Custom, Excise & Service Tax Tribunal
M/S Arya International vs Commissioner Of Customs on 26 November, 2015
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, Ahmedabad -ooOoo- Appeal No. : C/10039,10117/2015 [ Arising out of 1. OIA-KDL-CUSTM-000-APP-396-14-15 dtd 13/10/2014 2. OIA-KDL-CUSTM-000-APP-398-14-15 dtd 14/10/2014 Passed by Commissioner of CUSTOMS-KANDLA ] M/s Arya International - Appellant(s) Vs Commissioner of CUSTOMS- KANDLA - Respondent (s)
Represented by :
Appellant(s) : Shri P D Rachchh, Advocate Respondent(s) : Shri L Patra, Authorised Representative Shri T K Sikdar, Authorised Representative For approval and signature :
Mr. P.M.Saleem, Hon'ble Member (Technical) 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
Yes 3 Whether their Lordships wish to see the fair copy of the Order?
Seen 4 Whether Order is to be circulated to the Departmental authorities?
Yes CORAM :
Mr. P.M.Saleem, Hon'ble Member (Technical) Date of Hearing / Decision : 26/11/2015 ORDER No. A/11697-11698/2015 dtd 26/11/2015 Per : Mr.P.M.Saleem, The facts of the case are that the appellant herein has filed two appeals against two separate orders of the Commissioner (Appeals) in respect of a single Order in Original. The first order by Commissioner (Appeals) was on an appeal filed by the assessee appellant and the second order was on the appeal filed by the Revenue, against the same Order in Original. The Commissioner (Appeals) has taken up these two appeals separately and had issued two separate orders. Aggrieved by the said two orders of Commissioner (Appeals), the assessee appellant is before us in the present two appeals. As the issue is same and is arising out of the same Order in Original, both the appeals are taken up together for disposal.
2. Heard both the sides. The Learned Counsel for the appellant submits that they had exported Basmati Rice and had claimed the benefit of Notification No. 55 (RE-2008)/2004-2009 dtd 5.11.2008, as modified by Notification 57/2009-2014 dtd 17.8.2010. For better appreciation, the Notification No 55 is reproduced below:
NOTIFICATION NO. 55 (RE-2008)/2004-2009 NEW DELHI, NOVEMBER, 2008 S.O.(E) In exercise of the powers conferred by Section 5 read with Section 3(2) of the Foreign Trade (Development & Regulation) Act, 1992 (No.22 of 1992) and also read with Para 1.3 and Para 2.1 of the Foreign Trade Policy, 2004-2009, the Central Government hereby makes the following amendments to Notification No.93(RE-2007)/2004-2009 dated 1st April, 2008 read with Notification No. 37 (RE-2008)/2004-09 dated 3rd September, 2008 and Notification No. 38 (RE-2008)/2004-2009 dated 5th September, 2008 and Notification No. 39 dated 16th September, 2008:-
Sl. No. Tariff Item HS Code Unit Item Description Export Policy Nature of Restriction 1 2 3 4 5 6 45A 1006 10 1006 10 90 1006 20 00 1006 30 1006 30 10 1006 30 90 1006 40 00 1006 10 10 Kg.
Kg.
Non Basmati Rice Rice of seed quality Prohibited Free vide Notification No.32 dated 19th August, 2008 Not permitted to be exported.
Subject to conditions imposed vide Notification No.32 dated 19th August, 2008. 45AA 10063020 Kg.
Basmati Rice including Pusa Basmati 1121 (Dehusked (Brown), semi-milled, milled both in either par-boiled or raw condition) Free
1. Grain of rice to be exported shall be more than 7 mm of length and ratio of length to breadth of the grain shall be more than 3.6;
2. Exports to Russian Federation permitted subject to pre-shipment quality certification issued by Sri Ram Institute for Industrial Research or any other agency as may be notified from time to time.
3. Export permitted only if the minimum FOB price is US$ 1200 per ton or Rs.54,000/- per ton.
4. Export of Basmati Rice will be restricted through the following six ports only :
(i) Kandla
(ii) Kakinada
(iii) Kolkata
(iv) JNPT, Mumbai (as approved vide Notification No.82 dated 5.3.08.
(v) Mundra, and
(vi) Pipavav (as approved vide Notification No.84 dated 17.3.08).
2. All other provisions of the Notification No.93 (RE-2007)/2004-09 dated 1st April, 2008 shall remain unchanged, and shall continue to apply.
3. This issues in public interest.
3. The Learned Counsel submits that against Sl. No 45AA of the Notification there are only two ingredients specified under column 6 of the said Notification which are qualifying or restrictive factors for Basmati Rice to be eligible for the benefit of the said Notification. The said nature of restriction reads as follows :
Grain of rice to be exported shall be more than 7 mm of length and ratio of length to breadth of the grain shall be more than 3.6. The same was amended in Notification 57/2009-2014 to read as under:
Grain of rice to be exported shall be more than 6.61 mm of length and ratio of length to breadth of the grain shall be more than 3.5.
4. He submits that as per the test report, the impugned goods satisfy both these conditions and therefore they are eligible for the benefit of the Notification. He further submits that the lower authorities in the impugned orders have gone beyond the above said conditions of the Notification and have relied upon the specifications under AGMARK standards. He contends that this was not called for as the Notification does not prescribe the same. He also submitted that the goods were exported and the assessments were finalised and therefore confiscation and redemption fine cannot be sustained in the instant case. He also argued that penalty under Section 114AA is not imposable as the same was introduced to penalize fraudulent exporters. He drew the attention of the Bench to Para 27 of the Standing Committee on Finance (2005-2006) 14th Lok Sabha, 27th Report, which discuss about the rationale for introduction of Section 114AA of the Customs Act. The Learned Counsel also filed a written compilation including case laws. He drew the attention of the Bench particularly to the specific decision of the Tribunal in the case of Shree Jagdamba Agrico Export Pvt Ltd Vs CC, Kandla -2014(307)ELT.764 (Tri. Ahmd).
5. On the other hand, the Learned Authorised Representative for Revenue submits that at column No 4 of Sl. No 45AA, of the Notification No 55 (RE-2008)/2004-2009, gives the description of the item allowed to be exported under the said Notification as:
Basmati Rice including Pusa Basmati 1121 (Dehusked (Brown), semi- milled, milled both in either par-boiled or raw condition).
6. He submits that Column 6 of the Notification mentions nature of restriction of length, and the ratio of length and breadth, of the grain. However, he argued that these restriction/specification pertains to Basmati Rice and to avail the benefit of the Notification, the goods have to be Basmati Rice first and then satisfy the restriction mentioned in the column 6. He submits that the Commissioner (Appeals) has gone into the issue in detail in the impugned order in appeal and held that the gods exported are not Basmati Rice. The Commissioner (Appeals) has rightly relied upon the DGFT Circular Policy No. 33 (RE-08)/2004-2009 dtd 30.9.2008 which inter-aliea mentions that for deciding whether the goods are Basmati Rice or not, AGMARK testing can be done. He further submits that the goods were exported under the benefit of the impugned Notification and samples were drawn and hence the assessee appellant is bound by the test report and the consequent action is taken based on the test report. Therefore, there is no illegality with regard to confiscation of the goods and redemption fine. Further, he drew the attention to Para 12.6 of the impugned Order in Original, wherein the Adjudicating Authority has held that the goods are liable for confiscation due to violation of various provisions such as Section 113D of Customs Act and Section 11(1) of the Foreign Trade Development Regulation Act 1992 as amended. He also contends that the penalty under Section 114AA is appropriate in the instant case as the assessee had attempted to export Non-Basmati Rice which is a prohibited item, in the guise of Basmati Rice. He also relied upon the case law of Parvaz Overseas Pvt Ltd vs. CC, Kandla 32013(294)ELT.233 (Tri. Ahmd).
7. On perusal of the records and the arguments of both sides, we find that the appellant had exported goods claiming the benefit of the Notification No 55(RE-2008)/2004-2009 as amended, under Sr. No 45AA of the said Notification. We agree with the Learned Counsel for the appellant that the conditions specified as nature of restriction of the said Notification are the dimensions of length and ratio of length and breadth of the grain. The grain they have exported undoubtedly satisfies the same as per the test report. However, we find force in the argument of the Learned Authorised Representative for the Revenue that these specification of Nature of Restrictions is applicable to the goods which is described under column 4 of the Notification, which against Sr. No 45AA specifies Basmati Rice including Pusa Basmati 1121. It, therefore, undoubtedly means that the goods allowed to be exported under this Notification has to be Basmati Rice. We find that the original Adjudicating Authority has gone into the great detail whether the impugned goods are Basmati Rice or not. He has quoted the AGMARK specifications at Para 12.4 of the impugned Order in Original. For clarity, the same is reproduced below:
Grade Specification (quality) of Basmati parboiled rice (for export only) A) General characteristics :
1. The grains shall be long slender of creamy-white, brownish or grayish colour and translucent.
2. The rice :
a) Shall be the dried matured kernels of Oryza sativa L.; and have uniform size, shape and colour;
b) Shall possess in a marked degree the natural fragrance characteristic of Basmati rice both in the raw and cooked state;
c) Shall not have been artificially coloured and shall be free from polishing agents;
d) May contain upto 3 percent of grains with appreciable amount of bran thereon;
e) Shall be free from musty or obnoxious odour and shall carry no sign of mould or containing webs and dead or live weevils;
f) Shall have length 6.0 mm. and above and length breadth ratio 3 and above;
g) Shall be in sound merchantable condition.
B) Special characteristics :
Grade designation
Special characteristics (maximum limits of tolerance)
(percent by weight)
Foreign matter
Broken
and
fragments
Other rice
including
red grains*
Damaged discoloured and chalky grains
Moisture
Special
0.5
5.0
10.0
1.0
14.0
A
1.0
10.0
15.0
2.0
14.0
B
2.0
10.0
20.0
3.0
14.0
* Red grains shall not exceed 2%
C) Definitions :
1) Foreign matter Shall include dust, stones, lumps of earth, chaff, stem or straw and any other impurity.
2) Brokens and fragments - Shall include pieces of rice kernels which are less than three-fourth of a whole kernel. The pieces of kernels, smaller than one-fourth of the whole kernels, shall be treated as fragments.
3) Other rice including red grains - Shall consist of contrasting and/or inferior varieties. Red grains shall be the kernels, whole or broken, which have 25 percent or more of their surface coated with red bran.
4) Damaged discoloured Shall include rice, kernels, broken, fragments or
and chalky grains whole that are internally damaged or discoloured, materially affecting the quality. Chalky grains shall be the grains at least half of which is milky white in colour and brittle in nature.
8. He has held that the goods exported in the instant case are not Basmati Rice, in the light of the test result of the samples drawn from the consignments exported. Therefore, he has denied the benefit of the Notification of the consignments. We find, that the Commissioner (Appeals), has also gone into the issue whether the goods are Basmati Rice or non-Basmati Rice. He has also quoted the DGFT Policy Circular No 33 (RE-08) 2004-09 dtd 30.9.2008 under which DGFT also accepted that the goods may be sent for analysis to AGMARK test centres for variety identification purpose. In the case laws of Shree Jagdamba Agrico Export Pvt Ltd (Supra) cited by the Learned Counsel, the decision of the Tribunal was based on the decision of Global Agro Impex case, and on the grounds the Learned Authorised Representative is not able to point out any notification from DGFT which prescribes that the AGMARK standards have to be applied to decide whether the goods are Basmati Rice or otherwise. In the instant case, the DGFT policy circular (Supra) has clearly indicted that the same may be done. Hence, the said case law is of no help to the appellant. Moreover, the goods are described in the Customs Notifications (Supra) as Basmati Rice, and therefore Customs Authorities are fully justified to verify the impugned goods are Basmati Rice or not. We, therefore, find no illegality in the orders of the lower authorities in the said respect.
9. As regards confiscation, we find that the goods were exported by the appellant claiming the exemption under Notification No 55 (RE-2008)/2004-2009. It is observed that the samples were drawn and sent for test. It is seen that the benefit of the Notification rests upon meeting certain parameters which can only be ascertained by testing samples. However, the goods were allowed to be exported, pending the test results and the assessee agreed for taking the samples and being bound by the test results and allowing the clearance of the goods. Such clearance of the goods, pending the test results, is a facilitation in favour of the assessee as otherwise the goods would be held up for clearance. Therefore, the consequent action resulting from the test result cannot assailed on the ground that the goods have already been cleared and therefore the same is not liable for confiscation, in case the goods are otherwise liable to confiscation as per the provisions of the law. Further, there is a difference between confiscation and liable to confiscation. It is settled law that the goods which are liable to confiscation can be ordered for to be confiscated, and fine in lieu of confiscation can be imposed. We also find that the amount of redemption fine in the instant case is only Rs. 3 lacs whereas value of the goods is Rs 30,96,207/- which is considerate and appropriate. Therefore, we uphold the same.
10. As regards penalty, we find force in the arguments of the Learned counsel that the provisions of Section 114AA is not intended to penalize such type of exports as in the instant case. Moreover, a penalty of Rs 5 lacs has been imposed by the Adjudicating authority on the appellants. The contentions of the Revenue that separate penalty should be imposed under 114AA cannot be sustained under the facts and circumstance of the present case. We, therefore, set aside the second order of the Commissioner (Appeals) dtd 10/14.10.2014 remanding the matter to the Adjudicating authority for deciding the issue of separate penalties under 114(1) and 114AA. We uphold the impugned Order in Original and the first Order in Appeal dtd 13.10.2014.
11. In view of the above observation, the Appeal No C/10039/2015 is dismissed. The Appeal No C/10117/2015 is allowed.
(Dictated and pronounced in the Court) (P.M.Saleem) Member (Technical) swami ??
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