Case Law Details
Case Name : Commissioner of Customs Vs Orion Enterprises (Delhi High Court)
Appeal Number : Customs Appeal No.- CUSAA 4/2013
Date of Judgement/Order : 25/08/2015
Related Assessment Year :
Brief of the case:
The Delhi High Court in the case of Commissioner of Customs vs. Orion Enterprises held that as per Basmati Rice Rules if the rice doesn’t qualify as Basmati rice then the same cannot be exported as the export of non-Basmati rice is illegal and liable to confiscation. To qualify as Basmati rice the consignment must satisfy length as well as component parameters.
Facts of the case:
- The assessee filed shipping bills for export of ‘PUSA 1121 Basmati Sella Rice’. After the order of high court, the samples were sent for testing to RegionalAgmark Laboratory, Okhla, New Delhi (RAL).
- The RAL in its report reported that the sample does not conform to standards prescribed in Basmati Rice (Export) Grading and Marketing Rules, 1979.The sample conforms to the requirements of length and length/breadth ration as per the Notification dated 5th November, 2008 of the Director General of Foreign Trade.
- On seeking clarification , RAL confirmed that samples were not conforming to the Basmati
Rules as they contained ‘other rice’ in a proportion that exceeded 20% which was the maximum permitted under the said Rules. Secondly, the rice did not possess the natural fragrance in both raw and cooked stages. Hence, these sample could be considered as samples of Basmati Rice.
- A show cause notice was issued to assessee stating that the samples were not conforming to the Basmati Rice “as they were having other rice more than 20% (maximum permitted under the
rules) and do not possess the natural fragrance in both Raw and Cooked stages.
- Since the export of Non-Basmati Rice is prohibited u/s 113(d) of Customs Act, 1962 , the goods tendered for export are liable to confiscation.
- The SCN was adjudicated by Additional Commissioner of Customs who ordered confiscation of the seized goods and also imposed a penalty of Rs.3,00,000.
- In appeal before CESTAT , the case was decided in favour of assessee as CESTAT observed that the counsel for the Revenue had been unable to point out any notification of the DGFT which prescribes that the AGMARK standards had to be applied to decide whether the goods
were Basmati Rice or otherwise.
- Aggrieved by the said order , Revenue is in appeal before Hon’ble High Court.
Contention of Assessee:
- The samples clearly conformed to the requirements of length and the length/breadth ratio in terms of the DGFT notification dated 5th November, 2008. There was no such requirement regarding percentage of other rice component.
- Further,assessee contended that Bureau of Indian Standards in response to a query under Right to Information (RTI) replied that there was no Indian Standard or method to differentiate non-Basmati Rice from Basmati Rice.
- Even Further , the assessee also made a reference of reply received from Ministry of Agriculture in response to a query that Basmati Rice rules were made to ascertain the ‘quality of Basmati
- Thus , the ‘other rice’ component exceeding 20% as reported in test report of RAL could include even other varieties of Basmati rice which may not be able to be determined in terms of the Basmati Rules.
Contention of Revenue:
- DGFT Notification dated 5th November, 2008 prohibits the export of non-Basmati rice, this meant that the consignmenthad to also conform to the requirement of the Basmati Rice Rules.
- Schedule 2 to the Basmati Rice Rules specifies the maximum presence of other rice including red grain as 20%.
- Therefore, only satisfaction to length parameters is not enough rather the consignment should also satisfy the component parameter laid down in Schedule 2 of Basmati Rice Rules which had not been so satisfied in the present case as indicated by RAL test reports.
- Hence, the goods tendered for export were Non-Basmati Rice which are prohibited goods and liable for confiscation.
Held by Hon’ble High Court:
- The point of dispute in the present case is that whether rice tendered for export are Basmati or Non-Basmati which is essential to check the legality of proposed export.
- The department had relied on tests report submitted by RAL whichstated that non-basmati rice, was more than the permissible maximum limit of 20%.
- The contention of the respondent that the other rice component is also a type of Basmati Rice cannot be sustained without any evidence submitted by assessee that the other rice was also Basmati rice.
- Therefore, the test reports are more than enough to determine whether the rice tendered to be export are Basmati or other rice and the same cannot be questioned without any contra finding to the testing done by RAL.