M/S. SOUTHERN REFINERIES LTD. v. COMMISSIONER OF CUSTOMS COCHIN-9

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** # **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON** **FRIDAY ,THE 09TH DAY OF NOVEMBER 2018 / 18TH KARTHIKA, 1940** **Cus.Appeal.No. 8 of 2005** **AGAINST THE ORDER/JUDGMENT IN OTHERS /2003 of CUSTOMS,EXCISE&SERVICE TAX APP.TRIBUNAL,BANGALORE DATED 2202-2005** **APPELLANT/S:** **M/S. SOUTHERN REFINERIES LTD. PATTOM, KESVADASAPURAM, TRIVANDRUM.** **BY ADVS. SRI.E.K.NANDAKUMAR (SR.) SMT.PRIYA MAHESH** **RESPONDENT/S:** **COMMISSIONER OF CUSTOMS COCHIN-9** **BY ADVS.** **SRI.ABRAHAM THOMAS CGC SRI.ABRAHAM THOMAS SCCENTRAL BOARD-EXC SRI.JOHN VARGHESE ASSISTANT SG** ## **OTHER PRESENT:** **SRI SREELAL N WARRIER, CGC** **THIS CUSTOMS APPEAL HAVING BEEN FINALLY HEARD ON 09.11.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** Cus.Appeal No. 8/2005 2 **Cus. Appeal No. 8 of 2005** ## **J U D G M E N T** ## **Vinod Chandran, J** **The appeal arises from the order of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) wherein a modification was made to the penalty imposed in lieu of confiscation from Rs.2 lakhs to Rs.1 lakh.** **2. The brief facts to be noticed are that the appellant is engaged in distillation of waste oil; being equipped with vacuum distillation process. The appellant imports waste oil from abroad and converts it into lubricating oil at its factory premises. By** 3 Cus.Appeal No. 8/2005 **Bill of Exchange dated 12.12.1996 the appellant imported waste oil as it had been doing, from 1993 onwards. The appellant had also carried on these imports under Open General Licence (for short “OGL”). On filing Bill of Entry dated 12.12.1996 the Customs authorities however, refused clearance, finding that the waste oil is a hazardous material as defined under Rule 11 of Hazardous Wastes (Management and Handling)Rules, 1989 and hence required a special permit under Rule 11. The goods could not have been imported by an OGL.** **3. The appellant obtained clearance on executing a bond with the Department, undertaking to produce a valid import licence and authorisation from the Kerala State Pollution Control Board as per the Rules. The** 4 Cus.Appeal No. 8/2005 **appellant was not able to obtain either of these and produce it before the Commissioner; allegedly due to a stay order passed by the High Court of Delhi. The import licence or authorisation having not been produced, the goods were liable to be re-exported. The appellant could not effect re-export for reason of the re-export having been declined by the foreign supplier; in which event the goods were liable to be confiscated. Also, by that time, the goods stored in the appellant's premises had leaked out and could not be confiscated. In such circumstances, proceedings were taken under Section 111 & 112 of the Customs Act for confiscation and imposition of penalty.** **4. We need not refer to the earlier proceedings which stood remanded by Annexure F** 5 Cus.Appeal No. 8/2005 **order of the CESTAT. By Annexure G order after remand, the Commissioner found that the goods were not available for confiscation and hence imposed penalty of Rs.2 lakhs in lieu of confiscation under Section 111 (d) of the Customs Act, 1962. The said penalty was modified to Rs.1 lakh by the CESTAT against which the current appeal is filed.** **5. The learned Counsel appearing for the appellant would contend that there could be no** _**mens rea**_ **alleged and hence there could be no penalty imposed.** _**Akbar Badruddin Jiwani v. Collector of Customs [1990(47) E.L.T 161 (SC)]**_ **is pressed into service. Therein the appellant had imported stone slabs for home consumption which were suspected to be “marble”; which item was restricted and could not be imported by** 6 Cus.Appeal No. 8/2005 **OGL. The Hon'ble Supreme Court found bonafides on the appellant in having imported the goods; taking it to be stone slabs. Here the contention is that the appellant had all along been importing waste oil, by OGL and only this consignment was refused to be cleared. Reliance was also placed on** _**1970(1) SCR 753 [Hindustan Steel Ltd. v. State of Orissa;**_ **wherein the** **requirement of** _**mens rea**_ **for imposition of penalty was insisted.** **6. The declaration in** _**Akbar Badruddin Jiwani**_ **is not at all applicable to the facts of the instant case. Therein the question which came up for consideration in the appeal was whether marble as mentioned in the Tariff Item in the Appendix to the Import (Control Order) 1955 is the genus within which all other** 7 Cus.Appeal No. 8/2005 **kinds of calcareous stones can be included and whether marble is a distinct or different item; being a restricted item. The appellant was running a small scale industry engaged in processing of stone slabs. He required calcareous stones in the course of his manufacturing activity. In attempting to import calcareous stone through an OGL the appellant had taken many precautions to ensure that the imported stones are not marble. A specific reference was made to the Indian Standards Specification for Marble, to distinguish marbles as metamorphic rocks. A certificate was obtained from a reputed Geologist and the order placed was also specifically for calcareous stones other than marble. The stones on import under an OGL was** 8 Cus.Appeal No. 8/2005 **inspected, but was not cleared for reason of a doubt raised as to whether it is marble. The Department sent the samples of the imported goods for testing to the Petrology Department of the Geological Survey of India, who certified that the stones were not marbles.** **7. The Hon'ble Supreme Court after looking at the various certificates found that the expression marble being not distinguished in the Customs Tariff Act or the Customs Act or in the relevant notifications; the necessity arises to decide the true meaning of the word marble as used in the ITC Schedule as well as in the list of restricted items. On a conspectus of the various decisions referred and in the context of the restriction, the definition of “marble”, it was found cannot** 9 Cus.Appeal No. 8/2005 **concede to, how it is known commercially in trade parlance. It was held that the calcareous stones imported by the appellant cannot be held to be marble as they had not been recrystallized and metamorphosed in the geological and petrological sense of the term. Having found so, the Hon'ble Supreme Court held that even if it is taken for argument sake that the imported article is marble, there can be no malafides found on the importer.** **8. We do not think that the said** **decision has any application herein. In the present case, the only contention of the importer, the appellant is that they had been carrying on the import earlier also under OGL. We notice that the Commissioner in Annexure G Order has specifically indicated that the** Cus.Appeal No. 8/2005 10 **concept of “Hazardous Wastes” was introduced for the first time on 01.04.1995 in the “EXIN Policy 1992-97 through insertion of Sl.No.8 under Group H (Chemical and Allied Item) of Part II of the Negative List of imports, whereby Hazardous Wastes were placed in the Restricted List. The term Hazardous Wastes even then was not defined and the HSN aligned policy came into effect from 26.03.1996. In the HSN aligned policy which came into effect on 26.03.1996 there was an import licensing note in which it was** _**inter alia**_ **stated that Hazardous Wastes will be permitted for import only against the licence for the purpose of processing and reuse. It was taking into account, these aspects that the import licence as well as authorization from the respective** 11 Cus.Appeal No. 8/2005 **State Pollution Control Boards under Rule 11 of the Hazardous Wastes Rules was insisted upon. The import of the assessee was sought to be cleared by Bill of Entry dated 12.12.1986. Hence assessee cannot feign ignorance of requirement of an import licence as also authorization from the SPCB. The earlier imports under OGL has no relevance for reason of the change in Policy.** **9. We do not find any assistance from the aforesaid judgment or the declaration therein because in the present case, the appellant has only a plea of ignorance of law that waste oil was a prohibited item under the Rules. That Hazardous Wastes imported for the purpose of recycling required a valid import licence and authorisation from the SPCB cannot** 12 Cus.Appeal No. 8/2005 **now be disputed at all. The appellant only relies on the imports made earlier to prove its bonafides.** _**Hindustan Steel Ltd.(supra)**_ **also has no application since the liability incurred is a civil liability; attracted on the import made of a restricted item without license and authorisation.** **10. The further contention taken is on the strength of the Madras High Court decision reported in** _**1983(12)ELT 322 (Mad) B. Lakshmichand v. Government of India.**_ **That was a case in which the penalty was set aside on the ground that the provision alleged under Section 112 was not specified. We do not think such a defect exists in the present case. We have to at first notice, the show cause notice produced at Annexure C, wherein direction to** Cus.Appeal No. 8/2005 13 **show cause was on why the goods be not confiscated under Section 111(d) of the Customs Act and why no penal action is taken under Section 112.** **11. Section 111(d) is as extracted** **herein:** **S.111 Confiscation of improperly imported goods, etc. The following goods bought from a place outside India shall be liable to confiscation:a.....** **b.....** **d. any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force;** 14 Cus.Appeal No. 8/2005 **12. When proceeding for confiscation under Section 111(d) what would be applicable is penalty under Section 112 (a)(i):** **S.112.Penalty for improper importation of goods,etc.- Any person,-** **(a): who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under Section 111, or abets the doing or omission of such an act, or”** **xxx xxx** **xxx** **shall be liable,-** **(i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty not exceeding the value of the goods or five thousand** 15 Cus.Appeal No. 8/2005 ## **rupees, whichever is greater;** **13. There is absolutely no ambiguity insofar as the provision applicable under Section 112, which though not specifically mentioned is clear from the reference to Section 111(d). We also notice that the penalty imposed is in lieu of confiscation for reason of the goods not being available for confiscation. It is the admitted position that after the re-export was declined, the goods stored in containers in the premises of the appellant leaked out and the appellant's factory itself is closed down. We also notice the fact that the Bill of Entry dated 12.12.1996 produced as Annexure A shows a total cost of Rs.10,62,612/- In such circumstances, the penalty imposed in lieu of confiscation is** 16 Cus.Appeal No. 8/2005 **in fact a flea bite on the appellant, who was liable to confiscation of the goods imported.** **The appeal would stand dismissed. No** ## **costs.** **Sd/-** **K. Vinod Chandran, Judge Sd/Ashok Menon, Judge** jma Cus.Appeal No. 8/2005 17 ## **APPENDIX** **PETITIONER'S/S EXHIBITS:** **ANNEXURE A A TRUE COPY OF THE B/E DATED 12.12.96. ANNEXURE B1 A TRUE COPY OF THE B/E DATED 23.3.94. ANNEXURE B2 A TRUE COPY OF THE B/E DATED 22.12.95. ANNEXURE B3 A TRUE COPY OF THE B/E DATED 3.10.96. ANNEXURE C TRUE COPY OF THE SHOW CAUSE NOTICE DATED 24.6.97.** **ANNEXURE D TRUE COPY OF THE REPLY TO THE SHOW CAUSE NOTICE DATED 11.7.97. ANNEXURE E TRUE COPY OF THE ORDER OF THE COMMISSIONER OF CUSTOMS DATED 11.8.97. ANNEXURE F TRUE COPY OF THE ORDER OF THE HON'BLE CEGAT DATED 4.1.99. ANNEXURE G TRUE COPY OF THE ORDER OF THE COMMISSIONER OF CUSTOMS DATED NIL. ANNEXURE H TRUE COPY OF THE ORDER OF THE CESTAT DATED 22.2.05.**