Bombay High Court directs customs authorities to release yellow peas consignments upon full compliance with adjudication order

1. Background of the dispute

The Bombay High Court in Harihar Collections Vs Union of India dealt with two writ petitions where the assessee sought release of imported yellow peas that remained detained even after payment of customs duty, redemption fine and penalty in terms of an order-in-original. Both petitions involved identical facts and legal issues, and were therefore heard together and decided by a common judgment.

The assessee, a sole proprietorship based in Jaipur, is engaged in import and export of agricultural commodities. It had imported consignments of yellow peas after policy changes by the Government of India imposed restrictions on import of peas (pisum sativum) including yellow peas, green peas, dun peas and kaspa peas, classified under Exim Code 0713 1000.

1.1 Policy restrictions on import of peas

The relevant policy developments were as follows:

  • The Ministry of Commerce and Industry (Department of Commerce) issued a notification dated 29.03.2019 under section 3 of the Foreign Trade (Development and Regulation) Act, 1992 read with the Foreign Trade Policy 2015-20.

    • Peas (pisum sativum), including yellow peas and other specified varieties, were shifted to the restricted category.
    • Total import was capped at 1.5 lakh MT.

  • A subsequent Trade Notice No.6 of 2019-2020 dated 16.04.2019 prescribed detailed modalities for import within the restricted regime.

These measures were challenged by various importers across the country. One such petition was filed by M/s. Raj Grow Impex LLP before the Rajasthan High Court (Writ Petition No.11974 of 2019), which on 20.07.2019 granted interim relief by staying the operation and effect of the 29.03.2019 notification and 16.04.2019 trade notice qua that petitioner.

In light of such interim orders passed by several High Courts, the assessee placed orders for import of yellow peas and received consignments in November 2019.

1.2 Details of yellow peas consignments and warehousing

The imports in question were covered by the following Bills of Entry:

  • In Writ Petition (L) No.3503 of 2020:

    • Eight Bills of Entry Nos. 5720040, 5720192, 572069, 5722458, 5722730, 5719772, 5722243 and 5722456, all dated 18.11.2019, for a total quantity of 38,500 MT.

  • In Writ Petition No.3502 of 2020:

    • Bills of Entry Nos. 5520732, 5520871 and 5520536, all dated 01.11.2019.

Customs authorities did not allow clearance. Consequently:

  • The entire consignments were shifted to a customs warehouse under section 49 of the Customs Act, 1962.
  • The assessee had to regularly fumigate the cargo to prevent insect infestation, incurring substantial expenditure towards fumigation, warehousing and related charges.

Further, the Directorate General of Foreign Trade, by Notification No.37/2015-20 dated 18.12.2019, tightened the regime for import of peas (pisum sativum) including yellow peas, etc., by:

  • Prescribing a minimum import price of Rs.200 per kg CIF;
  • Maintaining an annual quota of 1.5 lakh MT; and
  • Restricting import to the Kolkata sea port.

2. Supreme Court decision in Union of India Vs. Agricas LLP

Multiple writ petitions challenging the notification dated 29.03.2019 and Trade Notice dated 16.04.2019 were transferred to the Supreme Court and registered as Transfer Petition (Civil) Nos.496-509 of 2020 in Union of India Vs. Agricas LLP.

By judgment dated 26.08.2020, the Supreme Court:

  • Uphold the notification dated 29.03.2019 and the trade notice dated 16.04.2019;
  • Rejected challenges raised by various importers; and
  • Made a critical observation regarding imports made under the cover of interim orders:

“Accordingly, we uphold the impugned notifications and the trade notices and reject the challenge made by the importers. The imports, if any, made relying on interim order(s) would be held to be contrary to the notifications and the trade notices issued under the FTDR Act and would be so dealt with under the provisions of the Customs Act 1962.”

The Supreme Court also clarified (in para 47) that statutory appeals filed by importers against suspension or termination of their import-export code would be decided independently in accordance with law and were not being examined in that judgment.

3. Adjudication under the Customs Act and order-in-original

3.1 Request by assessee for expedited adjudication

Post the Supreme Court judgment, the assessee:

  1. Forwarded a copy of the Union of India Vs. Agricas LLP decision to the adjudicating authority.
  2. Sought expeditious adjudication in light of mounting warehousing and fumigation costs and the perishable nature of yellow peas.
  3. Requested:
    • Waiver of show cause notice under section 124 of the Customs Act; and
    • Grant of a personal hearing.

The adjudicating authority:

  • Accepted the assessee’s request to waive written show cause notice, invoking the first proviso to section 124 which allows oral notice/representation at the request of the person concerned.
  • Granted and conducted a personal hearing on 28.08.2020.
  • Took up adjudication on priority, keeping in view that the consignments had been pending for around nine months and were stored in open yards subjected to monsoon rains.

3.2 Findings of the adjudicating authority and confiscation

The adjudicating authority concluded that:

  • The imports had been made in violation of the 29.03.2019 notification and 16.04.2019 trade notice.
  • The consignments thus constituted prohibited goods under the Customs Act.
  • They were liable to confiscation under section 111(d) of the Customs Act.
  • The assessee was liable to penalty under section 112(a)(i) of the Customs Act.

However, the authority decided not to resort to absolute confiscation and instead extended an option of redemption in terms of section 125(1).

3.3 Operative part of the order-in-original (28.08.2020, issued on 03.09.2020)

The operative directions were:

1.