Geekay Sales Corporation Vs. Commissioner of Customs - Court Judgment

Excerpt:
1. there are two applications before me, one for waiver of pre-deposit and stay of recovery in respect of an amount of penalty of rs. 15,000/- and the other for early disposal of the appeal. after examining the records and hearing both sides, i am of the view that the appeal itself requires to be disposed of at this stage. accordingly, after allowing the early hearing application and dispensing with pre-deposit, i take up the appeal.2. the appellants are traders. they trade in potable mineral water also. they imported a consignment of what was declared as 'montes natural mineral water' from austria in september, 2004 and filed a bill of entry for its clearance (the declared assessable value of the goods was rs. 55,929/-). the consignment was ordered for first check and referred to the port health officer (pho), who took representative samples in the presence of the importer as well as customs officers and sent them to the central food technological research institute (cftri).the cftri tested the samples and reported that they did not conform to the standards laid down for mineral water under the prevention of food adulteration act, 1954 (pta act, for short) and the rules thereunder.more precisely, the ph value of the test samples was found to be less than the minimum requirement, while the sulphate and magnesium contents of the samples exceeded the maximum prescribed under the pfa act. the pho communicated these results to the customs authorities and further noted that, as the imported item did not confirm to the pfa standards of potable mineral water, it could be released only for industrial purpose. the department, relying on the cftri test report, found that the imported consignment did not satisfy the requirement of itc (hs) classifications of export and import items and hence was liable to confiscation under section 111 of the customs act. in an effort to get over the department's objections, the party produced two certificates, one from the environmental survey laboratory (kalpakkam) of the bhabha atomic research centre under the department of atomic energy, government of india and the other from a private agency viz. sgs india ltd., chennai. the environmental survey laboratory certified that the concentration of radionuclides in the natural mineral water sample was within the prescribed limits under is : 13428 : 1998 and further that the sample was fit for human consumption. the test report of m/s. sgs india ltd. also was in favour of the importer. these reports, however, did not weigh with the customs authorities as they insisted that the cftri was the only competent authority to test and report on the potability of water samples. accordingly, after hearing the party, the assistant commissioner of customs passed an order of absolute confiscation of the goods under section 111(d) of the customs act. he also ordered destruction of the water under customs supervision, besides imposing a penalty of rs. 15,000/- under section 112 of the act on the importer. before the first appellate authority, the party requested for cross-examination of the author of the test report issued by cftri. this request was not acceded to by the appellate authority after noting that a report of the cftri issued to the party in respect of an earlier consignment of mineral water was in their favour. the appellate authority found no bias on the part of cftri, which had issued a favourable report to the party in respect of their earlier consignment of mineral water and an unfavourable report in respect of their subsequent consignment. the appellate authority rejected the test reports of m/s. sgs india ltd. and environmental survey laboratory and relied on the cftri report and upheld the decision of the lower authority.3. note 6 of the general notes regarding import policy (vide volume - 3, itc (hs) classifications of export and import items), to the extent necessary for the present case, reads as under: 6. import of all the products as per appendix iii to schedule i of the itc (hs) classifications of export and import items, 1997-2002, shall be subject to compliance of the mandatory indian quality standards as mentioned in column 2 of the said annexure, which are also applicable to domestic goods. for compliance of this requirement, all manufacturers/exporters of these products to india, shall be required to register themselves with bureau of indian standards (bis). alternatively certification of the products under mandatory quality indian standards will be permitted under the bis product certification scheme for indian importers provided all the following conditions are met: the indian importers would have to apply to bis for seeking a licence for each of the notified product he intends to import. bis would record the application after satisfying itself that all the above conditions are met and that the applicant importer has installed the test facilities. based on the recording of application, the customs can clear the consignment, which will be tested by the bis and a licence issued if the product conforms to the relevant indian standard. the importer would use the material only after grant of licence for the first lot so imported and for the subsequent imports, after testing the product for conformance to indian standard.manufacturers/exporters of the products mentioned in schedule-i appendix iii of itc (hs) classifications of export & import items register themselves with the bureau of indian standards (bis).admittedly, in the present case, the austrian suppliers of mineral water had not got themselves registered with the bis. the second part of the above note deals with an alternative scheme, whereunder the indian importers of the aforesaid goods would have to apply to bis for licence for importing the goods and bis would issue such licence after satisfying itself that all the three conditions (a), (b) and (c) mentioned above are met and that the importer has installed the necessary test facilities. upon such certification by bis, the customs authorities would clear the consignment, which would be tested by the bis. bis would issue licence only if, on such test, the product is found to confirm to the indian standards. in the present case, admittedly, the appellants are traders without any test facilities and also did not intend to make captive use of the mineral water imported by them. the import was made for retail sale in the indian market. thus the appellants did not satisfy the requirements of the alternative scheme either. in the circumstances, the imported goods offended the import policy of the government. the consignment thus attracted section 111(d) of the customs act for confiscation. consequently, the penal provision of section 112(a) of the act also became applicable. hence confiscation and penalty are irresistible in this case.4. on the question whether the mineral water imported by the appellants is redeemable under section 125 of the act, it has been submitted by id. consultant that the goods should have been allowed to be redeemed against payment of reasonable fine having regard to the fact that the environmental survey laboratory of barc, a governmental agency, had categorically certified samples of the goods to be fit for human consumption. it has also been pointed out by id. consultant that test certificate issued by the said laboratory found water samples to be within the prescribed limits of concentration of radionuclides in terms of is : 13428 : 1998. according to id. consultant this certificate met the requirement of itc (hs). ld. dr, on the other hand, has submitted that the test report of environmental survey laboratory was only on radioactivity and did not cover the various parameters laid down under is : 13428 : 1998. it has also been submitted that cftri is the only authorized agency to test and report on potability of mineral water and therefore the customs authorities have no obligation to rely on any test report of other agencies including barc.5. after giving careful consideration to the submissions, i find that the mineral water in question was imported one year ago. it has not been claimed by anybody, before me, that a one year old sample of mineral water is fit for human consumption. in any case, the subject consignment cannot be released for human consumption, unless, it is conclusively certified by the competent laboratory that it is fit for human consumption. it appears from the records that the party had requested the assistant commissioner of customs for permission to draw samples to be re-tested by pho and that the assistant commissioner granted such permission. however, it appears, no such sampling was actually done. in the circumstances, it is my considered view that the assistant commissioner's permission has to be acted upon and samples of the mineral water should be got re-tested by the pho to ascertain whether the samples conform to the requirement of potable mineral water in terms of is : 13428 : 1998 as required in schedule -1 appendix-ill to itc (hs) classifications of export and import item 2002 - 2007. it is open to the pho to consider any test report of any other government agency in relation to the subject consignment. apparently, the lower authorities were not inclined to allow any re-testing by pho.6. for the reasons noted above, i set aside the orders of the lower authorities and remand the case to the original authority for the limited purpose of deciding whether the water is fit for human consumption as per bis specifications, for which purpose samples of the consignment should be got re-tested in terms of this order. it will be open to the pho and cftri to consider any test report of any other government agency, which might be produced by the party. needless to say that the adjudicating authority shall give the party a reasonable opportunity of being heard. in case it is found that the water is fit for human consumption, an option shall be given to the party for redeeming it on payment of fine to be determined by the said authority.otherwise, no such option shall be given. in any case, the penalty of rs. 15,000/- which is reasonable shall remain.7. the appeal stands partly rejected and partly allowed by way of remand.

Judgment:
1. There are two applications before me, one for waiver of pre-deposit and stay of recovery in respect of an amount of penalty of Rs. 15,000/- and the other for early disposal of the appeal. After examining the records and hearing both sides, I am of the view that the appeal itself requires to be disposed of at this stage. Accordingly, after allowing the early hearing application and dispensing with pre-deposit, I take up the appeal.

2. The appellants are traders. They trade in potable mineral water also. They imported a consignment of what was declared as 'Montes Natural Mineral Water' from Austria in September, 2004 and filed a Bill of Entry for its clearance (the declared assessable value of the goods was Rs. 55,929/-). The consignment was ordered for first check and referred to the Port Health Officer (PHO), who took representative samples in the presence of the importer as well as Customs officers and sent them to the Central Food Technological Research Institute (CFTRI).

The CFTRI tested the samples and reported that they did not conform to the standards laid down for mineral water under the Prevention of Food Adulteration Act, 1954 (PTA Act, for short) and the rules thereunder.

More precisely, the pH value of the test samples was found to be less than the minimum requirement, while the sulphate and magnesium contents of the samples exceeded the maximum prescribed under the PFA Act. The PHO communicated these results to the Customs authorities and further noted that, as the imported item did not confirm to the PFA standards of potable mineral water, it could be released only for industrial purpose. The Department, relying on the CFTRI test report, found that the imported consignment did not satisfy the requirement of ITC (HS) Classifications of Export and Import Items and hence was liable to confiscation under Section 111 of the Customs Act. In an effort to get over the Department's objections, the party produced two certificates, one from the Environmental Survey Laboratory (Kalpakkam) of the Bhabha Atomic Research Centre under the Department of Atomic Energy, Government of India and the other from a private agency viz. SGS India Ltd., Chennai. The Environmental Survey Laboratory certified that the concentration of radionuclides in the natural mineral water sample was within the prescribed limits under IS : 13428 : 1998 and further that the sample was fit for human consumption. The test report of M/s. SGS India Ltd. also was in favour of the importer. These reports, however, did not weigh with the Customs authorities as they insisted that the CFTRI was the only competent authority to test and report on the potability of water samples. Accordingly, after hearing the party, the Assistant Commissioner of Customs passed an order of absolute confiscation of the goods under Section 111(d) of the Customs Act. He also ordered destruction of the water under Customs supervision, besides imposing a penalty of Rs. 15,000/- under Section 112 of the Act on the importer. Before the first appellate authority, the party requested for cross-examination of the author of the test report issued by CFTRI. This request was not acceded to by the appellate authority after noting that a report of the CFTRI issued to the party in respect of an earlier consignment of mineral water was in their favour. The appellate authority found no bias on the part of CFTRI, which had issued a favourable report to the party in respect of their earlier consignment of mineral water and an unfavourable report in respect of their subsequent consignment. The appellate authority rejected the test reports of M/s. SGS India Ltd. and Environmental Survey Laboratory and relied on the CFTRI report and upheld the decision of the lower authority.

3. Note 6 of the General Notes regarding import policy (Vide Volume - 3, ITC (HS) CLASSIFICATIONS OF EXPORT AND IMPORT ITEMS), to the extent necessary for the present case, reads as under: 6. Import of all the products as per Appendix III to Schedule I of the ITC (HS) Classifications of Export and Import Items, 1997-2002, shall be subject to compliance of the mandatory Indian Quality Standards as mentioned in column 2 of the said Annexure, which are also applicable to domestic goods. For compliance of this requirement, all manufacturers/exporters of these products to India, shall be required to register themselves with Bureau of Indian Standards (BIS).

Alternatively certification of the products under mandatory quality Indian Standards will be permitted under the BIS Product Certification Scheme for Indian importers provided all the following conditions are met: The Indian Importers would have to apply to BIS for seeking a licence for each of the notified product he intends to import. BIS would record the application after satisfying itself that all the above conditions are met and that the applicant importer has installed the test facilities. Based on the recording of application, the Customs can clear the consignment, which will be tested by the BIS and a licence issued if the product conforms to the relevant Indian standard. The importer would use the material only after grant of licence for the first lot so imported and for the subsequent imports, after testing the product for conformance to Indian Standard.

manufacturers/exporters of the products mentioned in Schedule-I Appendix III of ITC (HS) Classifications of Export & Import Items register themselves with the Bureau of Indian Standards (BIS).

Admittedly, in the present case, the Austrian suppliers of mineral water had not got themselves registered with the BIS. The second part of the above Note deals with an alternative scheme, whereunder the Indian importers of the aforesaid goods would have to apply to BIS for licence for importing the goods and BIS would issue such licence after satisfying itself that all the three conditions (a), (b) and (c) mentioned above are met and that the importer has installed the necessary test facilities. Upon such certification by BIS, the Customs authorities would clear the consignment, which would be tested by the BIS. BIS would issue licence only if, on such test, the product is found to confirm to the Indian standards. In the present case, admittedly, the appellants are traders without any test facilities and also did not intend to make captive use of the mineral water imported by them. The import was made for retail sale in the Indian market. Thus the appellants did not satisfy the requirements of the alternative scheme either. In the circumstances, the imported goods offended the import policy of the Government. The consignment thus attracted Section 111(d) of the Customs Act for confiscation. Consequently, the penal provision of Section 112(a) of the Act also became applicable. Hence confiscation and penalty are irresistible in this case.

4. On the question whether the mineral water imported by the appellants is redeemable under Section 125 of the Act, it has been submitted by Id. Consultant that the goods should have been allowed to be redeemed against payment of reasonable fine having regard to the fact that the Environmental Survey Laboratory of BARC, a Governmental agency, had categorically certified samples of the goods to be fit for human consumption. It has also been pointed out by Id. Consultant that test certificate issued by the said laboratory found water samples to be within the prescribed limits of concentration of radionuclides in terms of IS : 13428 : 1998. According to Id. Consultant this certificate met the requirement of ITC (HS). Ld. DR, on the other hand, has submitted that the test report of Environmental Survey Laboratory was only on radioactivity and did not cover the various parameters laid down under IS : 13428 : 1998. It has also been submitted that CFTRI is the only authorized agency to test and report on potability of mineral water and therefore the Customs authorities have no obligation to rely on any test report of other agencies including BARC.5. After giving careful consideration to the submissions, I find that the mineral water in question was imported one year ago. It has not been claimed by anybody, before me, that a one year old sample of mineral water is fit for human consumption. In any case, the subject consignment cannot be released for human consumption, unless, it is conclusively certified by the competent laboratory that it is fit for human consumption. It appears from the records that the party had requested the Assistant Commissioner of Customs for permission to draw samples to be re-tested by PHO and that the Assistant Commissioner granted such permission. However, it appears, no such sampling was actually done. In the circumstances, it is my considered view that the Assistant Commissioner's permission has to be acted upon and samples of the mineral water should be got re-tested by the PHO to ascertain whether the samples conform to the requirement of potable mineral water in terms of IS : 13428 : 1998 as required in Schedule -1 Appendix-Ill to ITC (HS) Classifications of Export and Import Item 2002 - 2007. It is open to the PHO to consider any test report of any other Government agency in relation to the subject consignment. Apparently, the lower authorities were not inclined to allow any re-testing by PHO.6. For the reasons noted above, I set aside the orders of the lower authorities and remand the case to the original authority for the limited purpose of deciding whether the water is fit for human consumption as per BIS specifications, for which purpose samples of the consignment should be got re-tested in terms of this order. It will be open to the PHO and CFTRI to consider any test report of any other Government agency, which might be produced by the party. Needless to say that the adjudicating authority shall give the party a reasonable opportunity of being heard. In case it is found that the water is fit for human consumption, an option shall be given to the party for redeeming it on payment of fine to be determined by the said authority.

Otherwise, no such option shall be given. In any case, the penalty of Rs. 15,000/- which is reasonable shall remain.

7. The appeal stands partly rejected and partly allowed by way of remand.