2025 (7) TMI 91 - AT - Customs

Absolute confiscation of goods - Light Melting Steel Scrap - Pre-Shipment Inspection Certificate (PSIC) in terms of para 2.51 of the Handbook of Procedure prescribed under Foreign Trade Policy 2023 has not been furnished in compliance to Board Circular No. 48/2016 read with DGFT Trade Notice No. 19/2017 - HELD THAT - The articles are kept with Customs Authorities possibilities of any explosion that would cause more hazard affecting officials and staff of Customs cannot be ruled out. Examination of the goods imported with adequate precaution would not only provide safety in the absence of which it would otherwise endanger life. but it would also help the proper officer to take a decision on the fate of imported goods if fit for home consumption or required to be re-exported. The order passed by the Commissioner of Customs (Appeals) JNCH Nhava Sheva Mumbai-II is hereby set aside - appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the order for absolute confiscation of imported goods, namely "Light Melting Steel Scrap," under Section 111(d) of the Customs Act, 1962, along with imposition of redemption fine and penalties, was justified in the absence of a Pre-Shipment Inspection Certificate (PSIC) as required under para 2.51 of the Handbook of Procedure prescribed under Foreign Trade Policy, 2023, and Board Circular No. 48/2016 read with DGFT Trade Notice No. 19/2017.

- Whether the goods could have been physically examined by experts post-importation despite the absence of PSIC, and if such examination would have been a valid alternative to confiscation and penalties.

- Whether the concerns raised by the Customs Department regarding safety hazards in opening shielded containers without PSIC, including risks of arms, ammunition, explosives, or radiation, justify denial of physical inspection and uphold confiscation.

- The applicability and relevance of judicial precedents where goods imported without PSIC were subsequently inspected and cleared or otherwise disposed of.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legality of Confiscation and Penalties Due to Absence of PSIC

The relevant legal framework includes Section 111(d) of the Customs Act, 1962, which provides for confiscation of goods in certain cases of contravention, Section 125 concerning redemption fines, and Section 112(a) relating to penalties. Additionally, para 2.51 of the Handbook of Procedure under the Foreign Trade Policy, 2023, mandates furnishing of PSIC for certain imports, supported by Board Circular No. 48/2016 and DGFT Trade Notice No. 19/2017.

The Court noted that the Adjudicating Authority and Commissioner (Appeals) had ordered confiscation and penalties primarily on the ground that the PSIC was not furnished as required. The PSIC serves as a declaration that the consignment is free from arms, ammunition, explosives, or radioactive materials, thereby ensuring compliance with safety and regulatory norms.

However, the Appellant contended that despite non-furnishing of PSIC, they had offered to allow 100% examination of the goods by experts at the behest of Customs. The Court observed that the authorities recorded these submissions but did not pass any order permitting physical examination, instead proceeding directly to confiscation and penalties.

The Court emphasized that confiscation without allowing physical inspection where offered would be improper and disproportionate. The Appellant further relied on precedents from this Tribunal and High Courts where goods imported without PSIC were subjected to subsequent inspection and appropriate decisions taken accordingly.

Issue 2: Validity and Feasibility of Physical Examination of Goods Without PSIC

The Respondent-Department argued that opening shield containers without PSIC would be hazardous to experts due to potential presence of arms, ammunition, explosives, or radiation. The PSIC is intended to certify absence of such dangerous materials, thereby protecting Customs officials and inspectors.

The Court acknowledged the validity of safety concerns but balanced this against the risk of endangering life by permitting uninspected goods to remain in custody without examination. It held that examination with adequate precautions could be conducted safely and would serve dual purposes: ensuring safety and enabling proper determination of the goods' fate (fit for home consumption or re-export).

The Court thus found that the safety concerns, while important, do not justify outright denial of inspection and confiscation without examination. The Court referred to judicial precedents where inspection was allowed post-importation in the absence of PSIC, reinforcing that physical examination is a viable and necessary step.

Issue 3: Application of Judicial Precedents and Principles of Natural Justice

The Appellant cited several decisions from this Tribunal and High Courts where goods imported without PSIC were subsequently inspected and decisions rendered accordingly. These precedents establish that non-furnishing of PSIC is not an absolute bar to physical examination and clearance, and confiscation without inspection is avoidable.

The Court relied on these precedents to underscore the principle that procedural fairness and natural justice require giving the importer an opportunity for physical inspection before imposing confiscation and penalties.

The Court noted that the authorities below failed to exercise discretion in favor of inspection despite the Appellant's submissions and offers, thereby rendering the confiscation order unsustainable.

3. SIGNIFICANT HOLDINGS

"Examination of the goods imported with adequate precaution would not only provide safety, in the absence of which it would otherwise endanger life, but it would also help the proper officer to take a decision on the fate of imported goods if fit for home consumption or required to be re-exported."

The Court set aside the order of confiscation, redemption fine, and penalties passed by the Commissioner of Customs (Appeals) and directed that the live consignment be inspected by an expert agency at the cost of the importer within three months.

The core principle established is that absence of PSIC does not mandate automatic confiscation and penalties without affording an opportunity for physical inspection, provided safety precautions are observed. The Court emphasized balancing regulatory compliance with principles of natural justice and safety.

Final determination on the issues:

• The confiscation and penalties imposed solely due to non-furnishing of PSIC were not justified in the absence of physical examination.
• Safety concerns raised by Customs do not preclude physical inspection if conducted with adequate precautions.
• Precedents support allowing inspection and subsequent decision-making rather than immediate confiscation.
• The order of confiscation and penalties was set aside, and the matter remanded for inspection and fresh decision.