Case Law Details

Case Name : Jayasakthi Papers Vs Commissioner of Customs (Madras High Court)
Appeal Number : W.P.(MD) Nos. 5161 & 5528 of 2021
Date of Judgement/Order : 26/03/2021
Related Assessment Year :

Jayasakthi Papers Vs Commissioner of Customs (Madras High Court)

The only question that arises for my consideration is whether the goods imported by the petitioner can be termed as a stock lot. This expression in normal parlance refers to those goods whose transaction value is less than the market value on account of their purchase during clearance sale or distress sale. But in the case on hand, the expression bears a different connotation altogether. The Director General of Foreign Trade has ascribed a particular meaning to this term in their trade notice No.8/2020-2021. Like Humpty Dumpty in Lewis Carroll’s ‘Through the Looking Glass’, when DGFT uses a word, it means just what it chooses it to mean-neither more nor less.

The imported paper consignment will qualify to be a stock lot, if it is without description for each category of the paper or if papers of different descriptions have been bundled together.

Trade Notice No.8/2020-2021 dated 04.05.2020 only insists that the importer should mention the correct description of paper being imported at 8 digit under ITC (HS) 4810. The importer must clearly specify the quantities of paper under each 8 digit ITC (HS) Code separately.

Only if the goods falling under different descriptions have been bundled together, then and then alone, they can be classified as stock lot. A mere look at the table issued by the Directorate General of Foreign Trade would show that the concept of GSM does not figure anywhere in 4810 13. The eight digit code in this case is 4810 13 90 and it does not envisage any GSM variations. 4810 13 deals with goods in rolls, while 4810 14 deals with goods in sheets. If 4810 13 and 4810 14 are compared, it can be seen that while dimensions are mentioned for sheets, no dimensions are mentioned for rolls. Therefore, the question of applying the yardstick of GSM variation in the case of 4810 13 will not arise at all.

In the case on hand, one consignment contains one sided coated paper rolls and the other consignment contains two sided coated paper rolls. The respondents have categorised the imported paper as falling under different heads only based on GSM dimensions. This is evident from the particulars set out in the mahazar referred to supra.

To reiterate, the key to the problem lies in the matter of classification. Classification is based on description of goods. If the imported goods can be demonstrated as falling under different codes and the importer has failed to describe each category of paper or if paper of different descriptions have been bundled together, then they would constitute a stock lot. In this case, the petitioner has classified the goods in question under eight digit ITC (HS) 4810 13 90. If the respondents are asked to classify the goods in question, they cannot come up with a different classification. Yet by introducing an impermissible yardstick namely, GSM variation, the respondents have arrived at a finding that the imported goods constitute a stock lot. This is patently illegal.

I, therefore, hold that the seizure and detention of the petition-mentioned goods is not warranted. The respondents are directed to release them. Since the petitioner cannot be blamed for the detention of the goods, he will be entitled to corresponding waiver. The respondents have to issue the necessary certificates.

FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

Heard the learned counsel appearing for the writ petitioner and the learned Standing counsel appearing for the respondents.

2. The petitioner is an importer of paper. He had imported two consignments from Canada. He filed the relevant ‘Bills of Entry’ for those two consignments. One consignment contained ‘two-sided coated paper in rolls’. The other consignment contained ‘one-sided coated paper in rolls’. The petitioner had mentioned that their classification falls under the Heading ‘481013 90’. He had also remitted the duty and other charges payable. The assessments were complete. When the goods were about to be cleared, the second respondent entertained a doubt that the imported goods are “stock lots” and seized them on 12.02.2021. The petitioner submitted representation on 16.02.2021 seeking their clearance on the ground that the consignments cannot be considered as ‘stock lots’. In the alternative, he prayed for provisional release. Since his request was not acted upon, the present writ petitions came to be filed.

3. The learned counsel appearing for the petitioner reiterated all the contentions set out in the affidavit filed in support of these writ petitions. He wanted this Court to direct the respondents to release the seized goods. The respondents have filed a detailed counter affidavit and the learned Standing counsel took me through the contents set out therein.

4. I wanted to know as to whether the respondents can consider provisional release of the goods subject to final adjudication. The learned Standing counsel replied that in view of the prohibited nature of the import, the goods may have to be re-exported or confiscated. Therefore, there was no scope for ordering provisional release. Thereupon, I directed the respondents to undertake a verification exercise in the presence of the petitioner and to submit a report. Accordingly, verification was done on 23.03.2021 and a mahazar has also been submitted before this Court.

5. The contention of the learned Standing counsel is that the goods in question were originally freely importable. But the Director General of Foreign Trade, Department of Commerce, Government of India, issued Notification No.45/2015-2020 dated 31.01.2020 prohibiting import of ‘stock lot’. An issue arose as to what was actually meant by the expression “stock lot”. Clarification was provided by the Director General of Foreign Trade vide Trade Notice No.8/2020-2021 dated 04.05.2020. It reads as follows:-

“Government of India
Ministry of Commerce & Industry
Department of Commerce
Directorate General of Foreign Trade

Dated 4th May, 2020.

TRADE NOTICE NO.8/2020-2021

To

1. Regional Authorities of DGFT
2. Customs Commissionerates
3. Members of Trade and Industry
4. Joint Secretary(Customs), CBIC

Subject : Clarification with regard to description of ‘Stock Lot’ used in the Notification No.45/2015-2020 dated 31st January, 2020.

Vide Notification No.45/2015-2020 dated 31st January 2020, import of Stock Lot under HSN Code 4810 of Chapter 48 of ITC(HS), Schedule-1(Import Policy) was ‘Prohibited’.

2. A number of representations were received seeking clarification with regard to description of ‘Stock Lot’ used in the said Notification. Accordingly, the matter has been examined in consultation with the Department for Promotion of Industry and Internal Trade (DPIIT) and following clarification is issued with reference to Notification No.45/2015 dated 31st January 2020:

a. Import of different kinds of paper description under all the 22 tariff lines covered under ITC(HS) 4810 is ‘Free’.

b. Importers should mention correct description of paper being imported at 8 digit under ITC(HS) 4810. They are expected to clearly specify quantities of paper under each 8 digit ITC(HS) Code separately.

c. If the whole imported paper consignment is without description for each category of paper it is a Stock lot.

d. The Customs would check before allowing consignments where the description of imported paper matches with any/some of the 8 digit entries under ITC(HS) 4810. The Customs would not allow consignment where paper of different description are intended to be imported and are bundled together under ITC (HS) 4810 as a Stock Lot.

e. In case paper proposed to be imported is not covered in any of the existing 8 digit ITC (HS) codes under ITC(HS) 4810, Trade is advised to request Department of Revenue for the creation of a new tariff with proper justification. This issues with the approval of the competent authority.

(Gagandeep Singh)
Deputy Director General of Foreign Trade
E-mail: s.gagandeep @nic.in

[Issued from F.No.M-5975/AM-04/PC-2[A]/e-5984]

6.The contention of the learned Standing counsel is that the petitioner had imported paper rolls of different GSM by bundling them together. They were also of various width. He drew my attention to the following particulars set out in the mahazar dated 23.03.2021 prepared by the authorities:

Bill of Entry No./Date Container Number (40“) Description of cargo declared Description of cargo Imported No. of packages declared No. of Packages found No.of Rolls/GSM
2485600/ 25.01.2021 BCMU 6380659 One side coated paper in Rolls One side coated paper in Rolls in different GSMs and different sizes 25 Rolls 10 Rolls/86 GSM 9 Rolls/81 GSM 5 Rolls/68GSM 1 Roll /90 GSM
2485273/ 25.01.2021 HLXU 4404569 Two side coated paper in Rolls Two side coated paper in Rolls in different GSMs and different sizes 16 Rolls 3 Rolls / 56 GSM 11 Rolls/66 GSM 2 Roll /68 GSM
BCMU 1236377 Two side coated paper in Rolls Two side coated paper in Rolls in different GSMs and different sizes 20 Rolls 1 Roll / 56 GSM 17Rolls/60GSM 1 Roll / 90 GSM 1 Roll / 74 GSM

According to him, the particulars gathered during the verification exercise clearly establish that what have been imported are a stock lot. He prayed for dismissal of the writ petitions.

7. I have carefully considered the rival contentions and went through the materials on record.

8. The only question that arises for my consideration is whether the goods imported by the petitioner can be termed as a stock lot. This expression in normal parlance refers to those goods whose transaction value is less than the market value on account of their purchase during clearance sale or distress sale. But in the case on hand, the expression bears a different connotation altogether. The Director General of Foreign Trade has ascribed a particular meaning to this term in their trade notice No.8/2020-2021. Like Humpty Dumpty in Lewis Carroll’s ‘Through the Looking Glass’, when DGFT uses a word, it means just what it chooses it to mean-neither more nor less.

9. The imported paper consignment will qualify to be a stock lot, if it is without description for each category of the paper or if papers of different descriptions have been bundled together.

10. Trade Notice No.8/2020-2021 dated 04.05.2020 only insists that the importer should mention the correct description of paper being imported at 8 digit under ITC (HS) 4810. The importer must clearly specify the quantities of paper under each 8 digit ITC (HS) Code separately.

11. Chapter-48 of ITC (HS) 2017 SCHEDULE 1-IMPORT POLICY deals with paper and related items. Each eight digit code refers to goods of a particular description. In P.Ramanatha Aiyar’s Law Lexicon, “description” is defined as the combination of qualities or features that marks out or describes a particular class. It is a representation by visible lines, marks, colours etc., It is the act of representing a thing by words or signs. In Black’s Law Dictionary (10th Edition), “description” is defined as an enumeration or specific identification of something. Likewise, each code occurring in the Chapters of Import Policy is a mode to describe goods of a particular class. Each code is a description by itself.

12. Chapter – 48 deals with paper and other related articles. The table occurring in the Chapter contains the following four columns:

Exim Code Item Description Policy Policy Condition

As we move from four digits to six digits to eight digits, the description becomes more specific and precise. 4810 contains general description and refers to paper and paper boards, coated on one or both sides with Kaolin(China Clay) or other inorganic substances, with or without a binder and with no other coating, whether or not surface-coloured, surface-decorated or printed, in rolls or rectangular (including square) sheets, of any size. 4810 13 deals with the aforesaid category “In rolls’. In 4810 13, there are four further sub-headings. They are as follows:

4810 13 In rolls:
4810 13 10 Imitation art paper Free
4810 13 20 Art paper Free
4810 13 30 Chrome paper or paper

Board

Free
4810 13 90 Other Free

Only if the goods falling under different descriptions have been bundled together, then and then alone, they can be classified as stock lot. A mere look at the table issued by the Directorate General of Foreign Trade would show that the concept of GSM does not figure anywhere in 4810 13. The eight digit code in this case is 4810 13 90 and it does not envisage any GSM variations. 4810 13 deals with goods in rolls, while 4810 14 deals with goods in sheets. If 4810 13 and 4810 14 are compared, it can be seen that while dimensions are mentioned for sheets, no dimensions are mentioned for rolls. Therefore, the question of applying the yardstick of GSM variation in the case of 4810 13 will not arise at all.

13. In the case on hand, one consignment contains one sided coated paper rolls and the other consignment contains two sided coated paper rolls. The respondents have categorised the imported paper as falling under different heads only based on GSM dimensions. This is evident from the particulars set out in the mahazar referred to supra.

14. To reiterate, the key to the problem lies in the matter of classification. Classification is based on description of goods. If the imported goods can be demonstrated as falling under different codes and the importer has failed to describe each category of paper or if paper of different descriptions have been bundled together, then they would constitute a stock lot. In this case, the petitioner has classified the goods in question under eight digit ITC (HS) 4810 13 90. If the respondents are asked to classify the goods in question, they cannot come up with a different classification. Yet by introducing an impermissible yardstick namely, GSM variation, the respondents have arrived at a finding that the imported goods constitute a stock lot. This is patently illegal.

15. I, therefore, hold that the seizure and detention of the petition-mentioned goods is not warranted. The respondents are directed to release them. Since the petitioner cannot be blamed for the detention of the goods, he will be entitled to corresponding waiver. The respondents have to issue the necessary certificates.

16. These writ petitions stand allowed accordingly. No costs. Consequently, connected miscellaneous petitions are closed.

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