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2014 (9) TMI 144 - HC - CustomsPrinciple of natural justice - Whether Betel Nut - Industrial Grade imported by the petitioner are permissible for import under the Duty Free Import Authorization (DFIA) Scheme under the Foreign Trade Policy (FTP) read with the Standard Input Output Norms (SION) thereunder, and are entitled to exemption under Customs Notification No. 40/2006, dated 1-5-2006 - Held that - Taking the second ground first, the principles of natural justice are not to be observed on paper only. Its importance lies in its effective compliance. It does not lie in the mouth of the authority that it has complied with the principles of natural justice when the authority called upon the party to remain present on 10-5-2011, wherein notice was served on the party on 6-5-2011 and when the party prays for time on 10-5-2011, the authority proceeded to pass final assessment order on 12-5-2011. Intimating to the party the date of hearing that by itself cannot be said to be in compliance of the principles of natural justice. It is step towards compliance of natural justice. Intimation of date of hearing to the party affected is initial part of compliance of principles of natural justice as the hearing is inevitable aspect of natural justice. Intimation is not hearing . - order passed on 12-5-2011 is vitiated, as it is passed without complying with the principles of natural justice. - Decided in favor of assessee. Validity of panchnama-cum-seizure order - Held that - The seizure order dated 29-12-2010 is also bad and illegal. It is the panchnama-cum-seizure order. Such composite order is unheard off. - Technically, asking the party to submit fresh PD Bonds for a period of six months on one hand and proceeding to seize the goods on the other hand may not perhaps be faulted with, however, burden lies on the authority to explain rationale to rush into seizure/confiscation of the goods in such circumstances, the reason is the proper officer cannot proceed to seize the goods under Section 110 of the Act unless he has reason to believe. - Unexplained inconsistent conduct makes dent on the belief. It would shake the basis and vitiate the seizure. We had a privilege to have a brief journey into the world of Areca nut/betel nut . Parties have produced some material in support of their respective submissions, viz. on tannin contents of Areca nut . It was pointed out that Areca nut may be dry, hard, whole or cut or it may be fresh, green, soft, etc. That it undergoes three stages of development. It was asserted by the respondent that the Areca nut cannot be commercially viable for the tannin purposes. It is not for this Court to give any opinion on tannin content of Areca nut or to say about propriety of reading Areca nut in SION. It is for the D.G.F.T. to say on this. The say of the D.G.F.T. is in favour of the petitioner. - Decided in favor of assessee.
Issues Involved:
1. Legality and validity of the seizure orders dated 29-12-2010 and 7-2-2011. 2. Entitlement of the petitioner to import Betel Nut under the Duty Free Import Authorization (DFIA) Scheme. 3. Validity of the Order-in-Original dated 12-5-2011. 4. Validity of the assessment orders dated 23/24-3-2011. Detailed Analysis: 1. Legality and Validity of the Seizure Orders: The petitioner challenged the seizure of 708 MT and 2238 MT of Betel Nut by the Directorate of Revenue Intelligence (DRI) under Panchnamas dated 29-12-2010 and 7-2-2011, respectively. The court found that the seizure orders were not justified. The DRI had directed the petitioner to submit fresh Provisional Duty (PD) Bonds for six months on 24-12-2010, implying that the goods were not immediately liable for confiscation. The court noted that the seizure should be based on a valid reason to believe that the goods were liable for confiscation, which was not sufficiently demonstrated by the DRI. The court held that the seizure orders were illegal and without jurisdiction. 2. Entitlement to Import Betel Nut under DFIA: The primary legal issue was whether Betel Nut - Industrial Grade was permissible for import under the DFIA Scheme and entitled to exemption under Customs Notification No. 40/2006. The petitioner argued that Betel Nut is a Vegetable Tanning Agent used in the leather industry and falls under the generic description of "Vegetable Tanning Agents" in Standard Input Output Norms (SION) G-7. The court considered the clarification issued by the Directorate General of Foreign Trade (DGFT), which confirmed that Betel Nut is covered under SION G-7. The court held that the DGFT's interpretation is final and binding, and therefore, Betel Nut is permissible for import under DFIA and entitled to exemption from duty. 3. Validity of the Order-in-Original dated 12-5-2011: The petitioner challenged the Order-in-Original dated 12-5-2011, which denied the benefit of exemption under Customs Notification No. 40/2006 and confirmed a duty demand of Rs. 3,02,56,350/-. The court found that the order was passed without affording the petitioner an opportunity of hearing and without supplying the petitioner with the DGFT's clarification relied upon for the final assessment. The court held that the order was in breach of principles of natural justice, non-application of mind, and passed in haste. Consequently, the Order-in-Original was quashed. 4. Validity of the Assessment Orders dated 23/24-3-2011: The petitioner also challenged the assessment orders for 16 Bills of Entry made on 23/24-3-2011, denying the benefit of exemption under the DFIA Scheme. The court found that these orders were passed without issuing a notice to the petitioner and without giving an opportunity of hearing. The court held that the assessment orders were in breach of principles of natural justice and were passed with a view to render the pending petition infructuous. Therefore, the assessment orders were quashed. Judgment: The court allowed the petitions and directed the respondents to pass consequential orders of assessment on revalidation of licenses, including orders of refund. The respondents were instructed to grant the benefit of exemption notification for the goods mentioned in the specified Bills of Entry against the DFIA. The DFIA licenses, which had expired during the pendency of the petitions, were to be returned to the petitioner for revalidation by the DGFT. The DGFT was directed to revalidate the licenses within three weeks from receipt. Upon submission of the revalidated licenses, the respondents were to act in accordance with the law and the judgment's discussion. The court also directed the refund of the duty deposited by the petitioner under protest and discharge of the bank guarantee submitted pursuant to interim orders. Conclusion: The court ruled in favor of the petitioner, quashing the seizure orders, the Order-in-Original dated 12-5-2011, and the assessment orders dated 23/24-3-2011. The petitioner was entitled to import Betel Nut under the DFIA Scheme and to the exemption from duty under Customs Notification No. 40/2006. The court emphasized the binding nature of the DGFT's interpretation and the necessity of adhering to principles of natural justice.
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