2014 (9) TMI 144 - HC - Customs

Petitioner wins case, seizure orders quashed. Upheld import rights under DFIA Scheme. DGFT interpretation binding.

BABOO RAM HARI CHAND Versus UNION OF INDIA

BABOO RAM HARI CHAND Versus UNION OF INDIA - 2014 (304) E.L.T. 371 (Guj.) Issues Involved:1. Legality and validity of the seizure orders dated 29-12-2010 and 7-2-2011.2. Entitlement of the petitioner to import Betel Nut under the Duty Free Import Authorization (DFIA) Scheme.3. Validity of the Order-in-Original dated 12-5-2011.4. Validity of the assessment orders dated 23/24-3-2011.Detailed Analysis:1. Legality and Validity of the Seizure Orders:The petitioner challenged the seizure of 708 MT and 2238 MT of Betel Nut by the Directorate of Revenue Intelligence (DRI) under Panchnamas dated 29-12-2010 and 7-2-2011, respectively. The court found that the seizure orders were not justified. The DRI had directed the petitioner to submit fresh Provisional Duty (PD) Bonds for six months on 24-12-2010, implying that the goods were not immediately liable for confiscation. The court noted that the seizure should be based on a valid reason to believe that the goods were liable for confiscation, which was not sufficiently demonstrated by the DRI. The court held that the seizure orders were illegal and without jurisdiction.2. Entitlement to Import Betel Nut under DFIA:The primary legal issue was whether Betel Nut - Industrial Grade was permissible for import under the DFIA Scheme and entitled to exemption under Customs Notification No. 40/2006. The petitioner argued that Betel Nut is a Vegetable Tanning Agent used in the leather industry and falls under the generic description of 'Vegetable Tanning Agents' in Standard Input Output Norms (SION) G-7. The court considered the clarification issued by the Directorate General of Foreign Trade (DGFT), which confirmed that Betel Nut is covered under SION G-7. The court held that the DGFT's interpretation is final and binding, and therefore, Betel Nut is permissible for import under DFIA and entitled to exemption from duty.3. Validity of the Order-in-Original dated 12-5-2011:The petitioner challenged the Order-in-Original dated 12-5-2011, which denied the benefit of exemption under Customs Notification No. 40/2006 and confirmed a duty demand of Rs. 3,02,56,350/-. The court found that the order was passed without affording the petitioner an opportunity of hearing and without supplying the petitioner with the DGFT's clarification relied upon for the final assessment. The court held that the order was in breach of principles of natural justice, non-application of mind, and passed in haste. Consequently, the Order-in-Original was quashed.4. Validity of the Assessment Orders dated 23/24-3-2011:The petitioner also challenged the assessment orders for 16 Bills of Entry made on 23/24-3-2011, denying the benefit of exemption under the DFIA Scheme. The court found that these orders were passed without issuing a notice to the petitioner and without giving an opportunity of hearing. The court held that the assessment orders were in breach of principles of natural justice and were passed with a view to render the pending petition infructuous. Therefore, the assessment orders were quashed.Judgment:The court allowed the petitions and directed the respondents to pass consequential orders of assessment on revalidation of licenses, including orders of refund. The respondents were instructed to grant the benefit of exemption notification for the goods mentioned in the specified Bills of Entry against the DFIA. The DFIA licenses, which had expired during the pendency of the petitions, were to be returned to the petitioner for revalidation by the DGFT. The DGFT was directed to revalidate the licenses within three weeks from receipt. Upon submission of the revalidated licenses, the respondents were to act in accordance with the law and the judgment's discussion. The court also directed the refund of the duty deposited by the petitioner under protest and discharge of the bank guarantee submitted pursuant to interim orders.Conclusion:The court ruled in favor of the petitioner, quashing the seizure orders, the Order-in-Original dated 12-5-2011, and the assessment orders dated 23/24-3-2011. The petitioner was entitled to import Betel Nut under the DFIA Scheme and to the exemption from duty under Customs Notification No. 40/2006. The court emphasized the binding nature of the DGFT's interpretation and the necessity of adhering to principles of natural justice.