Commissioner Of Customs, New Delhi vs M/S Jaiswal Import Cargo Services Ltd on 13 December, 2023

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Delhi High Court - Orders

Commissioner Of Customs, New Delhi vs M/S Jaiswal Import Cargo Services Ltd on 13 December, 2023

1. The Commissioner (Customs) assails the validity of the order dated 07 August 2019 passed by the Customs Excise & Service Tax Appellate Tribunal ['CESTAT'] which has proceeded to set aside an Order-in-Original dated 31 July 2018 which had provided for the revocation of the Custom Broker license ['CB license'] of the respondent as well as forfeiture of the security deposit so held. The said Order-in-Original was passed with respect to Bill of Entry [„BOE‟] nos. 421909 dated 10.02.2016 and 4076229 dated 29.01.2016 for consignments of „assorted birthday candles‟ cleared by the respondent on behalf of the importer -M/s Ess Enn Impex.

2. These proceedings against the respondent appear to have been initiated consequent to the Order-in-Original dated 13 December 2017 against the importer - M/s Ess Enn Impex, whereby doubts were expressed with respect to the aforenoted BOEs and the BOE no. 5222876 dated 11 May 2016 filed by M/s Guha Sarkar and Company This is a digitally signed order.

3. The appellant appears to have taken the position that the subject goods were liable to be classified under Customs Tariff Heading [„CTH‟] 3604 and which related to "Fireworks, Signalling Flares, Rain Rockets, Fog Signals and other Pyrotechnic Articles". Upholding the initial view taken that the goods had been wrongly classified, the Adjudicating authority proceeded to pass the said Order-in-Original dated 13 December 2017 confiscating the subject goods while allowing it to be redeemed subject to payment of fine and fulfilment of the condition of removing the central wick/wig/flare from the subject goods before clearance of the goods and imposing a penalty on the respondent as well as M/s Guha Sarkar & Co.

4. It is pertinent to note that parties have failed to place any material on record and which may have indicated the fate of the Order-in-Original dated 13 December 2017. However, from a reading of the impugned order of the CESTAT, we note that an appeal was in fact preferred against the said order and on which the Commissioner (Appeals) ultimately by its order dated 22 March 2019 held that the respondent had neither instigated nor aided the imports undertaken by the importer. We have also not been apprised of whether the importer assailed the findings either with respect to classification of the subject goods or the directions for confiscation as rendered in the order dated 13 December 2017.

5. Pursuant to the Order-in-Original dated 13 December 2017, a Show Cause Notice ['SCN'] dated 02 February 2018 came to be issued calling upon the respondent to show cause as to why further action in terms of Regulation 18 read with Regulations 20 and 22 of This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 18/12/2023 at 20:52:52 the Customs Brokers Licensing Regulations, 2013 ['CBLR 2013'] be not taken on a purported failure on its part to comply with the obligations placed in terms of Regulations 11(d) & (e) of CBLR 2013 in relation to the aforenoted BOE nos. 421909 and 4076229 cleared on behalf of the importer. Those proceedings ultimately culminated in the passing of the Original Order of 31 July 2018 as noticed above.

6. On the appeal preferred by the broker, the CESTAT has on a due consideration of the issue of classification proceeded to render the following findings:-

"8. Fireworks are considered as a low hazard explosives whose sale is regulated by Explosives Rules, 2008 framed under Explosives Act, 1884. The Act as such do not define the fireworks nor do the said Rules. Thus, we bank upon the dictionary meaning of fireworks. Literally, it is an object that burns or explodes with coloured lights and loud sounds and is used for entertainment. As per Cambridge Dictionary - "fireworks is an explosive in a small container filled with explosive chemicals that produce bright coloured pattern or loud noises when they explode".

The most common feature of fireworks is a paper or pasteboard tube or casing filled with the combustible material, often pyrotechnic stars.

As per Wikipedia encyclopaedia - "Fireworks are a class of low explosive pyrotechnic devices used for aesthetic and entertainment purposes. The most common use of a firework is as part of a fireworks display (also called a fireworks show or pyrotechnics) a display of the effects produced by firework devices." Definition of pyrotechnic in Cambridge Dictionary - "a public show of fireworks, a show of great skills by someone giving performances or ammunition containing chemicals for producing smoke or light as for signalling, illuminating or screening." The bare perusal of these definitions along with the admission that the impugned goods are assorted candles makes it clear that the impugned goods neither can be called as firework nor are the pyrotechnic substance.

9. Now coming to the reports of CFSL which reads as follows: "On the basis of physio-chemical examinations it is opined that the presence of Chlorate, Potassium, Aluminium, Nitrate and Sodium were detected only in the material contents of the wig fixed in the middle of the candles."

The PESO report is with reference to examination report from This is a digitally signed order.

These reports have admission that goods in question are candles. However, the Central wig of the candles contains such chemicals as are the contents of fireworks. Thus, the goods are such that a small part thereof contains such chemical as are required to manufacture fireworks. If similarity of contents is the criteria to classify than even match stick should be classified as firework, in the given circumstances and in view of the principle of common parlance/ in terms of trade we hold that goods are not fireworks.

10. We hereby refer to Rule 3(a) of General Rules of Interpretation Customs Tariff Act which reads as follows:

"3. When by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:

(a) the heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods."

These Rules clarify that the Chapter Headings have first to be looked into and the Heading which suits most to the goods has to be applied for purpose of this classification. In the case of overlapping or in case of confusion the Rules clarify that the essential use criteria has to be given preference. Admittedly the essential use of impugned goods is as that of birthday candles. The introduction of Nitrogen, Potassium, Calcium, etc. is intended to just add on the sparkle to that candle and to add on a musical feature to the candles. The object is neither fireworks show for entertainment nor to have the explosions/bursts nor even to use the sparkle as fog lamp or signalling apparatus as are the characteristics of fireworks as per Head note of CTH 3604. This further corroborates our opinion that the impugned good cannot be classified under Chapter 36 CTH 3604 i.e. "fireworks, signalling, flares, rain rockets, fog signals and other pyrotechnic articles." Rather these fall under Chapter 34 CTH 3406 "candles, tapers and the like."

11. In the Order dated 13.12.2017, the Assistant Commissioner after physically examining the goods and appreciating the various definitions of fireworks had formed the opinion as follows: "Only the central red stick which is hardly less than one gram consisting This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 18/12/2023 at 20:52:53 of Chlorate, Potassium, Aluminium, Nitrate and Sodium that the said description does not match with the description of either firework or fire crackers. That even the heads of matchsticks are also made of oxidising agents viz. Potassium Chlorate, mixed with sulphur, fillers and glass powder, similar to the goods found in the central wick by CFSL. Hence, the impugned goods should not be treated as either firework or firecrackers. That the impugned goods are not prohibited goods but merely restricted goods as has also been accepted by PESO in their report dated 19.10.2016." But vide the Order under challenge, the adjudicating authority has still presumed the impugned goods as fire crackers in absolute contradictory to the said observations. It has also been held that due diligence has been compromised and mistakes have been committed in the classification of the goods by the CHA, while ordering the evocation of the CB licence and the forfeiture of the security deposit.

12. In view of the above discussion and the fact that this Bench also has physically examined the similar goods as was directed to be produced, we are of the opinion that G-Card Holder, Shri Kuber Nath Rai had a bonafide belief for the impugned goods to be assorted birthday candles simpliciter as the earlier two consignments had also been cleared rather on the basis of the reports of the Customs officers acknowledging the goods to be assorted birthday candles only. Above all, the present appellant admittedly has no concern with the intercepted consignment. He rather admittedly was the CHA for the said two previously cleared consignments. The adjudicating authorities have gone beyond the limit while cancelling the Custom Broker Licence of M/s. Jaiswal Import Cargo Services Limited whose consignment were never intercepted nor ever got examined by CFSL/PESO simply because his G-Card Holder was same as was for M/s. Guha Sarkar & Co. Ltd. whose consignment was intercepted. Question of cancellation of licence because of subsequent interception of consignment of similar goods is held to be highly unjustified which otherwise stands barred by principle of estoppel."

7. It is pertinent to note that the aforesaid findings of the CESTAT on the question of classification were neither questioned nor assailed before us in this appeal. That only leaves us to consider whether the action of revocation of the CB license and forfeiture of security would sustain.

8. We find ourselves unable to appreciate how the respondent could have been held to be in violation of clauses (d) and (e) of This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 18/12/2023 at 20:52:53 Regulation 11 of CBLR 2013 and which essentially places a duty upon the Customs Broker to correctly advise and exercise due diligence with respect to information which it may impart to an importer or exporter as the case may be.

9. An issue of classification has ultimately come to be answered by the CESTAT in favour of the declarations that were contained in the original BOE. In any case, since the issue of classification itself was contested and has ultimately culminated in an adjudication in favour of the respondent, we find no justification to sustain the cancellation of the CB license and revocation of security. In light of the findings returned with respect to classification, a charge of wrong advice or a failure to exercise due diligence would also not sustain. This, for the obvious reason that the stand taken in respect of classification has ultimately come to be redeemed by the CESTAT and the correctness of which was not questioned before us.

10. Moreover, we find that the legal position with respect to alleged misclassification of goods and where the issue be contested and debatable appears to be well settled. We have consistently held that where the importer asserts that the goods have been correctly classified and the said stand is found to have been taken bona fide, there would be no justification for penal action being taken against the CB. This more so when the stand of the importer is ultimately affirmed and upheld in adjudication proceedings.

11. This Court recently in Green View Logistics v. Commissioner of Customs [2023 SCC Online Del 528] rendered the following observations on this aspect:

"22. It is also material to state that the consignment of „Glucose Test Strips‟ was held up at the material time on the ground that the items were restricted. In this regard the exporter and the This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 18/12/2023 at 20:52:53 Department had exchanged correspondence. It is not disputed that the consignment was finally cleared. Admittedly, the goods in question were correctly described as „Glucose Test Strips‟ in the Shipping Bills and these goods were exported after the initial hold up. It is, thus, not difficult to accept that at the material time, there may have been some confusion as to the classification of the goods as has been contended by the appellant.

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24. According to the respondent, the appellant was remiss in not ascertaining the correct classification of the goods in question. However, it is seen that Regulation 10(e) relates to the failure to impart correct information to the client. In the present case, the exporter was fully aware of the issue regarding classification of the goods in question and had also corresponded to the department in this regard.

25. In Kunal Travels (Cargo) v. CC (I & G), IGI Airport, New Delhi, (2017) 354 ELT 447 (Del.), a Division Bench of this Court had in the context of Regulation 13(e) of the Customs House Agents Licensing Regulations, 2004 -which is pari materia to Regulation 10(e) of CBLR, 2018-observed as under:

"Regulation 13(e) of the CHALR 2004 requires the CHA to: "exercise due diligence to ascertain the correctness of any information which he imparts to a client with reference to any work related to clearance of cargo or baggage" (emphasis supplied). The CHAs due diligence is for information that he may give to its client and not necessarily to do a background check of either the client or of the consignment. Documents prepared or filed by a CHA are on the basis of instructions/documents received from its client/importer/exporter. Furnishing of wrong or incorrect information cannot be attributed to the CHA if it was innocently filed in the belief and faith that its client has furnished correct information and veritable documents. The mis-declaration would be attributable to the client if wrong information were deliberately supplied to the CHA. Hence there could be no guilt, wrong, fault or penalty on the appellant apropos the contents of the shipping bills. Apropos any doubt about the issuance of the IE Code to M/s. H.S. Impex, it was for the respondents to take appropriate action. Furthermore, the inquiry report revealed that there was no delay in processing the documents by the appellant under Regulation 13(n)."

26. In the present case, the exporter had classified the goods in question under CTH 90279090. It is the exporter's stand that the said classification was a correct one. The appellant had candidly stated that there was some confusion at the material time. In his statement, he had also candidly admitted that the shipping bill was This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 18/12/2023 at 20:52:53 filed during the period of lock down and that there was a mistake. He had also stated that he was not aware that the goods in question, namely, glucose tested strips contained reagents. He had also stated that they always took due care before filing shipping bill, but due to shortage of staff during the lock down period, a mistake had occurred.

27. In view of the aforesaid admission, it is apparent that the appellant had been remiss, however, the appellant's candid admission must also be read along with his statement that he was not aware that the goods in question contained reagents. The question whether the revocation of license is justified in the facts of the case must be considered in the aforesaid facts.

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30. In this case the exporter was fully aware of the issue regarding classification and, the exporter had also corresponded with the department and had asserted that the goods in question were not restricted. Undisputedly, the goods in question were correctly described in the Shipping Bill as "glucose testing strips". Further, the appellant had explained that there was confusion on his part and had candidly admitted his mistake.

31. In the given facts, any error on the part of the appellant to inform the exporter regarding the classification of the goods cannot be considered as sufficiently grave so as to forfeit the appellant's license. We are of the view that the learned Tribunal had not examined the material facts of the present case to ascertain whether an action under Regulation 14 was justified.

32. In view of the above, the impugned order as well as the order dated 11.06.2021 passed by the Commissioner of Customs to the extent that it revokes the appellant's license and forfeits the security deposit is set aside."

12. We, consequently find no ground to interfere with the view as expressed by the CESTAT. The appeal fails and shall stand dismissed.

13. Consequently, all pending applications shall stand disposed of.

YASHWANT VARMA, J.

RAVINDER DUDEJA, J.

DECEMBER 13, 2023 RW This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 18/12/2023 at 20:52:53

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Delhi High Court - Orders