High seas sale through State Trading Enterprise not a prohibited import; confiscation and penalty under Customs Act set aside.

Import of Technical Grade Urea through a State Trading Enterprise on high seas sale basis was treated as permissible where the import policy used the term "through" rather than "by" State Trading Enterprises. The permission from the Ministry of Chemicals and Fertilizers was read consistently with that policy, and no condition prohibiting high seas sale was found. As the goods were imported through the State Trading Enterprise and cleared on payment of duty, confiscation under Section 111(d) of the Customs Act and penalty under Section 112(a)(i) were not sustainable. CESTAT accordingly allowed the appeals and set aside the impugned orders.

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Issues: Whether import of Technical Grade Urea through a State Trading Enterprise on high seas sale basis, in the prevailing import policy, amounted to violation of the Foreign Trade Policy so as to justify confiscation under Section 111(d) of the Customs Act, 1962 and penalty under Section 112(a)(i) of the Customs Act, 1962.

Analysis: The applicable import policy used the expression "through" State Trading Enterprises and not "by" them. On that footing, import of Urea routed through MMTC or other State Trading Enterprises, including by high seas sale to the importer, was treated as a permissible mode of import and not as a prohibited import. The permission granted by the Ministry of Chemicals and Fertilizers was also read as permitting import through a State Trading Enterprise, and no restriction prohibiting high seas sale was found in the conditions relied upon. Since the goods were imported through the State Trading Enterprise and cleared on payment of customs duty, the basis for confiscation and consequential penalty was not made out.

Conclusion: The import was held to be in accordance with the policy, and the confiscation and penalty were not sustainable.

Final Conclusion: The appeals succeeded and the impugned orders were set aside, with relief granted to the importer.

Ratio Decidendi: Where the import policy permits import "through" State Trading Enterprises, high seas sale by such enterprises to the importer does not by itself amount to a prohibited import attracting confiscation or penalty.

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