By TIOL News Service

NEW DELHI, SEPT 28, 2017: THE Respondent had filed two shipping bills for export of 'PUSA 1121 Indian Basmati Sella Rice' to Dubai in four containers. The Respondent also submitted a copy of the test report of a private laboratory, i.e.,  Sri Ram Institute of Industrial Research, New Delhi . The goods were examined in the presence of the staff of Customs and of the Respondent and samples were drawn for testing at the  SGS Laboratory Pvt. Ltd. at Gurgaon. However, the CHA and the representative of the Respondent requested that the sample be sent for testing to any Agmark Testing Centre.

The Respondent thereafter filed a Writ Petition. The Court directed the Department to draw the necessary samples in the presence of the Respondent and send them to any of the Agmark Testing Centres in terms of Circular No. 33(RE-2008)/2004-2009 dated 30th September, 2008 of the Customs Department.

Pursuant to the above order, samples were drawn and sent to the Regional Agmark Laboratory, Okhla, New Delhi (RAL). Two analytical reports were submitted by the RAL mentioning as follows -

Since this appeared to be an ambiguous report, the Commissioner sought a clarification from RAL as to whether in the light of the notification dated 5th November 2008 the product in question was Basmati (including Pusa Basmati 1121) or Non-Basmati Rice. In response to the above query the RAL, New Delhi sent a letter dated 16th March 2011 in which it confirmed that both samples were not conforming to the Basmati Rules as they contained 'other rice' in a proportion that exceeded 20%, which was the maximum permitted under the said Rules. Secondly, the rice did not possess the natural fragrance in both raw and cooked stages. Hence, neither of these samples could be considered as samples of Basmati Rice.

Since export of non- Basmati Rice was prohibited under the Export Policy in terms of Notification No. 55 (RE-2008) 2004-2009, a SCN was issued to the Respondent  inter alia  proposing confiscation of the impugned goods u/s 113(d) of the CA, 1962 and imposition of penalty.

The Additional Commissioner ordered confiscation of the seized goods with an option to redeem the same on payment of a redemption fine of Rs.8,00,000/-. A Penalty of Rs.3,00,000/- was also imposed on the respondent u/s 114.

This order was upheld by the Commissioner(A) but in appeal, the CESTAT relying on the decision in  Global Agro Impex  2012-TIOL-1408-CESTAT-DEL set aside the orders of the lower authorities and allowed the appeal.

Aggrieved, the Commissioner of Customs filed an appeal before the Delhi High Court.

The High Court had observed -

+ While the notification dated 16th September, 2008 did prescribe that the standard to be met as far as Basmati rice meant for export was concerned was that the grain should be 7 mm in length and ratio of length to breadth of the grain shape should be more than 3.6, (which was later amended vide notification dated 17th August, 2010 to read more than 6.61mm of length and a length to breadth ratio of more than 3.5), the fact is that under the DGFT Circular dated 30th September, 2008 the samples were also to be sent for testing to the Agmark Laboratories. Combined with the fact that the notification dated 5th November, 2008 prohibited the export of non-Basmati rice, this meant that the consignment had to also conform with the requirement of the Basmati Rice Rules. Schedule 2 to the Basmati Rice Rules specifies the maximum presence of other rice including red grain as 20%.Therefore, the contention of the Respondent that the samples in question were required to conform only to the DGFT notification dated 5th November 2008 and only in terms of the length and length/breadth ratio as specified in said the DGFT notification is not acceptable.

+ In the decision in  Global Agro Impex  (supra), the CESTAT did not have the benefit of noticing the DGFT circular dated 30th September, 2008 which permitted samples to be sent for analysis to AgmarkCentres. To that extent, the CESTAT, in the impugned order, by mechanically following the earlier decision in Global Agro Impex (supra) clearly committed an error.

+ In the present case, the testing by the RAL was on the request of the Respondent itself. Once there was a report of the RAL clearly stating that the samples did not conform to the requirements of the Basmati Rules inasmuch as the presence of other rice exceeded the maximum permissible limit of 20%, then the Customs Authority was bound by such report.

+ If the Respondent wanted to show that the other rice found present in the consignment was also Basmati Rice then the burden was on the Respondent to show that. As far as the Department is concerned, it was justified in proceeding on the strength of the test report that the presence of other rice, i.e. non-basmati rice, was more than the permissible maximum limit of 20%. Since the consignment was not entirely of Basmati Rice, it was not sufficient that the grains conformed to the length and length/breadth ratio prescribed for Basmati Rice in order to pass the test.

The order dated 12th June 2012 passed by the CESTAT was set aside and the order of the original authority was restored.The Revenue appeal was allowed. We reported this order as =   2015-TIOL-1991-HC-DEL-CUS.

The exporter has filed a Review Petition against this order.

The central plank of the submission of the Review Petitioner is that by the Notification No. 55 (RE-2008)/2004-2009 dated 5th November 2008 issued by the Ministry of Commerce & Industry, Government of India, an amendment was made to the earlier Notification dated 16th September 2008 whereby under Serial No. 45AA, 'Basmati Rice including Pusa Basmati 1121 (Dehusked Brown)' was allowed to be freely exported, i.e. without a licence; that till that point in time, the Pusa 1121 variety was acknowledged to be a non-Basmati variety; that the Review Petitioner maintains that even today the Pusa 1121 variety continues to be a non-Basmati variety; that, however, since the nomenclature used was 'Pusa Basmati 1121' the said variety was tested as a Basmati variety and that is where the mistake occured.

The Delhi High Court in its order dated 10 February 2017 observed -

Pursuant to the said order, an affidavit dated 7th September 2017 was filed by the Deputy Director General of Foreign Trade bringing forth some facts which were not available to the Court when it passed the order dated 25th August 2015.

The High Court, therefore, allowed the review petition and recalled its order dated 25th August 2015.

After extracting passages from the affidvait filed, the High Court observed -

"10. What is discernible from the above affidavit, read together with the notifications enclosed therein, is that the consistent policy of the central government was to allow export of PUSA 1121 although it was a non-basmati variety. Some confusion arose from the reference to 'PUSA 1121' as 'Basmati Rice', by inserting the word 'basmati' either as a prefix or as a suffix to PUSA 1121. If indeed PUSA 1121 was basmati rice then clearly its export was never prohibited. However, it does appear that at one stage it was decided to call the said variety of rice 'PUSA Basmati 1121' and specify a slight change in grain length as explained in para 7 of the affidavit filed by DDGFT. In the circumstances, as long as the consignment of PUSA 1121 sought to be exported by the Respondent satisfied the said grain length parameters, which it in fact did, the Respondent ought to be given the benefit of doubt even if the description of the variety was shown as PUSA Basmati 1121."

Nonetheless, the High Court noted that in terms of the impugned order of the CESTAT dated 12 June 2012, the consignment of rice sought to be exported was released to the Respondent and a number of years have gone by since then, no purpose would be served in re-examining the entire matter now.

In view of the peculiar facts, the High Court held that the impugned order of the CESTAT does not call for interference.

The Revenue appeal was dismissed.

(See 2017-TIOL-2040-HC-DEL-CUS)