2025 (5) TMI 1464 - AT - Customs

Confiscation of the goods - admissibility of the imported goods to the benefit of duty in terms of Notification No.84/97-CUS - post import condition - transferred the goods to a new project without the request from the appropriate authority - no bond/bank guarantee obtained - contravention of the eligibility to said exemption Notification - Differential duty demand along with interest - HELD THAT - We find from record that the respondent had before the lower authority also raised the plea and relied upon sub-Section (2A) of section 25 of the Customs Act 1962 to submit that any explanation inserted in Notification issued under sub-section (1) or sub-section (2) of section 25 of the Customs Act 1962 after the statutory limit of one year is arbitrary and ultra vires of section 25 of the Customs Act 1962. As the explanation was inserted with effect from 01.03.2008 by Notification No.24/2008-Cus.; dated 01.03.2008 in the Notification No.84/97-Cus, ; dated 11.11.1997 issued under sub-section (1) of the section 25 of the Customs Act 1962 i.e. after more than one year of the issue of the Notification No.84/97-Cus. They submit that the Explanation inserted in the Notification with effect from 01.03.2008 is therefore not applicable for the goods imported by them during April 2005 to December 2005. Delving into the genesis giving rise to the impugned Notification and its subsequent amendments the ld. Commissioner has arrived at a finding that new additional conditions in respect of imports made prior to 01.03.2008 were imposed vide Notification No.22/2014-CUS and as the respondent had transferred the goods to a new project without the request from the appropriate authority and as that the said goods were no longer required for the stated project. This according to the adjudicating authority was in contravention of the eligibility to said exemption Notification. It is their case that the goods were cleared to them by the department on the basis of exemption certificates issued by Govt. of India and under bond/guarantees were executed at the time of clearance of the goods. The imported goods were used for the specified projects which were since completed. As the impugned notification had no post import condition at the time of import the respondent upon completion of the said project utilized the imported goods for executing some approved projects and other projects. The fact that no bond/bank guarantee was obtained by the department from the respondent is a very material factual contention. We find that the revenue s reliance therefore on Mediwell Hospital and Health Care Pvt.Ltd. v. Union of India 1996 (12) TMI 51 - SUPREME COURT and Commissioner of Customs (Import) Mumbai v. Jagdish Cancer Research Centre 2001 (8) TMI 113 - SUPREME COURT would not arise for once. There are a plethora of orders of various judicial bodies to hold that when the goods are not available for confiscation they cannot be directed to be confiscated. For the proposition we rely on the case law of Atul Kaushik v. Commissioner of Customs (Export) New Delhi 2015 (9) TMI 317 - CESTAT NEW DELHI and Chinku Exports v. Commissioner of Customs Calcutta 1999 (6) TMI 113 - CEGAT NEW DELHI . Moreover we also find sufficient merit in the contention of the ld. Consultant inviting our attention to sub-section 2A of Section 25 wherein the amendment was introduced to the to the parent Notification cannot be sustained in the present matter. The fact that the goods were not cleared on execution of any bond/bank guarantee cannot bring about a continuous obligation for the violation of which the same can be enforced by way of a continuing obligation as held by the hon ble apex court referred to supra. Thus we find no merit in the appeals filed by the Revenue. The same are therefore dismissed and the Cross Objections filed by the respondents also get disposed of in the aforesaid terms.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal are:

• Whether the imported goods cleared under Notification No.84/1997-CUS dated 11.11.1997, which provided for nil rate of customs duty for machinery and equipment imported for specified projects, remained eligible for exemption despite subsequent amendments imposing post-import conditions with retrospective effect.
• Whether the Revenue was justified in issuing show cause notices and demanding differential duty along with penalties for alleged diversion or sale of goods imported under the exemption notification, in light of the retrospective amendments and the absence of any bond or bank guarantee executed at the time of import.
• Whether the limitation period under section 28 of the Customs Act, 1962 barred the Revenue from recovering duty after more than thirteen years from the date of clearance of goods.
• Whether the insertion of explanations and additional conditions in the exemption notification after the statutory limit of one year under section 25 of the Customs Act, 1962 was valid and applicable to goods imported prior to the amendments.
• Whether confiscation of goods was warranted or possible given that the goods were no longer available for confiscation, and the impact of this on the imposition of redemption fines or penalties.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Eligibility of Imported Goods for Duty Exemption under Notification No.84/1997-CUS and Effect of Retrospective Amendments

Relevant Legal Framework and Precedents: The original Notification No.84/1997-CUS dated 11.11.1997 exempted machinery and equipment imported for execution of specified projects from customs duty. Subsequent amendments via Notification No.24/2008-CUS dated 01.03.2008 and Notification No.22/2014-CUS dated 11.07.2014 introduced post-import conditions, including restrictions on diversion, transfer, or sale of goods without permission and conditions for re-export or payment of duty at depreciated values. Section 25 of the Customs Act governs the issuance and amendment of notifications. The Revenue relied on apex court decisions in Mediwell Hospital and Health Care Pvt. Ltd. v. Union of India and Commissioner of Customs (Import), Mumbai v. Jagdish Cancer & Research Centre to support their contention that diversion of goods violates notification conditions, rendering the exemption inadmissible.

Court's Interpretation and Reasoning: The Tribunal noted that at the time of import (2005-2007), the original notification did not stipulate any post-import conditions. The amendments introducing such conditions were issued retrospectively, but the Tribunal found that retrospective imposition of conditions via notification amendments after the statutory period under section 25(2) is impermissible. The Tribunal emphasized that the goods were cleared without any bond or bank guarantee, and the exemption was granted based on exemption certificates issued by the Government of India. Consequently, the Tribunal held that the retrospective amendments could not be applied to imports made prior to the amendments.

Key Evidence and Findings: The Revenue alleged diversion and sale of goods without permission, but the respondents contended that the goods were used for the specified projects, which were completed, and subsequently utilized for other approved projects. The absence of any bond or bank guarantee at the time of import was a material fact favoring the respondents.

Application of Law to Facts: Given that no post-import conditions were stipulated at the time of import and no bond or guarantee was executed, the Tribunal found no continuous obligation on the importers to seek permission for transfer or re-utilization of goods. The retrospective amendments could not be enforced to deny exemption or recover duty.

Treatment of Competing Arguments: The Revenue's reliance on retrospective amendments and case law supporting continuous obligations was rejected due to the absence of bonds and the impermissibility of retrospective imposition of conditions beyond the statutory limit. The respondents' argument regarding the non-applicability of post-import conditions at the time of import was accepted.

Conclusions: The imported goods remained eligible for exemption under the original notification, and the retrospective amendments imposing post-import conditions were not applicable to goods imported prior to their issuance.

Issue 2: Limitation Period for Recovery of Duty under Section 28 of the Customs Act

Relevant Legal Framework and Precedents: Section 28 of the Customs Act prescribes a limitation period of five years (extended in certain cases) for recovery of duty. The respondents argued that the show cause notices issued in 2019, more than thirteen years after import, were barred by limitation.

Court's Interpretation and Reasoning: The adjudicating authority and the Tribunal observed that the imposition of post-import conditions created a continuing obligation, which could potentially extend the limitation period. However, since the Tribunal held that retrospective imposition of such conditions was invalid and no bond was executed, the continuing obligation did not arise.

Key Evidence and Findings: The goods were imported between April and December 2005, and the show cause notice was issued on 26.11.2019, beyond the limitation period.

Application of Law to Facts: Without a continuing obligation or bond, the limitation period expired in December 2010. Therefore, the Revenue's action was time-barred.

Treatment of Competing Arguments: The Revenue's argument that post-import conditions extended limitation was rejected due to invalid retrospective imposition and absence of bond.

Conclusions: The Revenue's recovery proceedings were barred by limitation.

Issue 3: Validity of Explanation Inserted in Notification under Section 25(2A) of the Customs Act

Relevant Legal Framework and Precedents: Section 25(2A) restricts amendments or explanations in notifications after one year of issuance. The respondents contended that the explanation inserted in 2008 to Notification No.84/1997-CUS was ultra vires and arbitrary as it was beyond the one-year limit.

Court's Interpretation and Reasoning: The Tribunal agreed with the respondents, holding that the insertion of explanation and additional conditions after more than one year was not valid. This invalidated the retrospective application of post-import conditions.

Key Evidence and Findings: The explanation was inserted in 2008, more than ten years after the original notification issued in 1997.

Application of Law to Facts: The invalidity of the explanation meant that the original notification's terms applied without the additional post-import conditions for the relevant imports.

Treatment of Competing Arguments: The Revenue's reliance on the explanation and retrospective conditions was rejected.

Conclusions: The explanation inserted in 2008 was invalid and could not be applied retrospectively.

Issue 4: Confiscation and Penalty in Absence of Goods

Relevant Legal Framework and Precedents: Section 111(o) of the Customs Act provides for confiscation of goods liable to confiscation. Section 112A allows imposition of penalty. The Revenue confirmed liability to confiscation but did not confiscate goods as they were not available. The Tribunal relied on precedents such as Atul Kaushik v. Commissioner of Customs (Export) and Chinku Exports v. Commissioner of Customs, Calcutta, which held that confiscation cannot be directed if goods are not available.

Court's Interpretation and Reasoning: The Tribunal held that in absence of goods, confiscation could not be ordered, nor could redemption fines be imposed. Penalty under section 112A was imposed on one appellant but confiscation was not possible.

Key Evidence and Findings: Goods with assessable value of Rs.13,61,51,797/- were not available for confiscation.

Application of Law to Facts: The Tribunal applied the principle that confiscation requires availability of goods and cannot be enforced otherwise.

Treatment of Competing Arguments: The Revenue's appeal against non-confiscation was dismissed due to factual impossibility.

Conclusions: Confiscation and redemption fines could not be imposed in absence of goods; penalty imposition was upheld where applicable.

3. SIGNIFICANT HOLDINGS

"The fact that no bond/bank guarantee was obtained by the department from the respondent is a very material factual contention. We find that the revenue's reliance therefore on Mediwell Hospital and Health Care Pvt.Ltd. v. Union of India (supra) and Commissioner of Customs (Import), Mumbai v. Jagdish Cancer & Research Centre (supra) would not arise for once."

"There are a plethora of orders of various judicial bodies to hold that when the goods are not available for confiscation, they cannot be directed to be confiscated."

"The insertion of explanation in the Notification with effect from 01.03.2008 is therefore not applicable for the goods imported by them during April, 2005 to December 2005."

"The retrospective imposition of post-import conditions through amendments beyond the statutory one-year period under section 25 of the Customs Act, 1962 is impermissible and cannot be enforced to deny exemption."

"In view of the foregoing discussions, we find no merit in the appeals filed by the Revenue."

Core principles established include:

• Retrospective imposition of post-import conditions via notification amendments beyond the statutory limit is invalid.
• Absence of bond or bank guarantee at the time of import negates the existence of a continuing obligation to comply with post-import conditions.
• Limitation period under section 28 bars recovery of duty after expiry where no continuing obligation exists.
• Confiscation requires availability of goods; it cannot be ordered if goods are not available.

Final determinations:

• The Revenue's appeals challenging non-confiscation and seeking recovery of differential duty based on retrospective conditions were dismissed.
• The respondents were held entitled to the exemption under the original notification without application of retrospective post-import conditions.
• Cross objections filed by the respondents were disposed of accordingly.