2016 (8) TMI 1577 - AT - Customs

Penalty under Section 114(i) of Customs Act, 1962 - Seizure of goods - export of pan masala containing gutka - packing material are prohibited for export or not - permission to withdraw the export - HELD THAT - The prohibition in use of plastic material for packaging was put in place at the end of August, 2011 and the goods were removed from the factory of manufacture shortly thereafter. The goods were removed under documentation for export which was approved by the officer of Central Excise. It would appear that the enforcing officials themselves were not aware of the prohibition. It is also noticed that the appellant were ready to withdraw the export. The goods were subject to absolute confiscation which, in these circumstances, is harsh enough without adding the penalty as a further measure of harshness. In view of the above, the imposition of penalty under Section 114(i) of Customs Act, 1962 is set aside. Appeal allowed.

Summary

Issues:
1. Seizure of goods for contravention of circular on packaging material.
2. Confiscation of goods and imposition of penalty under Section 114(i) of Customs Act, 1962.
3. Appellant's contention regarding lack of awareness and seeking permission to withdraw export.

Issue 1: Seizure of goods for contravention of circular on packaging material

The dispute involved two Shipping Bills filed for the export of 'pan masala containing gutka' with a local market value of ?2,26,07,614. The goods were seized under Section 110 of the Customs Act, 1962 for contravening a circular prohibiting the use of plastic as packing material for 'gutka', 'pan masala', and 'tobacco'. The circular was to be read in conjunction with an official memorandum dated 12th August, 2011. The appellant argued that they were unaware of this prohibition at the time of shipment and sought permission to withdraw the export. It was contended that while the packing material was prohibited, the main item for export should not have been subject to confiscation.

Issue 2: Confiscation of goods and imposition of penalty under Section 114(i) of Customs Act, 1962

The goods were confiscated for destruction at the cost of the appellant, and a penalty of ?10,00,000 was imposed under Section 114(i) of the Customs Act, 1962. The order-in-original by the Commissioner of Customs (Export) imposed this penalty. However, during the hearing, it was revealed that the prohibition on using plastic as packaging material was implemented at the end of August 2011, after the goods had already been removed from the factory for export. Furthermore, it was noted that the enforcing officials themselves were not aware of this prohibition. The appellant was willing to withdraw the export, and considering the circumstances, the absolute confiscation of goods was deemed harsh without the additional penalty. Consequently, the imposition of the penalty under Section 114(i) of the Customs Act, 1962 was set aside, and the appeal was allowed on that ground.

This judgment highlights the importance of awareness regarding regulations on packaging materials for exports and the significance of timely compliance. It also emphasizes the need for enforcement officials to be informed and updated on such prohibitions to avoid unnecessary penalties and confiscations.