Case Law Details
Kamachi Steels Ltd Vs Commissioner of Customs (CESTAT Chennai)
Introduction: Kamachi Steels Ltd filed an appeal against the order of the Commissioner of Customs, Chennai, for confiscation of imported steel scrap. The appellant imported goods with a Pre-shipment Inspection (PSI) certificate issued by a branch office of the Inspection Agency, which did not comply with the prescribed format. Consequently, the goods were subjected to 100% examination, and no banned substances were found. However, the authorities imposed a redemption fine and penalties, leading to the appeal before the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) in Chennai.
The appellant argued that non-compliance with the PSI certificate issuance was only a procedural violation and did not warrant improper import of goods. The appellant relied on various precedents where courts reduced or set aside redemption fines and penalties in similar cases. The appellant contended that the excessive fines imposed were unreasonable, considering the goods underwent 100% examination and did not contain any prohibited items.
The respondent supported the imposition of fines and penalties, emphasizing the mandatory requirement of producing a valid PSI certificate under the Hand Book of Procedures. The respondent cited a decision from Kolkata to emphasize the importance of adhering to the PSI certificate requirement.
Conclusion: The CESTAT Chennai acknowledged the procedural violation by the appellant but recognized that the goods underwent 100% examination, revealing no banned substances. Considering this and the appellant’s cost and delay in the clearance process, the CESTAT Chennai found the imposed redemption fine and penalties excessive. Therefore, the CESTAT Chennai reduced the redemption fine to INR 1,00,000 and the penalty to INR 50,000. The appeal was partially allowed in favor of the appellant.
FULL TEXT OF THE CESTAT CHENNAI ORDER
Brief facts are that the appellant imported goods viz. steel scrap vie various Bills of Entry. On examination of the documents submitted by the importer/appellant, it was seen that the Pre-shipment Inspection Certificate submitted by the importer was issued by the Branch office of the Inspection Agency and therefore did not comply with the requirement as per para 5 (iii) of Public Notice No.152/2004 dated 19.10.2004. The said Public Notice incorporates Board’s circular No.56/2004 dated 8.10.2004 which states that metal scraps in unshredded, compressed or loose form has to be accompanied with a pre-shipment inspection certificate as per the format in Annexure-I to Appendix-8 issued by any of the inspection and certification agencies given in Appendix 28 of the Hand Book of Procedures (Vol.II). The consignment was therefore subjected to 100% examination. The examination did not reveal any remnants of arms, ammunition or banned substances. The goods were provisionally released. Thereafter, show cause notice was issued to the appellant proposing to confiscate the goods under section 111 (d) of Customs Act, 1962 read with Section 3 (8) of Foreign Trade (Development & Regulations) Act, 1992 and also for imposing penalties. After due process of law, the original authority held that the goods are liable for confiscation. As the goods had been provisionally released under bond redemption fine of Rs.10,42,820/-under Section 125 of Customs Act, 1962 was imposed and ordered for enforcement of the bond, if necessary. A penalty of Rs.4,46,922/-under Section112 (a) of Customs Act, 1962 was also imposed. Aggrieved by such order, the appellant filed an appeal before the Commissioner (Appeals) who upheld the same. Hence this appeal.
2. Ld. Counsel Sri A. Mudimannan appeared and argued for the appellant. It is submitted that the bills of entry were given first check to verify the correctness of the same. On verification, the shed officers submitted a report that the declaration of the description of the imported goods are correct and valid but the pre-shipment certificate is seen issued by the Branch office of the Inspection Agency which is listed in Appendix 28 of Hank Book of Procedures.
3. During the relevant period, this issue was faced by many importers and therefore the Importers’ Association made a representation before the Commissioner of Customs. A decision had then been taken to release the goods provisionally after making 100% examination of the goods. Accordingly, the goods have been subjected to 100% examination and there are no remnants of arms/ammunitions or any such banned items. The only reason for the authorities below to hold that goods are liable for confiscation is that the PSI certificate produced by the appellant is issued by the Branch office of the inspection agency listed under Appendix 28 of HBP and not the Agency itself. The said infraction is only a procedural one. It is not a case where the appellant had not produced any certificate at all. Ld. Counsel submitted that since the appellant has produced a certificate and even after examination of the goods, there is no report of hazardous goods contained in the consignment, the imposition of such huge redemption fine and penalty is unreasonable and unfounded.
4. The decision in the case of CC Vs Senor Metals Pvt. Ltd. – 2009 (236) ELT 445 (Guj.) was relied to argue that non-compliance of producing the pre-shipment certificate may entail the importer to undergo 100% inspection of the entire consignment. The same cannot be considered as improper import of goods. The order of the Tribunal setting aside, the confiscation and penalty was upheld by the Hon’ble High Court.
5. In the case of Electrosteel Castings Vs CC (Port) Kolkatta – 2009 (239) ELT 258 Tri.-Kolkatta), pre-shipment inspection certificate produced by the importer was not in the prescribed format and the date and place of inspection was not mentioned in the certificate. The Tribunal observed that since the consignment was subjected to 100% examination and nothing objectionable was found in the consignment, the redemption fine was reduced to Rs.25,000/- and the penalties were entirely waived.
6. In the case of Anugraha Valva Castings Ltd. Vs CC (Seaport), Chennai – 2013 (292) ELT 86 (Tri.-Chennai), the very same issue that PSI certificate for import of scrap was not issued by the listed agencies came up for consideration. The Tribunal set aside the redemption fine and reduced the penalty to Rs.10,000/-.
7. In the case of CC Kandla Vs M.K. Steel – 2008 (229|) ELT 707 (Tri.-Ahmd.), the certificate produced by the importer was disputed by Department as the same was issued by Denmark office instead of Benin office of the inspection agency. In the said case, the importer contended that Benin was a branch office which inspected the goods and the certificate was issued by Denmark which is the Head office. The Tribunal rejected the Department appeal.
8. Shri Shakti Iron & Steel Rerolling Mill Vs CC Kandla – 2014 (304) ELT 279 (Tri.-Ahmd) is another case where the very same issue of PSI certificate was analysed. As the goods were provisionally released after 100% examination and as the consignment did not contain arms or ammunitions or banned goods, the Tribunal set aside the redemption fine and penalties.
9. In the case of NGA Steels Pvt. Ltd. Vs CC Chennai – 2010 (262) ELT 578 (Tri.-Chennai), the Tribunal relied upon the decision of the Hon’ble High Court of Gujarat (supra) to hold that non-compliance with the fulfilment of conditions such as production of Pre-shipment Inspection Certificate may entail an importer to undergo 100% inspection of the entire consignment and that it would not tantamount to improper import of goods as per Section 111 of the Customs Act, 1962.
10. Ld. Counsel adverted to an order passed by the Commissioner (Appeals) vide OIA No.584/2013 dated 04.04.2013 wherein on the same set of facts, the Commissioner (Appeals) set aside the confiscation and penalties observing that non-production of the pre-shipment inspection certificate from unregistered office of the inspection agency was not intentional and only procedural violation. The Ld. Counsel prayed that the appeal may be allowed.
11. Ld. A.R Ms.Anandalakshmi Ganeshram supported the findings in the impugned order. On examination of the documents, it was revealed that the PSI certificate produced by the importer was issued by a branch office which was not enlisted in Appendix 28 of HBP though the agency was enlisted therein. Thus, the appelalnt has not complied with the mandatory requirement of para 2.32 of Hand Book of Procedures of Foreign Trade Policy 2004-09 which has come into force on 31.08.2004. For these reasons, the imposition of redemption fine and penalty is legal and proper. Electrosteel Castings Ltd. Vs CC Kolkata (supra) was relied by the Ld. A.R. to argue that PSI certificate is legal requirement and cannot be taken lightly or waived. Ld. A.R. prayed that the appeal may be dismissed.
12. Heard both sides.
13. The facts narrated above establish that the appellant has not complied with the requirement of producing a Pre-Shipment Inspection certificate as required under para 2.32 of Hand Book of Procedures. The goods have been subjected to 100% examination. There are no remnants of arms or ammunitions or any banned substances. Ld. Counsel for appellant has relied upon various decisions to argue that the goods have been subjected to 100% inspection and that the non-compliance of the requirement of production of PSI certificate would be only a procedural infraction and would not tantamount to improper import of goods. We take note of the fact that after inspection of the goods, there is no prohibited goods or banned substances. The original authority has imposed redemption fine of Rs.10,42,820/- and penalty of Rs.4,46,922/- which, in our view, is on the higher side. The decisions relied by the Ld. Counsel for appellant show that courts have been lenient to set aside the redemption fine and penalties. In the decision relied by the Ld. A.R the redemption fine and penalty has been reduced. Taking into consideration that the goods have been subjected to 100% examination and the fact that the appellant had borne the cost of such examination as well as the delay in clearance of goods, we are convinced that redemption fine and penalties imposed are too excessive. We reduce the redemption fine to Rs.1,00,000/– (Rupees One lakh only) and the penalty is reduced to Rs.50,000/- (Rupees Fifty thousand only).
14. In the result, the impugned order is modified and the appeal is partly allowed by reducing the redemption fine to Rs.1,00,000/-(Rupees One lakh only) and penalty to Rs.50,000/- (Rupees Fifty thousand only) imposed under Section 112 (a) of the Customs Act, 1962.
(Pronounced in court on 17.07.2023)
