LI Network
Published on: 01 October 2023 at 12:24 IST
The Allahabad High Court recently ruled that it lacks the expertise to determine whether Ethephon, an insecticide, qualifies for exemption under Section 38(1)(b) of the Insecticide Act, 1968.
While acknowledging that the petitioner failed to prove the validity of their exemption claim, the court directed the petitioner to present their case before the statutory authority, which possesses the necessary fact-finding capabilities to decide the matter.
A bench consisting of Justices Saumitra Dayal Singh and Rajendra Kumar-IV emphasized the need for a factual inquiry to determine the validity of the petitioner’s claim. They stated that this consideration became necessary due to the exemption asserted by the petitioner, which must be evaluated and tested by the fact-finding authority, i.e., the statutory authorities.
Background
The petitioner is engaged in the business of importing, manufacturing, and trading in Ethylene Ripener/Ethephon. They import bulk quantities of Ethylene Ripener/Ethephon from China and repackage them into smaller units. Some of these goods were imported, and customs duty was paid on them. However, a search operation was conducted at the petitioner’s premises, leading to the detention of Ethylene Ripener/Ethephon, Ethylene Ripener (Mango), and Ethylene Ripener (Banana) under Section 110 of the Customs Act, 1969.
The petitioner challenged the detention memo and the search and seizure proceedings during the pendency of a writ petition. Notably, a seizure order was issued at this stage, which was contested through an amendment application. Currently, a show cause notice under Section 124 of the Act has been issued to the petitioner, and confiscation proceedings are pending.
The petitioner’s counsel argued that under Section 110 read with Section 111(d) of the Act, only goods subject to prohibition under the Act or any other applicable law may be seized or confiscated if they were imported in violation of such prohibition.
It was contended that the petitioner’s goods were not prohibited goods. Additionally, they invoked Section 38(1)(b) of the Insecticide Act, asserting that Ethephon qualifies for exemption as it is a ripening agent and is not regulated by the Insecticide Act, 1968, since it is not used to prevent, mitigate, repel, or destroy any plant or animal life.
The petitioner also argued that Section 11(3) of the Act stipulates that any prohibition under another law can only be executed under the Customs Act if a notification to that effect has been issued under the Customs Act.
The petitioner maintained that no such notification had been issued in their case, rendering the entire proceedings by the Department jurisdictionally flawed.
The revenue department defended the proceedings, citing Section 17 of the Insecticide Act, which prohibits the import or manufacture of certain insecticides without registration under the Act. They contended that the petitioner had not obtained registration under the Insecticide Act to import Ethephon, making it prohibited under the Customs Act.
The department also referred to Section 2(33) of the Customs Act to classify Ethephon as prohibited goods.
High Court’s Verdict
The court determined that Ethephon is a scheduled commodity under the Insecticide Act, and registration under the Act is mandatory for its import. Examining Section 38(1)(b) of the Insecticide Act, the court noted that the legislative intent was clear in allowing exemptions for insecticides used in households, kitchen gardens, and agriculture, provided they do not harm life forms perceived as not beneficial to humans.
However, the court concluded that it lacks the expertise in chemistry or the environment to determine whether the import or manufacture of Ethephon may prevent, destroy, repel, or mitigate any form of plant or animal life. As a result, the court held that the matter should be adjudicated by a fact-finding authority.
Referring to the Supreme Court’s decision in Commissioner of Income Tax, Madras vs. R. Venkataswamy Naidu, the court emphasized that the burden of establishing an exemption rests with the person making the claim. Thus, the petitioner could not claim an exemption for Ethephon without providing proof of its exemption under the Act.
The court also clarified that Section 11(3) of the Act, though inserted, had not been enforced through a notification and therefore would not apply. However, it noted that Section 110 read with Section 111(d) and 2(33) of the Customs Act, as well as Section 9 and 17 of the Insecticide Act, empower authorities to seize Ethephon for the lack of a registration certificate under the Insecticide Act.
Consequently, the writ petition was disposed of with a directive for the petitioner to respond to the show cause notice.
Case Title: M/S Gold Ripe International Private Limited v. Directorate Of Revenue Intelligence And 4 Others