2019 (5) TMI 1032 - AT - Customs

Denial of benefit of exemption based on test reports for the present consignment and consignments cleared in the past - import of Fruit Grape Guard Packaging Paper in sheet form coated with Sodium Meta Bi Sulphite - Benefit of N/N. 21/2002 Cus. Dt. 01.3.2002 - benefit of notification denied on the basis of test report of samples relating to few consignments could be applied to the consignments imported and cleared in the past be denied. HELD THAT - Not only on the basis of chemical test report but also relying upon the statement of Shri Dilip Patel, authorised signatory of the Appellant, the Adjudicating authority had concluded that the sample of imported papers when subjected to chemical test, found to be free from Sodium Meta Bi Sulphite. Consequently, he has held that the Appellants are not eligible for benefit of exemption Notification No.21/2002- Cus, dt.1.3.2002. Also, reading the opinion of UDCT, Mumbai, there is no contra report to the test results of CRCL, New Delhi. In the said report, the method of testing of samples has been narrated. There is no opinion about the contents of the samples. Therefore, the said reports also would not be of any help to the Appellant. The learned Commissioner extrapolated the test results of the samples to the consignments which were imported and cleared in the past. In absence of any adverse test report of the samples relating to past consignment, there is no merit in the order of the Adjudicating authority, to apply the test results of the samples drawn to the past consignments in directing confiscation and denying the benefit of exemption N/N. 21/2002-Cus, dt.1.3.2002. Consequently, the test report, be restricted to the consignment of packing papers whose samples were drawn and tested and found to be free from Sodium Meta Bi Sulphite. However, since there is mis-declaration of the description of the imported goods, in order to avail the benefit of exemption Notification No.21/2002-Cus, dt.1.3.2002, the goods which were seized and released provisionally are liable to confiscation and the importer and the persons associated are liable for penalty. The Appellants are not eligible to the benefit of N/N. 21/2002-Cus, dt.1.3.2002 relating to the imported consignments whose samples were drawn and test results found to be free from Sodium Meta Bi Sulphite. The test results of the samples cannot be extrapolated to the consignment cleared in the past - The Appellants are liable for discharging differential duty relating to the consignment whose test results were found to be free from Sodium Meta Bi Sulphite and also seized goods are liable for confiscation, and penalty attracted against the importer-Appellant and other Appellants. Since the quantum of demand to be recalculated as above, therefore, to compute the duty, fine and penalty relating to the consignment whose samples were tested, and found to be free from Sodium Meta Bi Sulphite, the matter is remanded to the Adjudicating authority. Appeal allowed by way of remand.

Issues Involved:

1. Eligibility of imported goods for exemption under Notification No. 21/2002-Cus dated 1.3.2002.
2. Applicability of test reports for consignments imported and cleared in the past.
3. Legality of denial of cross-examination of chemical examiners.
4. Validity of demand for differential duty and penalties based on test reports.
5. Legality of confiscation of goods and imposition of penalties.

Issue-wise Detailed Analysis:

1. Eligibility of Imported Goods for Exemption:
The primary issue was whether the imported goods described as "Fruit Grape Guard Packaging Paper in sheet form coated with Sodium Meta Bi Sulphite" were eligible for the benefit of exemption under Notification No. 21/2002-Cus dated 1.3.2002. The notification required the paper to be coated with Sodium Meta Bi Sulphite for preventing fungal decay and prolonging storage of grapes. Chemical tests conducted on the samples revealed that the imported paper did not contain Sodium Meta Bi Sulphite, thereby disqualifying it from the exemption.

2. Applicability of Test Reports to Past Consignments:
The adjudicating authority applied the test results of the samples drawn from the current consignment to past consignments, denying the benefit of the exemption for those as well. However, the tribunal found this approach incorrect, stating that in the absence of specific adverse test reports for past consignments, the benefit of the exemption could not be denied retroactively. The tribunal restricted the application of the test results to only the consignments whose samples were tested and found to be free from Sodium Meta Bi Sulphite.

3. Denial of Cross-examination of Chemical Examiners:
The appellant argued that the denial of cross-examination of chemical examiners resulted in grave injustice, as it prevented them from challenging the test reports. The tribunal upheld the adjudicating authority's decision, noting that the tests were conducted in the normal course of official duties without any bias or malafide intent. The tribunal cited the Supreme Court's judgment in the case of M/s Reliance Cellulose Products Vs Collr.of C.E. Hyderabad, which supported the reliance on official test reports over private reports.

4. Validity of Demand for Differential Duty and Penalties:
The tribunal found that the demand for differential duty and penalties was valid for the consignments whose samples were tested and found to be free from Sodium Meta Bi Sulphite. However, it ruled that the demand could not be extended to past consignments without specific test results indicating non-compliance. The tribunal remanded the matter to the adjudicating authority to compute the duty, fine, and penalties based on the test results of the specific consignments.

5. Legality of Confiscation of Goods and Imposition of Penalties:
The tribunal upheld the confiscation of the goods that were seized and released provisionally, as well as the imposition of penalties on the importer and associated persons. The tribunal noted that the mis-declaration of the description of the imported goods to avail the benefit of the exemption justified the confiscation and penalties. However, the tribunal clarified that the penalties and confiscation should be limited to the consignments whose samples were tested and found to be non-compliant.

Conclusion:
The tribunal concluded that the appellants were not eligible for the benefit of the exemption under Notification No. 21/2002-Cus dated 1.3.2002 for the consignments whose samples were tested and found to be free from Sodium Meta Bi Sulphite. The test results could not be extrapolated to past consignments. The tribunal upheld the confiscation of the goods and imposition of penalties for the specific consignments but remanded the matter to the adjudicating authority to recalibrate the duty, fine, and penalties based on the test results. The appeals were disposed of accordingly.

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