1. The learned advocate for the petitioner has tendered a draft amendment. The amendment is allowed in terms of the draft. The same shall be carried out forthwith.
2. Rule. Mr. R. J. Oza, learned Senior Standing Counsel, waives service of notice of rule on behalf of the respondents.
3. Considering the nature of the controversy involved in the present case, the petition was taken up for final hearing and is finally disposed of by this judgment.
4. By this petition, the petitioner, a Public Limited Company, seeks the following substantive relief:
"[10] Under the circumstances, petitioners most respectfully pray that:
[A] Your Lordships may be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other writ, order or direction, quashing Detention Memo No.1/2010-11 dated 19.9.2010 (Annexure-G) and Seizure Memo dated 29.9.2010 (Annexure-H);
[A-1] Your Lordships may be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction, directing the respondents, their servants and agents for release of the goods in question for reprocessing the same on such terms and conditions as this Hon'ble Court deems fit and proper and after reprocessing the same, be permitted to clear the goods for home consumption after carrying out legal requirements, inclusive of test.
[B] Your Lordships may be pleased to issue an appropriate writ, order or direction, directing the respondents No.2 to 5 to decide representations for provisional release of goods imported vide Bill of Entry No.000198 dated 6.8.2010, Kandla Port;"
5. The facts of the case as appearing in the petition are that the petitioner company in the regular course of its business, entered into a contract with M/s PEC Limited for the purchase of 5,000 MT +/- 2% "Cottonseed Oil of Edible Grade" (fit for human consumption after further refining) on high seas sale basis. On arrival of the cargo at Kandla Port, the petitioner company filed Bill of Entry No.000198 dated 6.8.2010. Since the cargo was not being released, the petitioner furnished a PD bond for provisional assessment and release of the goods in question. The petitioner, in its letter dated 4.9.2010 addressed to the Customs Department, stated that after the cargo is released, the same would be refined at its factory under the custody of the Central Excise authorities. The petitioner also undertook that after confirmation of test results of samples, which would be forwarded subsequent to the refining, to the effect that the same meets with standards laid down under the PFA, the goods in question would be released for human consumption. The Bill of Entry filed by the petitioner was assessed provisionally pending the test reports for confirmation from the Central Excise as per PFA standards on 13.9.2010. Thereafter, the petitioner company requested the Customs Department to allow refining of the goods at its plants. Subsequently, the petitioner company received a copy of a letter dated 16.9.2010 addressed by the Assistant Commissioner (Group-1), Kandla, to the concerned Central Excise authorities, where the plants of the petitioner are situated. In the said letter, a reference to the test report given by the Port Health Officer, Kandla, on the samples drawn had been made in the following terms:
"PHK/E/131 to 134/2010 DOES NOT CONFORM to the standards & provisions as laid down under the Prevention of the Food Adulteration Rules, 1955, for Cottonseed Oil on account of Acid Value of 0.65% (0.5). On discussion with the Chief Technical Officer, CFL, Pune, the oil can be used for human consumption, only after proper & thorough cleaning, refining & conforming to the standards as laid under the item A-17 15 of PFA Rules, 1955, during this period the cargo must be under the custody of the Customs and Central excise. On completion of the refining, a sample has to be sent for analysis and on conformation to the PFA standards, the cargo must be released for human consumption."
Thereafter, there is a reference to the contents of the petitioner's letter dated 14.9.2010 after which it is stated thus:
"It is therefore requested to ensure that the following step at your end:
"[i] To ensure that cargo released from Kandla is reached at the declared plant having relevant Central Excise Jurisdiction thereon, cargo must be stored separately.
[ii] To draw the sample of the refined cargo and send to Director, CFL, Vadodara for testing purpose, intimating this office.
[iii] On receipt of the report from CFL, Vadodara, confirming the standards laid down in Prevention of the Food Adulteration Rules, 1955, the cargo may be released by Central Excise Authorities.
[iv] Report may be sent to this office."
In the footnote to the said letter, the petitioner company was directed to follow the instructions and release the cargo only after confirmation from Central Excise Authorities/customs, and that final assessment only could be done after conformation with the PFA standards.
6. Out of the entire cargo imported, the petitioner company lifted 135.950 MT for refining the same at its plant at Thor, District Mehsana. Vide letter dated 18.9.2010, the Customs Department directed the petitioner company to stop the delivery of cargo lifted till further order. Vide Detention Memo No.1/2010-11, the officers of Central Excise Department, Kadi detained the cargo which was lifted on 19.9.2010 after which, the Directorate of Revenue Intelligence (DRI), Gandhidham drew 12 samples of the said cargo and prepared a panchnama in that regard on 22.9.2010. Subsequently, by a communication dated 23.9.2010 issued by the Customs Department to the Central Excise authorities, a copy whereof was forwarded to the petitioner company, it was stated that further progress in the matter should not be allowed and there should be no further receipt of the cargo till further orders from DRI. Thereafter, the balance quantity of the entire cargo, being 4867.222 MT, came to be seized by the DRI on 29.9.2010 under the provisions of section 110 of the Customs Act, 1962 (the Act). Since the petitioner company was in dire need of the goods in question as a huge amount of capital was blocked for the purpose of procuring the same as well as in view of the fact that the goods were of perishable nature, the petitioner addressed a representation dated 4.10.2010 to the respondent No.4-Additional Director General, Directorate of Revenue Intelligence, with a copy to the respondent No.2-Commissioner of Customs, Kandla, requesting for release of the seized cargo on such terms and conditions as may be deemed fit pending inquiry into the matter. Subsequently, further representations and written submissions were made explaining that serious problems were likely to be caused due to delay in release of the goods in question and that irreparable financial loss running into crores of rupees was being caused to the petitioner company. Subsequently, the DRI advised the petitioner company to deposit the entire differential amount pertaining to the goods in question being Rs.1,62,96,312/- pursuant to which, the petitioner company deposited the said amount on 11.10.2010. Similarly, the petitioner company deposited the entire amount of differential amount of Rs.1,74,00,112/- in relation to goods imported in the year 2009 as directed by the DRI. Thereafter, various representations were made reiterating the hardships caused to the petitioner. However, since the representations remained unattended, the petitioner has moved the present petition seeking the relief noted hereinabove.
7. In response to the petition, an affidavit in-reply has been filed on behalf of the respondent No.5 Additional Director, Directorate of Revenue Intelligence, Gandhidham, controverting the averments made in the petition. It is stated that on detailed inquiry, investigation and re-testing of the samples taken by the DRI, it is revealed that the goods under seizure are "Refined Cottonseed Oil of Non-Edible Grade". It is stated that a show cause notice dated 14.12.2010 has been issued to the petitioner pursuant to the seizure and inquiry. That the Port Health Officer, Kandla had drawn four representative samples from four different compartment vessels and sent the same to the Food & Drugs Laboratory, Vadodara, which had issued four test reports, stating that the samples do not conform to the standards and provisions laid down under the PFA Rules for Cottonseed Oil on account of iodine values being more than the prescribed limit and very low acid value in comparison to other cottonseed oil. Thereafter, counter part samples were sent to the Central Food Laboratory, Pune, and the result of the analysis of the Central Food Laboratory, Pune, indicates that the samples do not conform to the standards and provisions laid down under the Prevention of Food Adulteration Rules, 1955 (PFA Rules), for cottonseed seed oil on account of high acid values. According to the respondents, the petitioners had intentionally declared the goods as "fit for human consumption after further refining" to show that the imported goods were of non-edible grade and would be made edible after further refining and to avail of the benefit of Circular No.29/97-Cus dated 31.07.1997 which defines the term "vegetable oils of edible grade" as the vegetable oils which are fit for human consumption at the time of import and the vegetable oils which are fit for human consumption after further processing. It is also stated that the test reports issued by the Central Excise & Customs Laboratory, Vadodara, and the Customs Laboratory, Kandla, showed that the subject goods were Refined Cottonseed Oil of Edible Grade and that gross variation was found in respect of acid values of the subject goods determined by the Food & Drugs Laboratory, Vadodara and Central Food Laboratory, Pune. That counter part sample drawn under panchnama dated 22.9.2010 was sent to Central Food Laboratory, Pune, for re-testing and vide report dated 24.10.2010, it was found that the sample contained higher iodine value and Bellier Test was less than 19.0 Degree Centigrade and hence, the same did not conform to the standards of Cottonseed Oil as per PFA Rules. It is, accordingly, stated that in the light of the said test report, it is amply clear that the subject goods are "Refined Cottonseed Oil of Non-Edible Grade".
8. In reply to the submission that the representations made by the petitioner have not been decided, it is stated that pursuant to the interim order of this Court in Special Civil Application No.12386 of 2006 filed by M/s Teej Impex Pvt.Ltd., the CBEC, New Delhi, had issued Circular No.28/2006-Cus., dated 6.11.2006, in consultation with the Ministry of Health & Family Welfare, instructing that all the consignments of edible/food products which fail PHO testing shall be re-exported or destroyed and permission for re-processing should not be allowed suo motu by the Commissioners. In view of the said instructions, the Customs authorities do not have any discretionary power to grant provisional release of the edible/food products, which fail the PHO testing. Therefore, the Department could not accede to the various representations made by the petitioner for grant of provisional release of the goods in question.
9. Mr. K. B. Trivedi, Senior Advocate, learned counsel for the petitioner invited attention to the various reports which have been received by the concerned authorities in relation to the samples taken by them, to submit that there are wide variations in the different reports. Whereas, the initial inquiry reports state that the goods are refined Cottonseed Oil (Edible Grade) which conform to the PFA standards, subsequent reports of the Central Food Laboratory, Pune, indicate that the goods in question do not meet with the PFA standards. It was submitted that in the show cause notice, the respondents have come out with a new case that the goods are Refined Cottonseed Oil of Non-Edible Grade, whereas none of the reports in question indicate that the goods in question are of Non-Edible Grade.
10. Inviting attention to the unreported decision of this Court in the case of M/s Teej Impex Pvt. Ltd., through Shri Vijay Joshi, Commissioner of Customs and others, rendered on 4.12.2006 in Special Civil Application No.12386 of 2006, it was submitted that in a similar set of facts, this Court has granted permission for re-processing the goods by issuing certain directions taking care of the interests of the revenue. It was submitted that the facts of the present case being similar to the facts of the said case, similar directions are required to be issued to the respondents subject to such conditions as may be deemed fit by this Court. Various other contentions have been also been advanced as regards the variations in the reports of different laboratories as well as the provisions of the Prevention of Food Adulteration Act, 1954 (PFA Act) and the Rules framed there under. However, considering the view that the Court is inclined to take in the matter, it is not necessary to set out the said contentions in detail.
11. The petition was opposed by Mr. R. J. Oza, learned Senior Standing Counsel appearing for the respondents, who invited attention to the averments made in the affidavit in-reply as well as the reports submitted by the Central Food Laboratory, Pune and more particularly, the last report dated 24.10.2010 of the Director, Central Food Laboratory, Pune, which indicates that iodine value is higher than the limit prescribed under the PFA Rules and Bellier test is lower than the limit prescribed under the said Rules. It was submitted that the reports indicate that the goods in question are refined cotton seed oil and considering the iodine content of the goods in question, the goods are non-edible in nature, inasmuch as food which has a high iodine content and even otherwise does not meet with the PFA standards, cannot be said to be of edible grade. Inviting attention to the provisions of sub-section (3) of section 13 of the PFA Act, it was submitted that the certificate issued by the Director of Central Food Laboratory under sub-section 2B supersedes the report given by the public analyst under sub-section (1) and as such, the report of the Central Food Laboratory, Pune, would supersede all other reports and therefore, is the only report on which reliance can be placed. It was submitted that the subject goods being non-edible and having failed on PFA parameters, cannot be released provisionally in the light of Circular No.28/2006-Cus. dated 6.11.2006 issued by the Government of India, Ministry of Finance, Department of Revenue, Central Board of Excise & Customs. Referring to the contents of the said Circular, it was submitted that in the present case, the food articles in question having been imported in the country and not found to be conforming to the prescribed standards, the customs authority suo motu would not be in a position to release the food articles for re-processing. In the light of the Circular No.58/2001-Cus. Dated 25.10.2001, all the consignments of edible/food products, which fail on PHO testing, are required to be re-exported or destroyed. Hence, only consignments of edible/food products which conform to the provisions of Prevention of Food Adulteration Act, 1954 and the Rules made there under are allowed to be imported into India and the consignments which do not conform to the provisions of the PFA Act and the PFA Rules are required to be dealt with in the manner prescribed in Circular No.58/2001-Cus. Dated 25.10.2001 and as such, the goods in question are required to be re-exported or destroyed.
12. Dealing with the last contention, Mr. K.B. Trivedi, learned counsel placed reliance upon a decision of the Bombay High Court in the case of Commissioner of Customs (Import), Raigad v. Amrit Banaspati Co. Ltd., 2007 (218) ELT 336 (Bom.) wherein the Court has held that the fact that section 18 of the PFA Act empowers the Court to allow clearance of the domestic goods subject to reprocessing, cannot be a mere ground to hold that the Tribunal constituted under the Customs Act cannot allow redemption of confiscated goods subject to reprocessing. It was held that in the absence of any bar under the Customs Act or the PFA Act, the Tribunal in an appropriate case is entitled to allow redemption of confiscated goods subject to reprocessing. It was accordingly, submitted that there is no bar to the Court allowing release of the goods subject to reprocessing.
13. Insofar as the contention raised by the revenue by placing reliance upon sub-section (3) of section 13 of the Act is concerned, it was submitted that the said provision would be applicable only in case where a sample has been sent to the concerned Central Food Laboratory by the Court as contemplated under sub-section (2) of the said provision. That in the facts of the present case, the said provision would not be applicable. Further, inviting attention to the provisions of section 6 of the PFA Act, it was pointed out that the present case falls within the ambit of sub-section (1) of section 6 of the Act and as such, the laboratory specified for the purpose of carrying out the functions under the Act would be the Central Food Laboratory, Mysore, as provided under Table-I below Rule 3 of the PFA Rules and that the Central Food Laboratory, Pune, which finds place in Table-II below Rule 3 of the Rules is a laboratory specified for the purposes of sub-section (2) of section 6 of the Act.
14. On a perusal of the averments made in the petition as well as considering the submissions made by the learned counsel for the petitioner, it is apparent that the main relief claimed in the petition is that the goods in question be permitted to be reprocessed and released subject to their conforming to the PFA standards on such conditions as may be deemed fit by this court. Reliance is placed upon the decision of this High Court in the case M/s Teej Impex Pvt. Ltd. (supra) wherein the Court in a case where the Hydrogenated Vegetable Oil (Vanaspati Ghee) was found to be not conforming to the standards of vanaspati as per PFA Rules, and there were conflicting reports, one stating that the goods conformed to the PFA Rules and another stating that the same did not conform to the PFA Rules, upon considering the perishable nature of the goods as well as the fact that the confiscated goods which were worth crores of rupees, could be destroyed, and nobody would be benefited by it, took support of the above referred Circular No.28/2006 and permitted reprocessing of the goods subject to certain conditions. The Court took care to ensure that firstly there was an expert opinion to the effect that after reprocessing the vanaspati ghee would be fit for human consumption conforming to the standards laid down in the PFA Rules.
15. In the aforesaid backdrop, examining the facts of the present case, a perusal of the various reports given by the different laboratories indicates that there are wide variations in the reports received from different laboratories. The Chemical Examiner, Customs Laboratory, Kandla, gave his test report dated 12.08.2010 stating that the goods in question were cotton seed oil having acid value = 0.04 and Iodine value =108.8. The report dated 12.08.2010 of the Gujarat Laboratory is to the effect that the sample conforms with prescribed quality in respect of PFA Rules. The test reports of the Food & Drugs Laboratory, Vadodara, dated 12.8.2010 indicate that the sample is edible oil falling under Item No.A.17.02 of the PFA Rules. The report further says that the sample does not conform to the standards and provisions laid down under the PFA Rules in respect of iodine value. (The iodine value ranges from 113.85 to 115.23, the normal range being 98 to 112.) As per the said report the result of analysis of sample also shows very low acid value in comparison of other crude cottonseed oil. The test reports of the Central Food Laboratory, Pune, dated 21.8.2010 are to the effect that the sample does not conform to the standards of cottonseed oil as per the PFA Rules. The test reports indicate that the acid value is higher than permissible. Pursuant to the aforesaid reports of the CFL, Pune, the Port Health Officer, Kandla has forwarded communication dated 30.8.2010 to the Commissioner of Customs, Kandla Port, wherein it is stated that the Director, CFL, Pune, is of the opinion that the sample does not conform to the standards and provisions as laid down under the Prevention of Food Adulteration Rules, 1955 for Cottonseed Oil on account of Acid Value of 0.65% (0.5). On discussion with the Chief Technical Officer, CFL, Pune, the oil can be used for human consumption, only after proper and thorough cleaning, refining and conforming to the standards as laid down under the Item A-17.15 of PFA Rules, 1955. During this period, the cargo must be under the custody of Customs and Central Excise. On completion of the refining, a sample has to be sent for analysis and on conformation to the PFA standards, the cargo must be released for human consumption. The test reports of the Chemical Analyzer, Central Excise & Customs Laboratory, dated 29.9.2010 indicate that the values obtained for the sample are within the limits mentioned for Cottonseed Oil Refined Grade (Edible Grade). There are no deviations observed in the standards prescribed under the PFA Act for refined edible grade cottonseed oil. The test reports of the Chemical Examiner, Grade I, Customs House Laboratory, Kandla, indicate that the sample does not require further refining or other treatment to make it edible, because other tested parameters already are in the range of refined cottonseed oil of edible grade as per 17.15 of Appendix-B of the PFA Act, 1954. It is further stated in the note that all the parameters of sample are already in the mandatory limit of refined cottonseed oil of edible grade as per PFA Act, 1954. Therefore, this product does not require further refining/ treatment in order to fulfill any further mandatory requirement of PFA quantitatively. The certificate of analysis dated 24.10.2010 of the Director, Central Food Laboratory, indicates that the sample shows iodine value more than 112.0, Bellier test less than 190 degree centigrade and hence, does not conform to the standards of cottonseed oil as per PFA Rules as per tests performed. (The iodine value indicated in the said report is 114.78).
16. As noted hereinabove, the certificate of analysis issued by the Director, Central Food Laboratory, Pune, indicates that Iodine value is more than 112.0 and that Bellier test is less than the prescribed standard. However, from the said report it is not clear as to whether the goods in question are of non-edible grade, as is sought to be contended on behalf of the respondents, or as to whether the goods can be made fit for human consumption upon reprocessing. In support of the contention that the goods in question are of non-edible grade, the learned Senior Standing Counsel for the respondents has placed reliance upon various parameters provided under the Prevention of Food Adulteration Rules, to submit that since the sample does not meet with the requirements laid down there under, the same are of non-edible grade. However, since show cause notice has already been issued to the petitioner and dealing with the said contention would amount to touching the merits of the case, the Court has refrained from dealing with the said contention.
17. As noted hereinabove, the record of the case as placed before this Court by way of affidavit in reply of the respondent No.5 makes it amply clear that there are conflicting reports of different laboratories and wide variations in the reports. The goods in question, by their very nature are perishable goods and as such if the same are retained in the same state till the pendency of the proceedings before the concerned authorities, the goods would be likely to spoil. Considering the quantity and the cost of the subject goods, if the goods are detained for a long period the same would cause immense financial loss to the petitioner and would not benefit any party. In the circumstances, the Court is of the view that the interests of justice would be served by following the decision of this High Court in the case of M/s Teej Impex Pvt. Ltd and disposing of the petition in the terms mentioned hereinafter and granting permission for re-processing of goods after obtaining an expert's opinion as to whether after re-processing, the goods in question will be fit for human consumption conforming to the standards as laid down under the Food Adulteration Rules, 1955. Moreover, as regards the Central Food Laboratory to which the sample should be sent for testing is concerned, on a perusal of the provisions of sub-rule (2) of Rule 3 of the PFA Rules, this Court is of the view that as to whether the Central Food Laboratory, Pune, is a laboratory specified for the purposes of subsection (1) of section 6 of the PFA Act is a matter of interpretation, whereas the Central Food Laboratory, Mysore, clearly is a laboratory specified for the purposes of sub-section (1) of section 6 of the PFA, Act. In the circumstances, without delving into the question as regards whether or not the Central Food Laboratory, Pune is a Laboratory specified for the purposes of sub-section (1) of section 6 of the PFA Act, the ends of justice would be met if the samples are sent for testing to the Central Food Laboratory, Mysore, as specified under Table-I of Rule 3 of the PFA Rules.
18. In the aforesaid facts and circumstances of the case, the petition is disposed of in the following terms:
The respondents-authorities are directed as under:
i. To send samples of the subject goods seized to the Central Food Laboratory, Mysore for testing for opinion as to whether, after re-processing, the goods in question will be fit for human consumption conforming to the standards of cottonseed oil prescribed in the Prevention of Food Adulteration Rules, 1955. This shall be done within one week from the date of receipt of this order. The Laboratory shall submit report within one week on receipt of the sample.
ii. On receipt of the report, if the report is in the affirmative, i.e., the Laboratory finds that, after re-processing, the goods will be fit for human consumption conforming to the standards of cottonseed oil prescribed in the Prevention of Food Adulteration Rules, 1955, then the petitioner shall be permitted to reprocess the goods within one week from the date of receipt of the report.
iii. After reprocessing of the goods, the respondents shall send samples of the re-processed goods again to the Central Food Laboratory, Mysore, for testing as to whether the re-processed goods are fit for human consumption conforming to the standards of cottonseed oil prescribed in the Prevention of Food Adulteration Rules, 1955. The Laboratory shall submit report within one week of the receipt of the sample. If the Laboratory submits the report in favour of the petitioner, the goods shall not be detained on this ground and shall be released in accordance with law;
iv. If either of the reports is against the petitioner, then the respondents shall take appropriate steps under the provisions of the Customs Act.
19. With the aforesaid directions, this petition stands disposed of.
20. It is clarified that the aforesaid directions shall be without prejudice to the rights of either of the parties in the adjudication proceedings and the release of goods pursuant to the aforesaid directions shall be subject to the final order that may be passed in the adjudication proceedings.
21. Since the aforesaid directions have been issued merely to obviate the hardships that could be caused to the petitioner on account of an irreversible situation arising in case the petitioner finally succeeds in the adjudication proceedings, it is clarified that the petitioner shall not claim any equity based on this order.
Direct service is permitted.