2024 (10) TMI 908 - AT - Customs

Ineligible exemption benefit of N/N. 11/97-Cus dated 01.03.1997, entry on S.No. 78 - mis-declaration of imported goods as printing paper instead of newsprint - SCN issued after a significant delay - Extended period of limitation - HELD THAT - The test reports of CPPRI, Saharanpur has contradictory findings vis- -vis CRCL, Pusa reports. Also it is not clear as to why, after release of 100% goods, report from another lab were required. Apparently no intimation of second testing, as required, was sent to the respondent-assessee. There is nothing on record to show that which samples were sent to Saharanpur lab and when those were drawn. Still the test report of CPPRI, Saharanpur have been relied upon by the department while issuing the Show Cause Notice with allegations to say that the ash content is less than 8%. Since the ash content is absolutely irrelevant for the above entry, it is held that the ash content was unnecessarily discussed in those reports, despite that mechanical wood pulp is the criteria for classification of paper under Chapter 48.02. The test report of Saharanpur, despite it is reporting mechanical wood pulp be more than 70% was wrongly made the basis of denying the imported goods to be printing paper. It is also observed that even the detention certificates of the period August, 1997 to December 1997 specifically mentions that the importer was not found at fault. Above all the test bonds as were furnished by the assessee-respondent were all cancelled by the department while releasing the goods/printing paper of CTH 4802.60 - even the detention certificates of the period August, 1997 to December 1997 specifically mentions that the importer was not found at fault - all the test bonds as were furnished by the assessee-respondent were all cancelled by the department while releasing the goods/printing paper of CTH 4802.60. There is no proof/bagger with the department to get the samples tested from the Lab at Saharanpur. There is also no proof as to which samples were sent to Saharanpur, and the reason to doubt the report of CRCL, Pusa, which is the department s own laboratory. No additional document is produced by the department to justify the subsequent drawing of samples, if any, that too at the back of importer. There is no additional document produced by the department which may falsify their own documents which had come in existence prior to sending the samples to CPPRI, Saharanpur. This is sufficient for us to hold that CPPRI, Saharanpur Report is an afterthought, which has no basis. The report cannot be relied also for the reason that it has been obtained at the back of the respondent and is contradictory to the report which was already accepted and acted upon by the department itself. No opportunity of representation, against a contrary report, was given to the importer-respondent. It stands clear that the proper procedure was not followed while obtaining the report from CRCL, Saharanpur. The reports cannot be accepted to the prejudice of the importer-respondent. In view of lack of evidence in support of CPPRI, Saharanpur report, and no other document than what have been already produced and discussed, there are no justification in remanding the matter back to the adjudication authority. The department itself had acted upon the test reports of CRCL, Pusa, Delhi and had finally released the goods by January 1998 itself. The show cause notice of July 2002 based on the subsequent report which is not legally sustainable and have no fate other than it being rejected. There can be no proper findings on such show cause notice in the absence of any document with department to reopen department s earlier assessment. There are no infirmity in the order under challenge - appeal dismissed.

Issues Involved:

1. Alleged mis-declaration of imported goods as "printing paper" instead of "newsprint."
2. Validity and reliability of test reports from CRCL, Pusa, and CPPRI, Saharanpur.
3. Invocation of the extended period of limitation.
4. Legality of the Show Cause Notice issued after a significant delay.
5. Final assessment and release of goods based on initial test reports.
6. Procedural irregularities and violation of principles of natural justice.

Detailed Analysis:

1. Alleged Mis-declaration of Imported Goods:

The department alleged that the importer mis-declared the imported goods as "printing paper" under Customs Tariff Heading (CTH) 4802 to avail exemption benefits, whereas the goods were actually "newsprint" classifiable under CTH 4801. This mis-declaration was purportedly to circumvent restrictions imposed on traders post-amendment in 1997, which allowed only end-users to import newsprint. The department's case relied heavily on test reports from CPPRI, Saharanpur, which contradicted the initial findings from CRCL, Pusa.

2. Validity and Reliability of Test Reports:

The core of the dispute revolved around conflicting test reports. The initial test reports from CRCL, Pusa, Delhi, indicated that the goods were "printing paper," supporting the importer's declaration. These reports led to the release of the goods by January 1998. However, the department later relied on CPPRI, Saharanpur reports, which suggested the goods were "newsprint." The tribunal found the Saharanpur reports to be an afterthought, obtained without following due procedure and without the importer's knowledge, thus lacking credibility.

3. Invocation of Extended Period of Limitation:

The department invoked the extended period of limitation under Section 28(4) of the Customs Act, alleging suppression of facts by the importer. However, the tribunal noted that the provisional assessments were finalized based on CRCL, Pusa reports, and the goods were released. The extended period was deemed unjustified as there was no evidence of continued mis-declaration after the goods were assessed and released.

4. Legality of the Show Cause Notice:

The Show Cause Notice was issued in July 2002, nearly four and a half years after the goods were released. The tribunal highlighted the lack of justification for this delay and noted that the notice did not mention any reasons for the prolonged period between the receipt of the CPPRI, Saharanpur reports and the issuance of the notice. This delay, coupled with the absence of any new evidence, rendered the notice legally unsustainable.

5. Final Assessment and Release of Goods:

The tribunal emphasized that the goods were assessed and released based on CRCL, Pusa reports, which were obtained following due process. The department's subsequent reliance on the Saharanpur reports, obtained without the importer's participation, was found to be procedurally flawed. The tribunal upheld the final assessment based on the initial reports, which classified the goods as "printing paper."

6. Procedural Irregularities and Violation of Principles of Natural Justice:

The tribunal observed significant procedural lapses, including the department's failure to provide the importer with the CRCL, Pusa reports and the lack of transparency in obtaining the CPPRI, Saharanpur reports. The adjudicating authority's reliance on the Saharanpur reports without considering the importer's submissions violated the principles of natural justice. The tribunal also noted that the department's actions appeared to be an attempt to circumvent a decree by the Delhi High Court, which had ruled in favor of the importer regarding demurrage charges.

Conclusion:

The tribunal dismissed the department's appeal, finding no merit in the allegations of mis-declaration or procedural propriety in the issuance of the Show Cause Notice. The order under challenge was upheld, and the appeal filed by the department was dismissed. The tribunal's decision reinforced the importance of adhering to procedural fairness and the principles of natural justice in customs adjudication.

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