In a major ruling, the Mumbai bench of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) quashed the confiscation and duty demand on the alleged misuse of ‘Saffron’ capable of use as food flavor and color.
The economic management of a nation rests upon four ‘policy’ pillars – monetary, fiscal, industrial and trade – and it is only from the harmonious blending of these that stability is assured. The issue in question is the statutory competence of a creature of Customs Act, 1962, owing its existence to section 3 therein, to interpret policy, and its offspring instrument thereof, enabled under the authority of the Foreign Trade (Development & Regulation) Act, 1992 beyond its jurisdictional ambit of the twin limbs of assessment -rate of duty and value – under section 17 of Customs Act, 1962, with contingent recourse to recovery under section 28 of Customs Act, 1962, and to interdict clearance of ‘saffron’ for home consumption from empowerment to deter entry of ‘prohibited’ goods.
The Commissioner of Customs , Mumbai found it conscionable hold that’s saffron’, valued at ₹ 70,19,96,270 and imported between October 2010 and May 2013, was liable to confiscation under section 111(d) and section 111(o) of Customs Act, 1962 and to direct recovery of ₹ 25,22,83,817 under section 28(4) of Customs Act, 1962 as duty not paid from the appellant, along with interest thereon under section 28AA of Customs Act, 1962, while imposing penalty of like amount under section 114A of Customs Act, 1962, as well as under section 114AA of Customs Act, 1962, on the assessee and under section 112(a) of Customs Act, 1962 on others, some of whom, including customs broker and a custodian of transferred licences, found themselves at the wrong end of section 114AA of Customs Act, 1962 too in the impugned order.
Ninety consignments of ‘saffron’/ ‘saffron pushali B’ were imported by M/s USMS Saffron Co Inc which, after assessment and upon satisfaction of ‘proper officer’ designated for section 47 of Customs Act, 1962, were allowed to be cleared for home consumption against the claim of being entitled, as holder of ‘authorizations’, to privileges in notification no. 40/2006-Cus dated 1st May 2006 and notification no. 98/2009-Cus dated 11th September 2009.
The impugned order denied entitlement to that claim for not having been in possession of valid ‘authorizations’ consonant with framework of ‘duty free import authorization (DFIA)’ scheme in the Foreign Trade Policy (FTP) and, thus, liable not only for return of duty foregone at the time of clearance but also to consequences of liability of the goods to confiscation as well as for furnishing false documentation.
According to the adjudicating authority, it all boiled down to ‘saffron’ not being ‘food flavour’ or ‘food colour’ that could, to the extent specified in ‘standard input output norms (SION)’, be legally imported without payment of duty in accordance with the particular scheme in the Foreign Trade Policy (FTP) and the authority to so determine vesting in the ‘proper officer’ from statutory control, between entry for the purpose of export and shipment out of India, over the goods that qualified for accrual of benefit as well as from responsibility to administer notifications issued under section 25 of Customs Act, 1962.
The bench held that the generality of description in ‘standard input output norms (SION)’ is intended to assist the policy objective of providing incremental incentive for export and, while that may not be entirely impossible in ‘pre-export’ importation, such possibility of alternative product being cleared in ‘postexport’ importation is not exactly not remote. The rigour of the expression ‘actual use’, to the extent inferred by the adjudicating authority, does not rule out such possibility. We proceed to look at it from two angles: literal and from its embedding in a policy document
In the circumstances of the present dispute, the two-member bench of the tribunal, comprising Vijay Sharma (Judicial member) and C.J. Mathew (Technical member), held that the adjudicatory jurisdiction should not have been extended beyond the contents of the authorizations, which were to be evaluated solely in terms of the appellant’s claim that ‘saffron’ is capable of use as ‘food flavor’ and ‘food color,’ as described in the impugned authorizations.
These descriptions were not disputed in the proceedings, and the test of commercial viability, adopted in the impugned order, was not conceptually intrinsic to export promotion schemes in the Foreign Trade Policy (FTP), thus undoing the foundation of both confiscation and recovery of duty in the impugned order.
Accordingly, the impugned order was set aside to allow the appeal.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
