Case Law Details
Additional Director General Vs Hazel Mercantile Ltd (Gujarat High Court)
t appears from the materials on record that the respondent No.1 herein imported goods declaring the same to be ‘Naphtha’ classified under CTH 27101229. The goods were imported at the Kandla Port vide the Bills of Entry. It appears that the respondent No.2 herein – Commissioner of Customs, Kandla, was not convinced with the declaration as regards the nature of the goods. In such circumstances, the samples were drawn and those were sent for testing to the Customs House Laboratory at Kandla. The Chemical Examiner, Customs House Laboratory, Kandla certified that the sample is ‘Natural Gasoline Liquid’. Upon receipt of such report from the Laboratory, the respondent No.2 confronted the respondent No.1 of having mis-declared and mis-classified the imported goods as Naphtha under the CTH 27101229. In view of the aforesaid, the entire consignment imported by the writ applicant came to be seized under Section 110 of the Customs Act, 1962
Having heard the learned counsel appearing for the parties and having gone through the materials on record, we are of the view that at this point of time without entering into any other controversy, we must pass an appropriate interim order that may protect the interest of both, the respondent No.1 also and at the same time the writ applicant DRI. It is very clear that even if the respondent No.1 is permitted to re-export the goods as ordered by the Tribunal, it is always open for the Department to initiate appropriate proceedings for the purpose of confiscation of the goods by issue of a show cause notice. All larger issues involved in this litigation shall be looked into and decided.
We are of the view that we should permit the respondent No.1 to re-export the goods on the condition that the respondent No.1 shall furnish a running Bank Guarantee of an amount of Rs.15 Crore of any Nationalized Bank in favour of the respondent No.2, Commissioner of Customs, Kandla. This would definitely protect the interest of the Revenue to some extent.
As the vessel is now ready to sail its going to be very difficult for the respondent No.1 to furnish the bank guarantee by today itself. In such circumstances, Mr. Nankani, the learned senior counsel submitted that an authorized representative of the Company i.e. the respondent No.1 shall file an undertaking in the form of an affidavit before this Court stating that the bank guarantee of the amount of Rs.15 Crore shall be furnished to the respondent No.2 by 31.01.2022 without fail. For the present, we permit the respondent No.1 to proceed with the re-export of the goods on the respondent No.1 furnishing a bank guarantee of Rs.15 Crore in favour of the respondent No.2 by 31.01.2022. The respondent No.1 be permitted to re-export the goods by using the nomenclature “Naphtha” and it is observed that using of the said nomenclature would not bind the Department (DRI) and would not entitle the respondent No.1 to raise a plea of estoppel in the proceeding that may be initiated by the DRI against the respondent No.1.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
Draft amendment is allowed. Necessary incorporation shall be carried out at the earliest.
As we intend to pass an interim order in this writ application, it is necessary for us to give a fair idea about the subject mater of this litigation.
1. By this writ application under Article 226 of the Constitution of India, the writ applicant, the Directorate of Revenue Intelligence has prayed for the following reliefs:
“39
A. Your Lordships be pleased to issue writ of mandamus or writ of certiorari or any other order, direction or writ in the nature of certiorari, quashing and setting aside the impugned orders dated 03.12.20221 passed in Appeal No.C/10953/2021 and 06.01.2022 passed in Misc. Application No.10547 of 2021 by the Customs, Excise and Service Tax Appellate Tribunal, Ahmedabad.
B. Your Lordships be pleased to direct the Customs, Excise and Service Tax Appellate Tribunal, Ahmedabad to stay the implementation and operation of the impugned orders dtd. 03.12.2021 passed in Appeal No.C/10953/2021 and 06.01.2022 passed in Misc. Application No.10547 of 2021;
C. To grant such other and further relief as the Hon’ble High Court may deem fit and appropriate in the facts and circumstances of the case.”
2. It appears from the materials on record that the respondent No.1 herein imported goods declaring the same to be “Naphtha” classified under CTH 27101229. The goods were imported at the Kandla Port vide the Bills of Entry. It appears that the respondent No.2 herein – Commissioner of Customs, Kandla, was not convinced with the declaration as regards the nature of the goods. In such circumstances, the samples were drawn and those were sent for testing to the Customs House Laboratory at Kandla. The Chemical Examiner, Customs House Laboratory, Kandla certified that the sample is “Natural Gasoline Liquid”. Upon receipt of such report from the Laboratory, the respondent No.2 confronted the respondent No.1 of having mis-declared and mis-classified the imported goods as Naphtha under the CTH 27101229.
3. In view of the aforesaid, the entire consignment imported by the writ applicant came to be seized under Section 110 of the Customs Act, 1962. The seizure memo dated 26.02.2021 is annexed as Annexure E at Page 30 of the paper book.
4. It appears that after the seizure of the goods, the writ applicant herein came before this High Court by filing the Special Civil Application No. 7840 of 2021 seeking the following reliefs:
“(A). That direction may be given to quash the illegal seizure memo dated 26.2.2021 issued by the Respondent No.2 and declare the seizure of the imported goods as illegal, and unauthorized by law:
(B) That direction may be given to the Respondents to release the subject goods without any condition with immediate effect as per the Fresh Test Report analyzed by the Indian Institute Of Petroleum in respect of the sealed Sample No.5 and the Test Report analyzed by the Geo-Chem Laboratories Private Limited in respect of the Sealed Sample No.4 and it may be declared that the Seizure Memo issued by the respondent should be declared as null and void in the interest of justice.
(c) That the Test Report submitted by the Geo-Chem Laboratories and Indian Institute Of Petroleum Dehradun in respect of the Sealed Sample No.4 and 5 which confirms that the subject goods are Naptha should be declared as a valid test report in the interest of justice.”
5. Thus, the writ applicant prayed for two fold reliefs; first a declaration that the entire seizure was illegal and secondly, the goods be released having regard to the fresh test report of the Indian Institute of Petroleum.
6. The Special Civil Application No.7840 of 2021 came to be rejected holding that the entire exercise of seizure was an interim measure pending the investigation. A Coordinate Bench of this Court declined to entertain such application substantially on the ground that the entire issue of the seizure memo being disputed on the basis of test report essentially would be a disputed question of the fact.
7. It appears that the order passed by the Coordinate Bench referred to above was challenged before the Supreme Court by way of Special Leave Petition (SLP) No. 15718 of 2021. The said SLP came to be disposed of vide order dated 08.10.2021 in following terms:
“The impugned order directs that the petitioner is entitled to press its application for provisional release udner Section 110 of the Customs Act, 1962 and the Authorities have been directed to decide the application, in accordance with law within a period of four weeks from the date of receipt of certified copy of the order of the High Court.
We hope and trust that the Authorities will comply with this direction and the petitioner would fully cooperate in this regard.
We are not inclined to interfere with the impugned order. The special leave petition is dismissed.
Pending application(s), if any, stand disposed of.”
8. Thus, the Supreme Court, while dismissing the SLP clarified that at the most the petitioner (respondent No.1) herein can pursue its application filed for the provisional release of the goods under Section 110A of the Customs Act, 1962.
9. The application filed by the respondent No.1 for the provisional release of the goods under Section 110A of the Act came to be rejected vide communication dated 27.10.2021 (Annexure M, Page 87).
10. The respondent No.1 being dissatisfied with the decision of the respondent No.2 herein not to release the goods provisionally, went in appeal before the Customs, Excise & Service Tax Appellate Tribunal, West Zonal Bench at Ahmedabad, ( for short “CESTAT”). The Tribunal thought fit to set aside the order passed by the Commissioner declining provisional release and allowed the
Appeal filed by writ applicant herein in the following terms:
“04. We have carefully considered the submissions made by both the sides and perused the records. We find that the limited issue to be decided in the present case is that whether the seized imported goods which was warehoused by filing warehouse Bills of entry which is exclusively meant for export can be released provisionally for export or otherwise. Since the proceeding of DRI is continued, no final conclusion can be drawn as regard the allegation of DRI that whether the appellant have correctly classified the goods and/or valued the imported goods therefore, we proceed to decide only the issue of release of the goods. We find that since the goods before import and warehousing was intended to be exported, no prejudice will cause to the revenue with regard to dispute, if any for classification of goods and/or valuation of the goods. There is no dispute on the fact that the appellant had export order in possession, moreover, they had received the part payment against the export order therefore, it is clear that the goods which were warehoused and the goods seized by the DRI was already meant for export. In this position, the mala fide cannot be attributed to the appellant. The appellant have heavily relied upon the provisions of Foreign Trade Policy and Hand Book Procedure, the same is reproduced below:
FOREIGN TRADE POLICY 2015-20
“1.23 Free passage of Export consignment: Consignments of items meant for exports shall not be withheld delayed for any reason by any agency of Central/State Government. In case of any doubt, authorities concerned may ask for an undertaking from exporter and release such consignment
1.24 No seizure of export related Stock: No seizure shall be made by agency so as to disrupt manufacturing activity and delivery schedule of exports. In exceptional cases, concerned agency may seize the stock on the basis of prima facie evidence of serious irregularity. However, such seizure should be lifted within 7 days unless the irregularities are substantiated.
“2.36 Private/Public Bonded Warehouses for Imports (a) Private/Public bonded warehouses may be set up in DTA as per rules, regulations and notifications issued under the Customs Act, 1962. Any person may import goods except prohibited items, arms and ammunition, hazardous waste and chemicals and warehouse them in such bonded warehouses.
(b) Such goods may be cleared for home consumption in accordance with provision of FTP and against authorization, wherever required. Customs duty as applicable shall be paid at the time of clearance of such goods. The clearance of the warehoused goods shall be as per the (C) provisions of the Customs Act, 1962.
FOREIGN TRADE PROCEDURES
“2.36 Warehousing Facility
(a) Public/Private Customs Bonded Warehouses may be set up in DTA as per Chapter-IX of Customs Act, 1962, to import items in terms of Paragraph 2.36 of FTP. On receipt of goods, such warehouses shall keep these goods for one year without payment of applicable customs duties. Goods can be cleared against Bill of Entry for home consumption, on payment of custom duty and on submission of authorization wherever, required, after an order for clearance of such goods for home consumption is issued by competent customs authorities. In case of clearance against duty free categories /concessional duty categories, exemption/concession from duty shall be allowed.
(b) Goods can be re-exported without payment of customs duty provided shipping bill or a bill of export is presented in respect of such goods; and order for export of such goods has been made by competent customs authorities.
From the above provision, it is clear that continued withholding of export consignment even if seized by any agency is not appreciated as per ‘Foreign Trade Policy’. After drawl of samples, the seized goods can be allowed to clear for exports pending investigations by accepting undertaking of the exporter.
4.1 The goods other than prohibited goods can be imported, ware housed in public/private bonded warehouse without payment of duty. Authorization for clearance and duty payment is required only for clearance for home consumption which in the present case had not been sought by the appellant as the goods are meant for export only. The warehoused goods can be re exported without payment of customs duty under shipping bills. Therefore, In view of the clear provision under ‘Foreign Trade Policy’ and ‘Hand book Procedure’ as reproduced above, the goods which are under seizure is required to be released provisionally for export without payment of duty. We also find that the department could not make a prima facie case even for seizure of the goods in view of the contrary test reports.
4.2 As per our above discussion and findings, we are of the clear view that the warehoused goods which are meant for export only must be released provisionally by accepting only a bond of the total value of the goods, accordingly, we direct the concerned respondent to release the goods provisionally on execution of only a bond for full value of the goods and the same shall be allowed to be exported without any payment of duty, fine, penalty. The appellant is given liberty to approach the concerned authority for issuance of waiver certificate for the demurrage charges which the concerned authority shall consider in the facts and circumstances of the present case, in accordance with law.
11. It appears that the respondent No.1 preferred Misc. application seeking direction to the Commissioner to implement the order passed by the Tribunal dated 03.12.2021. The Tribunal disposed of the said Misc. Application vide order dated 06.01.2022 in the following terms:
“From the above judgments of the Hon’ble Apex Court, it is settled that the order of the Higher authority is binding on the lower authority. Accordingly, the full effect of the order should be given by the lower authority. As regard the decision cited by learned Authorised Representative in the case of Commissioner of lewe lers(supra). The Customs (Preventive), Kochi Kallarackal of that case are entirely different from the facts of this case. The Tribunal has power to pass an order under Rule 41 to implement the final order which was already passed. In the case cited by the learned Authorised Representative, the fact was that in the main petition itself the single judge of the Hon’ble High Court has released the goods despite the petition being pending before him. Therefore, the facts are different hence, the case is cited by learned Authorised Representative not clear y applicable in the facts of the present case. Accordingly, we direct the Respondent to implement the order of this Tribunal dated 03.12.2021 with immediate effect and the compliance of the same be reported on 11 January, 2022. Copies of the order be given dasti to both the sides.”
12. It appears that when the decks got cleared for the respondent No.1 herein for the purpose of getting the goods reexported in accordance with the order passed by the Tribunal, the DRI thought fit to come before this Court by this writ application, questioning the legality and validity of the order passed by the Tribunal ordering provisional release of the goods for the purpose of export.
13. We have heard Mr. Devang Vyas, the learned Additional Solicitor General of India assisted by Mr. Dhaval Vyas, the learned senior standing counsel appearing for the writ applicant, DRI and Mr. Vikram Nankani, the learned senior counsel assisted by Mr. Hardik Modh, the learned counsel appearing for the respondent No.1.
14. At the outset, Mr. Nankani, the learned senior counsel raised a preliminary objection as regards the very maintainability of the present writ application essentially on the ground of propriety. Mr. Nankani would submit that apart from propriety even otherwise the writ application is not maintainable as an appeal would lie before this High Court under Section 130 of the Customs Act. He would submit that such appeal under Section 130 of the Act can be entertained by the High Court only on the substantial questions of law, if involved any. Mr. Nankani pointed out that the writ application has been affirmed by the Assistant Director, DRI, Gandhidham, whereas the writ application has been filed by a higher authority i.e. the Additional Director General. He would submit that if the Assistant Director, DRI, Gandhidham thought fit to affirm the writ application then he is subordinate to the respondent No.2 i.e. the Commissioner of Customs. The entire edifice of the argument is that if the Additional Commissioner of Customs (respondent No.2) has accepted the order passed by the Tribunal then how could the DRI have thought fit to prefer a writ application challenging the order of the Tribunal.
15. Mr. Nankani further submitted that his client as on date is in a very precarious situation. Pursuant to the order passed by the Tribunal, he is all ready to sail with the goods. He submitted after taking instructions from his client that 50% of the goods have already been uploaded in the vessel and the vessel is likely to leave tonight. He has paid more than Rs.3 Crore as the freight charges. He submitted that he has already executed a bond of the value of the goods declared by him as directed by the Tribunal.
15. Mr. Nankani submitted that there are many other contentions available to him to be canvassed on the merits of the matter. He would submit that the Tribunal committed no error much less an error of law in passing the impugned order of provisional release of goods for the purpose of export. He laid much emphasis on the fact that his client had an export order in possession and had also received part payment against the export order. In such circumstances, the goods which were warehoused and seized by the DRI was already meant for the export. He would submit that the warehoused goods can be re-exported without payment of any customs duty under the shipping bills.
16. Mr. Nankani made a fervent appeal that this writ application may be heard by this Court on its own merits, but his client may be permitted to re-export the goods upon furnishing of some tangible security to the satisfaction of this Court, so as to protect the interest of the revenue. He would submit that any delay on the part of his client in re-exporting the goods would lead to an irreparable injury, which cannot be compensated in terms of money.
17. Mr. Vyas, the learned ASG submitted that he would make good his case as regards the maintainability of the present writ application at the instance of the DRI. Mr. Vyas criticized the impugned order passed by the Tribunal by submitting that Section 110A does not contemplate provisional release of the seized goods for the purpose of export. In other words, if we have understood the argument of Mr. Vyas correctly, the Authority has power to order provisional release of the seized goods under Section 110A but while passing such order, cannot permit reexport of the goods. He would submit that the goods are liable to confiscation. Ultimately, at end of the adjudication proceedings, if an order of confiscation is passed, redeemption fine would be imposed along with penalty and interest.
19. Manifold other contentions were raised by Mr. Vyas, the learned ASG, while assailing the impugned order passed by the Tribunal.
20. Having heard the learned counsel appearing for the parties and having gone through the materials on record, we are of the view that at this point of time without entering into any other controversy, we must pass an appropriate interim order that may protect the interest of both, the respondent No.1 also and at the same time the writ applicant DRI. It is very clear that even if the respondent No.1 is permitted to re-export the goods as ordered by the Tribunal, it is always open for the Department to initiate appropriate proceedings for the purpose of confiscation of the goods by issue of a show cause notice. All larger issues involved in this litigation shall be looked into and decided.
21. We are of the view that we should permit the respondent No.1 to re-export the goods on the condition that the respondent No.1 shall furnish a running Bank Guarantee of an amount of Rs.15 Crore of any Nationalized Bank in favour of the respondent No.2, Commissioner of Customs, Kandla. This would definitely protect the interest of the Revenue to some extent.
22. As the vessel is now ready to sail its going to be very difficult for the respondent No.1 to furnish the bank guarantee by today itself. In such circumstances, Mr. Nankani, the learned senior counsel submitted that an authorized representative of the Company i.e. the respondent No.1 shall file an undertaking in the form of an affidavit before this Court stating that the bank guarantee of the amount of Rs.15 Crore shall be furnished to the respondent No.2 by 31.01.2022 without fail. For the present, we permit the respondent No.1 to proceed with the re-export of the goods on the respondent No.1 furnishing a bank guarantee of Rs.15 Crore in favour of the respondent No.2 by 31.01.2022. The respondent No.1 be permitted to re-export the goods by using the nomenclature “Naphtha” and it is observed that using of the said nomenclature would not bind the Department (DRI) and would not entitle the respondent No.1 to raise a plea of estoppel in the proceeding that may be initiated by the DRI against the respondent No.1.
23. The authorized representative of the respondent No.1 shall file an affidavit latest by tomorrow morning stating that by 31.01.2022, the necessary bank guarantee shall be furnished to the respondent No.2. The affidavit that may be filed shall be kept with record of this case i.e. the original shall be kept in the paper book of this Court.
24. Let Notice be issued to the respondents returnable on 17.02.2022. No notice now be issued to the respondent No.1 as Mr. Modh, the learned counsel already entered his appearance. Notice be issued respondent No.2 shall be served by Email. Direct service is permitted.
We permit Mr. Modh, the learned counsel appearing for the respondent No.1 to tender the affidavit directly to the Registrar (Judicial), who in turn shall place the same in the paper book of this Court. One copy of such affidavit shall be furnished to Mr. Dhaval Vyas, the learned senior standing counsel appearing for the writ applicant. One copy of the bank guarantee also shall be furnished to Mr. Vyas.
