CESTAT New Delhi has observed that assorted birthday candles with Chlorate, Potassium, Aluminium, etc., (material for fireworks) only in material contents of the central wig, are not classifiable as fireworks. The Tribunal for this purpose, relied upon Rule 3(a) of Interpretative Rules and the essential use criteria. It observed that if similarity of contents is the criteria, even matchstick is a firework. The Tribunal also held that although CHA is obligated with CBLR Regulations but not every breach leads to revocation of license.
FULL TEXT OF THE CESTAT JUDGEMENT
M/s. Jaiswal Import Cargo Services Limited, the appellant, is a Customs Broker with Shri Pawan Kumar Jaiswal as one of its Directors. Department observed the violation of Regulation 11(d) and (e) of CBLR, 2013 on the part of the appellant in a case of import of assorted birthday candles by M/s. Ess Enn Impex importer through M/s. S. Guha Sarkar & Co. Ltd. vide Bill of Entry No. 5222876 dated 11.05.2016. The Department after intercepting and examining the goods observed that the candles were described as sparkling taxguru.in flower candles. The central part thereof was found coated with brown coloured paste there upon. Department got it examined from Central Forensic Science Laboratory, (CFSL) New Delhi and from Petroleum and Explosives Safety Organisation (PESO). Based on the reports, the Department formed an opinion that the goods appeared to be classifiable under Chapter heading 3604 “fireworks, signalling flares, rain rockets, fog signals and other pyro-technic articles” whose import is restricted under the Foreign Trade Policy. Resultantly, a show cause notice No. 26/9 dated 02.02.2018 was served upon said importer, M/s. Guha Sarkar Co., their partner, the G-Card Holder and also upon the appellant proposing them to be held responsible for contravention of Regulations of CBLR, 2013 and proposing the revocation of their CB license with forfeiture of whole of the security submitted at the time of issue of their license.
Appellant was issued with the show cause notice after Department noticed that appellant’s two consignments of identical product (assorted birthday candles) had earlier been cleared through G-Card holder, Sh. Kuber Nath Rai. In furtherance of said show cause notice, the Order-in-Original cum offence report dated 13.12.2017 was prepared. The Additional Commissioner of Customs (Exports TKD), New Delhi ordered to seize birthday candles of the impugned bill of entry on the ground of holding them to be mis-declared however allowed the redemption thereof. In addition, the penalty on M/s. Ess Enn Impex, the partners thereof, Shri Kuber Nath Rai, G-Card Holder and on Customs Broker M/s. S. Guha Sarkar & Co. and also upon the appellant was imposed.
On receipt of the said offence report, Commissioner of Customs, Airport and General vide Order No. 42 dated 31.07.2018 had revoked the Customs Broker Licence of the appellant and forfeited the whole amount of security deposit of Rs.75,000/-. However, no separate penalty was imposed upon Custom Broker in view of the said forfeiture. Being aggrieved of the said Order that the appellant is before this Tribunal.
2. We have heard Shri Virendra Kumar and Shri Jitendra Singh, learned Counsels for the appellant and Shri Rakesh Kumar, learned Authorised Representative for the Department.
3. It is submitted on behalf of the appellant that the licence has been revoked on the ground of failure in suggesting to the importer about correct classification of assorted birthday candles under CTH 3604 (fireworks) which were declared under CTH 3406 (wax candles) in two prior Bills of Entry dated 29.02.2016 and 10.02.2016 filed by the appellants G-Card Holder, Mr. Kuber Nath Rai on the basis of import documents provided by the importer M/s. Ess Enn Impex. On the above suspicion that one live Bill of Entry dated 11.05.2016 filed subsequently by said Shri Kuber Nath Rai however while working as G-Card Holder for another CHA, i.e., M/s. S. Guha Sarkar & Co. that the Department got tested the samples of impugned goods and on the basis of said test reports that the candles have been classified in the Order/offence report dated 13.12.2017 under CTH3604. It is submitted that the Appeal against the said Order was decided by Commissioner of Customs (Appeals) vide Order dated 22.03.2019 wherein it has been held that there was no aid or instigation on the part of the Customs Broker, M/s. Jaiswal Import Cargo Services Ltd. Resultantly, the proceedings under Customs Act stands closed against the appellant. It is impressed upon that the said fact and circumstances is sufficient for impugned order dated 31.07.2018 the order of revoking appellant’s license, to have no more significance, as such, the same is liable to be dropped. Learned Counsel has also impressed upon that revocation of his licence in the given circumstances is highly inappropriate penalty. He has relied upon the following case laws:
4. While rebutting these arguments it is submitted on behalf of the Department that the clearance of two earlier consignments of similar goods cannot be a ground for any benefit when the subsequent live consignment was examined not only physically but by the labs as that of CFSL and PESO. The reports thereof leave no doubt to hold that the candles are the goods of fireworks/pyrotechnic substances as such are classifiable under CTH 36.04. The goods are accordingly the restricted goods and thus cannot be imported without permission of Foreign Trade Organisation. Since there was no licence produced for the import of said goods, the confiscation as ordered vide order dated 13.12.2017 had no infirmity. The penalty on the appellant has been levied on the basis of the observation that the Customs Broker failed to advice its clients about the import of such fire crackers/ birthday candles to be restricted and permissible only after getting necessary NOC. Hence, the penalty has rightly been imposed. There is no infirmity in the Order under challenge. Appeal is prayed to be dismissed.
5. After hearing both the parties and going through the entire record of this Appeal as well as the submissions of both the parties we observe and hold as follows:
5.1 It is an admitted fact that the goods imported by the appellant are:
(1) Assorted birthday candles.
(2) Importer M/s. Ess Enn Impex imported assorted candles earlier through appellant w.r.t. two bills of entry and subsequently thourgh M/s. G. Guha Sarkar & Co.
(3) The G-Card Holder remains same for both CHA.
(4) The live consignment as was intercepted and examined was got cleared through Shri Kuber Nath Rai however, at that time he was the G-Card Holder of M/s. S. Guha Sarkar & Company.
(5) The goods imported with the aid of M/s. Jaiswal Import Cargo Services Limited were never examined and the penalty has been imposed based on the admission that those goods were similar as got examined in respect of Bill of Entry No. 5222876.
(6) The license of appellant is revoked due to the fact that Shri Kuber Nath Rai was his G-Card Holder while getting clearance of earlier two consignments of identical products as were intercepted, examined and were observed to be fireworks under CTA 3604. The failure of observing CBLR Regulations is alleged based on these facts.
6. In view of these admitted facts, the controversies to be adjudicated are:
Whether the appellant failed to inform the correct classification about the impugned birthday candles to the importer intentionally and as such, the license has rightly been revoked?
7. For the purpose we need to first adjudicate:
Whether the imported goods i.e. assorted birthday candles can actually be classified as fireworks/pyrotechnics?
8. Fireworks are considered as a low hazard explosives whose sale is regulated by Explosives Rules, 2008 framed under Explosives Act, 1884. The Act as such do not define the fireworks nor do the said Rules. Thus, we bank upon the dictionary meaning of fireworks. Literally, it is an object that burns or explodes with coloured lights and loud sounds and is used for entertainment.
As per Cambridge Dictionary – “fireworks is an explosive in a small container filled with explosive chemicals that produce bright coloured pattern or loud noises when they explode”.
The most common feature of fireworks is a paper or pasteboard tube or casing filled with the combustible material, often pyrotechnic stars.
As per Wikipedia encyclopaedia – “Fireworks are a class of low explosive pyrotechnic devices used for aesthetic and entertainment purposes. The most common use of a firework is as part of a fireworks display (also called a fireworks show or pyrotechnics) a display of the effects produced by firework devices.”
Definition of pyrotechnic in Cambridge Dictionary – “a public show of fireworks, a show of great skills by someone giving performances or ammunition containing chemicals for producing smoke or light as for signalling, illuminating or screening.” The bare perusal of these definitions alongwith the admission that the impugned goods are assorted candles makes it clear that the impugned goods neither can be called as firework nor are the pyrotechnic substance.
9. Now coming to the reports of CFSL which reads as follows: “On the basis of physio-chemical examinations it is opined that the presence of Chlorate, Potassium, Aluminium, Nitrate and Sodium were detected only in the material contents of the wig fixed in the middle of the candles.”
The PESO report is with reference to examination report from CFSL, New Delhi itself. But still the goods were opined to be the firework as defined in Part One of Schedule One.
These reports have admission that goods in question are candles. However, the Central wig of the candles contains such chemicals as are the contents of fireworks. Thus, the goods are such that a small part thereof contains such chemical as are required to manufacture fireworks. If similarity of contents is the criteria to classify than even match stick should be classified as firework, in the given circumstances and in view of the principle of common parlance/ in terms of trade we hold that goods are not fireworks.
10. We hereby refer to Rule 3(a) of General Rules of Interpretation Customs Tariff Act which reads as follows:
“3. When by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:
(a) the heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.”
These Rules clarify that the Chapter Headings have first to be looked into and the Heading which suits most to the goods has to be applied for purpose of this classification. In the case of overlapping or in case of confusion the Rules clarify that the essential use criteria has to be given preference. Admittedly the essential use of impugned goods is as that of birthday candles. The introduction of Nitrogen, Potassium, Calcium, etc. is intended to just add on the sparkle to that candle and to add on a musical feature to the candles. The object is neither fireworks show for entertainment nor to have the explosions/bursts nor even to use the sparkle as fog lamp or signalling apparatus as are the characteristics of fireworks as per Head note of CTH 3604. This further corroborates our opinion that the impugned good cannot be classified under Chapter 36 CTH 3604 i.e. “fireworks, signalling, flares, rain rockets, fog signals and other pyrotechnic articles.” Rather these fall under Chapter 34 CTH 3406 “candles, tapers and the like.”
11. In the Order dated 13.12.2017, the Assistant Commissioner after physically examining the goods and appreciating the various definitions of fireworks had formed the opinion as follows:
“Only the central red stick which is hardly less than one gram consisting of Chlorate, Potassium, Aluminium, Nitrate and Sodium that the said description does not match with the description of either firework or fire crackers. That even the heads of matchsticks are also made of oxidising agents viz. Potassium Chlorate, mixed with sulphur, fillers and glass powder, similar to the goods found in the central wick by CFSL. Hence, the impugned goods should not be treated as either firework or firecrackers. That the impugned goods are not prohibited goods but merely restricted goods as has also been accepted by PESO in their report dated 19.10.2016.”
But vide the Order under challenge, the adjudicating authority has still presumed the impugned goods as fire crackers in absolute contradictory to the said observations. It has also been held that due diligence has been compromised and mistakes have been committed in the classification of the goods by the CHA, while ordering the revocation of the CB licence and the forfeiture of the security deposit.
12. In view of the above discussion and the fact that this Bench also has physically examined the similar goods as was directed to be produced, we are of the opinion that G-Card Holder, Shri Kuber Nath Rai had a bonafide belief for the impugned goods to be assorted birthday candles simplicitor as the earlier two consignments had also been cleared rather on the basis of the reports of the Customs officers acknowledging the goods to be assorted birthday candles only. Above all, the present appellant admittedly has no taxguru.in concern with the interecepted consignment. He rather admittedly was the CHA for the said two previously cleared consignments. The adjudicating authorities have gone beyond the limit while cancelling the Custom Broker Licence of M/s. Jaiswal Import Cargo Services Limited whose consignment were never intercepted nor ever got examined by CFSL/PESO simply because his G-Card Holder was same as was for M/s. Guha Sarkar & Co. Ltd. whose consignment was intercepted. Question of cancellation of licence because of subsequent interception of consignment of similar goods is held to be highly unjustified which otherwise stands barred by principle of estoppel.
13. No doubt, CHA is a link between the Customs Authorities and the importers and the CBLR Regulations imposes obligation upon them which have to be taken as mandatory but law is also settled that not any and every infraction of the CHA Regulations either Regulation 13 or elsewhere leads to the revocation of license rather in line with a proportionality analysis and only grave and serious violation justify revocation. As it was held by this Tribunal in the case of Ashiana Cargo Services Vs. Commissioner of Customs (I & G) reported in 2014 (302) E.L.T. 161 (Del.), the Tribunal further clarified that revocation of licence under Rule 20(1) can only be justified in the presence of aggravating factors that allow infraction to be labelled grave. It is the presence of mensrea to act fraudulent or an act of corruption due to intentional violation of CBLR Regulations with an intent to evade duty which invites the punishment as that of cancellation of CB Licence. This punishment cannot be proportionate to the mere absence of due diligence. As far as M/s. Jaiswal Import Cargo Services Limited is concerned there is nothing on record to even show the absence of due diligence on their part. Thus, no reason appears to us for the cancellation of appellant’s CHA license. The penalty is also opined to be far beyond the proportion. Hence, same is also held liable to be set aside.
14. As a result of entire above discussion, the Order under challenge is set aside and Appeal stands allowed.
[Order pronounced in the open Court on 07.08.2019]