2025 (5) TMI 1465 - AT - Customs

Seeking provisional release of the seized goods for re-export - mis-declaration of the goods - bona-fide mistake on the part of the foreign supplier - mandatory registration certificate under Section 9 of the Insecticides Act for import of Novaluron - absolute confiscation - huge demurrage and detention charges - distinguish between Restricted and Prohibited goods - HELD THAT - Since the Appellant themselves caused enquiry with the overseas supplier once the imported goods were detained by Revenue and duly communicated the lapse much before the chemical report was communicated to the Appellant there was no place for any doubt regarding the intention of the Appellant and since the goods were also found to be restricted in nature post-chemical analysis for which the Appellant was not entitled to import as having no authorization from the competent Ministry it was appropriately requested for re-export. By not allowing the re-export the original authority had erred since his findings are based merely on assumptions and presumptions which could not sustain. The refusal to allow re-export is without any justifiable reason and if found erroneous which is not sustainable. Based on the decision of this Tribunal in the case of Siemens Public Communication Networks Ltd. 2001 (1) TMI 686 - CEGAT KOLKATA when the goods are liable to be re-exported neither redemption fine/penalty nor duty is required to be paid by the Appellant. I therefore hold that the order rejecting the re-export was not justified. The delay in allowing the re-export would result in adverse effect on the flora fauna and the ecosystem of the country. Therefore set aside the impugned order and allow the above appeal with the specific direction to the Customs Noida to forthwith allow unconditional re-export of the consignment with consequential relief.

Summary

Issues Presented and Considered

The core legal questions considered by the Tribunal include:

1. Whether the importer's request for re-export of goods, which were mis-declared and subsequently found to be restricted goods without proper authorization, can be allowed under the Customs Act and relevant regulations.

2. Whether the refusal to allow re-export, particularly when the goods were wrongly supplied by the overseas supplier due to a bona fide mistake, is justified under the principles of natural justice and applicable customs law.

3. The applicability and scope of Section 110A of the Customs Act, 1962, regarding provisional release of seized goods for the purpose of re-export.

4. The distinction between restricted and prohibited goods under the Customs Act and Foreign Trade Policy, and the implications of such classification on confiscation, release, and re-export.

5. Whether redemption fine, penalty, or duty can be imposed when goods are allowed for re-export.

Issue-wise Detailed Analysis

Issue 1: Legitimacy of Re-export Request for Mis-declared and Restricted Goods

The legal framework involves Sections 111(d) and 111(m) of the Customs Act, 1962, which empower confiscation of goods in cases of mis-declaration and import of restricted goods without mandatory registration or authorization. The Appellant imported a chemical product but received a different insecticide, Novaluron, which is a restricted item requiring registration under the Insecticides Act. The Department alleged mis-declaration and smuggling of Novaluron.

The Tribunal noted that the Appellant promptly engaged with the overseas supplier upon suspicion of mis-declaration and obtained confirmation that the wrong goods were shipped due to an inadvertent mistake by the supplier. This bona fide error was communicated well before the chemical analysis report was received. The Appellant's request for re-export was made in good faith, supported by the supplier's request to take back the consignment.

The Court emphasized that the Appellant had claimed ownership of the goods upon filing the Bill of Entry, and liability remained with them unless they formally abandoned the goods. However, mere ownership does not preclude re-export, especially when the goods were not ordered or paid for in their received form.

The Tribunal applied the principle that restricted goods, unlike prohibited goods, may be re-exported without causing harm to Indian territory, and thus, confiscation or denial of re-export is not automatically warranted. This was supported by the Foreign Trade Policy distinction and judicial precedents.

Issue 2: Refusal of Re-export and Principles of Natural Justice

The Department rejected the re-export request without providing reasons, which the Appellant challenged as a violation of natural justice. The Tribunal found this rejection to be arbitrary and unsupported by evidence, relying on assumptions rather than concrete findings. The absence of reasoned order contravened procedural fairness.

The Tribunal underscored that the Department's stance was inconsistent with the facts and the Appellant's bona fide conduct. The refusal to allow re-export was therefore unsustainable.

Issue 3: Provisional Release under Section 110A of the Customs Act

The Appellant alternatively sought provisional release of the seized goods to facilitate re-export. Section 110A empowers Customs to provisionally release goods subject to conditions and safeguards. The Tribunal noted that since the goods were restricted but not prohibited, provisional release was a viable option to mitigate financial and strategic losses suffered by the Appellant due to detention and demurrage charges.

The Tribunal found that the Original Authority erred in denying provisional release on the ground of absolute confiscation liability, as the goods were not prohibited but restricted, and re-export was the intended course.

Issue 4: Distinction Between Restricted and Prohibited Goods and Its Legal Consequences

The Tribunal elaborated on the legal distinction: prohibited goods possess an intrinsic taint and are liable to absolute confiscation for public health, security, or order reasons, e.g., arms or narcotics. Restricted goods require compliance with conditions such as registration or permits, and non-compliance may lead to confiscation or redemption fine but do not attract absolute confiscation.

In this case, Novaluron was a restricted insecticide requiring registration, which the Appellant lacked. Hence, the goods fell under restricted category, making re-export a permissible remedy rather than confiscation.

Issue 5: Imposition of Redemption Fine, Penalty, or Duty on Re-export

The Tribunal relied on binding precedents, including the Supreme Court and Tribunal decisions, which held that when goods are allowed to be re-exported, no redemption fine, penalty, or duty is payable. The Tribunal cited the Siemens Public Communication Networks Ltd. case and others where re-export was permitted without financial penalties.

This principle was applied to the present facts, reinforcing that the Appellant should not be burdened with such charges given the bona fide nature of the mistake and the intention to re-export.

Significant Holdings

"The refusal to allow re-export is without any justifiable reason, and if found erroneous, which is not sustainable."

"When the goods are liable to be re-exported, neither redemption fine/penalty nor duty is required to be paid by the Appellant."

"The rationale for confiscation of the goods under Section 111 of the Customs Act authorizing absolute confiscation of certain goods, is to restrict the goods, having hazardous nature, to enter the Indian territory. However, when the goods are re-exported from the custom station itself, no damage is caused to the Indian soil."

"The Original Authority had erred since his findings are based merely on assumptions and presumptions which could not sustain."

"The delay in allowing the re-export would result in adverse effect on the flora, fauna and the ecosystem of the country."

Core principles established include:

- The bona fide mistake by a foreign supplier leading to wrong goods being imported does not preclude the importer's right to seek re-export.

- Restricted goods, unlike prohibited goods, can be re-exported without attracting absolute confiscation or financial penalties.

- The Customs authorities must provide reasoned orders when rejecting requests such as re-export to comply with principles of natural justice.

- Judicial precedents mandate that redemption fine, penalty, or duty should not be imposed when goods are allowed re-export.

The Tribunal set aside the impugned order rejecting re-export and directed the Customs authorities to allow unconditional re-export of the consignment forthwith, granting consequential relief to the Appellant.