2024 (4) TMI 79 - AT - Customs

Classification of imported goods - plastic regrind - waste or not - restricted goods or prohibited goods - to be classified under tariff item 3915 1000 of First Schedule to Customs Tariff Act, 1975 or under tariff item 3901 1090 of First Schedule to Customs Tariff Act, 1975 - discharge of onus for displacing the declared classification - confiscation - redemption fine - penalty - HELD THAT - The entirety of the dispute lies within the entry of goods for import under section 46 of Customs Act, 1962 and to be cleared, in terms of section 48 of Customs Act, 1962, for home consumption subject only to satisfaction of proper officer that duties, as leviable, has been discharged and that goods are not prohibited for import. Duties of customs are assessed as leviable by application of rate of duty determined by classification within First Schedule to Customs Tariff Act, 1975 to value as determined by the valuation provisions emanating from section 14 of Customs Act, 1962. The other, viz., prohibition , is an entirely different facet of clearance and undertaken as agency function which, though resort is permissible to the Central Government in section 11 of Customs Act, 1962. The findings of the lower authorities appear to have been caught in circular reasoning of cause and effect as re-classification is seen to have been caused by references to purported restriction on import of waste in Foreign Trade Policy (FTP) and standards formulated by Bureau of Indian Standards (BIS), which the imported goods were held to be, and the restrictions on import of waste plastics brought to bear upon the goods consequent to determination that the goods are waste corresponding to tariff item 3915 1000 of First Schedule to Customs Tariff Act, 1975. It is moot if the different statutes intended waste of plastics to coincide so but that caution does not seem to have impressed itself on the lower authorities. The determination that impugned goods had been misdeclared and prohibited for import is rooted in the purported designating of plastic regrind , in two of the three consignments, as waste by the Central Revenue Control Laboratory (CRCL) - it cannot be concluded from the test reports if the Deputy Chief Chemist concerned intended this to inform classification exercise or to be acted upon for furtherance of restriction in the Foreign Trade Policy (FTP). The onus for displacing the declared classification has not been discharged. The test reports do not lead to the conclusion that classification was to be altered or that the goods are restricted for import. In fact, the entire proceedings are vitiated by lack of any expert ascertainment of the nature of the goods - Between uninformed zeal and deliberate harassment is a very thin dividing line and no whit is added to the credibility of an institution when such blurring occurs in patently ill-considered enforcement. The impugned order is not based on appreciation of facts in totality and has not taken the proposals in the show cause notice to legal and logical conclusion - the impugned order set aside - appeal allowed.

Summary

Issues involved:
The judgment involves the import of plastic regrind without a valid license, misdeclaration, confiscation, redemption, destruction of goods, compliance with Foreign Trade Policy, classification of goods, burden of proof, reliance on expert reports, and standards for handling waste plastics.

Issue 1: Import of plastic regrind without a valid license
The dispute centered around the import of plastic regrind against bills of entry without the required license from the Directorate General of Foreign Trade (DGFT) as mandated by the Foreign Trade Policy (FTP). The goods were reclassified under the Customs Tariff Act, leading to confiscation under section 111(d) and 111(m) of the Customs Act, with the option of redemption on payment of a fine. The appeal challenged the order of the Commissioner of Customs, which upheld the confiscation.

Issue 2: Destruction of goods and compliance with legal provisions
The judgment highlighted the illegality of the proposed destruction of goods for non-availment of re-export, stating that the Customs Act does not empower such action. It emphasized that the authority to order destruction should be vested by the Central Government, which was not the case. The lack of detail in the original authority's order regarding the composition of the goods and the general tone of consequences raised concerns about the legality and procedural fairness of the decision.

Issue 3: Classification of goods and burden of proof
The judgment discussed the classification of the impugned goods as waste plastics under the Customs Tariff Act, relying on official determinations and standards set by the CRCL, BIS, and DGFT. It raised questions about the adequacy of expert reports and the relevance of visual evaluations in determining the classification. The burden of proof was emphasized, citing precedents that require the Revenue to provide proper evidence to support classification decisions.

Issue 4: Compliance with Foreign Trade Policy and standards
The judgment analyzed the restrictions on importing plastic waste under the FTP and BIS standards, emphasizing the need for compliance with regulations. It critiqued the lower authorities' reliance on visible impurities and processing standards in determining the classification of goods, noting the lack of expert assessment and the misinterpretation of relevant standards.

Issue 5: Legal and logical conclusion in the impugned order
The judgment concluded that the impugned order did not consider all facts comprehensively and failed to address the proposals in the show cause notice in a legal and logical manner. It highlighted the importance of expert evaluation, burden of proof, and adherence to legal provisions in customs clearance proceedings, ultimately setting aside the impugned order and allowing the appeal.