Somesh Arora: Customs overdoing its Act?

Customs overdoing its Act?

It is important that procedural laws should be uniform, harmonised and evolved with consensus at the level of CBEC, and should not reflect any individualistic thinking   

Traditionally at the border frontiers, Customs was the sole repository of all enforcements relating to various laws pertaining to antiques, ITC violations, intellectual property rights violations, drugs and cosmetics, Wildlife and Arms Act violations and many others.

This was because under various Acts — either powers were delegated to Customs or because the enforcement agencies under relevant legislations did not have the manpower to look at the border contraventions for which the Customs had the necessary expertise.

With passage of time, certain agencies started having their own enforcement that is available next door, especially in cases where matters pertain to ICD and also in other cases where power to Customs was considered necessary as in case of IPR violations, Customs got the necessary legislative mandate in relation to borders or entry points.

It has to be understood that under some of these legislations, the role of the Customs now remains advisory and in certain cases that of  reporting the offence. This also flows from a plethora of case laws where courts have held that in cases of ITC policy, it is the interpretation of DGFT which is final.

But the Customs still interprets EXIM policy regularly. Say, for example, the following observations of the Bombay High Court reported in 2009 (241) E. L. T. 168 (Bom), Hamid Fahim Ansari Vs Commissioner of Customs (Import), Nhava Sheva- Imports carried out by the petitioner on behalf of another person. If petitioner obtained the IEC Code by misrepresenting, then the DGFT can take action. The petitioner having valid IEC Code is entitled to release of goods from Customs.

The High Court in the matter was concerned with the issue as to who is the `importer’, the person who holds himself as importer before the Customs authorities at the time of import, and not the person whom department thinks is the Financer and Importer.  But will this stop Customs from lifting the veil as to who it thinks is the importer and leave it for DGFT to do so in future. Chances are indeed bleak.

Similarly, in the matter of rice exports where Customs took it upon itself to probe if there was anything wrong with rice that was going out of India, it clearly violated the mandate of the DGFT authorities ordained in the following manner in its notification No.39/2008 dated 16.9.2008: 2.1 Customs shall allow export consignments of Basmati rice and PUSA 1121 Non-basmati rice based on the parameters of grain length, and grain length to breadth ratio. Customs may draw random  samples for testing, to ascertain variety identification and send these samples for analysis to AGMARK testing centres. However, Customs will not hold back export consignments/containers for want of test reports, and export will be allowed after drawing samples, wherever required.

2.2 In cases, where test reports of samples are found at variance with the export declaration, Customs will report the matter to the nearest Zonal Joint DGFT (with copy to DGFT at New Delhi HQs) for necessary action and remedial measures to be taken regarding the defaulting exporter.

But again the Customs circumventing the procedure prescribed by the DGFT took upon itself to detain consignments, drawing and testing samples wherever it felt from and not holding prior consultation with DGFT. However, in such cases it is the DGFT which has the last laugh, because courts have been holding such procedures involving other Departments under their legislation as sacrosanct.

As if ignoring the DGFT authority was not enough, Customs released the goods which were meant for export and which it claimed were prohibited items by choosing to ignore Circular No. 33/2005-Cus., dated 2-8-2005 issued in F.No. 605/3/2004-DBK by the Central Board of Excise & Customs, New Delhi relating to seizure of goods entered for export on account of misdeclaration of quantity, value etc. (Provisional release instructions - Para3).

After having examined the problems associated with the seizure of export of goods, the Board decided that except forprohibited/contraband goods, the seized goods should be released provisionally and allowed to be exported on a bond of an amount equivalent to the value of seized goods and probable fine and penalty which might be imposed.

That such goods when entered for export were “prohibited goods” and were more restricted goods is quite clear by the law of the land as laid down by the apex court in 2003(155) ELT 423 (SC) in the matter of Om Prakash Bhatia versus CC, Delhi — confiscation of export goods-prohibited goods-prohibition of import or export could be subject to certain prescribed conditions, to be fulfilled before or after clearance of goods — if conditions are not fulfilled, it may amount to prohibited goods.

Further, in this case even the EXIM policy mentioned that barring certain varieties, the export of other non-basmati rice was prohibited. Then, in such a situation, it is debatable as to whether Customs should have provisionally released the prohibited goods in derogation of CBEC`s circular or should have disposed off such goods in the market being perishable goods.

In another instance, a particular Customs formation took it upon itself to interpret provisions of Drug and Cosmetics Act, 1940, subverting a long-standing practice  without reference to Drug Authorities with full facts and provisions or without reference to any of the legal departments in the government (since interpretation of another Act was involved) and stopped consignments of cosmetics on the pretext that same were not permitted through its port (even when other Customs ports similarly placed continued to maintain that they will permit the same). This was done without any attempt to refer the matter to CBEC so as to atleast involve uniform thinking within the Customs Department.

While the legality of the issue will be decided by the courts, it is pertinent to mention that some of the Customs formations singularly lay down law and subvert long-standing practices being followed even elsewhere in other Customs formations without reference to CBEC or the authorities (legal or otherwise) under a different piece of legislation, abrogating to themselves all the authority to interpret not only Customs Act but also other legislations.It will be beneficial if Customs determines the legal limits laid down for them by the courts and works within the confines of and to the extent of delegating legislations. It was recognized by the World Customs Organisation at the time of formation of World Trade Organisation that with dismantling of tariffs there will be much reduced role for the Customs organizations to play and that was the reason that work relating to Intellectual Property Rights enforcement on the border was assigned to them. Indian Customs, which has on the whole, shown remarkable adaptability in the past to all the new roles assigned to it and was on the forefront to voluntarily adapt itself to the new liberalised environment in the late 1990s should continue to maintain its image as a disciplined law abiding force . For that, it is important that procedural laws should be uniform and harmonized and evolved with consensus at the level of CBEC and then strictly adhered to and should not reflect any individualistic thinking, which has the inbuilt potential to do damage to the trade and to the nation.

Somesh Arora Former Commissioner, Customs & Excise

CCO, Amicus Rarus Consults