2011 (1) TMI 20 - HC - Customs

Detention of goods import of Cottonseed Oil Held that - Department directed to set samples of the subject goods seized to the Central Food Laboratory and obtain within one one week - 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.

Summary

Issues Involved:
1. Quashing of Detention Memo and Seizure Memo.
2. Provisional release and reprocessing of imported goods.
3. Conflicting test reports and standards compliance.
4. Applicability of Prevention of Food Adulteration Rules.
5. Financial implications and perishable nature of goods.
6. Authority and discretion of customs in provisional release.
7. Legal precedents and interpretation of relevant statutes.

Detailed Analysis:

1. Quashing of Detention Memo and Seizure Memo:
The petitioner, a Public Limited Company, sought to quash Detention Memo No.1/2010-11 dated 19.9.2010 and Seizure Memo dated 29.9.2010. The petitioner contended that the detention and seizure were unjustified given the conflicting test reports regarding the quality of the imported "Cottonseed Oil of Edible Grade."

2. Provisional Release and Reprocessing of Imported Goods:
The petitioner requested a writ of mandamus to direct the respondents to release the goods for reprocessing and to permit clearance for home consumption after reprocessing and meeting legal requirements. The petitioner argued that the goods were perishable and that prolonged detention would cause irreparable financial loss.

3. Conflicting Test Reports and Standards Compliance:
The case involved multiple test reports with conflicting results. Initial reports indicated compliance with PFA standards, while subsequent reports from the Central Food Laboratory, Pune, suggested non-compliance due to high iodine values and low acid values. The petitioner highlighted these discrepancies to argue for provisional release and reprocessing.

4. Applicability of Prevention of Food Adulteration Rules:
The respondents contended that the goods were "Refined Cottonseed Oil of Non-Edible Grade" based on the Central Food Laboratory, Pune's report, which indicated non-compliance with PFA standards. The petitioner disputed this, citing earlier reports that classified the goods as edible after further refining.

5. Financial Implications and Perishable Nature of Goods:
The petitioner emphasized the financial burden and potential spoilage of the perishable goods if detained for an extended period. The petitioner had already deposited significant amounts as directed by the DRI and argued that continued detention would exacerbate financial losses.

6. Authority and Discretion of Customs in Provisional Release:
The respondents argued that, per CBEC Circular No.28/2006-Cus., customs authorities lacked discretion to release goods failing PHO testing for reprocessing. The petitioner countered this by referencing a similar case (M/s Teej Impex Pvt. Ltd.) where the court allowed reprocessing under certain conditions.

7. Legal Precedents and Interpretation of Relevant Statutes:
The petitioner cited the Bombay High Court's decision in Commissioner of Customs (Import), Raigad v. Amrit Banaspati Co. Ltd., arguing that there was no statutory bar to allowing reprocessing of confiscated goods. The court agreed, noting the absence of a clear prohibition under the Customs Act or PFA Act.

Judgment:
The court directed the respondents to send samples of the seized goods to the Central Food Laboratory, Mysore, for testing to determine if the goods could be made fit for human consumption after reprocessing. If the laboratory confirmed this, the petitioner would be allowed to reprocess the goods, and subsequent testing would determine their compliance with PFA standards. If the goods met the standards post-reprocessing, they would be released; otherwise, appropriate steps under the Customs Act would be taken.

The court's directions aimed to mitigate the petitioner's hardships without prejudicing the adjudication proceedings' final outcome. The judgment balanced the need for regulatory compliance with the petitioner's financial and operational concerns, ensuring that the perishable goods were not unnecessarily wasted.