ORDER
Gowri Shankar, Member (T)
1. After having heard the stay applications at length, we have taken up the appeals for disposal, after waiving deposit.
2. In the order impugned in these appeals, the Commissioner has confiscated a consignment of poppy seeds imported by Saudagar Exports on the ground that it contravened the provisions of Clause (d) of Section 111 of the Act, for the reason that it was imported from Afghanistan contrary to the conditions of the import licence and, on the further ground that it was adulterated within the meaning of Section 2 (ia) of Prevention of Food Adulteration Act, 1954. He has imposed penalties on Saudagar Exports, and Nagendra Singh, its sole proprietor. He has also imposed penalty on Adani Exports Ltd. and on Rajesh Adani, its director for abetting the import contrary to law on his view that Adani Exports Ltd. knowing that the actual user condition subject to which the licence was issued could not be fulfilled financed the export of the goods.
3. The licence itself does not contain any actual user condition. After issue of the licence, Saudagar Exports had, by its letter of 28-1-1999 asked the Director General of Foreign Trade to clarify that the goods to be imported against the licence issued to it were for stock and sale and thus could be sold in the open market. By its reply dated 8-2-1999 Director General of Foreign Trade replied to the appellant that instructions had already been issued to the Joint Director General of Foreign Trade, Central Licensing Area, New Delhi that the actual user condition need not be imposed on poppy seed import cases and advising the appellant to get in touch with the Central Licensing Area. It seems clear from this, that the actual user condition was not attached to the licence. After the consignment was seized by the Directorate of Revenue Intelligence, that organisation wrote to the Director General of Foreign Trade, apparently proposing cancellation of the licence on two grounds : (i) that the actual user condition subject to which the licence had been issued had not been fulfilled, and (ii) that the import of goods has been made from Afghanistan. A show cause notice was thereafter issued to Saudagar Exports by the Additional Director General of Foreign Trade proposing cancellation of the licence on these grounds. Adjudicating on this nonce, the Additional Director General of Foreign Trade has cancelled the licence by his order dated 17-9-1999. In that order, however, he has specifically cancelled the licence only on one of the grounds, that the “condition” relating to the import from a country certified by the International Narcotic Control Board have not been complied with. The order is silent with regard to the actual user condition. We do not attach any great significance in the contents of paragraphs 7 and 8 of the order of the Additional Director General of Foreign Trade in which he says that the “conditions” of the licence has not been complied. The fact that the plural of the word is used does not necessarily mean that his conclusion elsewhere in the order that the “condition” relating to the import from a country certified by the International Narcotic Control Board has not been complied with, should be added to and a conclusion attributed to him which he has not expressed. We are, therefore, satisfied that the actual user condition did not attach to these goods.
4. The Commissioner advanced two reasons for imposition of penalty upon Adani Exports and Rajesh Adani, its director. One, as we have seen, is that he conspired to import the poppy seeds knowing that the actual user condition, subject to which the licence was issued, could not be fulfilled.
5. Paragraph 5.7 of the Handbook of Procedures of the Import and Export Policy provides that the licence holder or an actual user importing goods which are subject to actual user condition may appoint another person as his agent by issuing a letter of authority in his favour for arranging the imports. The agent shall act only as a facilitator, and not as an importer, and his functions, acting on behalf of the licence holder/actual user, shall be limited to placing of orders, opening letters of credit in the name of the licence holder/actual user, arranging movement of goods and clearing the same through the customs. All the documents shall be in the name of the licence holder/actual user and not in the name of the agent.
6. The Commissioner has found that the condition has not been complied with and all the documents were in the name of Adani Exports Ltd. We do not find this to be the case. Except for the letter of credit which was necessarily to be opened by the agent in its name on its bank, the documents are in fact in the name of Saudagar Exports. The contract for purchase and sale was between Texpo International, Hong Kong and Saudagar Exports, in whose name the bill of entry, invoices, and certificate of origin are filed or issued. The letter of credit itself contained a condition that all documents except bill of exchange, to be made in the name of Saudagar Exports. We, therefore, do not find any case for imposition of penalty on Adani Exports Ltd. and Rajesh Adani, its Director.
7. The import licence for the goods imported contained a condition that a certificate was to be produced to the customs at the time of clearance of the goods from a competent authority of the country of origin to the effect that poppy seeds has been grown licitly/legally in that county as per requirement of the International Narcotics Control Bureau and notified as such by the Department of Revenue, Ministry of Finance, Government of India.
The goods were of Afghan origin. The appellant produced before the customs authority a certificate issued by the Ministry of Public Health, Department of the Republic of Afghanistan attesting inter alia that “the cargo has been legally grown and processed in the Republic of Afghanistan conforming to standards laid down by ministry of public health department, drug inspection unit”. The Commissioner has found this certificate to be unacceptable. He says that enquiries with the Central Bureau of Narcotics of India showed that in terms of international conventions, only 12 countries including India) could legally grow poppy seeds and Afghanistan was not one of them. He also finds that enquiries with the Embassy of the Islamic Emirate of Afghanistan, New Delhi revealed that growing of poppy seeds was illegal in Afghanistan and the certificate issued by the Ministry of Agriculture, Government of Islamic State of Afghanistan was fake.
8. It was well known that during the relevant time, Afghanistan was in the midst of a civil war and that it had two rival governments, one of these controlling the administration of large territory of Afghanistan, whereas another had control over some area of the northern part of Afghanistan. The new group Taliban was recognised by three countries and India was not among them. Diplomatic representation in India was by the rival group loosely referred as the Northern Alliance which was at war with the other group. We are therefore not inclined to place any credence to the certificate issued by the Embassy of Afghanistan, New Delhi.
9. The Counsel for the appellant accepts, after some discussion, that since Afghanistan was not one of the countries in which poppy seeds was permitted to be grown in accordance with the international convention to this effect, he does not question the liability to confiscation of the goods on this score. He however contests the issue of imposition of penalty on the importer. He points out that the importer had indicated in the application for the licence that poppy seeds would be imported from Afghanistan, Australia and Turkey. Despite this being made aware of, the licensing authority issued a licence subject to the condition. The importer could not be expected to go into the intricacies of the control or the regulation of growing of the opium poppy by the international convention and in good faith believed that poppy seeds could be imported from Afghanistan. The Departmental Representative emphasised the Commissioner’s view that we have explained above.
10. After hearing both sides on this, we are of the view that the benefit of doubt with regard to the import would go to the importer. The condition in the licence and the import policy with regard to production of the certificate could be interpreted to mean that the certificate from the country of origin would suffice. The Departmental Representative is not able to produce any notification issued by the Department of Revenue containing details of countries permitted to grow poppy seeds. We cannot help thinking that of the matter were so simple that poppy seeds could be imported from one of the eleven countries (other than India) which were permitted to grow poppy seeds in terms of international conventions. It would be a simple matter for the licensing authority to list in the licence from importation the names of the countries from which the seeds could be imported. This has not been done, and the somewhat unclear condition, that we reproduced above, was contained in the licence. In effect, the importer is being held at present for not fulfilling the condition in the licence that the licensing authority could have easily made clear, after he specifically stated in the application for the licence that he would be importing poppy seeds from Afghanistan, Taiwan or Australia. Our attention is also drawn to two decisions of the Tribunal in Diamond Traders v. CC – 1999 (111) E.L.T. 921 in which the Chennai Bench of the Tribunal has found no objection to import of poppy seeds from Pakistan and did not accept the department’s contention that Pakistan was not one of the countries legally permitted to grow poppy seeds. That decision has also made it clear that if it were the case the evidence that Pakistan and other specified countries are not allowed to cultivate opium licitly, then the best course would have been to make such a specific announcement in the import policy. This decision has also been followed by a single member bench in its decision in Arun Kumar Kapoor v. CC – 2000 (37) RLT 310. Applying the ratio of the decision, we allow the appeal of Saudagar Exports and set aside the penalty imposed on this firm. Penalty could not have been imposed on its proprietor, in addition to the firm. That is also set aside.
11. The liability to confiscation of poppy seeds on this ground not being questioned, we confirm it. The Commissioner has absolutely confiscated the poppy seeds on his view that it was adulterated. He has relied upon a report dated 28-11-1999 and 10-1-2000 of the Port Health Officer at Kandla that a sample of the goods under consideration contained 4.3% of inorganic extraneous matters and does not conform to the standards of poppy seeds as per Prevention of Food Adulteration Rules, 1955.
12. The Counsel for the appellant refers to Section 2(ia) of the Prevention of Food Adulteration Act, 1954 which describes various conditions under which the articles of food deemed to be adulterated. Among these are Clauses (1) and (m) which reads as follows :
“(1) if the quality or purity of the article falls below the prescribed standard or its constituents are present in quantities not within the prescribed limits of variability, which renders it injurious to health;
(m) if the quality or purity of the article falls below the prescribed standard or its constituents are present in quantities not within the prescribed limits of variability but which does not render it injurious to health :
Provided that, where the quality or purity of the article being primary food, has fallen below the prescribed standards or its constituents are present in quantities not within the prescribed limits of variability, in either case, solely due to natural causes and beyond the control of human agency, then, such article shall not be deemed to be adulterated within the meaning of this sub-clause.”
13. Rule 5 of the Prevention of Food Adulteration Rules, 1955, made under the Act, specified in Appendix B, the standard of quality of various articles of food. Entry at A.05.18 deals with “poppy (khas-khas)”. This provides for the proportion of permissible extraneous matter. It appears that this proportion had varied from time to time. The Counsel for the appellant says that the proportion of extraneous matter in 2002 shall not exceed 15% by weight. The entry produced by the Departmental Representative for the year 1997 says it is not to exceed 5%. Although the foreign matter found in the goods is 4.3% within the permitted percentage of 5%, we take note of the Departmental Representative’s contention that the permissible percentage of extraneous matter varied from time to time, and that it is necessary to determine what was the permitted percentage of extraneous matters at the relevant time of import. The percentage of extraneous matter is the sole reason for absolute confiscation of the poppy seeds that we could see. The fact that import is unauthorised while justifying the confiscation does not in our view justify absolute confiscation. The goods are not toxic or hazardous but are in fact used as flavouring agent. Therefore, unless the goods are adulterated and therefore injurious to health, absolute confiscation is not justified.
14. We think that after considering evidence that the appellant may produce before the Commissioner to determine whether at the relevant time the percentage of foreign matters that the poppy seeds contained were such as not to permit to be redeemed at all or not. If he finds that the percentage of foreign matter is within the permissible limit, he shall permit the poppy seeds to be redeemed on payment of fine which he will determine after taking into account the margin of profit, detention charges, demurrage incurred etc., in accordance with the principles laid down by the Courts and the Tribunal.
15. Appeal C/480/01 allowed in part. Appeals C/481 and 482/01
are allowed.