2022 (12) TMI 321 - AT - Customs

Tribunal upholds penalties for importing hazardous waste under Hazardous Waste Rules

M/s Ayyan Energy Resources (P) Ltd. Versus Commissioner, Customs, Jaipur

The Tribunal upheld the impugned order, affirming the confiscation and penalties imposed on the appellant for importing prohibited waste oil under the ... Denial of redemption fine in lieu of confiscation of goods - Wilful mis-declaration of imported goods - Low Sulphur Waxy Residue (fuel oil) - violation of of paragraph 2.7 of Foreign Trade Policy 2009-2014 read with Rule 13 (4) or not - Confiscation - levy of penalty u/s 112 (a) of the Customs Act - HELD THAT:- The facts are not in dispute. The imported good, declared as ‘low sulphur wax residue fuel oil’ was on testing, found to be ‘waste oil’. Import of waste oil is prohibited under the Rules. The appellant had no licence or permission to import and process ‘waste oil’. Therefore, the confiscation of the goods under section 111 (d) and 111 (m) must be upheld as there was not only misdeclaration of the goods but the import itself was in violation of the prohibition under the Rules. Since import of the disputed good was prohibited, the Adjudicating Authority had the discretion to either allow redemption or not. In our considered view, the Adjudicating Authority has correctly exercised its discretion not to allow redemption of hazardous waste to the appellant and the Commissioner (Appeals) has, in the impugned order, correctly upheld it. Section 112 (a) of the Customs Act provides for penalty for acts or omissions which render goods liable to confiscation under Section 111. The amount of penalty imposed is Rs. 1,00,000/- which, is fair and proper considering that the value of the confiscated goods is Rs. 10,98,772/-. Appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether goods declared as 'Low Sulphur Waxy Residue (fuel oil)' that, on testing, are found to be 'waste oil' (a hazardous waste) and whose import is prohibited under applicable hazardous-waste rules, are liable to confiscation under Sections 111(d) and 111(m) of the Customs Act. 2. Whether the adjudicating authority was obliged under Section 125 of the Customs Act to offer an option to redeem (pay a fine in lieu of confiscation) where the confiscated goods are imported in violation of a prohibition under other laws (i.e., hazardous-waste rules). 3. Whether the appellant could be permitted to re-export the confiscated goods or have them released to a third party possessing the required state-level authorization after confiscation. 4. Whether imposition of a monetary penalty under Section 112(a) of the Customs Act on the importer for importing prohibited hazardous waste was appropriate in amount and lawfully imposed. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Confiscation of misdeclared hazardous import (Sections 111(d) and 111(m)) Legal framework: Section 111(d) and 111(m) provide for confiscation where goods are misdeclared or imported in contravention of prohibitions; the Hazardous Waste (Management, Handling and Trans-boundary Movement) Rules, 2008 (the Rules) list certain wastes (Schedule VI) and, by Rule 13(4), prohibit their import without statutory authorization. Precedent Treatment: No prior judicial authorities were invoked or relied upon in the judgment; the Tribunal proceeded on statutory text and admitted test results. Interpretation and reasoning: The Tribunal accepted uncontested laboratory test results establishing that the imported product was waste oil listed in Schedule VI and that its import was prohibited under Rule 13(4). The goods were therefore both misdeclared (declared as fuel oil) and imported in violation of a statutory prohibition. On these facts, confiscation under Sections 111(d) and 111(m) was a lawful exercise of the adjudicating authority's power. Ratio vs. Obiter: Ratio - where imported goods are shown by testing to be hazardous waste whose import is statutorily prohibited and were misdeclared, confiscation under the cited provisions is justified. There is no obiter on alternative factual permutations. Conclusion: Confiscation of the goods was upheld as legally valid. Issue 2 - Duty to offer redemption option under Section 125 Legal framework: Section 125 grants an adjudicating officer discretion to offer an option to pay a fine in lieu of confiscation; the statute mandates offering that option in cases of 'other goods' but permits (does not mandate) it where importation is prohibited under the Customs Act or any other law for the time being in force. Precedent Treatment: No case law was cited to limit or expand the discretion; the Tribunal applied the plain statutory wording. Interpretation and reasoning: The Tribunal interpreted Section 125's text to distinguish goods the importation of which is prohibited under statute from 'other goods.' Because the imported item was a hazardous waste prohibited from import under the Rules, the adjudicating authority had discretion whether to allow redemption. The Tribunal found the authority's decision not to allow redemption to be a proper exercise of discretion given the environmental and regulatory considerations attendant to hazardous waste imports. Ratio vs. Obiter: Ratio - where importation is prohibited under another law, Section 125 confers discretion (not an obligation) to offer redemption; denial of redemption in the exercise of that discretion is sustainable if reasonably exercised. Obiter - commentary on environmental seriousness informing discretion is persuasive but not a separate legal rule. Conclusion: The adjudicating authority permissibly declined to offer redemption; Section 125 was correctly applied. Issue 3 - Request to re-export or release confiscated goods to a licensed third party Legal framework: Section 126 provides that upon confiscation goods vest in the Central Government and the adjudicating officer takes possession; once vested, the importer lacks title to deal with the goods. Precedent Treatment: No authorities were cited; the Tribunal relied on statutory effect of confiscation. Interpretation and reasoning: Because confiscation had vested title in the Central Government, the appellant lacked locus to effect re-export or to arrange release to a third party, even if that third party held relevant state-level authorization. The Tribunal also noted policy concerns about permitting hazardous waste to re-enter circulation where import had been prohibited, emphasizing the regulatory objective of preventing such environmental harms. Ratio vs. Obiter: Ratio - following confiscation under the Customs Act, the importer cannot claim title to the goods and therefore cannot unilaterally re-export or transfer them; release to a third party after confiscation is not available to the original importer as of right. Obiter - policy remarks on environmental danger of hazardous-waste imports supplement the rationale but are not essential legal holdings. Conclusion: The prayer to re-export or to have the goods released to a licensed third party was properly rejected. Issue 4 - Validity and quantum of penalty under Section 112(a) Legal framework: Section 112(a) permits imposition of penalty where acts/omissions render goods liable to confiscation under Section 111; penalty quantum is within adjudicator's discretion and ought to be proportionate to circumstances and value involved. Precedent Treatment: No prior decisions were invoked to define the appropriate range; Tribunal assessed proportionality against the value of the confiscated goods. Interpretation and reasoning: The Tribunal found the penalty of Rs. 100,000 to be fair and proper in light of the confiscated goods' assessed value (Rs. 10,98,772). The penalty was imposed on the importer, while a parallel personal penalty initially imposed on the director was set aside on appeal by the Commissioner (Appeals) and not reinstated by the Tribunal. Ratio vs. Obiter: Ratio - penalty under Section 112(a) is appropriate where goods are confiscated due to prohibited importation and misdeclaration; an amount that is proportionate to the goods' value is sustainable. Obiter - no detailed sentencing principles were articulated beyond proportionality; absence of personal liability for the director in the appellate outcome is factual and not expanded into a general rule. Conclusion: The monetary penalty imposed on the importer under Section 112(a) was sustained as reasonable; the Tribunal did not reinstate any personal penalty on the director. Cross-references and Related Points 1. Issues 1-3 are interconnected: misdeclaration and statutory prohibition (Issue 1) triggered confiscation, which by operation of Section 126 removed title and thereby affected availability of redemption (Issue 2) and the ability to re-export or transfer (Issue 3). 2. The discretionary structure of Section 125 is central to the outcome: where import is prohibited under other laws, denial of redemption is a permissible exercise of administrative discretion that will be upheld absent arbitrariness; the Tribunal found discretion exercised reasonably here given statutory prohibition and environmental considerations. 3. The Tribunal's conclusions rest on uncontested factual findings (laboratory test and absence of license), statutory interpretation of Sections 111, 112, 125 and 126, and policy considerations concerning hazardous-waste imports; no conflicting authorities or dissenting opinions were recorded.