2022 (10) TMI 707 - AT - Customs

Reduced penalty under Section 114 of the Customs Act - improper export of buffalo meat - export of excess quantity of eat, than the processing capacity - refund the drawback - demand for return of drawback is dropped on the ground that no provision exist in the Customs Act for such recovery but confirmed the penalty under Section 114 of the Customs Act by reducing it from Rs.20,00,000/- to Rs.15,00,000/- - HELD THAT - The Respondent-Department is of the opinion that since Note 6 contains a direction that export of meat and meat products must be sourced exclusively from APEDA approved plants and this M/s. Al-Azlan Frozen Foods could not produce more than 62 MT of frozen buffalo meat per day, there is improper export done by the Appellant. On perusal of the show-cause notice, the Order-in- Original and the Order-in-Appeal it would clearly indicate that they have referred to buffalo meat and processed frozen buffalo meat interchangeably at different places but consistently stated that M/s. Al-Azlan Frozen Food s production capacity of buffalo meat per day is 62 MT. However, going by the APEDA certificate of registration granted to M/s. Al-Azlan Frozen Foods, copy of which is annexed to appeal memo at page 23, the production capacity of this food processing unit M/s. Al-Azlan Frozen Foods was 62 MT of frozen meat per day and 40 MT of chilled meat per day and if both are taken together it would be consistent to the pleading of the Appellant. The show-cause notice did not propose for any action concerning mis-declaration in the shipping bills or propose any penalty, for which discussion on the same is outside the purview of this appeal, besides the fact that not a single shipping bill is annexed to the show-cause notice to substantiate that description of goods exported was different. Since nowhere during adjudication, the Appellant had ever averred that it had exported only frozen meat and as Note 6 has not kept the category of export of meats to frozen one only, there is no basis in the claim made by the Department. This being facts on record and having regard to the fact that Respondent- Department had not taken into consideration the entire production capacity of M/s. Al-Azlan Frozen Foods and confined it to 62 MT meat to presume such mis-declaration though it is only in respect of frozen buffalo meat only, imposition of penalty on the basis of mathematical variation is unsustainable in law and facts. The order passed by the Commissioner of Customs (Appeals), Mumbai-II vide to the extent of confirmation of penalty at a reduced rate of Rs.15,00,000/- is hereby set aside - Appeal allowed.

Summary

Issues:
Confirmation of penalty under Section 114 of the Customs Act for improper export of buffalo meat.

Analysis:
The case involved the appeal by an exporter against the confirmation of a penalty by the Commissioner of Customs (Appeals) for improper export of buffalo meat. The exporter, Siba International, was engaged in exporting processed buffalo meat procured from an approved processing plant. The Departmental enquiry revealed that the processing capacity of the plant was limited, and the exporter had exported meat in excess of the plant's capacity, leading to a demand for refund of drawback and imposition of penalty under Section 114 of the Customs Act. While the demand for drawback return was dropped in the Order-in-Appeal, the penalty was confirmed but reduced from Rs.20,00,000 to Rs.15,00,000. The main contention was the alleged improper export due to exceeding the processing plant's capacity.

The relevant provisions from Chapter 2 of Schedule 2 of the ITC (HS) classification of export and import items were crucial in determining the compliance requirements for exporting meat products. The dispute centered around the interpretation of Note 6, which mandated that meat and meat products must be sourced exclusively from APEDA registered plants. The Department argued that since the processing plant's capacity was limited, the export was improper. However, the exporter contended that the plant's total production capacity, considering both frozen and chilled meat, was sufficient to cover the exported quantity. The discrepancy in descriptions of the exported goods as frozen boneless buffalo meat in shipping documents was also highlighted.

Upon thorough examination of the case record, submissions, and relevant provisions, it was observed that the Department had not considered the entire production capacity of the processing plant and had focused solely on the frozen meat aspect. The imposition of penalty based on a mathematical variation was deemed unsustainable in both law and facts. Ultimately, the appeal was allowed, setting aside the confirmation of the penalty at the reduced rate of Rs.15,00,000, providing consequential relief to the Appellant.

In conclusion, the judgment delved into the intricacies of compliance requirements for exporting meat products, the interpretation of relevant provisions, and the discrepancies in the Department's assessment of the export. The decision to set aside the penalty confirmation was based on the lack of consideration for the plant's total production capacity and the inconsistency in the Department's claims regarding the exported goods.