Τ. 815 (Tri. – All.)
12. The learned counsel submitted that; the impugned Order has imposed penalty only under Section 112 (a) of the Customs Act; penalty under Section 112(a) is leviable on a person only if he does or omits to do any act that would render the goods liable for confiscation under Section 111 ibid; as already submitted supra the goods are not liable for confiscation and hence the question of imposition of penalty under Section 112(a) of the Act does not arise; this was held in M/s. Tasty Nut Industries Vs. CC Cochin, 2024-TIOL-597-CESTAT-BANG.
13. Heard both sides and perused the records.
14. I find in this case the goods “Fermented and dried processed Sumatra Cocoa Beans (dead beans)’ were imported vide 4(four) bills of entry and on test by the FSSAI and thereafter by Indian Bureau of Standards as per the directions of the Hon’ble High Court of Kerala the analysis report states that, ” the sample cocoa beans does not conforms the requirement as laid down in “IS 8865:2003 for the above listed parameters”. Consequently, the goods were recalled and at the request of the appellant, the Adjudicating Authority has allowed re-export of the goods covered by the 4(four) Bills of Entry on payment of redemption fine of Rs. 15 Lakhs and penalty of Rs. 5 Lakhs.
15. I find that in this case the appellant contended that the goods when imported were meeting the standards of the exporting country “SNI 2323:208 for Grade: I-B” of Indonesia. I, find that the standards are for import into Indonesia and for manufacture in Indonesia. The appellant contended that when the goods were first examined and tested by FASSI on importation it was done against the standards which are not exactly for the impugned goods i.e., cocoa beans and the test conducted was as per the standards of ‘Fruits and Nuts’. Hence the appellant filed a Writ Petitions before the Hon’ble High Court of Kerala and FASSI filed Writ appeal against the order in the writ petitions, and as per the direction of the Hon’ble High Court the goods were sent for test to Bureau of Indian Standards (BIS). BIS has tested the samples of the impugned goods and the Analysis Report shows that, “the sample cocoa beans does not conform the requirement as laid down in “IS 8865:2003 for the above listed parameters”. The appellant contended that the goods were tested by BIS after a lapse of 11(eleven) months, therefore the goods being agriculture produce would certainly deteriorate with passage of time, therefore the test results after 11(eleven) months would be different, if they are tested immediately after import. I find in this case the imports were made in the month of May 2014 and September 2014, therefore the contention of the appellant in that the goods where tested after 11(eleven) is not correct, since 2(two) consignments have come in the month of September 2014. Further, I find that on import and on examination and testing by FASSI they have found that the goods are not as per the approved standards. The appellant has also contended that they obtained the import permit for import of the impugned goods as per the requirement of Plants, Fruits and Seeds (Regulation of Import into India) Order, 1989, Cocoa Beans being agricultural seed must be imported with a valid permit under the Regulation 3 (1), since they have the import permit from the concerned authority their import is valid and there is no violation of the import policy. I find that the first report of FSSAI, on import, even though it was with respect to the Standards of ‘Fruits and Nuts’ there are some common parameters for agriculture produce and food items, therefore even, if the test it was not exactly for the standards of ‘cocoa beans’, the report has a relevance. Further, I find that the appellant has contended that goods confiscated after clearance for home consumption is not tenable. I find that in this case goods have been released by Customs as per the directions of the Hon’ble High Court. The appellant contended that according to foreign supplier’s test report, the cocoa beans have fully complied with BIS standards prescribed under IS 8865:2003. On recall of the goods by the Authorised Officer and after the issue of the show cause notice, the Adjudicating Authority as per the request of the appellant permitted re-export of the impugned goods on payment of redemption fine and penalty.
16. The appellant has filed this appeal for waiver of fine and penalty imposed by the Adjudicating Authority, while allowing the re-export of the impugned goods.
17. I find that in the facts and circumstances of the case, the redemption fine and penalty imposed by the Adjudicating Authority could be considered for reduction.
18. Accordingly, redemption fine is reduced to Rs. 5,00,000/- (Rupees Five lakhs) and penalty to Rs. 2,00,000/- (Rupees Two lakhs).
19. The appeal is partially allowed in the above terms.
(Order Pronounced in Open court on 24.12.2024)
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