2021 (7) TMI 1066 - HC - Customs

Permission to mutilate the imported goods - 459 packages weighing 55.740 MT of mixed wet strength scrap paper (silicon paper and coated) - seeking allowance of clearance of the goods under the exemption claimed for waste paper - HELD THAT - The Government of India Ministry of Commerce and Industry Department of Commerce Directorate General of Foreign Trade (DGFT) in exercise of powers conferred under Section 3 of the Foreign Trade (D R) Act 1992 r/w Paragraph 1.02 and 2.01 of the Foreign Trade Policy 2015-2020 as amended from time to time introduced a policy condition for items under EXIM Code 4810 of Chapter 48 of ITC (HS) 2017 Schedule-I (Import Policy) - This was vide a Notification dated 31.01.2020 in Notification No. 45/2015-2020. The policy condition for items under EXIM Code 4810 was free but import of stock lot was prohibited. This prohibition came into force on 31.01.2020. The Importer filed bill of entry on 27.10.2020 well after Notification No.45 came into force. The imported goods were examined at the Tuticorin Port by the Officers attached to the SIIB and on examination the Officers found that the imported goods were coated paper classifiable under RITC 4810 and coated paperboard classifiable under RITC 4810 and tissue paper classifiable under RITC 4823 imported in the guise of waste paper. The request for mutilation was much after seizure of the goods. On and after 31.01.2020 stock lot goods are prohibited - the Revenue has rightly construed the prayer sought for by the Importer and passed the order dated 29.12.2020 permitting provisional release of the cargo subject to certain conditions. Therefore no error can be attributed to the manner in which the Revenue construed the Letter dated 23.12.2020 as we are of the clear view that the Letter was for release of the goods and the request for mutilation was only an alternate submission if the Department is not convinced for release of the goods. The Revenue agreed for release of the goods by way of provisional release subject to certain conditions. Therefore the Importer cannot state that the order impugned in the writ petition dated 29.12.2020 was not based on the recommendation given by the Importer. The provisional release of the cargo is allowed subject to the following conditions (a) execution of a bond for 34, 65, 334/- (b) production of cash security / bank guarantee for 12, 12, 867/- towards redemption fine and penalty and (c) payment of duty of 9, 43, 411/-. Appeal allowed.

Issues Involved:
1. Legality of the order dated 29.12.2020 for provisional release of goods.
2. Appropriateness of the writ court's direction to permit mutilation of goods.
3. Allegation of mis-declaration and concealment of prohibited items.
4. Validity of the pre-inspection certificate and its rejection by the customs authorities.
5. Conditions imposed for provisional release of goods.

Issue-wise Detailed Analysis:

1. Legality of the order dated 29.12.2020 for provisional release of goods:
The appeal by the Commissioner of Customs and others challenges the writ court's quashing of the order dated 29.12.2020, which allowed provisional release of goods under specific conditions. The writ court held that the importer did not invoke Section 110 of the Customs Act, 1962, and thus, the order for provisional release was unnecessary. The appellate court, however, found that the request for release of the goods, made by the importer on 23.12.2020, inherently implied provisional release since the goods were seized under a Mahazar on 11.12.2020. The appellate court concluded that the order for provisional release was appropriate given the ongoing investigation and subsequent issuance of a show-cause notice.

2. Appropriateness of the writ court's direction to permit mutilation of goods:
The writ court directed the customs authorities to allow the importer to mutilate the goods under supervision, based on the importer's willingness to do so. The appellate court noted that the request for mutilation was made after the goods were seized and that there was an allegation of mis-declaration. The court emphasized that the request for mutilation was an alternate prayer and not the primary relief sought. It was held that the request for mutilation could not be considered bona fide given the circumstances and ongoing investigation.

3. Allegation of mis-declaration and concealment of prohibited items:
The customs authorities seized the goods on the grounds of mis-declaration, alleging that prohibited items were concealed within freely importable items. The appellate court acknowledged the seizure under Mahazar and the subsequent investigation, which led to the issuance of a show-cause notice. The court noted that the matter of whether the goods were stock lots, prohibited under Notification No.45/2015-2020, needed adjudication. The court found that the writ court's decision did not adequately consider the allegation of mis-declaration and the ongoing investigation.

4. Validity of the pre-inspection certificate and its rejection by the customs authorities:
The importer relied on a pre-inspection certificate from an approved agency, certifying the goods as waste paper. The customs authorities, however, rejected this certificate based on their examination, which found different types of paper bundled together, indicating a stock lot. The appellate court noted that the customs authorities had the right to reject the pre-inspection certificate if they found evidence of mis-declaration. The court emphasized that the matter required adjudication through the show-cause notice process.

5. Conditions imposed for provisional release of goods:
The order dated 29.12.2020 imposed conditions for provisional release, including execution of a bond, production of cash security/bank guarantee, and payment of duty. The appellate court found conditions (a) and (c) reasonable but modified condition (b), which required a bank guarantee/cash security for redemption fine and penalty, deeming it harsh given that the show-cause notice was yet to be adjudicated. The court directed the importer to execute a bond for the amount instead.

Conclusion:
The appellate court allowed the appeal, setting aside the writ court's order and restoring the order dated 29.12.2020 with a modification to the conditions for provisional release. The court directed the customs authorities to permit provisional release upon compliance with the modified conditions and emphasized that the release would be subject to the outcome of the adjudication of the show-cause notice. The importer was directed to cooperate fully in the adjudication proceedings.

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