Calcutta High Court
Atherton Engineering Co. Private ... vs The Commissioner Of Customs (Airport & ... on 10 July, 2025
Author: T.S Sivagnanam
Bench: T.S Sivagnanam
1
2025:CHC-OS:118-DB
OD-6
IN THE HIGH COURT AT CALCUTTA
SPECIAL JURISDICTION
ORIGINAL SIDE
CUSTA/86/2024
IA NO: GA/2/2024
ATHERTON ENGINEERING CO. PRIVATE LIMITED
VS
THE COMMISSIONER OF CUSTOMS (AIRPORT & AIR CARGO COMPLEX), KOLKATA
:CORAM:
THE HON'BLE THE CHIEF JUSTICE T.S SIVAGNANAM
-A N D-
HON'BLE JUSTICE CHAITALI CHATTERJEE (DAS)
HEARD ON : 5.3.2025 and 10.7.2025
JUDGMENT DELIVERED ON : 10.7.2025
T.S SIVAGNANAM, CJ. :
1. This appeal filed by the importer is directed against the order dated 26th June,
2024, passed by the Customs, Central Excise and Service Tax Appellate Tribunal
(Tribunal), by which the appeal filed by the appellant herein challenging the de novo
adjudication Order-in-Original dated 12.09.2017 was dismissed.
2. The appellant has raised the following substantial questions of law for
consideration :
"I. Whether the Hon'ble Tribunal acted without jurisdiction and in breach of
judicial discipline by relying upon and reinstating its own earlier three-
member decision which had already been set aside by the Hon'ble High
2
2025:CHC-OS:118-DB
Court by its judgment dated 10.3.2010 in Atherton Engineering Co. Pvt. Ltd.
v. Union of India, 2010 (256) ELT 358 (Cal), which has not been appealed
by any of the parties and has since attained finality?
II. Whether the Hon'ble Tribunal failed to appreciate the limited scope of the
de-novo adjudication laid down by the Hon'ble High Court in its said
judgment dated 10.3.2010 and acted beyond its jurisdiction by restoring
findings from a previously quashed decision?
II. Whether the Hon'ble Tribunal exceeded its jurisdiction by reopening the
issue of classification which had already been finally settled by the Hon'ble
High Court, and whether it erred in disregarding the binding nature of the
said judgment dated 10.3.2010?
V. Whether the Hon'ble Tribunal failed to address the issue of inordinate
delay in the conduct of de-novo adjudication proceedings and whether such
failure vitiated the impugned order for being in violation of the principles of
natural justice?
XII. Whether the Hon'ble Tribunal committed an error of law by failing to
make any finding on confiscation and redemption fine imposed by the de-
novo adjudicating authority even though the original adjudicating authority
had not ordered confiscation, thereby rendering its order incomplete and
unenforceable?
3. We have heard Mr. Arnab Chakraborty, learned Counsel appearing for the
appellant and Ms. Manasi Mukherjee, learned Counsel for the respondent.
3
2025:CHC-OS:118-DB
4. The case on hand has a chequered history and it may not be necessary for us to
recapitulate all the earlier facts as to how the adjudication proceedings were done,
how the matter was carried to the Tribunal, where the learned Members rendered
differing opinion, reference to the third Member and the orders passed in a writ
petition etc. This is so in the light of the fact that earlier writ petitioner had
approached this Court and filed a writ petition being WP 748 of 2006 challenging the
order passed by the Tribunal dated 2.3.2006, which decision is reported in 2007(21)
ELT 464 Tri.(Kol.). This final order passed by the Tribunal is by a majority of 2:1.
5. Before we examine the matter on merits and correctness of the findings
recorded by the Tribunal, we propose to answer the question as to whether this appeal
could be maintainable before this Court and whether the issue involved touches upon
classification of the goods.` In fact, this question was posed by the Court to the
learned Advocate appearing for the appellant though not raised by the Department in
such form and manner.
6. To answer this question, we may straightaway refer to a few decisions of the
Hon'ble Supreme Court which have decided as to when and under what
circumstances an appeal would be maintainable before the Hon'ble Supreme Court
and when it would be maintainable before this Court in terms of Section 130 of the
Customs Act, 1962. The Hon'ble Supreme Court in Commissioner of Customs,
Bangalore-1 Vs. Motorola India Ltd., 2019 (368) ELT 3 (SC) referred to an earlier
decision in the case of Navin Chemicals Manufacaturing & Trading Company Ltd. vs.
Collector of Customs, (1993) 4 SCC 320 and held that where the value of the goods for
the purpose assessment is required to be increased or decreased is a question that
relates to directly and proximately to the value of the goods for the purposes of
4
2025:CHC-OS:118-DB
assessment. The statutory definition of the said expression indicates that it has to be
read to limit its application to cases where, for the purpose of assessment, the
question arises directly and proximately as to the rate of duty or the value of the
goods.
7. Noting the above finding rendered by the Hon'ble Supreme Court in (supra), the
Hon'ble Supreme Court held that when an order of the appellate Tribunal would go
beyond inter se disputes between the parties and may affect a large number of cases,
such an issue will be one of the general public importance. It has been further held
that certain questions raised or arisen may require interpretation of the Constitution.
Once such question of general importance alone are required to be decided by the
Hon'ble Supreme Court and the very nature of question raised or arisen, the same
necessarily has to involve the issue of law going beyond the inter-parties' rights and
extending to a clause or category of assessees as a whole. On the facts of the said case
(Motorolla), the Hon'ble Supreme Court observed that the only question is as to
whether the assessee therein has breached the condition which are imposed by the
notification for getting exemption from the payment of customs duty or not and the
appeals do not involve any question of law of general public importance which would
be applicable to a class or category of assessees as a whole and the question is purely
inter se between the parties and is required to be adjudicated upon the facts available
and therefore, held that the High Court was not justified in holding that the appeals
are not maintainable under Section 130 of the Act. The decision in Motorola was
followed by the Hon'ble Supreme Court in the Commissioner of Central Excise,
Customs and Service Tax, Mysore Vs. Such Silk International Ltd., (2022) 1 Centax 18
(SC), in M/s. Asean Cableship Pte. Ltd. vs. Commissioner of Customs, 2022 (380) ELT 4
5
2025:CHC-OS:118-DB
(SC) and Commissioner of Central Excise, Hyderabad Vs. Shriram Refrigeration
Industries, 2022 (382) ELT 20 (SC). In the preceding paragraphs we have quoted the
substantial questions of law which are required to be decided in this appeal and on a
bare perusal of the same it would be evidently clear the matter concerns disputes
inter-parties and it is not a case where the court has to decide the value of the goods
for the purposes of assessment or a question which relates to directly and proximately
to the value of the goods and not a case where the issue of law would go beyond the
inter se parties and extend to a class or category6 of assessees as a whole.
8. In the light of the above, we hold this appeal is maintainable before this Court.
Reverting back to the factual position in the instant case, as observed earlier, it would
be suffice to note the facts which have arisen after the order passed in WP 748 of
2006, dated 10.3.2010 [2010 256 ELT 358 (Cal.)]. In the said writ petition, the
appellant challenged the order passed by the learned Tribunal dated 2.3.2006, which
was a final order passed by a majority of 2:1.
9. The appellant is an importer and during October, 1998 to February, 2001, it
imported several consignments of the product called `Artemia Cyst (Brine Shrimp
eggs)'. The appellant described and declared this product as `prawn feed' and on this
basis goods were assessed provisionally by accepting a bank guarantee as security for
the duty that may be finally assessed. If the goods were classified by the Customs as
`prawn feed', there was a duty exemption before 1999 budget and only 5% basic duty
after that. The Directorate of Revenue Intelligence intervened during 1999 and stated
that the goods were not `prawn feeds' and they have to be classified differently
attracting a higher rate of duty. If the goods are classified as `prawn feed', the
appropriate head under which it will be classified is Customs Tariff Heading 2309.90
6
2025:CHC-OS:118-DB
under the Customs Tariff Act, 1975. According to the Customs authorities, it would
fall under Chapter Heading 0511.99 and that the imported goods were prawn feed.
Further, the Department was of the view that the `Cysts' had to be incubated under
controlled temperature and oxygen and hydrated in hatcheries and after that
incubation period one would get an organism known as Nauplii which is food for
prawn and according to them, this imported goods have to undergo some processes to
become prawn feed and therefore, there was a misdeclaration of goods and the
appellant would have to face its consequences.
10. The appellant challenged the order passed by the learned Tribunal by
contending that the provisional assessment was made on or about 15.4.1999 but no
final assessment was ever made; the show-cause notice was issued on the basis of the
provisional assessment; the show cause notice was adjudicated on the basis of the
evidence at the time of provisional assessment; the product imported were eggs with a
live organism or embryo. This live organism or embryo upon nurturing and incubation
became prawn feed. It was always prawn feed, at its infant stage and the product after
nurturing and incubation was not something different from the product imported. Test
reports during provisional assessment are not made available and the appellant did
not have adequate opportunity to substantiate the contention that the imported goods
were goods with the live organism or embryo and after nurturing and incubation they
became prawn feed and there was no change of the nature of the product imported.
11. The appellant placed reliance on the decision of the Hon'ble Supreme Court in
Commissioner of Income Tax Vs. Venkateswara Hatcheries (P) Ltd., (1999) 237 ITR 174,
where the assessee was in the business of hatchery and the Hon'ble Supreme Court
held that the assessee did not contribute to the formation of chicks and the formation
7
2025:CHC-OS:118-DB
of chicks was a natural and biological process over which the assessee had no hand or
control and the assessee was helping the natural and biological process of giving birth
to chicks and the birth of chicks was an `event of nature'.
12. Reliance was also placed on the decision of the Hon'ble Supreme Court in
Commissioner of Central Excise & Customs, Mumbai vs. ITC Ltd., 2006 (203) ELT 532
(SC) to support their contention that the alleged short payment of duty can arise only
upon completion of assessment as it was the case of the appellant that no final
assessment was ever made. The Hon'ble Court while considering the correctness of the
finding rendered by the learned Tribunal took note of the fact that the decision of the
Tribunal was based on a decision with regard to importation of prawn Brine Shrimp
eggs and the Mumbai Bench of the Tribunal in Commissioner of Customs (P.), Mumbai
vs. Atherton Engg. Pvt. Ltd., 2001 (129) ELT 502 (Tri.-Mum.) where the Tribunal
accepted the classification made by the Department under Chapter Heading 0511.99.
The appellant challenged the said order before the Hon'ble Supreme Court and a SLP
was dismissed on 4.4.2002.
13. The Hon'ble Court first examined as to the effect of the decision of the Mumbai
Tribunal and held that the decision of the Hon'ble Supreme Court is the final decision
on the particular consignment in issue between the parties involved in that litigation
and the decision of the Hon'ble Supreme Court cannot be read as an authority for the
proposition that any product imported and declared as Brine Shrimp Eggs would
necessarily have to be classified 'other category' under heading 0511.99. The following
reasons were given by the Hon'ble Court to support the above conclusion and it will be
beneficial to extract the relevant paragraph of the said order.
8
2025:CHC-OS:118-DB
"11. It should be remembered that the above decision of the Supreme Court
is the final decision on the particular consignment in issue between the
parties involved in that litigation. I do not read that Supreme Court decision
as an authority for the proposition that any product imported and declared as
Brine Shrimp eggs would necessarily have to be classified in the 'other
category' under the heading 0511 for reasons given by me below
12. It is the categorical case of the writ petitioner that these goods which were
imported by them were fertilised eggs They contained embryos or little
organisms enclosed within the cysts, which upon incubation in controlled
temperature and hydration would become larvae which could be used as
prawn feed, it is submitted.
13. If there is an embryo within the egg, then there is a living organism within
it Upon such incubation the living organism merely grows, it does not change
its nature and character. If there is no embryo within the eggs then there is no
living organism and these eggs cannot be used as prawn feed.
I am of the opinion that if an embryo is within an egg and it is
subsequently incubated in controlled temperature and under hydration the
larvae which are subsequently born do not assume the character of any
different product but remain in nature and characteristics the same product or
organism which is within the egg. Therefore, if the eggs did contain an
embryo they could be classified as feeding materials for prawns and ought to
have been so classified. These embryos may not be proper prawn feed at the
time of importation but could become so, after incubation. Refusing to classify
the product as prawn d ought to have been so classpo feed on this basis is
not reasonable. In deducing the above principle I have taken a lot of guidance
from the case of Commissioner of Income-tax. v. Venkateswara Hatcheries (P)
Ltd. reported in (1999) 237 ITR 174 (S.C.) (supra)"
14. Thus, in the above order, the classification issue has been put to rest wherein
the Court held if the eggs did contain an embryo they could be classified as feeding
9
2025:CHC-OS:118-DB
materials for prawns and ought to have been so classified. The embryos may not be
proper prawn feed at the time of importation but could become so, afar incubation and
refusing to classify the product as prawn feed on this basis is not reasonable. In this
regard, the decision of the Hon'ble Supreme Court in Venkateswara Hatcheries [P] Ltd.
was referred to. The above findings rendered by the Hon'ble Court attained finality and
the revenue has not preferred any appeal. After having held so with regard to the
classification that the product has to be classified as prawn feed, the Court thought fit
to remand the matter for factual inquiry to examine as to whether the imported goods
contained an embryo or a live organism and that this factual inquiry ought to have
been made upon notice to the appellant/writ petitioner and after giving them an
opportunity to counter the evidence of the revenue and to produce his own evidence in
support of his contention. With the above finding, the following directions were issued:
"14. Therefore, in the circumstances there has to be a factual enquiry which
has not been done
15. I do not agree with the submissions of Mr. R.K. Chowdhury that the order
of the Commissioner could not have been passed without assessment. In my
opinion, such an order is in the nature of an assessment. But nevertheless,
such order has been passed without making available the test report of the
provisional assessment to the writ petitioner or by considering any material,
whether from the seller's invoice or other materials available from the seller or
elsewhere, regarding the exact nature of the goods. The pointed fact of
enquiry should have been whether the imported goods contained an embryo
or a live organism. This factual enquiry ought to have been made upon notice
to the writ petitioner and after giving them an opportunity to counter the
evidence of the revenue and to produce his own evidence in support of his
contention
16. For those reasons, the order of the tribunal dated 2-3-2006 as well as the
order of the Commissioner dated 6-11-2002 are set aside. The Commissioner
10
2025:CHC-OS:118-DB
of Customs (Airport and Administration) is directed to rehear and re-decide
the matter in accordance with the above observations within a period of 12
weeks from the communication of this order The writ application is allowed"
15. In paragraph 15 above, the argument made on behalf of the appellant that the
proceedings cannot be initiated under Section 28 of the Customs Act without there
being a final assessment was rejected. As against which, the appellant had not carried
the matter on appeal and such finding also attained finality. Thus, the scope of
remand has been clearly circumscribed by the court and in the de novo proceeding the
authority has to scrupulously follow the direction issued by the court and cannot
deviate from the same. Unfortunately, the authority lost sight of the effect of the
direction and in the de novo adjudication reopened the entire matter and proceed to
render a finding against the appellant.
16. The Hon'ble Supreme Court in Union of India vs. Kamlakshi Finance Corporation
Ltd., 1991 [55] ELT 433 [SC] held the principles of judicial discipline requires that the
order of the higher appellate authority should be followed unreservedly by the
subordinate authorities. The mere fact that the order of the appellate authorities is not
acceptable to the department in itself and objectionable phrase and is the subject
matter of an appeal can furnish no ground for not following it unless its operation has
been suspended by a competent court. Further it was held that if this healthy rule is
followed the result will not only be undue harassment to assessee and chaos in the
administration of law laws. This decision has to be borne in mind in the instant case
as we are of the clear view that the adjudicating authority while commencing the de
novo adjudication proceeding can culminate the same by an order dated 12.9.2017
virtually sat in judgment over the direction issued by this court. In the decision
11
2025:CHC-OS:118-DB
reported in 2010 [256] ELT 358 [Calcutta] not stopping with that the adjudicating
authority proceeded to order confiscation of the goods and also imposed redemption
fine. This was clearly without jurisdiction. In the first round, an order of adjudication
was passed on 6.11.2002 wherein the adjudicating authority in no uncertain terms
holds that the goods are not available for confiscation since they have already been
released provisionally at the request of the importer and no redemption fine was
imposed. If that be the factual position on de novo adjudication, the authority
exceeded its jurisdiction in ordering confiscation of the goods which admittedly was
not available and also ordering for redemption fine. One more major error committed
by the adjudicating authority is to impose penalty on one of the Directors of the
appellant, who was no more. This aspect has been specifically pleaded by the
appellant before the authority. Though several grounds were raised by the appellant
before the learned Tribunal, the learned Tribunal lost sight of the scope of the remand
pursuant to the order passed by this court. Despite the fact, it has noted the order
passed by this court in paragraph 11.2 of the impugned order. However, the appellant
was non-suited on the ground that they never took any stand that Brine Shrimp Eggs
would be classified under a particular heading and that eggs without larvae would be
classified under a different heading and this observation made by the learned Tribunal
in paragraph 13.1 and other paragraphs are not sustainable as it tantamount to sit in
judgment over the order passed by this court in the writ petition filed by the appellant
when the department had not carried the matter on appeal. It is incumbent upon the
department to accept the judgment and all the directions contained therein in full,
rather the department was selective in accepting a portion of the judgment which was
decided in favour of the department and against the appellant. This would clearly
12
2025:CHC-OS:118-DB
show that the order of de novo adjudication was thoroughly failed and this aspect of
the matter has been lost sight of by the learned Tribunal while passing the impugned
order which would render impugned order perverse. One more aspect which is to be
noted is the inordinate delay in commencing and completing the de novo proceeding.
The writ petition filed by the appellant was allowed on 10.3.2010 and the order passed
by the Tribunal dated 2.3.2006 as well as the order of the Commissioner dated
6.11.2002 were set aside and the Commissioner of Customs (Airport & Administration)
was directed to re-hear and re-decide the matter in accordance with the observation
within a period of twelve weeks from the date of the order. This direction has not been
complied with by the department and it has taken seven long years for the department
to commence the de novo adjudication that too after a direction was issued in a writ
petition filed by the appellant in WP/203/2017 dated 13.4.2017. The delay is
attributable to the department and the department is solely responsible for the delay
as is evident from the submissions made before the learned writ court in
WP/203/2017 to the effect that they were under the impression that an appeal was
filed against the order passed in the writ petition dated 10.3.2010 when the fact
remains that no such appeal was preferred. Therefore, this delay has resulted in great
prejudice to the appellant which cannot be compensated. In this regard, we take note
of the decision of the Hon'ble Supreme Court in Union of India vs. ATA Freight Line (I)
Pvt. Ltd., (2023) 6 Centax 153 (SC) wherein the Hon'ble Supreme Court dismissed the
appeal filed by the Union of India. Against the decision of the High Court of Bombay in
ATA Freight Line (I) Pvt. Ltd. vs. Union of India, (2022) 1 Centax 32 (Bombay) wherein
the Hon'ble Division Bench of the High Court of Bombay held that the department
cannot adjudicate notices that were transferred to call book without communicating
13
2025:CHC-OS:118-DB
the same to the assessee for seven to eleven years and the department was under a
duty to take notice issued to its conclusion by adjudicating the same within a
reasonable time. The case on hand is better on facts as there a time bound direction
given by the learned writ court while allowing the writ petition filed by the appellant.
So, this is also one more ground to set aside the adjudication order as well as the
order passed by the learned Tribunal. Yet another very important issue which comes
to light from the order passed by the Tribunal reported in 2006 (197) ELT 428 (Kolkata)
that all along the department had been classifying 'prawn feed' under heading 2309.90
of the Customs Tariff Heading as 'prawn feed' and it is only after a notification issued
by the Government reducing the rate of duty, a sudden change of stand has been
taken by the department. This is also one more fact which should also enure in favour
of the appellant.
17. Thus, for all the above reasons, we are of the clear view that the adjudicating
authority while carrying out the de novo proceeding clearly exceeded its jurisdiction
and proceeded to re-open a settled issue which could not have been done and this
aspect of the matte has not been taken note of by the learned Tribunal in a proper
sense which results in perversity in the order passed by the learned Tribunal.
18. For the above reasons, the appeal is allowed and the order passed by the
learned Tribunal as well as the de novo adjudication order are set aside and the
substantial questions of law are answered in favour of the appellant.
19. The stay application, IA No:GA/2/2024, stands allowed.
20. In the preceding paragraph we have noted the gross delay which had occurred
in the entire process. The import of the consignment covered under 19 bills of entry
was effected in August 1998. The show-cause notice was issued by DRA on 23.1.2002
14
2025:CHC-OS:118-DB
and roughly about the same time the goods were permitted to be provisionally cleared
subject to furnishing the bank guarantee. The appellant submitted reply to the show-
cause notice which was answerable to the jurisdictional Commissioner, namely, the
Commissioner of Customs, Calcutta, who took up the same for adjudication and an
order of adjudication was passed on 6.11.2002. The appellant carried the matter on
appeal to the learned Tribunal. The learned Tribunal delivered a split verdict which
necessitated the matter to be referred to a third member and by a majority decision
the learned Tribunal held against the appellant by an order dated 2.3.2006. This order
was put to challenge by filing WP/748/2006 which was pending and finally allowed on
10.3.2010. No appeal was preferred against the said order. The de novo adjudication
did not commence within the time permitted by the High Court but commenced after a
period of seven years, that too, after a direction was issued by this Court in a writ
petition filed by the petitioner in WP 203/2017 dated 13.4.2017. The de novo
adjudication was commenced and completed and an order was passed on 12.9.2017.
21. Against this order the appellant preferred appeal before the Tribunal and the
learned Tribunal dismissed the appeal filed by the appellant by order dated 26.6.2024,
against which this appeal was filed before this Court and the appeal was listed before
this Court for the first time on 5.3.2025, subsequently again listed on 2.7.2025 to
enable the appellant to file a supplementary affidavit and raise substantial questions
of law. This direction was complied with today (10.7.2024) and the appeal was heard
out on merits and has been allowed by this judgment.
22. The question which would now arise is whether the order and direction issued
in WPO 748 of 2006 on 10.3.2010 is feasible of compliance. The answer to this
question should be a definite `no'. By efflux of time the direction cannot be complied
15
2025:CHC-OS:118-DB
with and as of now direction has now become unworkable. Since the Court directed an
enquiry to be done whether the imported goods contained an `embryo' or a live
organism and the factual enquiry was required to be done upon notice to the
appellant/writ petitioner and after giving them an opportunity to counter the evidence
of the revenue and to produce its own evidence in support of its contention.
Admittedly, the product was an imported `embryo' or a live organism and though it is
stated across the Bar that representative samples have been drawn by the
Department, it cannot be disputed that those samples will not be in the same
condition as on the date of import, that is, on August 19, 1998. Thus, as on date, the
direction issued by the Single Bench is not feasible of compliance.
23. Having held so, the only conclusion that can be arrived at is to direct the
Department to accept the classification as adopted by the appellant and accordingly,
there will be a direction to the adjudicating authority to accept the classification as
adopted by the appellant by classifying the imported goods under Heading 2309.90
and extend the benefit of the relevant notifications in favour of the appellant/importer.
This direction be carried out by the concerned authority within a period of three weeks
from the date of receipt of the server copy of this order. If the direction is not complied
with within the timeframe, then the Court will be constrained to take serious note of
the same and the concerned Officer will be held personally responsible.
.
(T.S. SIVAGNANAM, CJ.)
I agree.
(CHAITALI CHATTERJEE (DAS), J.)
SN/SM/pkd/S.Das. AR[CR]
