2017 (7) TMI 519 - AT - Central Excise

Confiscation - redemption fine - penalty - the proper officer of Customs did not clear the goods on the ground that the goods were not imported directly from the manufacturer, viz. M/s. Liyang Chemical Factory, China, as required in the Registration issued by Central Insecticide Board, but through their authorized distributor - Held that - the imported goods were actually manufactured by M/s. Jiangsu Tianrong Co. Ltd., China and as such the prime condition of the notification and registration is satisfied. I also find that such registration is required so as to ensure that the good quality insecticides only are imported. When the goods are admittedly manufactured by the empanelled manufacturer, the fact that the same have come through the distributor will not make much difference, in as much as the Insecticide Board itself could have allowed such import through the distributor. The commercial invoice, Bill of lading as also the Bill of entry clearly indicate that the goods have been manufactured and exported by M/s. Liyang Chemical Factory only and it may be for the business reasons that the documentation have been routed through the distributor. It can be safely concluded that there is no contravention of the registration certificate and even if it is there, it is too technical to be taken note of so as to penalize the assessee. There is no violation of the registration certificate and it is only a hyper technical objection taken by the Revenue, I find no reasons to sustain the impugned order imposing redemption fine and penalty on the assessee - appeal allowed - decided in favor of appellant.

Summary

Issues: Import of goods through an authorized distributor instead of directly from the manufacturer, imposition of redemption fine and penalty under Customs Act, 1962, justification of re-export of goods due to shelf life concerns.

Analysis:
1. Import through Distributor: The appellant imported goods declared as Cartap Hydrochloride Technical 98% through their authorized distributor instead of directly from the manufacturer as required by the Central Insecticides Board's registration. The appellant argued that there was substantial compliance with the registration certificate as there was no condition specifying direct import from the manufacturer. The Tribunal found that the goods were actually manufactured by the manufacturer mentioned in the registration certificate, even though they were routed through the distributor. The Tribunal noted that the Insecticides Act allows import either from the manufacturer or through its distributor. The breach was considered technical, not justifying the redemption fine and penalty imposed by the Customs authorities.

2. Redemption Fine and Penalty: The adjudicating authority confiscated the goods and imposed a redemption fine of ?15,00,000 and a penalty of ?5,00,000 under Section 112(a) of the Customs Act, 1962. On appeal, the Commissioner (Appeals) upheld the decision. However, the Tribunal observed that the imposition of the redemption fine and penalty was not justified due to the technical nature of the breach. The Tribunal referred to previous decisions where redemption fine imposition was not justified when allowing re-export of goods. The Tribunal concluded that the breach was not significant enough to penalize the appellant, especially considering the bonafide belief that the import from the distributor was covered by the registration certificate.

3. Re-export of Goods: The appellant had already re-exported the goods due to concerns about the shelf life. The Tribunal noted that the goods were manufactured by the empanelled manufacturer, satisfying the prime condition of the notification and registration. The documentation, including commercial invoices and Bill of lading, confirmed the origin of the goods from the manufacturer. The Tribunal emphasized that the import through the distributor did not contravene the registration certificate and was a hyper-technical objection by the Revenue. Citing a previous case, the Tribunal held that the redemption fine and penalty were unjustified, leading to the appeal being allowed with consequential relief to the appellant.

In conclusion, the Tribunal set aside the imposition of the redemption fine and penalty, allowing the appeal in favor of the appellant based on the technical nature of the breach and the justification for re-exporting the goods.