CESTAT Hyderabad Sets Aside Reclassification Of Jasmine Biotechnologies' Bio-Fertiliser Imports As Insecticides

The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has recently set aside the reclassification of imports made by Jasmine Biotechnologies from bio-fertilisers to insecticides.

It held that the Customs Department failed to establish through cogent, reliable and legally admissible evidence that the products were insecticides or prohibited imports.

The Division Bench comprising Judicial Member Angad Prasad and Technical Member A.K. Jyotishi passed the order while allowing four connected appeals filed against orders of the Commissioner (Appeals), Hyderabad.

The dispute related to imports of products declared as “Kingbo K Bio-Fertilisers/Exodus” plant protector under Customs Tariff Heading 3101 0099.

The Department alleged that the imported products contained Oxymatrine and related compounds. It said they were therefore classifiable as insecticides under Chapter 38, requiring registration under the Insecticides Act, 1968.

Customs authorities relied on laboratory reports from the Regional Centre for Organic Farming (RCOF), Bengaluru and the Indian Institute of Chemical Technology (IICT), Hyderabad. Based on these, they alleged misdeclaration and violation of the Insecticides Act.

The goods were confiscated under Sections 111(d) and 111(m) of the Customs Act. Penalties were also imposed under Sections 112(a) and 114AA.

However, the Tribunal found major inconsistencies in the laboratory reports. It noted that one report specifically recorded that the “analysis result did not show any peak related to pesticides.”

"Once the laboratory itself records absence of pesticides peaks, the Department cannot selectively rely upon some presence of naturally occurring alckaloids to conclude that the product is necessarily an insecticide", stated the bench.

The Tribunal held that the mere presence of naturally occurring alkaloids could not automatically establish that the imported products were insecticides.

The bench also observed that the Department failed to produce trade evidence, expert evidence or market enquiry. These could have shown that the products were commercially recognised or marketed as insecticides.

The bench further stated that "the Department has failed to establish deliberate suppression or wilful mis-statement. The imports were made through proper bills of entry with declared product descriptions and supporting literature. The goods were not clandestinely imported."

It further held that denial of cross-examination of the authors of the technical reports amounted to violation of principles of natural justice.

"the penalties imposed under Section 112(a) and 114AA of the Customs Act are wholly unsustainable, since, no evidence has been produced to establish conscious involvement and fraud, deliberate falsification or intentional evasion", added the bench.

Holding that the Department had failed to establish its case through cogent, reliable and legally admissible evidence, the Tribunal concluded that reclassification of the products under Customs Tariff Heading 3808 9199 was unsustainable.

Consequently, confiscation, duty demand, redemption fine, and penalties were set aside. The appeals were allowed.

For Appellant: Advocate G. Natarajan,

For Respondent: M. Anukathir Surya, Authorized Representative