2023 (9) TMI 535 - HC - Customs

Refusal on the part of the Directorate of Revenue Intelligence to permit re-testing in a manner contrary to Circular 30/2017-Customs - kerosene oil or not - petitioner was of the view that what was imported was Mixed Mineral Hydrocarbon Oil, and made a request for re-testing of the samples - no such testing carried out - Confiscation of the goods imported by the petitioner - levy of penalty - HELD THAT - The show cause notice issued to the petitioner on 22.03.2022 is entirely based on the report of the Vadodara Laboratory that states that the samples met the requirements of Kerosene as per IS 1459-1974. The show cause notice in clear terms states that the goods seized were containers of kerosene oil under the Bill of Entry dated 11.09.2021 and this was by virtue of mis-declaring the same as Mixed Mineral Hydrocarbon Oil. After the test report from the Vadodara Laboratory was received, a request for re-testing was made by the petitioner on 30.09.2021. This request was not accepted and the show cause notice came to be issued on 22.03.2022 - in the reply to the show cause notice, a clear stand was taken by the petitioner that the specific tests required to be done as per directions of the Senior Intelligence Officer were not undertaken by the Vadodara Laboratory. This aspect is clear on perusing the Test Memo dated 16.09.2021 and the test report of the Vadodara Laboratory. The Joint Commissioner of Customs in his order dated 21.06.2022 has not considered this relevant aspect and without dealing with the specific stand of the petitioner has proceeded to accept the test reports of the Vadodara Laboratory. From the test report dated 03.04.2023 received from the Mumbai Laboratory as well as the re-testing report dated 19.05.2023 received from CRCL, New Delhi, we find that the entire basis for issuance of the show cause notice that was issued in view of the report of the Vadodara Laboratory indicating import of kerosene oil would not now survive. It is not in dispute that the report received from the Vadodara Laboratory is categorical in its finding that the samples met the requirement of kerosene. The subsequent testing and re-testing reports bely the initial report obtained from the Vadodara Laboratory - the show cause notice in its present form cannot survive since the testing and re-testing of the samples has been undertaken in accordance with Circular 30/2017-Customs as issued by the Central Board of Excise and Customs on 18.07.2017. Consequentially, the impugned order passed by the Joint Commissioner of Customs dated 21.06.2022 is liable to be set aside on this short ground. The test report from the Mumbai Laboratory as well as the re-testing report from CRCL, New Delhi clearly indicate the samples to contain more than 70% Mineral Hydrocarbon Oil having characteristics of Base Oil. In view of these two consistent reports it is clear that the goods imported were neither restricted nor prohibited. In this factual backdrop when the show cause notice now does not survive, the confiscation of the goods under Section 111(d) and (m) would not be now sustainable. The goods in question are thus liable to be released. Appeal allowed.

Summary

Issues Involved:
1. Confiscation of imported goods.
2. Breach of principles of natural justice.
3. Validity of the Vadodara Laboratory report.
4. Request for re-testing and subsequent test reports.
5. Maintainability of the writ petition.

Summary:

Confiscation of Imported Goods:
The petitioner challenged the order dated 21.06.2022 by the Joint Commissioner, Customs, which directed the confiscation of goods imported by the petitioner, identified as kerosene oil valued at Rs. 1,19,96,909/- under Sections 111(d) and 111(m) of the Customs Act, 1962. The petitioner was given the option to redeem the confiscated goods by paying a redemption fine equivalent to the value of the goods, along with penalties under Sections 112(a) and 114-AA.

Breach of Principles of Natural Justice:
The petitioner argued that the request for retesting of the samples was not complied with, constituting a breach of natural justice. The Court acknowledged this grievance and directed the Customs Department to forward the samples to the New Customs House Laboratory, Mumbai, for re-testing.

Validity of the Vadodara Laboratory Report:
The initial test report from the Vadodara Laboratory indicated that the samples met the requirements of kerosene as per IS 1459-1974. The petitioner contested this report, claiming that the required tests were not conducted. The Court found that the Vadodara Laboratory's report was the basis for the show cause notice and subsequent confiscation order, which was legally flawed.

Request for Re-testing and Subsequent Test Reports:
The Court permitted re-testing of the samples at the Mumbai Laboratory, which reported that the samples were composed of more than 70% Mineral Hydrocarbon Oil with characteristics of Base Oil. A further re-testing at CRCL, New Delhi, confirmed these findings. Based on these consistent reports, the Court concluded that the initial report from the Vadodara Laboratory was incorrect.

Maintainability of the Writ Petition:
The respondent argued that the writ petition was not maintainable due to the availability of a statutory appeal. However, the Court entertained the writ petition, noting that the refusal to permit re-testing was contrary to Circular 30/2017-Customs, and the basis for the show cause notice was legally flawed.

Court's Decision:
The Court set aside the show cause notice dated 22.03.2022 and the order dated 21.06.2022. It ordered the release of the seized goods in favor of the petitioner, subject to compliance with requisite procedures. The petitioner was entitled to the return of the deposited amount of Rs. 8,99,770/- with accrued interest. The Directorate of Revenue Intelligence was granted liberty to take further steps based on the test reports in accordance with the Customs Act, 1962.

Conclusion:
The Court ruled in favor of the petitioner, finding that the initial testing by the Vadodara Laboratory was flawed and that subsequent re-testing reports confirmed the goods were not kerosene oil but Mixed Mineral Hydrocarbon Oil. The confiscation order was set aside, and the goods were ordered to be released.