2000 (9) TMI 166 - AT - Customs

Summary

Issues Involved:
1. Classification of imported goods as "DRY GARLIC" or "GARLIC".
2. Applicability of DGFT's policy circular dated 17-09-1999.
3. Violation of Sections 111(d) and 111(m) of the Customs Act, 1962.
4. Revision of valuation of imported goods.

Detailed Analysis:

1. Classification of Imported Goods:
The primary issue is whether the imported goods should be classified as "DRY GARLIC" under Tariff heading 0712.90.40 or as "GARLIC" under Tariff heading 0703.20. The appellants contended that their imports were "DRIED GARLIC," which was freely importable under the Open General License (OGL) category at the time of entering into contracts in July 1999. They argued that the term "DRIED GARLIC" should be interpreted based on trade parlance and international commercial transactions, which do not consider moisture content as a criterion for classification. The adjudicating authorities, however, classified the goods as "GARLIC" under Tariff heading 0703.20, imposing penalties and fines.

2. Applicability of DGFT's Policy Circular:
The DGFT issued a policy circular on 17-09-1999, clarifying that "DRIED GARLIC" would be treated as such provided the moisture content does not exceed 10%. The appellants argued that this clarification was issued after their contracts were finalized and shipments were made, making it inapplicable to their case. They contended that the DGFT's clarification could not retrospectively impose new conditions on already shipped goods. The Tribunal agreed, stating that the DGFT's circular did not constitute an amendment to the policy under Section 5 of the Foreign Trade Development and Regulation Act, 1992, and could not be applied retrospectively.

3. Violation of Sections 111(d) and 111(m) of the Customs Act:
The Customs authorities issued show cause notices under Sections 111(d), 111(m), and 112(a) of the Customs Act, alleging that the imported goods violated the Act due to incorrect classification and excess moisture content. The Tribunal found that the goods were classified as "DRIED GARLIC" under the existing policy at the time of import, which did not specify any moisture content restrictions. Therefore, the Tribunal held that there was no violation of Sections 111(d) and 111(m) of the Customs Act, as the goods were freely importable under the OGL category.

4. Revision of Valuation:
In some appeals, the Customs authorities revised the valuation of the imported goods from US$ 325 PMT to US$ 510 PMT based on contemporaneous imports. The appellants argued that the valuation was revised without proper justification or material evidence. The Tribunal emphasized that any revision of valuation must consider comparable prices, quantities, quality, and market conditions, and must be communicated to the importer for their response. The Tribunal found that the Customs authorities failed to provide such details and justification, making the revised valuation incorrect. Consequently, the Tribunal allowed the appeals, setting aside the revised valuation.

Conclusion:
The Tribunal allowed the appeals, setting aside the orders of the adjudicating authorities. It held that the imported goods should be classified as "DRIED GARLIC" under Tariff heading 0712.90.40, and the DGFT's policy circular dated 17-09-1999 could not be applied retrospectively. The Tribunal also found no violation of Sections 111(d) and 111(m) of the Customs Act and ruled that the revised valuation by the Customs authorities was incorrect due to lack of proper justification. The appeals were allowed with consequential relief according to law.