2018 (9) TMI 1677 - AT - Customs

Misdeclaration of Export goods - MOP of Fertilizer grade attempted to be exported in the guise of OWC (Drilling Chemical Additive) - restricted item - whether the goods attempted to be exported by the appellant were muriate of Potash of fertilizer grade or the same were OCW as declared by the assessee? Held that - The sample reports of both CRCL and SIIR confirmed the goods as MOP of fertilizer grade. It is seen that CRCL has submitted two reports vide their letters dated 08.12.2009 stating that the sample is in the form of white granular powder. It has the characteristics of muriate of Potash fertilizer grade . The said report was further elaborated by CRCL vide their letter dated 21.10.2009 indicating that percentage of K20 (Potash content) is as 62.61% and 62.71% by weight - Not only the reports of CRCL and SIIR have established that K2O present in the goods was more than 60%, but Shri Sikandar Alam has also informed the specifications of the goods as having K2O content more than 60%. Revenue has not only relied upon the said test reports solely, but have made further investigations also. As a result, it was found that the goods in question were imported in India by Indian Potash Ltd. for use by farmers as fertilizers. These goods have been supplied by IPL to their fertilizer dealer on subsidized rates, fixed by the Government for farmers - As such it gets established beyond doubt that what was purchased by the appellant from M/s.Lalita Prasad Sons was nothing, but MOP, fertilizer grade, the export of which is banned in India. Export of such MOP is admittedly banned inasmuch as the same was being supplied at subsidized rates fixed by Govt. of India and was meant for Indian farmers at a subsidized price. The appellants have procured the same at that subsidized price only from M/s.Lalita Prasad Solns and illegal export of the same, for personal gains by the appellant, at the cost of the farmers of the country and exchequer, become a serious offense punishable under the law - absolute confiscation upheld - Penalty of ₹ 50.00 Lakhs imposed on the appellant. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Misdeclaration of goods for export
2. Examination of goods by laboratories
3. Legal restrictions on export of Potassium Chloride
4. Investigation into the export activities
5. Confiscation of goods and imposition of penalties

Issue 1: Misdeclaration of goods for export
The appellant filed shipping bills for the export of "OWC (Drilling Chemical Additives)" but the examination revealed the goods to be Muriate of Potash (MOP) fertilizer grade. The goods were found to be misdeclared to evade export restrictions on MOP. The CHA submitted a Material Data Safety Sheet mentioning the goods as Potassium Chloride, further confirming the misdeclaration.

Issue 2: Examination of goods by laboratories
Samples from the containers were tested by Central Revenues Control Laboratory and M/s Shriram Institute for Industrial Research, which confirmed the goods as MOP fertilizer grade with Potash content exceeding 60%. The test reports established the true nature of the goods despite the misdeclaration by the exporter.

Issue 3: Legal restrictions on export of Potassium Chloride
Export of MOP fertilizer grade was restricted by DGFT, and the appellant's attempt to export subsidized MOP under the guise of OWC was a violation of the Customs Act and relevant circulars. The legal framework prohibited the unauthorized export of MOP due to its subsidized nature for domestic agricultural use.

Issue 4: Investigation into the export activities
Further investigations revealed the involvement of various parties in the export scheme, including the supplier, transporter, and forwarding agent. The appellant's premises contained evidence of agreements to export Potassium Chloride, confirming the intentional misrepresentation of the goods. Statements from individuals involved in the supply chain corroborated the illegal export activities.

Issue 5: Confiscation of goods and imposition of penalties
Based on the investigation findings, the Revenue initiated proceedings for the confiscation of the goods and imposed penalties on the appellant. The Commissioner ordered the absolute confiscation of the goods and imposed a penalty of ?50,00,000 on the appellant for attempting to export restricted MOP fertilizer grade. The appellant's defense of believing the goods to be OWC was dismissed due to substantial evidence proving the misdeclaration and illegal export activities.

In conclusion, the Tribunal upheld the Commissioner's order, rejecting the appeal filed by the appellant and affirming the confiscation of the goods and the penalty imposed for the unauthorized export of MOP fertilizer grade in violation of legal restrictions and misdeclaration of goods for export.