2025 (11) TMI 315 - AT - Customs

Appeal allowed: Quality Control Order effective after shipment; importer not liable to affix BIS mark or Sec 112(a) penalty

CESTAT AHMEDABAD - AT allowed the appeal, holding that the Quality Control Order requiring BIS marking came into force after the shipment date ... Requirement to affix BIS mark on the Stainless Steel imported - shipment of the goods took place on 27.01.2017 whereas the Bill of Entry was filed in respect of the imported Stainless Steel Rolled Coils Grade-201 on 16.02.2017on the date when the shipment of the goods took place, the Stainless Steel Products (Quality Control) (Amendment) Order, 2016 has not come into force. - goods imported before the Quality Control Order came into force can be held liable to confiscation or not - levy of penalty u/s 112(a) of FA - HELD THAT:- The submission of Revenue that “the appellant was having the full knowledge regarding provisions of Stainless Steel Products (Quality Control Order), 2016 at the time of shipment/ dispatch of the goods from the supplier country and therefore, they were duty bound to affix the BIS mark on the Stainless Steel” does not seem to have much force. It is pertinent to note here that in Metro Bright Bar India Pvt. Limited vs. Commissioner [2020 (5) TMI 227 - CESTAT AHMEDABAD] has held that the Stainless Steel Products (Quality Control Order) 2016 come into force on 07.02.2017. This order was not in force in the month of January, 2017, when the goods in question were shipped. Therefore, the appellant was not required to affix BIS mark on the product imported by them. The impugned order passed by learned Commissioner (Appeals) Customs, Ahmedabad is not sustainable and liable to be set-aside - Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the Stainless-Steel Products (Quality Control) Order, 2016 (as amended) was in force at the time of shipment such that imported stainless steel cold rolled coils were required to bear BIS certification and standard mark. 2. Whether goods imported before the Quality Control Order came into force can be held liable to confiscation under Section 111(d) of the Customs Act, 1962 and the importer penalized under Section 112(a) when the Bill of Entry was presented after shipment but before/after the Order's notified commencement date. 3. Whether the date of import for application of the Quality Control Order is the date of shipment/dispatch (as per Foreign Trade Policy provision) or the date of presentation of the Bill of Entry, for purposes of determining applicability of mandatory BIS certification. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Applicability temporal scope of the Stainless-Steel Products (Quality Control) Order, 2016 Legal framework: The Stainless-Steel Products (Quality Control) Order, 2016 (as amended) prescribes that specified stainless steel products shall conform to specified standards and bear the Standard Mark of the Bureau of Indian Standards on obtaining certification/license; the Order's operative date is fixed by its commencement clause as modified by subsequent amendment orders which altered the period after publication when it would come into force. Precedent Treatment: A prior decision by the Tribunal in a co-ordinate bench holding that the Quality Control Order came into force on 07.02.2017 was recognized and applied. Interpretation and reasoning: The Court examined the amendment sequence which changed the period for the Order to come into force from three months to 180 days and then to 242 days after publication, resulting in an operative date of 07.02.2017. The crucial inquiry was the temporal moment at which the Order imposed obligations - the operative commencement date fixed by the amending notifications. Where shipment occurred prior to 07.02.2017, the statutory obligation to have BIS certification and mark did not legally attach to the goods at the time of shipment. Ratio vs. Obiter: Ratio - The operative date of the Quality Control Order is determined by the consolidated effect of the original notification and its amendments; where shipment predates the operative date, the BIS certification requirement does not apply. Obiter - Observations rejecting Revenue's contention regarding importer's knowledge of the Order at time of shipment are explanatory and not foundational to the holding. Conclusion: The Quality Control Order applied only to imports on or after 07.02.2017; goods shipped in January 2017 were not subject to the BIS certification obligation under that Order. Issue 2 - Confiscation under Section 111(d) and penalty under Section 112(a) where Quality Control Order not in force at shipment Legal framework: Section 111(d) of the Customs Act authorizes confiscation where goods are prohibited; Section 112(a) permits penalty where an importer is engaged in wrongful importation; Section 125 allows redemption by payment of fine. Applicability of these provisions depends on whether the imported goods were prohibited at the relevant time by reason of statutory control orders. Precedent Treatment: The Tribunal followed the co-ordinate decision that the Quality Control Order's operative date post-dated the shipment; therefore, the statutory basis for treating the goods as prohibited under the Order did not exist at the time of shipment. Interpretation and reasoning: Because the statutory prohibition (goods not bearing BIS mark and not conforming to BIS standards) only arose after 07.02.2017, confiscation and penalty predicated on contravention of that Order cannot be sustained for goods shipped earlier. The Court rejected the Revenue's implicit argument that subsequent notification can retrospectively render earlier shipments prohibited, emphasizing the temporal scope of statutory prohibitions. Ratio vs. Obiter: Ratio - Confiscation and penalty under the Customs Act cannot be sustained where the statutory prohibition relied upon did not exist at the time relevant to the import (shipment date); enforcement measures cannot be applied retrospectively to pre-commencement shipments. Obiter - Remarks about the importer's request for first check examination, commercial pressures, and storage charges are factual and do not constitute legal precedent. Conclusion: Confiscation under Section 111(d) and penalty under Section 112(a) based on contravention of the Quality Control Order are not sustainable in respect of goods shipped prior to 07.02.2017; the impugned orders imposing confiscation and penalty were set aside. Issue 3 - Determination of 'date of import' for applying the Quality Control Order: shipment date vs. Bill of Entry date Legal framework: The Foreign Trade Policy provision cited (para 2.17) treats the date of import as the date of shipment/dispatch of goods; the operative question is which temporal marker governs applicability of import restrictions and standards under a statutory order. Precedent Treatment: The Court relied on the reasoning in the Tribunal's prior decision that the shipment date governs the applicability of the Quality Control Order, not the date of filing the Bill of Entry. Interpretation and reasoning: The Court accepted the appellant's contention that the Bill of Lading showing January 2017 shipment establishes the date of import for the specific purpose of the Policy and the statutory order, and that the later presentation of Bill of Entry in February 2017 does not convert the legal status of the goods at shipment. The Court therefore treated the date of shipment/dispatch as determinative for applicability of the Quality Control Order. Ratio vs. Obiter: Ratio - For determining applicability of the Quality Control Order, the relevant date is the date of shipment/dispatch (date of import as per Foreign Trade Policy), not the date of Bill of Entry presentation; a subsequent Bill of Entry does not retrospectively subject earlier-shipped goods to a later-commencing statutory prohibition. Obiter - Discussion on first check examination confirming chemical composition pertains to admissible factual evidence but does not alter the legal determination of the applicable date. Conclusion: The date of shipment/dispatch is the operative date for determining applicability of the Quality Control Order; therefore imports shipped before 07.02.2017 are outside its scope notwithstanding later filing of import documentation. Cross-references and dispositive conclusion Cross-reference: Issues 1 and 3 are interrelated - the operative commencement date of the Quality Control Order (Issue 1) and the legal import date (Issue 3) together determine whether statutory prohibitions existed at the material time, which in turn determines the viability of confiscation and penalty proceedings (Issue 2). Dispositive conclusion (ratio of the decision): The statutory Quality Control Order came into force on 07.02.2017; goods shipped prior to that date are not subject to its BIS certification requirement; consequently, confiscation and penalty based on alleged contravention of that Order for such shipments cannot be upheld and the impugned enforcement orders are set aside.