2008 (9) TMI 230 - AT - Customs

Tribunal overturns customs penalties, allows export of paddy seeds, emphasizes retrospective application.

The Tribunal set aside the order confiscating the goods, ruling that the appellants were not liable for penalties under the Customs Act. The appeal was ... Appellant submit that since the DGFT had issued a Notification dated 19-8-2008 lifting the ban on export of Non Basmati Rice (seed quality) and since the goods are perishable in nature appellant should be permitted to export the consignment – revenue argue that export of same is prohibited by DGFT Not. No. 93/04-09 dated 1.4.08 – appellant submit that Government’s intention while imposing ban on export of rice was not to ban export of seeds of Paddy – appellant has fulfilled the conditions of notification dated 19.8.08 and this should be given retrospective effect - confiscation of the impugned item is not justified Issues Involved:1. Confiscation of goods.2. Interpretation of DGFT Notification regarding export prohibition.3. Classification of goods under Customs Tariff.4. Imposition of Redemption Fine and Penalty.5. Clarification and Policy Interpretation by DGFT.6. Retrospective application of subsequent notifications.Issue-wise Detailed Analysis:1. Confiscation of Goods:The appellant filed a Shipping Bill for the export of 'Non-Basmati Hybrid Rice Seed' valued at Rs. 2,17,14,312/- and weighing 150 MTs. The goods were detained by the DRI on the grounds that they were prohibited for export under DGFT Notification No. 93-(RE-2007)/2004-2009 dated 1-4-2008. The Adjudicating Authority found the goods to be prohibited and confiscated them under Section 113(d) of the Customs Act, 1962, imposing a Redemption fine of Rs. 75,00,000/- and a penalty of Rs. 4.5 crores under Section 114(i) of the Customs Act.2. Interpretation of DGFT Notification:The appellants argued that the DGFT Notification prohibited only 'Non Basmati Rice' and not 'Non Basmati Hybrid Rice Seed'. They contended that 'seed', 'paddy', and 'rice' have different connotations and that the exported seeds are used for sowing, not for consumption. The DGFT Notification did not specifically mention the prohibition of the impugned goods, and the Policy should be determined by the description of the item, not by the code.3. Classification of Goods under Customs Tariff:The Non Basmati Rice is classifiable under HS Code 1006 30, while paddy falls under HS Code 1006 10. The appellants argued that the export of paddy seeds is not restricted as per the Policy, which focuses on the item description rather than the HS Code. The Commissioner relied on a clarification from DGFT dated 22-7-2008, which stated that the export of paddy of seed quality is prohibited, but the appellants contended that this clarification is contrary to the Policy provisions.4. Imposition of Redemption Fine and Penalty:The appellants argued that the imposition of a huge penalty of Rs. 4.5 crores was not warranted, especially when the appellants acted under a bona fide belief. They cited several case laws to support their argument that penalties should not be imposed in cases of policy interpretation disputes.5. Clarification and Policy Interpretation by DGFT:The appellants contended that the DGFT clarification cannot override the clear Policy provisions and that the clarification is not binding on the Courts and Tribunals. They cited case laws to support this argument. The Customs Authorities at Hyderabad had permitted the export of similar seeds, indicating inconsistency and discrimination in the application of the Policy.6. Retrospective Application of Subsequent Notifications:A subsequent Notification No. 32(RE-2008)/2004-2009 dated 19th August 2008 allowed the export of 'Non Basmati Rice (seed quality)' subject to certain conditions. The Tribunal found that this Notification should be given retrospective effect, as the intention of the Government was not to ban the export of seeds of paddy. The Tribunal noted that the appellants had fulfilled the conditions specified in the subsequent Notification.Judgment:The Tribunal set aside the impugned order, stating that the confiscation of the goods was not justified and that the appellants were not liable for any penalty under Section 114(i) of the Customs Act. The appeal, along with the misc. application and stay application, was allowed with consequential relief. The Tribunal emphasized that the Policy of the Government was not to ban the export of seeds of paddy and that the subsequent Notification should be applied retrospectively.