By TIOL News Service

MUMBAI, FEB 24, 2014: THE case concerns export of rice.

Suspecting the rice to be non-basmati, the officers of Customs, Mumbai withdrew the samples from the goods lying for export. Within a few days, the DRI, Mumbai also on some information that the appellant exporter is illegally exporting non-basmati rice by mis-declaring the same as Basmati rice inspected the consignment lying in Dock and also withdrew samples.

Statement of exporter Mr. Daulatram Chawla, Proprietor of M/s Chawla Trading Company was recorded on 11.8.2009, wherein it was stated that rice has been procured from Delhi and Haryana. It was further stated that he has been in regular business of export of Basmati rice to Dubai, where he had around 10 buyers and he had not exported non-basmati rice after the prohibition was imposed by the Government. The statement of Shri Daulatram was recorded on 19.8.2009 at the DRI office in Mumbai when he deposed that he had also been purchasing non-Basmati rice and exporting the same by mis-declaring as basmati rice. In his statement, recorded on 19.8.2009, Shri Santosh Chawla, nephew of the Proprietor and who was associated in running the business, stated that they used to export non-basmati rice as basmati rice. Incidentally, Shri Santosh Chawla retracted his statement on 20.08.2009 before the Additional Chief Metropolitan Magistrate claiming that the same was recorded under duress and by applying pressure and force and is not his true and voluntary statement.

A show-cause notice dated 10.12.2010 came to be issued alleging mis-declaration of export of non-basmati rice in the name of basmati rice and proposing confiscation of the quantities of non-basmati rice seized, appropriation of bank guarantees and imposition of penalties.

The exporter in his reply submitted that in the SCN there is no mention of sample of rice tested by authorized laboratory, as per law. The test reports (relied upon documents) and the reports relied upon in the show-cause notice are received from one Intertek India Pvt. Ltd. (testing laboratory) and such report cannot be relied upon and further, the report from Basmati Export Development Foundation is also not reliable as the said authority was authorized w.e.f. 1.10.2010. Thus they were not the authorized laboratory for testing of the samples during the period in investigation.

Based on the statements recorded, the proposals in the SCN were upheld and confiscation was ordered and penalties were imposed.

The Commissioner (Appeals) recorded the following finding:-

"I find that in the instant case, samples were sent to three different laboratories and the test results of all three are at variance with each other. While M/s Intertek India (P) Ltd. categorically says the rice to be non-basmati rice, Regional Agmark Laboratory describes it as "raw milled basmati rice" and the report from the Basmati Export Development Foundation, Meerut describes them to be a mix of basmati and non-basmati rice with plain rice being in markedly higher percentage (ranging from 41.50% to 91.30) than that would occur naturally. I find that both the Agmark Laboratory and Basmati Export Development Foundation, Meerut are govt. recognized."

He held that benefit of doubt must go to the appellant and concluded thus -

(i) The order of confiscation of goods was upheld but redemption fine was reduced from Rs.50 lakhs to Rs.5 lakhs. Further, the penalty imposed on the appellant firm M/s Chawla Trading Company was reduced from Rs.50 lakhs to Rs.5 lakhs and further penalty imposed on Shri Santosh Chawla of Rs.10 lakhs was reduced to Rs.2 lakhs.

(ii) In a separate appeal, order passed by the same Commissioner (Appeals) in case of other appellant Shri Mukesh D Thakkar, CHA, it was held that he is giving the benefit of doubt as mentioned in para 8 of the order. In absence of any corroborative evidence, the penalty imposed of Rs.20 lakhs is reduced to Rs.4 lakhs. Thus, allowed the appeal in part."

Against this order, the appellants are before the CESTAT and make the following submissions -

+ Circular No.33/2008 dated 30.9.2008 issued by the Dy. Director, DGFT, lays down that the Customs may withdraw samples for testing, to ascertain variety for identification, and send to Agmark Testing Centre and Customs shall not hold back the export consignment for want of test reports.

+ Reports from other testing agencies cannot be relied upon.

+ The reports of another Govt. laboratory have also certified that the rice samples contain mix of basmati and non-basmati rice.

+ The Tribunal has allowed the appeal filed by theirCHA M/s M.K.Shipping Services - (2012-TIOL-860-CESTAT-MUM) challenging the order of Commissioner of Customs (General) wherein their CHA licence was revoked. The Tribunal after considering the facts and circumstances had found from a copy of the report obtained by the said appellant from the Revenue under RTI Act that the export was made of ‘rice-milled basmati rice'. Further, test report was not considered either by the enquiry officer or by the adjudicating authority; since the goods under export having been proved to be basmati rice, the charges of mis-declaration of goods under export, which was the basis for investigation is vitiated and accordingly there is no case of mis-declaration made out.

The Revenue representative submitted that the order passed by the Tribunal in the cited case has been challenged by the Revenue in the Bombay High Court [Customs Appeal No. 88 of 2012] but no stay has been granted so far.

The CESTAT in a crisp order observed -

"6. Having considered the rival contentions, in view of the finding already arrived at by this Tribunal that there is no case of mis-declaration made out, to which I agree on appreciating the facts. It is just and proper that these appeals have to be allowed in favour of the appellants and accordingly, the order of confiscation is set aside as well as the penalty imposed on the appellant firm and penalty imposed on Shri Santosh Chawla, Manager of the Exporting firm as well as the penalty imposed on CHA Shri Mukesh D Thakkar are set aside."

In fine, the appeals were allowed with consequential relief.

(See 2014-TIOL-288-CESTAT-MUM)