2012 (6) TMI 644 - AT - Customs

Indo Sri Lanka Free Trade Agreement - Duty free clearances - Notification No.2/07-Cus dated 5.1.2007 - non-confirmation to the standard specified in the PFA ACT - Redemption fine of Rs.10 lakhs and penalty of Rs.5 lakh - Held that - On being intimated about the discrepancies appellant immediately contacted foreign suppler who accepted the re-export of the same, thus the imposition of penalty upon the importer is not justified - reduce the redemption fine in the present case to Rs.3.5 lakhs considering subject matter of earlier proceedings in respect of the same appellant.

Summary

Issues:
Import of bakery shortening from Sri Lanka, duty free clearances under Notification No.2/07-Cus, discrepancy in testing results under PFA Act and PFA Rules, imposition of redemption fine and penalty, confiscation of goods not meeting standards, reduction of redemption fine and setting aside penalty.

Analysis:
1. The appellants imported bakery shortening from Sri Lanka claiming duty free clearances under Notification No.2/07-Cus. The goods were tested by an independent agency in Sri Lanka, and certificates were issued confirming the quality parameters. The goods were imported under Indo Sri Lanka Free Trade Agreement, attracting nil rate of duty.

2. The dispute arose when the department's tests revealed discrepancies in the free fatty acid content and melting point of the goods compared to the prescribed limits under PFA Act and PFA Rules. The appellants, though disagreeing with the test results, arranged for re-export of the goods with the foreign supplier due to non-conformity to standards. However, a high redemption fine and penalty were imposed by the Commissioner, leading to the appeal.

3. The Revenue argued that since the goods did not meet the standards under the Prevention of Food Adulteration Act, importation should not be allowed, and the goods should be confiscated. Justification was provided for the imposition of redemption fine and penalty due to the technical non-compliance of the goods.

4. Referring to an earlier order involving the same appellant, the Tribunal acknowledged the liability of goods not conforming to PFA standards for confiscation but reduced the redemption fine considering the importer's lack of involvement in the non-compliance. The penalty was also set aside due to the importer's reliance on the foreign supplier's certificate and lack of malafide intent.

5. Following the precedent, the Tribunal reduced the redemption fine to Rs.3.5 lakhs and set aside the penalty of Rs.5 lakhs since no duty was involved. The appeal was disposed of accordingly, aligning with the earlier decision of the Tribunal.

This judgment highlights the importance of adherence to quality standards in imports, the liability of non-conforming goods, and the considerations for imposing fines and penalties based on importer's involvement and intent.