2014 (10) TMI 835 - HC - Customs

Court sets aside penalty for importing prohibited goods; Balaji Impex not actual importer.

RASHMI JAIN Versus ADDITIONAL DIRECTOR GENERAL OF FOREIGN TRADE

The court set aside the penalty imposed on M/s. Balaji Impex for importing prohibited goods, as Balaji was not the actual importer and did not benefit ... Import of metal scrap - no-war material certificate - Customs authorities had examined the consignment, some used and rusted empty cartridges/shells were found in some of the containers. - The said consignment was sold by Balaji to M/s. S.G Steels Pvt. Ltd., Uttaranchal (herein after referred to as “SGS”) on high seas. - Confiscation and levy of penalty - Levy of penalty on Balaji for abatement - Held that:- Balaji had purchased these goods on the strength of a certificate issued by Moody International, Iran. Concededly, Moody International (India) Pvt. Ltd. is an authorized agency listed in appendix 5 to the handbook of procedures. The petitioners, thus, proceeded on the basis that Moody International, Iran which is an affiliate of Moody International (India) Pvt. Ltd. would also be accredited for certification purposes. It is also not in dispute that Custom officers had not raised any objection with respect to the pre-shipment inspection certificate. Thus, although the respondents may be correct that the pre-shipment certificate was not from an accredited agency, Balaji’s assumption that M/s. Moody International, Iran was an accredited agency appears to the bona fide. In the given facts and circumstances, no ulterior motive or mal-intent can be ascribed to Balaji in accepting the certificate of M/s. Moody International. It is also relevant to note that the value of HMS was only ₹ 33,600/- which was not significant in comparison to the total value of the goods imported. This fact has been completely ignored by the respondents while imposing penalty on Balaji. - No penalty on Balaji - Decided in favor of petitioner. Issues Involved:1. Validity of the penalty imposed on M/s. Balaji Impex.2. Legitimacy of the pre-shipment inspection certificate issued by M/s. Moody International, Iran.3. Determination of the actual importer of the consignment.4. Allegations of abetting the import of prohibited goods.5. Adherence to principles of natural justice and procedural fairness.Issue-wise Detailed Analysis:1. Validity of the Penalty Imposed on M/s. Balaji Impex:The petitioner challenged the orders dated 7-9-2006 and 9-2-2011, which imposed a penalty of Rs. 2,50,000 on M/s. Balaji Impex for importing prohibited war materials. The court noted that the penalty was based on the allegation that Balaji had 'misdeclared the description of goods' and imported objectionable items with the intention to smuggle them into India. However, the court found that Balaji had not imported any objectionable items and was not the beneficiary of the import. Therefore, the penalty imposed on Balaji was deemed unsustainable.2. Legitimacy of the Pre-shipment Inspection Certificate:The petitioner argued that the consignment was accompanied by a no-war material certificate from M/s. Sun Metal Casting LLC, UAE, and a pre-shipment Inspection Certificate from Moody International, Iran. The respondents contended that Moody International, Iran was not an authorized agency to issue such certificates. The court acknowledged that while the certificate was not from an accredited agency, Balaji's assumption that Moody International, Iran was accredited appeared bona fide. The court found no ulterior motive or mal-intent on Balaji's part in accepting the certificate.3. Determination of the Actual Importer:The petitioner contended that M/s. S.G. Steels Pvt. Ltd. (SGS) was the actual importer, as Balaji had sold the goods to SGS on a high seas basis. The court referred to the definitions of 'import' and 'importer' under the Foreign Trade (Development and Regulation) Act, 1992, and the Foreign Trade (Regulation) Rules, 1993. It concluded that Balaji was not the importer of the offending goods, as the consignment was sold to SGS before it entered India.4. Allegations of Abetting the Import of Prohibited Goods:The respondents argued that Balaji had abetted the import of goods in contravention of the FTDR Act. The court rejected this contention, noting that the allegation of abetting did not find mention in the impugned orders. Furthermore, the court highlighted that SGS, the actual importer, had succeeded in its appeal, and the penalty imposed on SGS had been quashed. Therefore, the question of imposing a penalty on Balaji for abetment did not arise.5. Adherence to Principles of Natural Justice and Procedural Fairness:The petitioner argued that the orders were unreasonable, arbitrary, and violative of principles of natural justice. The court found that the respondents had misdirected themselves in imposing the penalty on Balaji, as there was no evidence of deliberate disobedience of statutory provisions by Balaji. The court also noted that the value of the HMS was insignificant compared to the total value of the goods imported, a fact ignored by the respondents.Conclusion:The court set aside the impugned orders dated 9-2-2011 and 7-9-2006, allowing the writ petition and leaving the parties to bear their own costs. The judgment emphasized that Balaji was not the importer of the offending goods, the pre-shipment certificate was accepted bona fide, and there was no basis for the penalty imposed on Balaji.