2018 (8) TMI 1411 - HC - Customs

Rejection of release of imported goods - restricted item or not? - Biodiesel or HSD? - Held that - What prima facie emerges is that the petitioner had placed an order for supply of Biodiesel. The specifications thereof, were that the product would contain not less than 30.1% and not more than 35.0% of Biodiesel meeting the Indian Biodiesel Specification. Correspondingly, it would contain not less than 65.0% and not more than 69.9% of Diesel meeting the Bharat Stage IV Diesel Specifications - the product, other than Biodiesel, be it HSD, was at any rate, less than 70%. The promulgation of Foreign Trade Policy in terms of Section 5 of the Act would not be sufficient to change the category of a product from being freely importable to the import of which is restricted. Such restrictions are envisaged under sub-section 2 of Section 3 of the Act. No Notification under the said provision has been issued - in the present case, the petitioner had sought a clarification from the Director General of Foreign Trade whether the import of the goods is free. The answer of the Director General of Foreign Trade, as noted, was in the affirmative. The first objection of the authorities, at this stage, therefore, would not be sufficient to permit detention of the goods. Correct declaration of the nature of imported substance - Held that - It is nobody s case, at least as of now, that the fuel contains more than 70% HSD or conversely, less than 30% biofuel. We have already noted that the very definition of Biofuel is that it must have not more than 70% of weight of petroleum oil or oils obtained from bituminous minerals. This is not disputed by the Department. Under the circumstances, we would not prevent the Department from carrying out further investigation. Nevertheless, only on this ground, the detention of goods cannot be permitted. Correct rate of duty - Held that - In the facts of the case, therefore, while not preventing the Department from carrying out further investigation and adjudicating the entire issue on both counts, whether the imported goods happen to be Biodiesel as declared or HSD as complained and the correct rate of duty leviable therein, the provisional release of goods is directed subject to certain safeguards - In any case, if it is, ultimately, found that the goods were mis-declared, the Customs Act, particularly, Sections 111 and 112 therein, provide for adequate penalty and other adverse consequences. The respondents shall permit provisional clearance of goods upon the petitioner providing Bond for the difference in duty between 12% already deposited and 18% of IGST - petition disposed off.

Summary

Issues:
1. Import of consignment declared as Biodiesel refused by Customs authorities.
2. Dispute over clearance of goods due to objections raised by authorities regarding import policy and nature of goods.
3. Legal implications of National Policy on Biofuels and applicability to the import consignment.

Analysis:
1. The petitioner, a Company engaged in import and trading in edible oils, imported a consignment declared as Biodiesel from Singapore. Customs authorities initially cleared the goods but later intercepted the clearance process, citing reasons related to the National Policy on Biofuels and incorrect duty payment. The petitioner sought clarification from DGFT, confirming the import of Biodiesel under the prevailing policy. The authorities raised objections based on the import policy and suspicions regarding the nature of the imported substance, leading to the detention of goods.

2. The authorities relied on a Notification by the Ministry of Petroleum and Natural Gas regarding the National Policy on Biofuels - 2018, emphasizing the promotion of domestic Biofuel industry and discouraging import of Biofuels to protect domestic production. However, the absence of a specific order restricting the import of Biodiesel under Section 3 of the Foreign Trade (Development and Regulation) Act raised doubts about the legality of detaining the goods based solely on the policy. The petitioner's compliance with DGFT's clarification further supported the argument for the free import of Biodiesel.

3. The dispute over the nature of the imported substance, whether it is Biodiesel or High-Speed Diesel (HSD), was a key point of contention. Despite a complaint suggesting misdeclaration, the authorities did not provide substantial evidence disputing the composition of the goods. The petitioner presented laboratory certificates confirming the Biodiesel content, and the complaint did not challenge this aspect. The issue of duty rate was also linked to the nature of the goods, with the authorities claiming a higher IGST rate for HSD. The court proposed provisional release of goods pending further investigation and clarification on the nature of the imported substance and the correct duty rate, ensuring safeguards for revenue protection.

In conclusion, the judgment highlighted the need for thorough investigation into the nature of the imported goods and the correct duty rate, emphasizing the provisional release of goods with safeguards. The legal implications of the National Policy on Biofuels were analyzed in light of the import dispute, emphasizing the importance of clarity in import policies and accurate declaration of goods to avoid detention and potential penalties under the Customs Act.