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2024 (7) TMI 73 - AT - CustomsRecovery of differential duty with interest and penalties - imports of inshell walnuts - declaration of eligibility for exemption afforded by notification no. 98/2009-Cus dated 11th September 2009 against transferable scrips - Penalty under section 112 of Customs Act 1962 imposed on the other appellants. Imports effected between 2019 and 2022 against authorization issued much earlier and even made transferrable subsequently to enable imports of several ingredients for manufacture and export of biscuits that deployed dietary fibre an expression that does not exist in the Harmonized System of Nomenclature (HSN) and the hierarchical parent of both the First Schedule to Customs Tariff Act 1975 as well as the Import Trade Classification (HS) appended to the Foreign Trade Policy (FTP). HELD THAT - It is on record that the proceedings were not completed within the statutorily stipulated time. Doubtlessly section 28 (9A) of Customs Act 1962 enabled flexing of this time frame in specific circumstances and subject to stipulated conditions among which is the mandate of notice from proper officer that was not adhered to in the present instance. It must be noted that responsibility devolved on the proper officer both to ensure that such deferment was made after proper application of mind about the event upon which the deferment was predicated and for the noticee to have opportunity for challenging the correctness of such intention to defer as well as to expect resumption of the inexorable cycle of time upon termination of the triggering event. Even assuming that the intimation by Assistant Commissioner of Customs in communication dated 7th April 2021 of instructions of Central Board of Indirect Taxes Customs (CBIC) on such notices to be kept pending was covered by section 28(9A) of Customs Act 1962 and as due adherence the appellant has contented that the said deferment could not in the light of amendment by Finance Act 2022 be kept pending beyond 30th March 2022. The adjudication of the notice dated 30th September 2020 only as late as 23rd May 2023 has stretched way beyond one year after the purportedly validating event of March 2022. As the senior authority of proper officer had not permitted extension of the permitted period for completion of adjudication the proceedings will have to be deemed as having been concluded well before the impugned order was issued. Penalty under section 112 of Customs Act 1962 imposed on the other appellants - HELD THAT - These are consequent upon liability to confiscate having been determined under section 111(o) of Customs Act 1962. In SHAH NANJI NAGSI EXPORTS PVT. LTD. VERSUS UNION OF INDIA MINISTRY OF COMMERCE INDUSTRY DIRECTORATE GENERAL OF FOREIGN TRADE AND JOINT DIRECTOR GENERAL OF FOREIGN TRADE 2019 (4) TMI 146 - BOMBAY HIGH COURT the Hon ble High Court of Bombay has held that no conditions can attach to goods imported against scrips released from export obligation under authority of Directorate General of Foreign Trade (DGFT) and it is not in dispute that eligible exports had earned privileges before impugned goods were imported. In the absence of condition appendant to import the liability to confiscation under section 111(o) of Customs Act 1962 does not survive and with that penalties under section 112 have no basis in law. The impugned order is set aside - Appeal allowed.
Issues Involved:
1. Authority of Customs Officers to specify import articles under the Foreign Trade Policy (FTP) and Customs Act, 1962. 2. Recovery of differential duty and imposition of fines and penalties. 3. Validity of the import of 'inshell walnuts' under the 'dietary fibre' category. 4. Adherence to judicial precedents and principles of judicial discipline. 5. Timeliness and procedural compliance in adjudication under Section 28 of the Customs Act, 1962. 6. Applicability of penalties under Section 112 of the Customs Act, 1962. Issue-wise Detailed Analysis: 1. Authority of Customs Officers to specify import articles under the FTP and Customs Act, 1962: The principal challenge was whether the Customs authorities had the power to specify the article of import even when such details were not explicitly mentioned in the notification and the scheme confined itself to generic descriptions. The Customs authorities concluded that 'dietary fibre' permitted for import did not include 'inshell walnuts'. The Tribunal found that the Customs authorities overstepped their jurisdiction by interpreting the scheme and notification in a manner that restricted entitlement to 'dietary fibre' actually used by the exporter, which was not their prerogative. 2. Recovery of differential duty and imposition of fines and penalties: The Customs authorities sought to recover Rs. 26,82,71,059 as differential duty along with interest, imposed a fine of Rs. 2,00,00,000, and penalties under various sections of the Customs Act, 1962. The Tribunal noted that the Customs authorities' actions were not supported by law or facts, as the imports were made under valid 'scrips' and the Customs authorities had no grounds to retrospectively alter the entitlement. 3. Validity of the import of 'inshell walnuts' under the 'dietary fibre' category: The Tribunal observed that the Customs authorities' rejection of 'inshell walnuts' as 'dietary fibre' was based on flawed reasoning. The Central Revenue Control Laboratory (CRCL) report confirmed that 'inshell walnuts' contained 'dietary fibre', and there was no legal basis to exclude them. The Tribunal found that the Customs authorities' reliance on commercial feasibility and tariff classification was misplaced and unsupported by law. 4. Adherence to judicial precedents and principles of judicial discipline: The Tribunal criticized the Customs authorities for disregarding judicial precedents and the decisions of higher courts and tribunals. The Tribunal emphasized that the Customs authorities are bound by the decisions of appellate authorities and cannot discard them without valid reasons. The Tribunal noted that the Customs authorities' actions constituted a breach of judicial discipline as established by the Supreme Court in Union of India v. Kamalakshi Finance Corporation Ltd. 5. Timeliness and procedural compliance in adjudication under Section 28 of the Customs Act, 1962: The Tribunal found that the Customs authorities failed to complete the adjudication within the statutory time frame prescribed by Section 28(9) of the Customs Act, 1962. The Tribunal noted that the extension of time under Section 28(9A) was not properly invoked, and the proceedings were not concluded within the permissible period. Consequently, the Tribunal deemed the proceedings as having been concluded well before the impugned order was issued. 6. Applicability of penalties under Section 112 of the Customs Act, 1962: The Tribunal held that the penalties under Section 112 were consequent upon the liability to confiscate under Section 111(o). Since the Tribunal found no basis for confiscation, the penalties under Section 112 were also deemed unsustainable. The Tribunal referred to the decision in Shah Nanji Nagsi Exports Pvt Ltd, which clarified that no conditions could attach to goods imported against 'scrips' released from export obligation. Conclusion: The Tribunal set aside the impugned order, allowing the appeals and emphasizing adherence to legal principles and judicial discipline. The Tribunal criticized the Customs authorities for overstepping their jurisdiction, disregarding judicial precedents, and failing to adhere to statutory timelines and procedural requirements.
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