Telangana High Court
M/ S. R.K. Digital Solutions vs Union Of India And 3 Others on 26 August, 2021
Bench: M.S.Ramachandra Rao, T.Vinod Kumar
THE HON'BLE SRI JUSTICE M.S.RAMACHANDRA RAO
AND
THE HON'BLE SRI JUSTICE T.VINOD KUMAR
WRIT PETITION No.12802 of 2021
O R D E R:(per Hon'ble Sri Justice T.Vinod Kumar)
This Writ Petition was filed on 04.06.2021 assailing the action of
the respondents in holding back the import consignment of gold pendants
weighing 5 kgs. under Bill of Entry No.3892849 dt.10.05.2021.
2. While the said Writ Petition was pending consideration, the
respondents, under the cover of a Panchanama drawn on 05.06.2021 at
13.15 hours, seized the subject goods imported by the petitioner. Thus,
the petitioner filed I.A.No.2 of 2021 to declare the seizure affected by the
respondents of the goods under import as illegal, mala fide and
motivated.
3. On 07.06.2021, when the Writ Petition was listed 'For Admission',
this Court, while issuing notice to the respondents, suo motu impleaded
the Director General of Foreign Trade, Department of Commerce, Ministry
of Commerce and Industry, Government of India, New Delhi, as the 5th
respondent, as this Court felt that the said authority would be necessary
party to the present proceeding, since, the issue involved relates to
Import policy as issued by the concerned authorities of the Government of
India.
4. On 17.06.2021, this Court, by taking note of the clarification
dt.14.06.2021, (i.e., after the first date of hearing by this Court), issued
by the 5th respondent to the 2nd respondent regarding importability of gold
pendants by the petitioner from Indonesia presented for clearance under
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Bill of Entry No.3892849, dt.10.05.2021, (whereunder it has been clarified
that the said import does not contravene the Foreign Trade Policy 2015-
2020 and other RBI regulations), passed interim order in I.A.No.1 of 2021,
directing the respondents to release the goods of the petitioner by taking
a bond from the petitioner covering the amount of preferential duty of
concession, if so required, and also permitted the respondents to take any
other proceedings against the petitioner, if permitted by law.
5. Upon this Court passing the said interim order on 17.06.2021, the
respondents, along with a counter-affidavit, filed I.A.No.5 of 2021 on
05.07.2021 and sought for modification of the interim order passed by this
Court on 17.06.2021 to the extent of release of goods.
6. This Court, upon the said I.A. being filed by the respondents
seeking modification of the order, took up the same for hearing on
07.07.2021.
7. When the above said I.A. was taken up for hearing, Sri N.Venkat
Raman, learned Assistant Solicitor General of India (ASG), appeared for
the respondents.
8. Though this Court made it clear to the counsel appearing for the
parties that since an application to modify the interim order passed by this
Court on 17.06.2021 has been filed by the respondents and the
submissions are to be confined to the grounds seeking modification of the
said interim order, the learned ASG filed written submissions and
advanced arguments touching upon the merits of the matter, in detail, not
only covering the grounds seeking modification, but also the main issue
involved in the Writ Petition with regard to importability of the goods in
question.
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9. Upon the learned ASG making submissions, in detail, on
07.07.2021, 08.07.2021 and 09.07.2021 and also filing written
submissions touching upon the entire gamut of the matter, this Court
informed the learned ASG that, since, arguments are advanced touching
upon each of the issues raised in the main Writ Petition, the writ petition
itself can be taken up for hearing and disposal and not merely the I.A.
filed seeking modification of the order. Further, since, the learned ASG
had addressed the entire gamut of the matter, this Court permitted the
petitioner also to advance his submissions and adjourned the matter to
19.07.2021.
10. The petitioner had also filed his written submissions, when the
matter was taken up for his response on 19.07.2021.
11. In view of the sequence of events narrated as above, the Writ
Petition is taken up for hearing and disposal.
Contentions of the petitioner :
12. The case of the petitioner is that it had imported gold pendants in
oval shape of 99.99% purity, numbering 250, each weighing 20 grams, in
all totalling 5 kgs., valued about Rs.2,15,60,883.27 from a manufacturer
in Indonesia; that for effecting clearance of the said import consignment,
Bill of Entry No.3892849, dt.10.05.2021, was filed under the Customs Act,
1962, claiming concessional rate of duty of 0%, since, the goods imported
were of Indonesian origin eligible for preferential treatment in the form of
concessional rate of duty in terms of Free Trade Agreement (FTA) entered
into by Union of India with Association of South East Asian Nation
(ASEAN), which, inter alia, includes Republic of Indonesia.
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13. The petitioner claims that since the imported goods were gold
pendants, the petitioner classified the same as falling under Custom Tariff
Trading No.7113 19 10. The petitioner further contends that, upon filing
of Bill of Entry No.3892849 dt.10.05.2021 under the Customs Act for
effecting clearance, a query was issued electronically on the EDA system
on 11.05.2021 calling the petitioner herein to "justify the FTA claim, by
uploading the gold procurement details"; and that the petitioner submitted
its reply enclosing therewith copies of survey report and the pre-export
verification report issued by the Surveyor of the country of origin of the
goods, namely, Republic of Indonesia.
14. The petitioner contends that, in spite of the petitioner submitting
its reply to the query raised by the respondents on the same day, i.e.
07.05.2021, the respondents, instead of assessing the bill of entry and
permitting the petitioner to clear the imported consignment, issued one
more query on 05.05.2021 directing the petitioner to upload Form 1 as
per Customs (Administration of Rules of Origin under Trade Agreement)
Rules, 2020 (for short, 'the Rules'), justifying their claim to notification
benefit; and that the petitioner submitted the requisite details in Form 1
on 17.05.2021 justifying its claim to the benefit of Notification
No.81/2020-Customs (N.T.) on 17.05.2021.
15. The petitioner further contends that instead of permitting clearance
of the imported goods in spite of uploading the above details, the
petitioner was again issued with the same query, by raising piecemeal
queries contrary to the Circular of the 2nd respondent dt.03.09.2015, on
the specific issue of delay in assessment on account of piecemeal queries
raised by officers; that by the above said circular, the 2nd respondent
directed its officers to raise all queries/clarification in one go and not in
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piecemeal manner; and that the action of the respondents in not raising
the queries with regard to import consignment for which the petitioner
has filed Bill of Entry No.3892849 on 10.05.2021, is contrary to the
circular issued by the 2nd respondent, apart from being contrary to the
timelines specified by the 2nd respondent by its Citizens Charter.
16. The petitioner contends that till the petitioner approached this
Court by filing the Writ Petition, the respondents never disputed that the
description of the goods shown in the Bill of Entry is not the same as
goods under import and therefore, they are liable for seizure.
17. It is only after a copy of the Writ Petition was served on the
respondents that the respondents chose to resort to seizure of goods
claiming that the goods under import are gold bars, entry of which is
"restricted" falling under Indian Tariff Code, also called as Indian Trade
Classification - ITC(HS) 7108, and contending that they cannot be
classified as 'gold jewellery', classifiable under ITC(HS) 7113.
18. The petitioner contends that the claim of the respondents that the
subject import of 'gold bars', is liable to be classified under Custom Tariff
Heading (CTH) 7108 and not CTH 7113, is without any basis and that the
said claim of the respondents is contrary to the classification under the
classification of the goods as provided under Indian Tariff Code (ITC)
governing the Export - Import Policy and also the Custom Tariff Act,
which are based on Harmonized System of Nomenclature (HSN) followed
worldwide for common classification of goods to avoid disputes on
classification.
19. According to the petitioner, the ITC classification with Exim code
7108 relating to "non-monitory gold" covers only gold in powder form,
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gold in unwrought form and gold in semi-finished form. Since, the
petitioner imported "gold pendants" in oval shape with a hook and ring for
being worn with a chain, and a design of flower etched / imprinted on one
side with the purity being specified on the other side, the subject goods
are in a fully manufactured form and cannot be considered as falling
under any of the three heads specified in Exim Code 7108 of ITC
classification and CTH 7108.
20. The petitioner further contends that the subject goods under
import are ready for being worn on person without being subjected to any
further process, and thus, the same are rightly classifiable as "jewellery"
falling under 7113 of the CTH. The petitioner would also contend that
even as per the Import Policy issued by the Government of India, the
subject goods are liable to be classified only under 7113, since the Import
Policy specifically mentions that 'pendants' have been classified as "article
of jewellery".
Contentions of the Respondents :
21. Opposing the above submissions, the primary contention of the
respondents is that no jewellery can be in the form of 24 carat gold; that
the subject import by the petitioner of gold in pendants form are of 24
carat, i.e., 99.99% purity, and they are only intended for being used in
the making of jewellery or for being used for investment purpose.
22. It is contended that the petitioner has resorted to wrong
classification by filing the Bill of Entry in respect of the subject goods by
classifying the same as falling under CTH 7113, since import of jewellery
is without any restriction, while under the Import Policy, import of gold in
non-monetary form is restricted and can only be imported by the
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nominated agencies. As the petitioner is not a "nominated agency", the
subject import being gold, and restricted under the Import policy, the
import is in contravention of the Import policy and thus, the goods are
liable for confiscation under Section 111 of the Customs Act, 1962.
23. The respondents would further contend that since the subject
import by the petitioner is in contravention of Import policy and being
'restricted', if the goods are permitted to be cleared as directed by this
Court by interim order in I.A.No.1 of 2021 dt.17.06.2021, no goods would
be available for confiscation, if, after investigation and adjudication, it is
found that the subject import as effected by the petitioner is in
contravention of Import policy.
24. It is also contended that only in order to examine the nature of
import whether it is a restricted one in contravention of the Import Policy
or otherwise, seizure has been affected, and the authorities would
complete the investigation in a time bound manner as may be directed by
this Court.
25. According to the respondents, since the subject goods cannot be
permitted to be imported other than by nominated agencies, and the
import by the petitioner being in contravention of the notifications issued
by DGFT under Foreign Trade Policy and being improperly imported
goods, the same would fall in the category of "prohibited" goods and
provisions contained in Chapter XIV of the Customs Act, would come into
operation and thus, the goods are liable for confiscation apart from other
consequences.
26. Further, the respondents would contend that since the subject
import by the petitioner is pure gold bar in oval shape, as per the
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panchanama drawn up with the help of the Government Assayer, and
being non-monitory gold and restricted under the Import policy, the same
would be liable for confiscation as per the judgment rendered by the
Hon'ble Supreme Court in Union of India V/s. Raj Grow Impex1,
rendered on 17.06.2021.
27. It is also contended that since upon adjudication it is found that the
import by the petitioner would fall under category of "prohibited goods",
the benefit of payment of redemption fine under Section 125(1) of the
Customs Act would also not be applicable, and it is for the said reason
that the goods under seizure cannot be directed to be released to the
petitioner.
28. We have taken note of the above rival submissions.
Consideration by the Court :
29. Before we deal with the specific facts of this case, as both the
petitioner and the respondents are laying their claim under the Export -
Import Policy framed under the Foreign Trade (Dev. & Reg.) Act, 1992, as
announced by the Govt. of India, Ministry of Commerce and Industry, to
be the sheet anchor of their respective stands, it is necessary to note
some of the provisions of the Import policy announced for the period
2015-2020, which is now extended up to 30th September, 2021 .
30. Section XIV Chapter 71 of the Import Policy deals with "Natural or
Cultured Pearls, Precious or Semi Precious Stones, Precious Metals, Metals
clad with Precious Metal and article thereof; Imitation jewellery; Coin".
1 2021 SCC Online SC 429
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31. Guidance with reference to the scope and coverage of entries in
the chapter is provided through Main Notes and Supplementary Notes of
the respective chapter.
- Main Note No.4 of Chapter 71 of the Import Policy states as
under:
(A) The expression precious metal means silver, Gold and
platinum.
(B) ....
(C) ....
- Main Note No.6 of the Chapter states that -
"Except where the context otherwise requires, any reference in
this schedule to precious metal or to any particular precious metal
includes a reference to alloys of precious metal or of the particular
metal in accordance with the rules in Note 5 above, but not to
metal or to base metal or non-metals plated with precious metal."
- Main Note No.9 of Policy explains the scope of Heading No.7113
of Chapter 71, reads as:
"For the purpose of heading 7113, the expression articles of
jewellery means :
(a) Any small objects of personal adornment (for example,
rings, bracelets, necklaces, brooches, ear-rings, watch-chains,
fobs, pendants, tie-pins, cuff-links, dress-studs, religious or
other medals and insignia), and
(b) Articles of personal use of a kind normally carried in the
pocket, in the handbag or on the person (for example, cigar
or cigarette cases, suff boxes, cachou or pill boxes, powder
boxes, chain purses or prayer beads). ......
32. The Schedule 1 of Import Policy titled as "Explanatory Note for Row
and Column Description of this Schedule" reads as under :
1. ...
2. In an eight digit EXIM Code, the first two digits represent the
Chapter, followed by two digit for the Heading, two digits for Sub-heading
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and another two digit developed in India under the common classification
system for the Item.
3. In this Schedule, the meanings of Heading, Sub-heading and
Items are as under:
a. "Heading", in respect of goods, means a description in list
of this Schedule accompanied by a four-digit number and includes all sub-
headings of items the first four-digits of which correspond to that
number;
b. "Sub-heading", in respect of goods, means a description in
the list of this Schedule accompanied by a six-digit number and includes
all items the first six-digits of which correspond to that number;
c. "Item Description" means a description of goods in the list
of this schedule accompanying eight digit EXIM Code as given in the
Column 2.
4. .....
5. The column name and their descriptions are given in the
table below :
Column Column Column Description
No. Name
1. EXIM Code First Column gives the ITC HS
Code, also called as EXIM Code.
2. Item Description This Column contains the ITC
(HS) description against the
respective codes. Some
adaptations have been made
in the descriptions to comply
with existing import policy.
3. Policy : This Column gives the Import
Policy regime applicable on the
item. Generally, the Import
Policy regime is one of the
following.
Prohibited Import of items is not
permitted.
Restricted Import of items is permitted
under an import Licence /
authorization / Permission
granted by the DGFT.
Application for import of
'Restricted' items may be
made in ANF 2B, as per
details policy / procedure
prescribed in Chapter 2 of
FTP and HBPv1.
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STE Import of items allowed only
through specified State
Trading Enterprises (STEs)
subject to specific conditions
laid out in the FTP and also
Para 2.11 of the Foreign
Trade Policy/ Handbook of
Procedures.
Free Import of items which do not
require any Licence /
Authorization / Permission
from the DGFT have been
denoted as 'Free'. Some
items are subject to the
Policy Conditions contained
in the relevant
chapter/heading/sub-
heading or as may have
been indicated under column
4 mentioning conditions
relating to the policy and is
also subject to any other law
for the time being in force.
4. Policy The precise restrictions are
Conditions detailed in this column, wherever
possible. In other cases, the
details of the conditions and
restrictions are given at the end
of the Chapter in the form of
Policy Conditions of this Chapter.
The intention of incorporating
this column is solely and
exclusively to make this schedule
self contained and user friendly.
However, this does not imply
that there may be no other
conditions applicable on imports.
33. The Explanatory note of the Import Policy states the purpose of
'four', 'six', and 'eight' digit code in the policy, as 'Heading', 'Sub-heading',
and 'item description'. It also explains as to the nature of policy
conditions that are generally made applicable in relation to import of
goods namely as 'free', 'restricted', 'prohibited' etc.,.
34. The dispute between the petitioner and the respondents relates to
the classification of the goods under import. While the petitioner claims
the goods as falling under Chapter Heading, Sub-heading and Item
Description as 7113-19-10 and "freely importable" under the policy, the
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respondents claim them to be falling under Heading 7108-12-00 of ITC
(HS), import of which is "restricted" under the Import policy.
35. Having regard to the guidance provided through Explanatory Note
in Schedule 1 of the Import Policy and through Main Note and
Supplementary Notes of Chapter 71, we proceed to deal with the scope of
entries under the policy.
36. The petitioner classified the subject goods as falling under entry
7113 of the policy which reads as under:
"Articles of jewellery and parts thereof, of precious metal or of metal clad
with precious metal."
37. A reading of the Main note No.9 of Chapter 71 as detailed in para
31 above, makes it clear that the heading 7113 dealing with 'articles of
jewellery' would mean any small object of personal adornment and by
way of example, various objects are mentioned, including 'pendants'.
38. In the import policy, the goods which are specified against the
chapter heading of four digit of '7113' with suffix of sub-heading of '19'
i.e. six digit deals with -
"Articles of jewellery and parts thereof, of precious metal whether or not
plated or clad with precious metal."
After classification of the goods with its sub-heading, by suffixing eight
digit code of '10' which gives the item description viz., 7113 19 10, the
goods are specified as -
"Articles of Jewellery and parts thereof, of gold, unstudded" .
39. In the Bill of Entry filed by the petitioner for clearance of goods for
Home consumption, the description of the goods was mentioned "Articles
of jewellery - pendants", with the eight digit code as 7113-19-10.
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40. On the other hand, the respondents seek to classify the subject
import as falling under the Chapter heading- 7108-12-00. Chapter
Heading 7108 of Import policy deals with -
"Gold (including gold plated with platinum) unwrought or in semi-
manufactured forms, or in powder form."
Further, under the heading '7108' with sub-heading and item description
various forms of 'Gold' have been specified, which are as under:
"7108-11-00 - Gold - Powder - Non Monetary ;
7108-12-00 - Gold - Other unwrought forms - Non Monetary;
7108-13-00 - Gold - Other semi-manufactured forms - Non
Monetary;
7108-20-00 - Gold - Monetary."
41. The import policy condition in respect of goods classified against
Exim Code 7108 as above is specified as "Restricted".
42. In the light of the entries in the import policy, we proceed to deal
with the contention of the respondents that the subject goods under
import are classifiable under Heading 7108-12-00 of ITC (HS); that they
cannot be permitted to be imported by the petitioner, since the import
condition under the Import Policy is stated as 'Restricted'; and that the
import is permitted only under an import Licence / authorization /
Permission granted by the DGFT. It is the further contention of
respondents that since, the petitioner does not possess any licence or
authorization granted by DGFT, the subject import by the petitioner is in
violation of policy condition of the Import policy and thus, the goods are
liable for confiscation.
43. Before, we proceed to consider the above contention urged on
behalf of the respondents, it is necessary to place on record the nature of
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goods as imported which are not in dispute, as stated in the panchanama
drawn-up by the respondents while affecting the seizure of the goods on
05.06.2021. The excerpts of the panchanama records the goods to be as
under :
"On opening the same there was a plastic box on which there were 250
Oval Shape yellow metal bars were there and in each metal bar on one
side there was flower symbol and on other side marked as 'FINE GOLD,
999.9'. Then the officers took the services of Govt. approved assayer
Shri. V. Vijay Kumar to assay the nature and purity of the yellow metal.
Shri V. Vijay Kumar subjected the said yellow metal to Kasouti Test and
Acid test in our presence and in the presence of the said persons and
given his report dated 05.06.2021 wherein he has certified that there are
two hundred and fifty pieces of Oval Shape Gold Bars of 20 Grams each
of 999 Purity totally weighing at 5000 Grams and valued at Rs.
2,52,50,000/-."
44. A reading of the panchanama whereunder the seizure has been
affected would indicate that the subject goods were - i) bars of 20 grams
each, ii) in Oval shape, iii) bearing a flower symbol imprinted/ etched on
one side, and iv) on other side stamping of 'FINE GOLD, 999.9'.
45. From the above, it would show that the subject goods under import
were subjected to refining and manufacturing process, resulting in getting
an oval shape with flower symbol and purity being imprinted thereon.
Thus, the subject goods were in fully worked and finished condition.
46. Exim Code and CTH 7108 and with sub-heading and item
description 7108-12-00 under which heading the respondents seek to
classify the subject import deals with 'Gold - unwrought'.
47. The term 'unwrought' as used in the heading means 'Gold' that is
'not worked upon' thereby meaning "not subjected to process of refining
and reaching finished condition".
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48. In the present case, as noted in the panchanama, the goods under
import were all weighing 20 grams each, in oval shape, with flower
design imprinted on one side and purity on the other side. So they are in
finished condition after being worked thereon. Thus, the goods under
import cannot be considered as 'unworked' gold, and on the other hand
have attained the character of 'Articles of Jewellery, of Gold, unstudded'
as they are in finished condition.
49. Further, the term 'Gold- unwrought' as used ITC (HS) heading
7108-12-00, also finds mention in Section 2(j) Under the Gold (Control)
Act, 1968. Section 2(j) defines the 'Gold' which among other forms
includes the primary gold and in unwrought form also. The unwrought
form of Gold under the Gold (Control) Act, 1968 was considered as "Not
shaped into finished form, not processed for use"2.
50. From a reading of the meaning as assigned to the term
'unwrought', it would mean that it covers the goods which are in native
state, requiring to be worked thereon to be brought into a finished stage.
51. The respondents however sought to contend that upon issuance of
Notification No. 36/2015-2020 dt. 18.12.2019 under the import policy,
import of 'Gold in any form' has been amended from 'free' to
'restricted' and as such the import of 'pure gold' even in the form of
pendants, as imported by the petitioner, would be covered by the policy
condition of 'restricted' and could not have been imported without
obtaining licence from the DGFT; and that only by mis- classifying / mis-
declaring the goods as 'Articles of Jewellery', the petitioner is trying to
avoid the restrictive policy condition getting attracted.
2 Advanced Law Lexicon by P. Ramanatha Aiyer, 3rd edition, 2005.
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52. By laying emphasis on the phrase 'in any form' as used in the
notification dt. 18.12.2019, the respondents contend that in view of the
change in policy condition from 'free' to 'restricted', import of gold (non-
monetary) in any form is "restricted" and the goods imported in violation
of the restriction, become "prohibited" goods.
53. We are unable to agree with the above said contention of the
respondents for more than one reason.
54. Firstly, it is to be seen that if the policy condition as amended is to
apply to 'Gold in any form', then all the goods made out of gold including
'articles of gold' would get covered and there was no need or necessity in
the notification No. 36/2015-2020 to mention the amendment with
reference to Exim Code and item description.
55. Secondly, in the notification, when the amendment is specified
against a particular item with its Exim code, the same cannot be made
applicable to other goods having different Exim code and item description,
by widening the scope of notification to apply to other goods not specified
therein.
56. Thus, the amendment of policy condition by notification No.
36/2015-2020, dt. 18.12.2019, is applicable only in relation to - Non
monetary Gold - i) powder - Exim code 7108 1100, ii) other unwrought
forms - Exim code 7108 1200, and iii) Other semi-manufactured forms -
Exim code 7108 1300, and not to "finished" forms of gold like 'Articles of
Jewellery' falling under Exim Code 7113 of the Import policy.
57. Though it is sought to be contended that the subject import being
of gold with purity of 99.9% (considered as 'pure gold') cannot be
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considered as 'Articles of jewellery' as covered by Exim code 7113,
because in order to make jewellery, the gold is required to be alloyed to
make it harder in order to retain the design and shape, and that no
jewellery can be made with 'pure gold', the same is without any basis.
58. In the Import policy there is no mention of the articles of jewellery
with reference to the purity. If there was any basis for the said
contention of respondents, the Import Policy would itself mention the
articles of jewellery with reference to the purity.
59. On the contrary, by notification No.21/2015-2020 dt.14.08.2017
issued under the Export policy for the period 2015-2020, the Central
Government amended para 4.32(i) of Chapter 4 and para 6.01(a) of
Chapter 6 of Foreign Trade Policy 2015-2020, whereby the condition for
allowing export of 'Gold jewellery' has been specified with reference to
purity of gold viz., carat, of jewellery of '8 carat and above up to
maximum limit of 22 carat'. The amended portion in para 4.32(i) of the
Export policy 2015-2020 reads as under :
"Gold jewellery, including partly processed jewellery and articles including
medallions and coins (excluding legal tender coins), whether plain or
studded, containing gold of 8 carats and above up to a maximum limit of
22 carats." (included by way of amendment)
The intent behind specifying the maximum limit of 22 carat was to
prevent export of pure gold of 24 carat in the form of 'Articles of
jewellery', to control round tripping of gold and misuse of bank funds
meant for exports.
60. The issuance and existence of the above notification amending the
Export policy framed under the Foreign Trade Policy was not brought to
our notice by either of the parties. But the same in our view, clinches the
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issue. From a reading of the above amendment in Export policy, it cannot
be assumed that the Law Makers were not conscious or aware of 'Gold
Jewellery' with reference to caratage. The mention with reference to
minimum and maximum limit of carat in the Export policy and non
mention of the same in the Import policy makes the intent of the Law
Makers abundantly clear (ie.,) to allow import of 'Articles of jewellery' by
specifying the policy condition as 'free', without reference to carat of
precious metal.
61. Further, the issuance of the said notification under Export Policy
with reference to 'Articles of Jewellery', specifying the maximum limit of
carat would amount to the respondents acknowledging the fact that, there
exists jewellery with higher purity also, as otherwise there was no need to
amend the para 4.32 and 6.01 of the Export policy as noted above. It
cannot also be assumed that the Law Makers while amending the policy
used the language loosely or superfluously.
62. The further contention of the respondents is that as each of the
pendant is weighing 20 grams and in order to wear the same, one would
require a chain weighing 60 to 80 grams, so the subject imported
pendants cannot be considered as "small objects" as specified under
Chapter Heading 7113.
63. In order to appreciate the above contention urged, we refer to
Main Note No.9 of Chapter 71 of the Import policy, which reads as under -
"For the purpose of heading 7113, the expression "articles of
jewellery" means;
(a) Any small objects of personal adornment (for example,
rings, bracelets, necklaces, brooches, ear-rings, watch-chains, fobs,
pendants, tie-pins, cuff-links, dress-studs, religious or other medals
and insignia); and
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(b) .....
These articles may be combined or set, for example, with
natural or cultured pearls, precious or semiprecious stones, synthetic
or reconstructed precious, or semi precious stones, tortoise shell,
mother-of-pearl, ivory, natural or reconstituted amber, jet or coral."
64. The words used in the notes to the Chapter, namely, 'Any small
object of personal adornment ' is a subjective term, as it is not unknown
or unheard in a country like ours, of individuals wearing jewellery
weighing much more than the weight of each pendant under import.
Further, the proviso allows the 'Articles of jewellery' to be combined with
pearls, semi-precious stones, which invariably increases the weight of an
article of jewellery. Therefore, use of the subject import goods in
combination with other articles resulting in increase of weight by itself
would not have any bearing on the classification of the goods under
import.
65. Further, the claim of the respondents that the petitioner mis-
declared / mis- classified the subject goods as 'Articles of jewellery -
Pendants', though they are pure gold of 24 carat, also does not appeal to
this Court for acceptance, for the reason that import of pendants of
99.99% purity have been permitted to be cleared by the respondents over
a period of time in different ports, by accepting the bill of entries filed by
the respective importers under 7113 19 10, which deals with "Articles of
Jewellery, of gold, unstudded".
66. The respondents also sought to contend that the documents in the
form of import manifest/ statement filed by the petitioner relate to
imports of a period prior to the issuance Notification No. 36/2015-2020,
amending the policy condition from 'free' to 'restricted', and in absence of
the relevant bill of entries, the claim of the petitioner needs to be verified.
20 MSR,J & TVK,J
W.P.No.12802 of 2021
67. The fallacy of the above contention of the respondents is multifold.
68. At the outset, it is to be seen that similar imports of pendants of 24
carat by other importers were cleared by classifying the goods under
Custom Tariff Heading 7113 1910 which is pari materia to entry 7113
1910 of ITC (HS) classification of Schedule-1 of Import policy.
69. Even assuming, if such imports relate to a period prior to the
issuance of Notification No. 36/2015-2020 dt.18.12.2019, whereby the
policy condition has been amended from 'free' to 'restricted', the
classification of the product under the Customs Tariff Heading (CTH)
would not get changed from 7113 1910 to 7108 1200. Irrespective of
the policy condition, the classification of the product remains the same,
since classification of goods for Import and Export under the Indian Trade
classification (ITC) is by adopting Harmonized System (HS) developed by
World Customs Organization, adopted by more than 140 countries in the
world. The result of such adoption of HS in ITC would be that the six digit
tariff code would be common and would be applicable even in India to
goods being imported and exported. Thus, it would be absurd to assume
that due to change in policy condition of Foreign Trade Policy of India, the
classification of goods under the ITC(HS) and CTH would undergo a
change.
70. Further, the claim of the respondents that import of Gold-'in any
form', post issuance of Notification No. 36/2015-2020, dt. 18.12.2019 is
restricted and only nominated agencies as authorized by DGFT are
permitted to import, is belied by the fact of clearances affected at various
ports by the importers freely, even as late as in April, 2021.
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W.P.No.12802 of 2021
71. It is also to be seen that initially, on petitioner filing bill of entry by
classifying the subject import as 'Articles of jewellery' liable to be assessed
under the Customs Tariff Heading 7113 19 10, the respondents did not
dispute the classification shown in the Bill of Entry filed. On the other
hand, the respondents chose to raise queries as to the basis on which the
petitioner is claiming the benefit of FTA to which the petitioner has
submitted Certificate of Country of Origin and also offered explanation
claiming that since the import is from Republic of Indonesia, being part of
ASEAN countries, the subject import would be eligible for concessional
rate of duty. No material has been placed before this Court to show that
any doubt has been entertained by the respondents with regard to
classification of goods, whereby the authority can direct physical check of
the goods, which is termed as first check in the custom practice, prior to
petitioner filing the present Writ Petition on 04.06.2021.
72. On the other hand, the respondents straight away proceeded to
seize the subject import on 05.06.2021, by merely stating that the party is
attempting to import oval shaped bars of gold of 24 carat with 99.99%
purity, with an intention to mislead the department, as import of gold in
bar form with purity of 99.99% is restricted and allowed only to
nominated agencies as notified by DGFT and RBI.
73. It is sought to be contended by the respondents that as a result of
the petitioner mis-declaring / mis- classifying the goods, namely oval
shaped gold bars as 'Articles of jewellery', falling under ITC (HS) and CTH
7113 19 00 and import being 'restricted' under the Import policy, resulting
in violation of the policy condition, making the subject import as
'prohibited' one under the Customs Act, the same are liable for
confiscation.
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W.P.No.12802 of 2021
74. In support of the above contention, reliance is placed on the
judgment of the Hon'ble Supreme Court in the case of Raj Grow Impex
(supra), wherein it was observed as under:
"68. Thus, we have no hesitation in holding that the goods in
question having been imported in contravention of notifications dt.
29.03.2019 and trade notice dt.16.04.2019; and being of import
beyond the permissible quantity and without licence are prohibited
goods for the purpose of customs act.
The Hon'ble Supreme Court further went on to observe that:
"69. Once it is clear that the goods in question are improperly
imported and fall in the category of prohibited goods, the provisions
contained in Chapter XIV of Customs Act, 1962, come into operation
and the subject goods are liable to confiscation apart from other
consequences."
The Hon'ble Supreme Court, while dealing with the option to pay
fine in lieu of confiscation under Section 125 of the Customs Act, 1962,
held that -
" 79. As notice, the exercise of discretion is a critical and solemn
exercise, to be undertaken rationally and cautiously and has to be guided
by law; has to be according to the rules of reason and justice; and has to
be based on relevant considerations. The quest has to be to find what is
proper. Moreover, an authority acting under the Customs Act, when
exercising discretion conferred by Section 125 thereof, has to ensure that
such exercise is in furtherance of accomplishment of the purpose
underlying conferment of such power. The purpose behind leaving such
discretion with the Adjudicating Authority in relation to prohibited goods
is, obviously, to ensure that all the pros and cons shall be weighed before
taking a final decision for release or absolute confiscation of goods."
75. Before considering the above contention, it is to be noted that from
the date of filing of Bill entry by the petitioner on 10.05.2021 till
05.06.2021 i.e., the date of seizure, the respondents did not raise any
doubt as to the mis-declaring / mis- classifying the goods as 'Articles of
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W.P.No.12802 of 2021
Jewellery'. A reading of panchanama drawn on 05.06.2021 and also the
subsequent two panchanamas would show that the correct description of
the goods is not given, as it fails to mention that each of the pendant had
a protrusion with a hole and a ring through which a chain can be passed
through, so that the imported goods can be worn as a hanging in the
neck. Further, all the three panchanamas describe the seized imported
goods to be weighing 20 grams each and in oval shape, but are described
as 'Gold Bar'. The term 'Gold Bar' as known to people dealing in such
goods, is of a rectangular form having specified length and width and also
of a higher weight. That apart, when the Import of Gold was regulated in
the Gold (Control) Act, 1968, the bringing in Gold into country in small
quantity was in the form of 'Biscuit'- weighing about 50 grams and above,
followed by Gold-Bar and the last and bigger form being Gold-Brick.
76. As per the Indian Standard specification IS 17278 : 2019 adopted
by Bureau of Indian Standards, the size of the Standard Gold Bar of 995.0
purity and above for good delivery, is specified in para 8.1 of the standard
as having a weight of 1000 gms / 1kg.; having a length of 113 mm to 117
mm; width of 51 mm to 55 mm; and height of 6.5 mm to 10.5 mm. Any
bar that does not meet the requirement specified in the standard would
be considered as 'Non Good-Delivery Bars' and such goods shall have a
marking 'NGD' thereon.
77. Even though the subject import goods is weighing only 20 grams
each, the Assayer and the representative's of jewellers and MMTC, who's
services were availed by the respondents for conducting the panchanama,
described the goods as 'Gold Bar in oval shape', in spite of the goods
being not in consonance with prescribed standards. The endeavor to
describe the subject import goods as 'Gold Bar' appears be to create a
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W.P.No.12802 of 2021
prejudice against the petitioner and to deny the claim of subject import
being a pendant. Thus, the panchanama(s) drawn up for seizing the
goods with wrong description is vitiated.
78. Now turning to the law laid down in the case of Raj Grow Impex
(supra), the Hon'ble Supreme Court was dealing with imports made in
excess of licensed quantity permitted by the DGFT. The excess quantity
imported in violation of license granted always stood as 'prohibited' goods,
which the authorities under the Customs Act, 1962, are empowered to
confiscate or levy fine in lieu of confiscation.
79. In the facts of the present case, though it is contended that the
subject import is in violation of Import policy condition being 'restricted',
but this Court is of the view that the amendment made through
Notification No. 36/2015-2020 dt. 18.12.2019 would apply only to the
goods specified with their Heading, sub-heading and item description as
mentioned against Exim code 7108 in the notification. Since, the goods
imported by the petitioner are classifiable under Exim code 711319, the
amendment made to the policy condition from 'free' to 'restricted' would
not be applicable. If the import of goods is not 'restricted' and is
permitted as 'free', the subject import cannot be considered as 'prohibited'
goods liable for confiscation.
80. Even the reliance placed by the respondents on the decision of the
Karnataka High Court in the case of petitioner's sister concern has no
relevance in deciding the issue on hand. The Karnataka High Court in the
said case was dealing with gold granules and medallions imported prior to
issuance of notification dt.18.12.2019 and did not deal with the
application of the notification per se.
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W.P.No.12802 of 2021
81. The two communications addressed by the 5th respondent / DGFT
dt. 14.06.2021 and 27.06.2021 in response to the letters addressed from
the office of the 3rd respondent does not lead us any where, as these
responses only mention what is stated in the import policy and its
amendment. On the other hand, the 5th respondent by its letter
dt. 27.06.2021 further stated that the 2nd respondent / "CBIC being the
implementing agency in the field and having physical access to the goods
in question, they are the authority to decide about the classification of the
item in question, in the light of the import policy of items, as per ITC(HS)
classification".
82. Though, the respondents claim that the petitioner, being in the
business of import and export of gold and silver, is fully aware of the
foreign trade policy, since, the petitioner and it's sister concern also made
imports of gold in different forms in large volumes, we refrain from
considering the claim on the basis of the above submission, since, this
Court is concerned with the issue of classification, which is to be decided
on its own merit and as per law and not to be guided by the volume of
business or the other factors, like quantity involved and other
considerations.
83. As the dispute in the present case revolves on the interpretation of
the Import policy having regard to the language used in the notification,
we feel it apt to refer to the judgment of the Hon'ble Supreme Court in
Aluminium Corporation of India Ltd. v. Union of India and
Others3, wherein the Constitution Bench speaking through His Lordship
Justice V.R. Krishna Iyer, held -
3 (1975) 2 SCC 472
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W.P.No.12802 of 2021
"3. If we may anticipate our ultimate conclusion even at the opening
stage, this appeal deserves to be allowed as a matter of law, but what is
more significant for society are three unhappy features which, we feel
confident, the state will seriously consider. They are : (a) that good
government involves not only diligent collection of taxes, but also ready
refunds of excess levies; (b) that simplicity or easy comprehensibility in
drafting legislation, including rules and notifications affecting the laity, is
an art found absent, although not difficult to accomplish, given a fresh
approach to use of statutory language; and (c) that a fair construction -
not always one adverse to the assessee - is permissible and proper on
the part of government and the taxing officers when enforcing fiscal
legislation." (emphasis supplied)
84. In view of the conclusions arrived at, as above, the Writ Petition is
allowed; the seizure of import consignment affected on 05.06.2021 is set-
aside; the respondents are directed to assess Bill of Entry No. 3892849
dt. 10.05.2021, filed by the petitioner, classifying the goods as falling
under CTH 7113 1910, within a period of five (5) days from the date of
receipt of a copy of this order; the respondents shall bear the
warehousing charges payable for keeping the imported consignment
under safe custody till the date of release. Consequently, I.A. No. 5 of
2021 stands dismissed.
85. Pending miscellaneous petitions, if any, shall stand closed in the
light of this final order. No order as to costs.
___________________________
JUSTICE M.S.RAMACHANDRA RAO
_____________________
JUSTICE T.VINOD KUMAR
Date: 26.08.2021
GJ
27 MSR,J & TVK,J
W.P.No.12802 of 2021
THE HON'BLE SRI JUSTICE M.S.RAMACHANDRA RAO
AND
THE HON'BLE SRI JUSTICE T.VINOD KUMAR
WRIT PETITION No.12802 of 2021
(Order of the Division Bench delivered by
the Hon'ble Sri Justice T.Vinod Kumar)
Dt: 26.08.2021
GJ
