2013 (9) TMI 508 - AT - Customs

Misdeclaration of goods - import of BIO-ORGANIC FERTILIZER LIQUID - Confiscation of goods u/s 111(d) and 111(m) penalty u/s 112(a) and 114AA - Held that - Without ascertaining the correct identity of the goods one cannot hold it to be prohibited or to have been misdeclared - the goods in question cannot be confiscated in terms of Section 111(d) or 111(m) - the importer cannot be held to have rendered the goods liable to confiscation - the test report of IICT indicates that they were required to find out whether any pesticide was contained in the given sample - the analysis result was negative the absence of pesticides has not been shown to constitute a singular ground for holding the imported goods to be prohibited in terms of Section 111(d) or to have been misdeclared in terms of Section 111(m). Burden to prove - The burden shifted to the Customs authorities to prove that the imported item was not bio-organic fertilizer but an item prohibited for importation under the Customs Act or any other law - the report of RCOF showing absence of bio-organic fertilizer in the given sample was not a reliable evidence - even the lower appellate authority held that the burden of proof was on the department to classify the goods and this burden was not discharged order set aside decided in favour of assessee.

Issues Involved:
1. Absolute confiscation of imported goods.
2. Imposition of penalties on PASURA and VISWAS.
3. Reliability of test reports from RCOF and IICT.
4. Denial of cross-examination request.
5. Propriety of sending samples to outside laboratories.
6. Burden of proof regarding the classification of goods.

Issue-wise Detailed Analysis:

1. Absolute Confiscation of Imported Goods:
The appeals were directed against the order of absolute confiscation of goods imported by PASURA. The original authority held that the goods, misdeclared as "BIO-ORGANIC FERTILIZER LIQUID," were actually chemical waste hazardous to flora and fauna, thus liable for confiscation under Section 111(d) and Section 111(m) of the Customs Act. However, the appellate authority overturned the finding that the goods were hazardous, noting the department's failure to prove this classification.

2. Imposition of Penalties on PASURA and VISWAS:
Penalties were imposed under Section 112(a) of the Customs Act on PASURA and VISWAS. PASURA was penalized Rs. 20,000, while VISWAS faced a penalty of Rs. 10,000. Additionally, Rs. 5,000 penalties were imposed on the directors under Section 114AA. The appellate authority's decision to sustain these penalties was challenged, with the final judgment setting aside these penalties due to the department's failure to prove the goods were prohibited or misdeclared.

3. Reliability of Test Reports from RCOF and IICT:
The judgment scrutinized the test reports from RCOF and IICT. The IICT report indicated no presence of pesticides but lacked detailed documentation (ESI-MS mass spectrum and GC-MS chromatogram). The RCOF report merely stated that the sample was not a bio-fertilizer without detailing the testing method, results, or the analyst's identity. This lack of detail and transparency led to the conclusion that the test reports were unreliable.

4. Denial of Cross-Examination Request:
PASURA's request to cross-examine Dr. Krishan Chandra, Regional Director of RCOF, was denied by the lower authorities without valid reasons. The judgment noted that given the vague nature of the RCOF report, the request for cross-examination should have been granted to ensure a fair assessment.

5. Propriety of Sending Samples to Outside Laboratories:
The judgment questioned the propriety of sending samples to external laboratories instead of the department's chemical laboratory. The department's claim that their laboratories lacked the necessary testing facilities was unsubstantiated, as there was no documented correspondence or proof of this assertion.

6. Burden of Proof Regarding the Classification of Goods:
The judgment emphasized that the burden of proof lay with the Customs authorities to classify the goods correctly and prove them to be prohibited. The department failed to discharge this burden, as the RCOF report was deemed unreliable and the correct identity of the goods was not ascertained. Consequently, the goods could not be considered prohibited or misdeclared, and the confiscation and penalties were deemed unsustainable.

Conclusion:
The impugned order was set aside concerning the appellants, and both appeals were allowed. The judgment highlighted the need for reliable evidence, proper procedural conduct, and the department's responsibility to prove the classification and prohibition of imported goods.

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