2010 (10) TMI 120 - HC - Customs

Exemption notification no. 40/2002 - Protocol to the Indo-Nepal Treaty of Trade - Section 11 of the Customs Act, 1962 Mis-declaration - Classification Held that - Because, of misdeclaration, the respondent cannot avail the benefit of Indo-Nepal Treaty on the basis of certificate issued by the authorities of Nepal and M/s. Anivet Industries Limited. - The goods seized, has rightly been held by the original and appellate authority with finding that they should have been classified under heading 2936 of the Tariff. The finding recorded by the Tribunal, suffers from substantial illegality as observed in the body of judgment - the goods have not gone under manufacture process at Nepal hence order of Tribunal is bad in law -

Issues Involved:
1. Misdeclaration of goods under the Indo-Nepal Treaty.
2. Classification of goods under the Customs Tariff.
3. Manufacturing process in Nepal.
4. Finality of Bill of Entry and Customs clearance.
5. Jurisdiction of the High Court under Section 130 of the Customs Act.
6. Evidentiary value of retracted statements.
7. Compliance with statutory provisions of the Customs Act.

Issue-wise Detailed Analysis:

1. Misdeclaration of Goods under the Indo-Nepal Treaty:
The Directorate of Revenue Intelligence (DRI) found that the respondent misdeclared Vitamin E powder as "Poultry Feed Supplement" to avail duty-free import benefits under the Indo-Nepal Treaty. The goods were imported from Nepal without undergoing any manufacturing process or value addition in Nepal, violating Customs Notification No.40/2002-Cus dated 12.4.2002 and Notification No.9/96-Cus (NT) dated 22.1.1996. The High Court held that the respondent cannot avail the benefits of the Indo-Nepal Treaty due to misdeclaration.

2. Classification of Goods under the Customs Tariff:
The DRI classified the goods under Chapter 29 (specifically heading 2936) of the Customs Tariff, which pertains to vitamins, rather than Chapter 23, which covers animal feed supplements. The Tribunal's reversal of this classification was deemed incorrect by the High Court, which restored the original and appellate authorities' findings that the goods should be classified under heading 2936 due to their substantial Vitamin E content.

3. Manufacturing Process in Nepal:
It was established that M/s. Anivet Industries, Nepal, did not have any manufacturing facilities and imported Vitamin E from third countries. The goods were then exported to India by the respondent. The High Court upheld the findings that the goods did not undergo any manufacturing process in Nepal, thus violating the conditions for duty-free import under the Indo-Nepal Treaty.

4. Finality of Bill of Entry and Customs Clearance:
The respondent argued that once the Bill of Entry was cleared by Customs at the Indo-Nepal border, it could not be reviewed. However, the High Court clarified that clearance at the border is not final and is subject to action under Chapter XIII and XIV of the Customs Act, which deal with seizure, arrest, and confiscation of improperly imported goods.

5. Jurisdiction of the High Court under Section 130 of the Customs Act:
The respondent contended that the appeal should lie with the Supreme Court, not the High Court. The High Court, however, held that it has jurisdiction under Section 130 of the Customs Act to entertain the appeal as it involves substantial questions of law, not related to the rate of duty or value of goods for assessment.

6. Evidentiary Value of Retracted Statements:
The High Court considered the retracted statements of Sri Pradeep Pathak, which were corroborated by other evidence, including laboratory reports and import receipts. The Court held that retracted statements could still be admissible and binding if corroborated by other evidence, following precedents set by the Supreme Court.

7. Compliance with Statutory Provisions of the Customs Act:
The High Court emphasized that the Customs authorities have the power to seize goods and impose penalties under Sections 111 and 112 of the Customs Act if there is a misdeclaration or violation of the Act. The Court upheld the actions of the DRI in seizing the goods and imposing penalties on the respondent for misdeclaration and smuggling.

Conclusion:
The High Court allowed the appeal, set aside the Tribunal's order, and restored the orders of the adjudicating and appellate authorities. The respondent was found guilty of misdeclaring Vitamin E powder as "Poultry Feed Supplement" to evade customs duty, violating the Indo-Nepal Treaty and relevant Customs Notifications. The High Court upheld the classification of the goods under heading 2936 of the Customs Tariff and confirmed the jurisdiction of the High Court under Section 130 of the Customs Act.

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