2025 (6) TMI 279 - HC - Customs

Amendment of the In-bond Bills of Entry - re-export of goods stored in an FTWZ/SEZ unit - HELD THAT - The Order-in-Original permitted re-export but subject to payment of a redemption fine. The Order-in-Original was not challenged by the Customs authorities and therefore the issue of reexport not being challenged by the Customs authorities has attained finality qua them. The Customs Authorities have filed an Appeal bearing No. CUAPP(L)/14143/2025 challenging the CESTAT Order. However there is no challenge to and no embargo against the re-export. This Court need not opine in any manner whatsoever on the merits or the maintainability of the Appeal that is filed by the Customs Authority against the Order of CESTAT in the present matter. The said Appeal will be considered on its own merits. Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

- Whether the Specified Officer of the Free Trade Warehouse Zone (FTWZ) can be directed to allow amendment of In-bond Bills of Entry for the purpose of re-export of goods stored in an FTWZ/SEZ unit.

- The legality and applicability of confiscation and penalty orders issued under the Customs Act, 1962, particularly in relation to goods stored in a Special Economic Zone (SEZ) or Free Trade Warehouse Zone.

- The scope and finality of the Order-in-Original and subsequent appellate orders concerning confiscation, redemption fine, and penalties imposed on the goods and parties involved.

- The jurisdiction of Customs authorities to impose penalties and confiscate goods stored in SEZ/FTWZ.

- The procedural and substantive requirements for permitting re-export of goods subject to such confiscation and penalty orders, including the necessity of a No Objection Certificate (NOC) from Customs authorities for amendment of In-bond Bills of Entry and filing of shipping bills.

- The interplay and effect of pending appeals and arbitration proceedings on the rights and obligations of the parties regarding re-export and redemption fine deposit.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Authority and Procedure for Amendment of In-bond Bills of Entry for Re-export

Relevant Legal Framework and Precedents: The Customs Act, 1962 governs import-export procedures, including the filing and amendment of In-bond Bills of Entry and shipping bills. The Foreign Trade Policy and E-Waste Management Rules, 2016, also regulate trade compliance. The Court considered the procedural mandates for amendment of In-bond Bills and issuance of shipping bills for re-export within FTWZ/SEZ contexts.

Court's Interpretation and Reasoning: The Court recognized that the Order-in-Original permitted re-export subject to payment of a redemption fine, and that the Customs authorities had not challenged the re-export aspect, thus that part of the order attained finality. The Court noted the Petitioner's difficulty in obtaining amendment of the In-bond Bills of Entry to facilitate re-export, especially due to anticipated insistence on a Customs NOC by the Development Commissioner of the SEZ. The Court held that there was no legal basis for withholding permission for re-export and directed the Specified Officer to allow amendment of the In-bond Bills of Entry and filing of shipping bills within a stipulated timeframe.

Key Evidence and Findings: The Petitioner had filed the original In-bond Bills of Entry for three containers stored in the Respondent's FTWZ unit. The goods were seized and confiscated by Customs but re-export was permitted upon payment of a redemption fine. The Petitioner's inability to amend the In-bond Bills for re-export was the immediate grievance.

Application of Law to Facts: The Court applied the principle of finality to the unchallenged portion of the Order-in-Original permitting re-export and held that procedural compliance must be facilitated by the authorities. The Court balanced the regulatory framework with the Petitioner's right to re-export as per the order.

Treatment of Competing Arguments: While the Customs authorities contested the jurisdictional and penalty aspects, they did not challenge the re-export permission. The Court distinguished these issues and refrained from adjudicating on the merits of the Customs Appeal challenging penalties, focusing solely on facilitating re-export.

Conclusion: The Court ordered the Specified Officer to allow amendment of the In-bond Bills of Entry and filing of shipping bills for re-export, directing the Customs authorities to furnish the NOC within one week.

Issue 2: Jurisdiction of Customs Authorities to Confiscate Goods and Impose Penalties in SEZ/FTWZ

Relevant Legal Framework and Precedents: Sections 111(d), 111(l), 111(m), 112(a), 114AA, and 125(1) of the Customs Act, 1962, provide for confiscation, penalties, and redemption fines. The SEZ Act and related regulations govern the applicability of Customs laws within SEZs and FTWZs. The Court considered the appellate orders including the CESTAT's ruling on jurisdiction.

Court's Interpretation and Reasoning: The CESTAT held that Customs authorities lacked jurisdiction to confiscate goods and impose penalties when the goods were stored in an SEZ. The Court noted that the Customs authorities had filed an Appeal challenging this finding, but the present petition did not require adjudication on the merits of that Appeal. The Court emphasized that the issue of jurisdiction and penalties was distinct from the issue of re-export permission.

Key Evidence and Findings: The Order-in-Original imposed confiscation and penalties on multiple parties, including the Petitioner, unit holder, and customs broker, based on violations of Customs regulations and Foreign Trade Policy. The CESTAT allowed the Petitioner's Appeal on jurisdictional grounds.

Application of Law to Facts: The Court acknowledged the CESTAT's decision but refrained from expressing an opinion on the correctness of the jurisdictional issue, as that matter was sub judice before the Customs Appeal. The Court's role was limited to ensuring procedural facilitation for re-export.

Treatment of Competing Arguments: The Customs authorities argued for their jurisdiction and enforcement powers, while the Petitioner relied on the CESTAT ruling to challenge confiscation and penalties. The Court maintained neutrality on this issue pending final adjudication.

Conclusion: The Court did not decide the jurisdictional issue but allowed the re-export process to proceed without prejudice to the rights of the parties in the pending Appeal.

Issue 3: Deposit of Redemption Fine and Security for Re-export

Relevant Legal Framework and Precedents: Section 125(1) of the Customs Act allows redemption of confiscated goods on payment of a fine. The Court also considered principles of security deposit and safeguarding revenue interests pending final adjudication.

Court's Interpretation and Reasoning: The Court directed the Petitioner to deposit the amount equivalent to the redemption fine (Rs. 1.10 Crores as reduced by the Commissioner of Customs (Appeals)) with the Prothonotary & Senior Master of the Court, to be invested in a fixed deposit for one year, pending further orders in the Customs Appeal. This was intended to balance the Petitioner's right to re-export and the Customs authorities' interest in securing the fine amount.

Key Evidence and Findings: The redemption fine was reduced on appeal but remained substantial. The Court recognized the necessity of securing the fine prior to actual re-export.

Application of Law to Facts: The Court applied the statutory provision allowing redemption on payment of fine, ensuring that the fine was secured in a manner that did not impede re-export but protected Customs revenue interests.

Treatment of Competing Arguments: The Petitioner sought to proceed with re-export without delay, while the Customs authorities sought assurance of payment. The Court's direction balanced these concerns.

Conclusion: The Petitioner was directed to deposit the redemption fine amount as security before re-export.

Issue 4: Effect of Pending Appeals and Arbitration Proceedings on Re-export

Relevant Legal Framework and Precedents: Principles of interim relief and procedural fairness in the context of pending appeals and arbitrations were considered.

Court's Interpretation and Reasoning: The Court explicitly stated that the directions were given without prejudice to the rights and contentions of the parties in the pending arbitration and Customs Appeal proceedings. This ensured that the procedural facilitation for re-export did not interfere with substantive adjudication.

Key Evidence and Findings: The Petitioner and Respondent No. 5 had arbitration proceedings pending, and the Customs Appeal was yet to be decided.

Application of Law to Facts: The Court's order maintained the status quo regarding substantive rights while enabling procedural progress on re-export.

Treatment of Competing Arguments: The Court balanced the need for procedural progress with the preservation of substantive rights.

Conclusion: The Court's directions were expressly without prejudice to ongoing proceedings.

3. SIGNIFICANT HOLDINGS

"The Order-in-Original permitted re-export but subject to payment of a redemption fine. The Order-in-Original was not challenged by the Customs authorities and therefore the issue of reexport not being challenged by the Customs authorities has attained finality qua them."

"There is no basis for withholding permission for re-export and accordingly, the following order is passed: ... Respondent No. 5 shall within a period of one week from today submit to the Specified Officer i.e. Respondent No. 2, amended In - Bond bills of entry ... and the requisite shipping bills, for facilitating re-export of the subject consignments."

"The Customs Authorities shall furnish its No Objection Certificate within one week from today, for the purpose of amendment of In-Bond Bills of Entry and for permitting the filing of the shipping bills so as to facilitate the re-export of the said goods."

"The Petitioner shall deposit, within one week from Respondent Nos. 2 to 4 granting approval to re-export (but prior to any actual reexport being done), an amount equivalent to the redemption fine i.e. Rs.1.10 Crores with the Prothonotary & Senior Master of this Court to be invested in a fixed deposit in a nationalized bank for a period of 1 year, subject to further orders passed by this Court in the Customs Appeal."

Core principles established include:

- Finality of unchallenged orders permitting re-export under Customs law.

- The necessity of procedural facilitation by Customs and SEZ authorities to amend In-bond Bills and permit filing of shipping bills for re-export.

- The requirement of securing redemption fines prior to re-export to protect revenue interests.

- The Court's role in balancing procedural relief with preservation of substantive rights amid pending appeals and arbitrations.

Final determinations on each issue were:

- Amendment of In-bond Bills of Entry and filing of shipping bills for re-export must be allowed without undue delay.

- Customs authorities must issue NOC to facilitate such amendments and filings.

- Redemption fine must be deposited as security prior to re-export.

- The jurisdictional and penalty issues remain subject to pending appeals and are not decided in this order.