Customs, Excise and Gold Tribunal - Tamil Nadu
Siris Aqua Ltd. vs Commissioner Of Central Excise on 27 September, 1999
Equivalent citations: 2000ECR537(TRI.-CHENNAI), 2000(115)ELT186(TRI-CHENNAI)
ORDER S.L. Peeran, Member (J)
1. Both these appeals arise from a common Order-in-Original and common Order-in-Appeal and as there were two Bills of Entry, two appeals were filed. In the impugned Order-in-original the imported goods declared under Bill of Entry No. 5127, dated 8-9-1994 valued at CIF Rs. 5,15,131/- were ordered to be confiscated and released on redemption fine of Rs. 1 lac under Section 111(d) of the Customs Act, 1962. Penalty of Rs. 50,000/- has also been imposed under Section 112(a) of Customs Act, 1962. The goods imported under Bill of Entry No. 1819, dated 28-3-1994 were already cleared and were not available for confiscation, hence penalty of Rs. 1,20,000/- was imposed under Section 112(a) of the Customs Act.
2. The show-cause notice dated 19-9-1994 was issued to the appellants contending that they had filed Bill of Entry No. 5127, dated 8-9-1994 for clearance of 1000 kgs. of shrimp feed imported from USA under the cover of A.W.B. No. 40426960, dated 9-8-1994. They claimed the assessment of the goods imported i.e. shrimp feed falling under Heading 2309.90 of I Schedule of Customs Tariff read with Notification No. 17/93, dated 28-2-1993 at nil rate of duty. As per the invoice also the goods were described as shrimp feed. The Bill of Entry was assessed to nil rate of duty based on the documents made available with the Bill of Entry. During the course of examination of the goods, it was found that the packages imported were consisting of 1176 metal sealed tins having the description of the goods as "Brine Shrimp Eggs" (Artemia Cysts). These tins were vacuum packed and marked to have 425 grs. net weight. The literature on tin further describes the hatching conditions for maximum yield as follows :-
(a) Prepare hatching solution from non-iodized salt or diluted sea water to 20-33 PPT. (1.016-1.024 on Hydrometer).
(b) Incubate and aerate Cysts in a conical shaped container with Cyst to solution density not exceeding 2 Gms. per litre.
(c) Provide hatching tank with natural or artificial light and maintain in constant temperature of 82°F (28°C).
(d) Stop aeration and remove fresh nauplii after 18-24 hours.
The literature further indicated that the subject goods are for use by commercial hatcheries and not for human consumption. Therefore, it was presumed that what was imported was Artemia Cysts (Brine Shirmp Eggs). It was stated that as per the literature available in Hand Book on Aqua farming "Live Feed" published by the Marine Products Exports Development Authority, Ministry of Commerce, Govt. of India the brine shrimp artemia is classified as live feed to over 85% acqua cultured species around the world, although several artificial feeds have been formulated and compounded, but none have equalled and/or given better performance than artemia. Because of this unique nature and role, it has revolutionised the aquaculture industry especially prawn culture and salt production in many advanced countries. It is further stated that as per the Biological and Ecological classification, the brine shrimp artemia is "Crustacean" closely related to shrimp belonging to phylum arthropoda. It is also stated that in nature, artemia are normally found in by persaline lakes, brine ponds and lagoons and man made salterns. The show cause notice further stated the details of technical aspects and then it is alleged that the subject goods are cysts/eggs of Artemio, which falls under the clars of crustaceans. Therefore, all crustaceans whether in shell or not, live, fresh, chilled, frozen, dried, salted or in brine and crustaceans in shell, cooked by steaming or by boiling in water, whether or not chilled, frozen, dried, salted or in brine are classifiable under Heading 03.06 of the I Schedule of Customs Tariff Act and hence, the present form in which it is imported does not fall with this heading and this heading has been over-ruled in the show-cause notice. The show-cause notice, therefore, suggests that Tariff Heading 05.11 of the Schedule which covers animal products not elsewhere specified or included and dead animals of Chapter 1 or 3, unfit for human consumption as the heading under which the imported goods namely Artemia is required to be classified. It is stated that the importers claimed under Heading 2309.90 as preparation of a kind used in animal feeding is also not correct, as this heading refers to items obtained by processing vegetable or animal materials to such an extent they have lost the essential characteristics of the original material other than the vegetable waste, vegetable residues and by-products of such processing. Various other reasons have also been given for over-ruling the classification sought by the party under this heading and ultimately the show-cause notice proceeded to hold that the item was rightly classifiable only under Heading 0511.99 of the Act at 10% Basic + Nil CVD duty without the benefit of Notification and duty had been worked out to Rs. 52,028/- on the value of Rs. 4,42,5637- in respect of one Bill of Entry No. 1819, dated 28-3-1994 and in respect of another Bill of Entry No. 5127, dated 8-9-1994 the value was worked out to Rs. 5,15,1317- CIF (assessable value Rs. 5,20,282/-) which was awaiting clearance and goods cleared for home consumption under the cover of Bill of Entry No. 1819, dated 28-3-1994 having value of Rs. 4,42,563/- CIF (assessable value Rs. 4,46,989/-). Hence, the appellants were called upon to explain why the goods should not be confiscated under Section 111(m) of the Customs Act. The total duty demanded in the show-cause notice was Rs. 96,727/-.
3. The appellant contends that the first Bill of Entry No, 1819, dated 28-3-1994 was accepted by the department, after due examination and hence the question of mis-declaring or giving incorrect details is not correct. The second Bill of Entry was also done in terms of the first Bill of Entry, which had been accepted by the department. It was contended that the imported goods were technical in nature and the duty of classification was on the department and there was no intent to evade duty or to mis-declare the goods, as they had given all the technical literature and invoices were also available on record. Therefore, they contend that the proceedings for confiscation and penalty should not be taken and such proceedings are required to be dropped. However, they did not contest the classification adopted by the department. However, both the authorities had rejected their plea and confirmed the classification of impugned item under Heading 0511.99 and imposed fine and penalty as stated above.
4. Arguing for the appellants, the learned Consultant Shri Karikatti submits that there was a clear understanding on the part of the appellants that the item was required to be classified under Heading 2309.90 as a preparation for kind used in animal feeding and that the item was utilised for the purpose of using it in the shrimp feed and were falling under Chapter 2309.90. They were under the impression that the item is classifiable under 'Animal feeding'. He submits that the appellants had no intention to evade duty or to mis-declare the item, hence, the question of ordering for confiscation and releasing the same on payment of fine did not arise in the matter. He further submits that the appellants were actual users and the imported item was utilised for feeding of prawns and for worth of crores of rupees these prawns were exported and also removed in the domestic market. There was no attempt on their part to sell it in the market and make profits, hence redemption fine and penalty is required to be waived and the appellants do not wish to contest on the re-classification.
7. The learned DR points out that the department initially cleared the first consignment accepting their declaration. However, on a detailed scrutiny, it was found that the item impugned was not an animal feeding, as preparation of a kind used and hence the item is classified under Heading 05.11 as a residuary item, which covers animal products not elsewhere specified or included and dead animal of Chapter 1 or 3 unfit for human consumption. He also relies on the Explanatory Notes of HSN for upholding the said classification. He contends that the importers are expected to know the correct classification and any item mis-declared in the Bill of Entry calls for an order of confiscation and hence the authorities have rightly confiscated and released the same on imposing fine and penalty.
8. We have carefully considered the rival submissions and records of the case and since the appellants do not dispute the classification before us, we restrict our consideration to the quantum of redemption fine and penalties imposed. We find that in the two Bills of Entry concerned, the quantum of duty involved and confirmed was Rs. 44,699/- and Rs. 52,028/- respectively. We find that in view of the technical nature of the product imported and quantity because it is nowhere alleged in the case records that the goods were imported to gain of normal profits for trading them in the local market and also in view of the fact that the product is ultimately used for feeding prawns, therefore, we find that there was no glaring mala fide intent in the declarations made by the importers. We also find that whereas the show-cause notice has invoked the provisions of Section 111(m), however, in the Order-in-Original the goods have been confiscated under Section 111(d) of the Act. Therefore, the department itself is not very clear as to on what grounds the item impugned has been confiscated. We also find that a similar issue was considered by the Hon'ble Apex Court in the case of Akbar Badruddin Jiwani v. C.C. as reported in 1990 (47) E.L.T. 161 (S.C.), wherein it was held that the burden was always on the department to show that the importer had acted dis-honestly or with deliberate object of breaching the law and in such a case, mens rea was required to be established to impose penalty under Section 111(d)ibid. It was also held therein that heavy fine was unwarranted in the face of finding of bona fide belief on the import being legal. In the present case, for the reasons noted above, we find that there is no clear mens rea established on record. We also find that there is no allegation of the import being in contravention of any Import Trade Control provisions. Therefore, we find that the importers were under a bona fide belief of the item being animal feeding, particularly, as their first consignment was so accepted by the authorities.
9. In these circumstances, we are of the considered opinion that mens rea on the part of the importers has not been fully established and hence, respectfully following the ratio of the judgment of Hon'ble Supreme Court cited above, we find that the penalty cannot be imposed under Section 112 of the Customs Act in this case. With respect to the claim of redemption fine also the Hon'ble Supreme Court has held that heavy fine is unwarranted in these circumstances. Therefore, the redemption fine with respect to the Bill of Entry No. 5127, dated 8-9-1994 of Rs. 1,00,000/- is reduced to Rs. 25,000/- (Rupees Twenty five thousand only).
10. The Order-in-Appeal as well as the attendant Order-in-original are modified to this extent and the appeals succeed partially accordingly.