Customs, Excise and Gold Tribunal - Delhi
Ram Kirpal vs Commissioner Of Customs on 24 January, 1997
Equivalent citations: 1997(92)ELT433(TRI-DEL)
ORDER
U.L. Bhat, J. (President)
1. The Commissioner, Customs (Preventive), Ahmedabad passed order dated 21-3-1996 confiscating the consignment of Poppy Seeds weighing 151.060 tons under Clauses (d) and (m) of the Customs Act, 1962 (for short, the Act) on account of violation of Section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992 read with Clause 3 of the Import (Control) Order, 1955 and Section 11 of the Act and on account of misdeclaration of the value of the goods, but allowing redemption on payment of fine Rs. 50 lakhs and on payment of customs duty at the appropriate rate assessed on value reckoned at Rs. 13 per kg. CIF, as against the declared rate of about Rs. 10 (US $ 0.30) per kg. CIF. He also imposed penalty of Rs. 10 lakhs on Shri Sanjay Kapoor, partner of M/s. Sree Viswanath and Sons, Delhi (appellant in C/199/96-A ) and of Rs. 1000/- on Sri Ram Kirpal, proprietor of M/s. Sunder Brej Ayurvedic Pharmacy, Meerut (appellant in C/97/96-A (for short, SAP) under Section 112(a) of the Act. This order is challenged in both the appeals.
2. Subject matter of the appeals is import from Pakistan of 151.060 tons of Poppy Seeds or Khas Khas of Pakistan origin, at CFS, Adalaj for which seven Bills of Entry dated 10-10-1995, 8-11-1995 and 12-1-1996 were filed by M/s. Jaswant B. Shah, Ahmedabad, Custom House Agent of the importer, SAP. Clearance was sought under OGL on the ground that the goods are "Diabetic Food" in terms of serial number 55 of the list of consumer goods allowed to be imported freely under Para 156 of the 1992-97 Policy. As the goods appeared to be grossly undervalued, in the absence of value of identical or similar goods being available, valuation was proposed to be done by deduction method under Rule 7 of the Central Excise Valuation Rules, 1975 taking the wholesale price of the goods in India. The Custom House was of the prima facie opinion that goods were not "Diabetic Food" and being consumer goods falling under list of restricted items required specific licence for import. Investigation also showed that Shri Sanjay Kapoor fraudulently and unauthorisedly imported the goods in the name of SAP without the knowledge and consent of the proprietor of SAP. Accordingly show cause notice was issued to Shri Ram Kirpal, the proprietor of SAP, Sri Sanjay Kapoor and the Custom House Agent and its partner, Sri Jaswant B. Shah. Addendum show cause notice was issued explaining the further evidence collected by the Department.
3. Proprietor of SAP denied the material allegations in the notices, and asserted that he had himself imported the goods and signed the Bills of Entry, that poppy seeds being "Diabetic Food" were freely importable under OGL and that the value declared was correct. Sri Sanjay Kapoor denied the allegations made against him and stated that his firm had entered into an agreement with SAP and he had placed the order with the supplier with the approval of SAP and that he had submitted the Bills of Entry containing the signature of the importer. The Custom House Agent also denied the allegations against him and stated that he had taken all reasonable care before filing the Bills of Entry and acted bonafide.
4. The adjudicating authority overruled the material contentions of the appellants and confirmed the allegations in the show cause notices and passed an order as indicated above. He also dropped the proceedings against the Custom House Agent and its partner.
5. We will first deal with the legality of the import. There can be no doubt that Poppy Seeds are "consumer goods" covered by Serial No. (1) of List A of restricted items in Paragraph 156 of the 1992-97 Policy. In the absence of anything more, import could be made only under specific licence. At page 64 of the Policy ,there is a list of consumer goods which can be freely imported , notwithstanding anything contained in the list of restricted items. Serial No. 55 of this list is "Diabetic Foods". If Poppy Seed is an item of "Diabetic Food" it is freely imported under the list of exceptions. The Commissioner has rejected the contention of the appellants that Poppy Seeds are Diabetic Food. The burden of proving this aspect lies on the importer.
6. Appellants rely on certain documents to establish their contention. These documents had been secured before the import, after the import and also after the filing of the appeal.
(a) At page 238 of the paper book is copy of an unsigned letter of SAP to the Director, Ayurvedic and Unani Sewa Sanstha, Lucknow soliciting information about the use of poppy seeds in the treatment of Diabetics. At page 239 is the reply stating that poppy seeds can be used as food by Diabetic patients. This opinion is worthless as every item of food which can be used by such patients cannot be regarded as "Diabetic Food". Any item of food to be regarded as Diabetic Food must contribute to prevention, control or cure of the disease. The opinion expressed falls far short of the requirement.
(b) At page 240 is a copy of another unsigned letter dated 23-5-1996 of SAP to the Director, Central Council for Research in Unani Medicine, New Delhi seeking opinion about the use of Poppy Seeds for the treatment of Diabetics in the Unani system as one of the ingredients of nutritious food. At page 169 is the copy of the reply dated 28-6-1995 sent by the Senior Research Officer (Unani) of the Council stating that poppy seeds have frequently been mentioned for treatment of Diabetics in various unani formulations as one of the ingredients and since Poppy Seeds have been considered as nutritious food in unani medical literature, they can be used by Diabetic patients. A careful study of the opinion shows that it has two elements, namely,
(a) Poppy Seeds are an ingredient in the treatment of Diabetics.
(b) They are nutritous food and hence can be used by Diabetic patients.
Aspect (a) may show that poppy seeds constitute an ingredient in the preparation of medicine for treatment of Diabetics and aspect (b) may show that poppy seeds , being nutritous, can be used by Diabetic patients. These two aspects cannot show that poppy seeds fall under the category of "Diabetic Food". Ingredients of medicine in treatment can not be regarded as food and permissibility of an article as food for Diabetic patients is not sufficient to show it constitutes "Diabetic food". The above opinion refers to certain unani literature which have not been placed before us.
(c) At page 245 is a photocopy of copy of the reply dated 9-10-1992 of the Deputy Chief Controller of Imports and Exports, New Delhi, to M/s. Universal Fruit Co. Delhi stating that the view of the office was being communicated to the Custom authorities at Amritsar and Bombay. The view communicated to the custom authority is that poppy seeds required for making Ayurvedic and Unani medicines are freely importable and clearance may be allowed after taking a declaration that the poppy seeds imported would be used for such purpose. This letter does not indicate that poppy seeds are to be regarded as "Diabetic Food". The letter only indicates that poppy seeds are an ingredient of Ayurvedic and Unani medicine. This letter cannot have any relevance in considering item 55 in the list of exceptions. It may perhaps have relevance in the context of item (11) of the list.
(d) At page 274 is a copy of reply dated 4-4-1996 of Senior Research Officer (Unani) addressed to SAP stating that the earlier letter dated 28-6-1995 is self-explanatory, that poppy seed is an article of food having many medicinal values and it is included as one of the ingredients of the formulations prescribed for Diabetics in Unani system of medicine. This opinion relates to the medicinal quality of poppy seed but is not sufficient to indicate that it is Diabetic Food. The letter also enclosed copies of extracts of two books, one by Hakim Ajmal Khan and the other by Hakim Mohammad Aknal Khan. Copies of extracts from the books are before us. Translations have been rendered. According to these two Hakims, certain juices prepared out of poppy seeds and other substances can be used in the treatment of Diabetics. This is not sufficient to show that poppy seed is Diabetic food. The expertise and competency of the author of the book has not been established. No attempt is made to show that these books are standard or authoritative works on Unani system.
(e) Reliance is placed on certificate dated 9-4-1996 issued by Dr. Rajesh Kumar Sharma possessing M.Sc. and Ph.D. (Botany) qualifications. According to him Poppy Seeds are very nutritious and rich in proteins (21.5 to 23.5%), oil (about 46 to 49%), carbohydrates, vitamins, minerals, amino-acids etc. Poppy seeds have linoleic acid which has blood cholestrol lowering property and reduces Atherosclerosis, Arterial thrombosis, systolic and diastolic blood pressure and controls the progression of diabetic retinopathy, detoxifies carcinogens (cancer causing compounds). The certificate also refers to experiments conducted by Ahmed and Shaikh on rats which showed that blood glucose level came down within three hours after administering rats with poppy seed extract. Dr. Sharma ended by stating that poppy seeds, in addition to their nutritional qualities, may be used for medicinal preparations for coronary heart diseases, hypertension, Diabetic retinopathy and for its' hypo-glycenic effects. This opinion is based entirely on five articles published in research journals and book. These articles show, that poppy seeds contain crude protein, crude fibre, carbohydrate and minerals like Potassium, Phosphorus, Sodium, Iron, Calcium and Magnesium and poppy seed oil contains linoleic acid, saturated and unsaturated fatty acids. One of the articles prepared by two persons who conducted experiments on rats showed that extract from poppy seeds had a marked hypoglycemic action when administered to glucose loaded and alloxan diabetic rats. It was opined that the poppy and certain other plants have been identified as a source of anti-diabetic material which may have an action in the secretion of insulin and synthesis of insulin. The authors also cautioned (see page 314 of paper book) that more research is needed to pin-point and ascertain the actual modes of action of the plant materials and more research is required in the isolation and characterization of active ingredients for in vitro studies. These articles cannot lead to the reasonable conclusion that poppy seeds can be used as diabetic food from the preventive or curative point of view.
(f) After the impugned order was passed, appellant sent the materials already relied to the Drug Controller General, New Delhi and sought his opinion as to use of poppy seeds as "nutritious food for Diabetic patients and other diseases". In reply, Deputy Adviser (Unani) in the Drug Control cell of the Department of I.S.M. certified "on the basis of reference available in record" that poppy seed has therapeutic value and "can be used as nutritious supplement food for diabetic patient." The opinion is that poppy seed can be used as "nutritious supplement food" and not that poppy seed is used as food for Diabetic patients. Further the opinion is based on certain undisclosed references. The value to be attached to the opinion depends on the exact nature of the references and the weight to be attached to the same. This is so, since the expert opinion is opinion evidence and has to be supported by data and reasons and the opinion has to be tested by testing the data and the reasons. Expert opinion which does not disclose such data and reasons cannot have any value.
7. Thus it is seen that the documents relied on by appellant are not sufficient to show that Poppy Seed is Diabetic food, though the documents suggest that Poppy Seed is an ingredient of medicine for treatment of Diabetics in the Unani system. The Commissioner referred to several books on Diabetics projecting the allopathic point of view. The books explain that in a diabetic, due to inadequacy of insulin, there is non-utilisation of sugar by the tissues and the body is starved of glucose and other food constituents are also not utilized properly. The load on pancreas must be relieved through a diet which can maintain health. The books enumerate "dos" and "don'ts" for diabetic patients. Diet is an essential part of treatment. It requires specified calories of proteins, carbohydrates, fibres, vitamins and minerals. The relevance of these books lies in that they do not refer to poppy seeds as Diabetic food. But this cannot be decisive since according to appellant, Poppy Seed is Diabetic food according to Unani system of medicine. One of the books referred to by the Commissioner states that Poppy Seed is free from narcotic constituent and used in food, is nutritious, has pleasant nutty flavour and is often added to cakes or sprinkled on bread, is source of fatty oil used in preparation of sweets, curry etc. Reference was made to "Plants for Man" by Robert W. Schery of Washington University indicating that Poppy Seed is another spice by association. Entry A.05 of Appendix B of Prevention of Food Adulteration Rules, 1955 refers to poppy seed under the heading "Spices and Condiments". So also in "Nutritive Value of Indian Foods" by C. Gopalan, B.V. Rama Sastri and S.C. Balasubramanian, and published by National Institute of Nutrition under the Indian Council of Medical Research, Hyderabad. Detailed references are made in the impugned order to extracts of all these books and we have summarized the same.
8. It is contended by the appellants that the word "food" in "Diabetic food" should be understood not in a narrow sense, but in a wide sense. Reliance is placed on two decisions. One is State of Bombay v. Vir Kumar Gulab Chand Shah - AIR 1952 SC 335. The question was whether turmeric was "food stuff" within the meaning of the expression in Clause 3 of the Spices (Forward Contracts Prohibition) Order, 1944, read with Section 2(a) of the Essential Supplies (Temporary Powers) Act, 1946. The question arose in the context of the respondent having been acquitted of the charge of contravention of Clause (3) by entering into a forward contract in turmeric. It was held that turmeric, which falls under the category of "spices" and "condiments" could be "foodstuff" in the wider sense of the word. The court observed :-
"...turmeric falls within the wider definition of "food" and "foodstuff given in a dictionary of international standing as well as in several English decisions. It is, I think, as much a "foodstuff in its wider meaning, as sausage skins and baking powder and tea. In the face of all that I would find it difficult to hold that an article like turmeric cannot fall within the wider meaning of the term "foodstuffs". Had the Order of 1944 not specified turmeric and had it merely prohibited forward contracts in "foodstuffs" I would have held in line with the earlier tea case, that is not a proper way of penalising a man for trading in an article which would not ordinarily be considered as a foodstuff ".
The emphasis was on the wider definition and the specific inclusion of "turmeric" in the 1944 Order. In the wider context, spices and condiments would be food or foodstuff. The wider definition referred to is "that which is taken into the system to maintain life and growth and to supply waste of tissue" or as "nutritive material absorbed or taken in the body of an organism which serves for purposes of growth, work or refrain and for maintenance of vital processes." we are concerned in this case, not with words "food" or "foodstuff" but with the words "Diabetic food". The word "food" in "Diabetic food" must take its colour from the context as food recommended or prescribed for diabetic patients. We have already indicated that such evidence is lacking.
9. The other decision relied on is that of the High Court of Calcutta in Nathuni Lal Gupta and Ors. v. The State of West Bengal and Ors. - AIR 1964 Calcutta 279. The decision was rendered in a writ petition challenging criminal case launched under Defence of India Rules, 1962. The charge against the accused was that they squatted outside the main gate and rear entrance of a flour mill preparing wheat products. It was held that wheat and wheat products are "foodstuff" though they cannot be consumed as they are but have to be cooked before the same can be ready for consumption. This decision does not really help the appellants.
10. We agree with the view taken by the Collector that appellants have failed to prove that Poppy seed is "Diabetic food" according to Unani system of medicine. There is no case put forward before us that it is "Diabetic food" according to any other system of medicine. Hence, the same could not have been imported without specific licence. Since the importer did not have specific licence, there has been violation of Import Policy.
11. Appellant challenged the finding of the Collector in the manner of valuation also. The declared value is US $ 0.30 per kg. CIF. The rupee equivalent varies between Rs. 10.22 to Rs. 10.71 per kg. CIF as the exchange rate in the several Bills of Entry presented is not uniform. The show cause notice contained a bald assertion that there was gross under-valuation and proposed valuation under Rule 8 of the Valuation Rules, 1988 on the basis of contemporary wholesale prices appearing in "The Economic Times." It was proposed to value at Rs. 39 per kg. The notice also alleged that value of identical or similar imported goods was not readily available. However, the Collector, in the impugned order relied on an alleged admission in the reply to the show cause notice and an import at Bombay. The reply to the notice stated that "Grade I Khas-Khas was imported and cleared by the Bombay Customs in the month of November, 1995 at Rs 13.00 per kg. as per our information". The subject goods were described in all import documents as Grade II and this was confirmed in the inspection report on the reverse of the Bills of Entry. The Collector purported to overcome this difficulty by stating that there are no grades in Poppy Seeds. The Poppy Seeds Grading and Marking Rules specifically require grade designation to indicate the quality of Poppy Seeds as set out in column I of Schedule II. The Schedule shows that Poppy Seeds with foreign matter percentage and admixture of other seeds percentage not exceeding 1.5 and 0.5 respectively will be Grade I and where they are beyond such limits but within 3.0% and 1.0% respectively, will be Grade II. The admission contained in the reply to the notice about clearance at Rs. 13/- per kg. was specifically with reference to Grade I Poppy Seeds. The same value cannot be adopted for the goods which belong to Grade II. The Collector also placed reliance on invoice dated 6-1-1996 relating to import of Poppy Seeds of Pakistan origin by M/s. M.B. Pharma, Amritsar at Rs. 13 per kg. CIF at Bombay. This allegation was not made in the show cause notice. Copies of the relevant documents were not available to apellants. The quality and grade of Poppy Seeds covered by invoice dated 6-1-1996 have not been adverted to in the order. The Collector did not marshal any evidence to prove misdeclaration of value or the correct value. The finding of misdeclaration and determination of value in the impugned order are not sustainable and are set aside. The declared value has to be accepted and duty assessed accordingly.
12. The show cause notice alleged and the allegation has been confirmed in the impugned order that the import was made really by Shri Sanjay Kapoor using the name of the concern belonging to Shri Ram Kirpal and it was Shri Sanjay Kapoor who attempted to clear the goods without licence. This finding has not been challenged in the course of arguments. What is challenged is only the quantification of redemption fine and imposition and quantification of penalty.
13. Confiscation was ordered under Clauses (d) and (m) of Section 111 of the Act. Confiscation under Clause (m) cannot stand in view of our conclusion that there was misdeclaration of value. Confiscation under Clause (d) has to stand in view of our conclusion that Poppy Seeds could not have been imported under OGL and importer had no licence. The Collector did not indicate the basis on which he quantified redemption fine. There is serious dispute about the ruling price in India at the relevant time and the profit margin. Both sides produced evidence at the stage of hearing of the stay application. Hence, materials were evidently not available to the Collector. In the circumstances, quantification of redemption fine has to be done afresh on consideration of relevant circumstances and materials.
14. It is contended that SAP had conducted enquiry and bona fide believed that Poppy Seed is Diabetic food and as such freely importable without specific licence. We have considered the materials procured by the importer before the import and indicated that they are not sufficient to show that Poppy Seed is Diabetic food. The import was the result of manipulation by Shri Sanjay Kapoor with the connivance of Shri Ram Kirpal. The annual requirement of Shri Ram Kirpal of Poppy Seed is 100 kgs. as admitted by him in the course of investigation. It is true, as pointed out by learned counsel for apellants, if Poppy Seed could be imported under OGL, that would be without any end-use condition and It was unnecessary for Shri Sanjay Kapoor to use the name of Shri Ram Kirpal. But the manipulation by the two persons supports the conclusion that Import was made without special licence deliberately and knowingly. Hence, the imposition of penalty is sufficient. Penalty of Rs. 1000.00 imposed on Shri Ram Kirpal does not call for interference. However, quantification of penalty imposed on Shri Sanjay Kapoor (Rs. 10 lakhs) calls for interference. It has to be made afresh after quantifying the assessable value as indicated above.
15. In the result,
(a) Confiscation under Section 111(d) of the Act is confirmed and confiscation under Section 111(m) of the Act is set aside.
(b) Quantification of redemption fine as Rs. 50 lakhs is set aside.
(c) Quantification of penalty of Rs. 10 lakhs imposed on Shri Sanjay Kapoor is set aside.
(d) Imposition of penalty of Rs. 1000.00 on Shri Ram Kirpal is confirmed.
(e) Determination of value at Rs. 13.00 per kg. CIF is set aside.
(f) The jurisdictional adjudicating authority will quantify the redemption fine and penalty imposable on Shri Sanjay Kapoor and also determine assessable value on the basis of value declared and determine the duty payable and pass a fresh adjudication order after granting appellants opportunity of personal hearing and producing documents to show the ruling price of Poppy Seeds.
16. Appeals are accordingly allowed and the cases remanded to the jurisdictional adjudicating authority.