ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 20.03.2026
CESTAT Ahmedabad Set Aside Confiscation and Penalties in Aluminum Scrap Import
This Article has been written by Advocate Ravi Shekhar Jha-BALLB & LLM (Constitutional Law) based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email idย intelconsul@gmail.com or on his Mobile +91-9999005379.
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), West Zonal Bench, Ahmedabad, recently delivered a significant judgment in the case of M/s. โ Palco Recycle Exchange Limited & Others vs. Commissioner of Customs, Mundra. โ This case revolved around the import of aluminum scrap and the submission of allegedly invalid Pre-Shipment Inspection Certificates (PSICs). โ The tribunal’s decision, pronounced on March 18, 2026, has set a precedent for similar cases involving the import of metallic scrap and the interpretation of customs regulations.
Background of the Case
The case originated from the import of 25.175 MT of aluminum scrap “Terse” by M/s. โ Palco Recycle Exchange Limited from M/s. โ RKG International FZE, UAE. โ The consignment was accompanied by two PSICs issued by M/s. โ Worldwide Logistics Survey and Inspection Group and Affiliates (WLSI), New Delhi and M/s. โ Geo Chem Middle East, Dubai. โ These certificates are mandatory under the Foreign Trade Policy to ensure that imported metallic scrap does not contain hazardous materials or radiation levels exceeding natural background levels. โ
However, based on intelligence reports, the Directorate of Revenue Intelligence (DRI) investigated the matter and found that both PSICs were allegedly issued without proper inspection of the cargo at the port of loading. โ This led to the issuance of a Show Cause Notice proposing the confiscation of the aluminum scrap and the imposition of penalties under Sections 112(a) and 114AA of the Customs Act, 1962.
Lower Authorities’ Findings โ
The Additional Commissioner of Customs adjudicated the matter and passed an order on April 26, 2014, confiscating the seized goods under Section 111(d) of the Customs Act, 1962. โ The importer was given the option to redeem the goods upon payment of a redemption fine of Rs. โ 4 lakh. โ Penalties were also imposed on the appellants, including M/s. โ Palco Recycle Exchange Limited, its Director and Vice President of M/s. โ Vistas Trading. โ The Commissioner (Appeals) upheld the confiscation and penalties, leading the appellants to file appeals before the CESTAT. โ
Grounds of Appeal โ
The appellants argued that the goods were cleared after 100% examination by Customs, ensuring compliance with all regulations. โ They contended that the PSICs submitted were valid at the time of import and that any discrepancies in the inspection process were the responsibility of the inspection agencies, not the importer or indenter. โ They cited several judicial precedents to support their case, including:
- Alang Metal Exim Pvt. โ Ltd vs. CC (2015): This case established that importers who submit PSICs from authorized agencies and follow prescribed procedures are not liable for confiscation or penalties if the inspection agency fails to perform its duties. โ
- Commissioner of Customs vs. Senor Metals Pvt. โ Limited (2009): The Gujarat High Court ruled that non-compliance with import policy conditions may lead to 100% inspection but does not constitute improper import under Section 111 of the Customs Act. โ
- CMA CGM Agencies (I) Pvt. โ Ltd vs. Commissioner of Customs (Port-Import), Chennai (2016): The tribunal held that non-compliance with PSIC requirements does not automatically render goods liable for confiscation if no prohibited items are found during inspection. โ
CESTAT’s Final Decision โ
After hearing the arguments from both sides, the tribunal concluded that there was insufficient evidence to prove that the appellants had abetted the production of invalid PSICs or contravened the Foreign Trade Policy. โ The tribunal emphasized that the responsibility for ensuring the validity of PSICs lies with both the importer and the supplier, as per the Hand Book of Procedure 2015-20. โ
The tribunal relied on the aforementioned judicial precedents and ruled that the confiscation of goods, imposition of redemption fines, and penalties on the appellants were not sustainable. โ Consequently, the appeals filed by M/s. โ Palco Recycle Exchange Limited, its Director were allowed, and the impugned order was set aside. โ
Key Takeaways
- Importance of PSIC Compliance: The case highlights the critical role of Pre-Shipment Inspection Certificates in ensuring the safe import of metallic scrap. โ Both importers and suppliers must ensure the validity of these certificates to avoid legal complications. โ
- Judicial Precedents Matter: The tribunal’s reliance on previous judgments underscores the importance of established legal principles in resolving disputes. โ
- Shared Responsibility: The ruling clarifies that both importers and suppliers are jointly responsible for compliance with PSIC requirements, as per the Foreign Trade Policy. โ
- 100% Inspection as a Safeguard: The tribunal reiterated that non-compliance with PSIC requirements does not necessarily lead to confiscation if the goods pass a thorough inspection and are found to be free of prohibited materials. โ
Conclusion
The CESTAT’s decision in this case serves as a reminder of the importance of adhering to import regulations while also recognizing the limitations of importers in verifying the actions of third-party inspection agencies. โ This landmark ruling not only provides relief to the appellants but also sets a precedent for similar cases in the future, ensuring a balanced approach to the enforcement of customs laws.
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Source: CESTAT Ahmedabad
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