2024 (3) TMI 368 - HC - Customs

Challenging the legality and validity of the seizure memo - imported Ethanol Absolute assessed as Laboratory Chemical under Customs Tariff Heading 98.02 (CTH 98.02) - mis-classification of the goods - HELD THAT - Admittedly, there no dispute that the Petitioner has been importing Ethanol Absolute for the last few years and the classification under CTH 98.02 has been accepted by the Respondents, except in respect of Bill of Entry No. 7515045, which is the subject matter of the present Petition. The Petitioner has not been issued any Show Cause Notice till date. According to the Petitioner even the Investigation Report has not been provided to him. The Petitioner is a regular importer of Ethanol Absolute and not a fly by night operator. The Ethanol Absolute is in bottles of 500 ml and confirms to the marking requirement as per Chapter 98 of the Customs Tariff Act. In our view, the Respondents would not be justified in not permitting provisional release of Ethanol Absolute on the basis that some investigation is being conducted. The classification has to be seen at the time of import by the Petitioner and not the use to which it is put by the buyers of the goods from the Petitioner. There is no condition in the Customs Tariff under chapter 98, it imposes such an obligation on the Petitioner. In our view, in the light of these facts, the Respondents are not justified in refusing to release the Ethanol Absolute provisionally. The Ethanol Absolute under consideration is not prohibited goods but the only dispute between the Petitioner and the Respondents relates to classification, which, as observed above, has been permitted to be cleared since last many years under CTH 98.02 by the Respondents. As correctly submitted by the Petitioner, in similar circumstances, this Court, by its Judgement in M/s. K. Raj and Co. Vs. the Union of India 2023 (11) TMI 531 - BOMBAY HIGH COURT and M/s. K. Raj and Co. Vs. the Union of India 2024 (2) TMI 34 - BOMBAY HIGH COURT has ordered provisional release of the seized goods on execution of a bond. We see no reason as to why similar orders ought not to be passed in the present matter. Thus, we pass the following orders - a) The Petitioner is entitled for provisional release of the Ethanol Absolute under Bill of Entry No. 7515045 on execution of a bond by the Petitioner to secure the differential duty and consequential amount, if any. b) The Respondents are directed to release the goods within a period of two weeks from the execution of such a bond by the Petitioner. c) All contentions of the parties with regard to classification are kept open to be considered in appropriate proceedings. d) The Writ Petition is disposed of.

Issues Involved:
1. Legality and validity of the seizure memo dated 28th September 2023.
2. Classification of Ethanol Absolute under Customs Tariff Heading (CTH) 98.02 versus CTH 22.07.
3. Provisional release of Ethanol Absolute pending investigation.
4. Compliance with prior court orders and customs regulations.

Detailed Analysis:

1. Legality and Validity of the Seizure Memo:
The Petitioner challenged the seizure memo dated 28th September 2023 issued by Respondent No. 4 under Article 226 of the Constitution of India. The Petitioner argued that the seizure was arbitrary, without jurisdiction, and contrary to the orders passed by the Court. The Petitioner submitted that the seizure was based on an erroneous belief that the goods were misclassified under CTH 22.07 instead of CTH 98.02, despite previous consistent classification and clearance under CTH 98.02.

2. Classification of Ethanol Absolute:
The Petitioner has been importing Ethanol Absolute with a purity of 99.9% in 500 ml bottles, marked for laboratory use, and classified under CTH 98.02 for the past three years. The Petitioner argued that the goods met the requirements of Note 3 to Chapter 98, which covers chemicals imported in packings not exceeding 500 ml and meant solely for laboratory use. The Respondents, however, seized the goods on the belief that they should be classified under CTH 22.07. The Court noted that the classification under CTH 98.02 had been accepted by the Respondents for previous imports and there was no justification for the sudden change.

3. Provisional Release of Ethanol Absolute:
The Petitioner sought provisional release of the Ethanol Absolute, citing the Court's previous judgments in similar cases (e.g., M/s. K. Raj and Co.). The Court agreed with the Petitioner, noting that the goods were not prohibited and the only dispute was over classification. The Court found that the Respondents were not justified in refusing provisional release based on ongoing investigations, especially since the Petitioner had complied with all necessary requirements for classification under CTH 98.02.

4. Compliance with Prior Court Orders and Customs Regulations:
The Court observed that the Petitioner had not been issued any Show Cause Notice and had not been provided with the Investigation Report dated 27th October 2023. The Court also noted that the Petitioner had been a regular importer and not a fly-by-night operator. The Court referenced its previous orders allowing provisional release of similar goods under execution of a bond and found no reason to deviate from this precedent.

Conclusion:
The Court ruled in favor of the Petitioner, granting the following orders:
- The Petitioner is entitled to provisional release of the Ethanol Absolute under Bill of Entry No. 7515045 dated 25th August 2023 upon execution of a bond to secure the differential duty and any consequential amounts.
- The Respondents are directed to release the goods within two weeks from the execution of such a bond.
- All contentions regarding classification are kept open for consideration in appropriate proceedings.
- The rule is made absolute, and the Writ Petition is disposed of without any order as to costs.

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