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TMI Blog2024 (9) TMI 940X X X X Extracts X X X X X X X X Extracts X X X X ..... , fine and penalty involved are as under :- SCN date Port of Import and O-I-O. dtd 18-04-2024 Duty paid & Confirmed by OIO -Rs. Interest paid by appellant-Rs. Penalty imposed u/s 114A-Rs. R/Fine imposed-Rs. 20.04.2021 Mundra-OIO-11 1,39,38,827 1,43,38,992 1,39,38,827 23,00,000 17.08.2021 JNCH-OIO-12 1,41,04,014 1,06,36,235 1,41,04,014 23,00,000 16.09.2022 A'bad--OIO-13 11,10,26,373 10,42,86,757 11,10,26,373 1,85,00,000 Total 13,90,69,214 12,92,61,984 13,90,69,214 2,31,00,000 2. Appellant is a manufacturer importer and exporting their manufactured goods like, 1. Bi-Axially Oriented Polypropylene (Bopp) Film, 2. Aluminum Metalized Bopp Film, 3. Polyester Metalized Film, 4. Polyester Film, 5. Polyester (Pet) Chips (High Pressure Moulding Grade/Bottle Grade) Other Polyethylene Terepthalate, etc. (Export Products) since January, 2009. For manufacturing goods for export, Appellant have imported inputs viz. Plastic granules, Additives etc. under Advance Authorization, availed exemption of Notification No. 18/2015-Cus dt. 1.4.2015 issued u/s 25 (1) of Customs Act. The said Notification No. 18/2015-Cus was amended by Notification No. 79/2017-Cus on 13.10.2017 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgment of the Hon'ble Gujarat High Court before the Hon'ble Apex Court, wherein orders dt. 04-02-2019 by Gujarat High Court are over ruled with directions in para 75 of decision dated 28-04-2023 by the Hon'ble Apex Court, as reported in UOI vs Cosmo Films Ltd-2023 (385) E.L.T. 66 (S.C.) / (2023) 5 Centax 286 (S.C.). Revenue was also directed to permit all importers to claim refund or input credit, whichever is applicable. Appellant computed details and quantified their liabilities in imports made during the period from 13-10-2017 to 09-01-2019 i.e. amount of IGST payable for such imports made in that period. 2.4 CBIC issued Circular No. 16/2023-Cus dated 07-06-2023 directing field officers to allow all such importers in India to make payments of duty (IGST), who had not satisfied the Pre-Import Condition during the such period from 13-10-2017 to 09-01-2019. Since Appellant had interim stay from the Hon'ble Gujarat High Court against payment of IGST till issue was finally decided by the Hon'ble Supreme Court on 28-04-2023, Appellant had not deposited the IGST during the period in question. Appellant approached concerned assessment group at the Port of Import (POI) with relevant de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove Circular is complied with by Appellant, and no further liability remained to be recovered/discharged. Appellant further submitted that amount deposited and recovered towards interest was without authority of the law, hence, unsustainable. There was no justification in facts of this case nor any authority in law for the assessment of interest during such Re-assessment and collection and recovery thereof from the Appellant. 2.7 The respondent Principal Commissioner has passed the adjudication orders in the Show Cause Notices, and while confirming the demand of duty (i.e. IGST) with interest, he has also held that the goods imported by the appellant were liable for confiscation and that the appellant is liable for paying redemption fine in lieu of confiscation under Section 125 of Customs Act 1962, Penalty under Section 114A of Customs Act 1962 and interest under Section 28AA of Customs Act 1962 and that the amount deposited towards duty [IGST] and interest are appropriated under the 3 impugned Orders-In-Original dated 18.04.2024 and quantification thereof are reflected in the Table in Para 1 above. 2.8 Therefore, the said Orders are challenged by Appellant in the Customs Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant to pay tax and claim its credit and/or refund as the case may be. The appellant has been actually allowed credit of the entire amount of tax paid on reassessment of Bills of Entry, and such credit also stands completely utilized by the appellant within a month or two from date of allowing such credit. iii. The voluntary payment of duty [IGST] tax was made after 07-06-2023 as it was and it has been allowed as input credit of such tax if paid even at this stage. iv. The said demand of duty, though, may not be sustainable on other grounds, like availability of exemption, revenue neutral situation, demand being time barred etc, but, since Appellant has already been allowed to take credit of the duty paid, Appellant is not seriously objecting the demands of the duty [IGST] deposited after 7-6-2023 in this cases. 3.2 Submissions against Interest, Redemption Fine & Penalty imposed :- a) In facts of this case, Appellant is contesting Interest, Redemption Fine and Penalty imposed by the impugned Order-In-Originals dt. 18-04-2024. The appellant's submission is that in this case interest cannot be levied, penalty cannot be imposed and redemption fine cannot be charged as goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsequences of absence of such expressions may be grave for the Revenue, but then Article 265 of the Constitution mandated that no tax shall be levied and collected except by authority of law. There is no authority of law to levy penalty, interest and fine under Section 3 of the Customs Tariff Act 1975 and there is no charging provision for such levies under the Customs Tariff Act 1975. Procedural provisions of the Customs Act and even the definitions given under the Customs Act may be applicable by virtue of Section 3 (12) of Customs Tariff Act 1975, but the charging provisions for interest (Section 28AA), penalty (Section 114A) and fine (Section 125) are not applicable to Tax levied under sub-section (7) of Section 3 of the Customs Tariff Act 1975. f) The impugned Orders have applied provisions of the Customs Act for levying interest (Section 28AA), for Penalty (Section 114A) and for Confiscation and Redemption Fine (Section 111 (o) and 125); but these provisions of the Customs Act 1962 are not made applicable for interest, penalty and fine in respect of Integrated tax, levied under Section 3 (7) of the Customs Tariff Act 1975, which is a separate enactment and for separate levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the proper Custom officers were aware about pre-import condition and its scope and exemption for imports under Authorization had not been allowed, then the appellant would have paid Integrated tax leviable under Section 3 (7) of the Customs Tariff Act, and its credit under the GST law would have been taken at that time of import itself; and such credit would have been utilized for payment of GST on other goods or the appellant would have been allowed refund of such credit because GST law permits for refund of credit of tax paid on goods utilized for export transactions. Considering this legal position, the Hon'ble Supreme Court has also observed at para 75 of the judgment rendered on April 28, 2023 for permitting the importers to claim refund or input credit upon paying integrated tax, and the Revenue was directed for the appropriate procedure to be followed in this regard. 3) The situation thus being revenue neutral, the intention to evade payment of tax can never be attributed to the appellant; and the Commissioner's order upholding invocation of extended period on the basis that the appellant had intention to evade tax is on face of it illegal and impermissible. 3.4 Undue r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (344) E.L.T. 1072 (Tri. - Ahmd.) the Hon'ble Tribunal has firmly settled the legal principle that the provisions for issuing Notice to Show Cause were applicable even when a bond was furnished by the assessee, and the time limitation provided under these provisions was also applicable for such demand notwithstanding the bond furnished by assessee. It is settled that for recovery, following the mandatory procedure of Section 11A of Central Excise Act 1944 and/or Section 28 of the Customs Act 1962, as the case may be though Bond was furnished by Appellant. 3.5 Submissions against confiscation and Redemption Fine imposed:- * The impugned Orders has applied provisions of the Customs Act for Confiscation and Redemption Fine (Section 111 (o) and 125); but it is the appellant's submission that there is no charging provision for Confiscation and Redemption Fine in Section 3 (7) or 3 (12) of Customs Tariff Act 1975. In absence of any specific charging provision, charges of Confiscation and Redemption Fine cannot be imposed and levies cannot be recovered. * The Principal Commissioner has committed a further grave error in ordering confiscation of goods and imposed Redemption Fine, when, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... situation. 3.7 Penalty imposed under Section 114A of the Customs Act 1962 * The impugned Orders have applied of the Customs Act for Penalty (Section 114A); but it is the appellant's submission that there is no charging provision for Penalty in Section 3 (7) or 3 (12) of Customs Tariff Act 1975. In absence of any specific charging provision, Penalty cannot be imposed and levies cannot be recovered. * Penalty imposed on the appellant is also an action illegal and without jurisdiction because Section 114A of the Customs Act is not applicable for alleged violation or non-payment of IGST, which is an independent levy and this levy is imposed under a separate statute. Even in the facts of the present case, no penal action could have been taken against the appellant; and therefore also penalty on the appellant is unauthorized and is unjustified. The impugned order imposing penalty on the appellant is unsustainable and unjustified in facts as well as in law. The situation in the present case was actually revenue neutral, and therefore there cannot be any penal liability only because the amount of IGST is paid now owing to the litigation about the legality and validity of the pre-impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /-. (ii) Ordered to recover "interest" in respect of demand confirmed in (i) and ordered to appropriate paid interest of Rs. 12,92,61,984/-towards interest liability. (iii) hold that goods imported under Advance Authorizations are liable to confiscation under Section 111 (o) of Customs Act, 1962 and imposed total Redemption Fine of Rs. 2,31,00,000/- in lieu of confiscation under the Section 125 of Customs Act, 1962. (iv) imposed a total penalty of Rs. 13,90,69,214/- equal to the duty demanded and confirmed at (i) above under Section 114A of the Customs Act, 1962. 5.2 We find that an Advance Authorisation is issued in terms of Para 4.03 of the Foreign Trade Policy (2015-20) to allow duty free import of inputs, which are used in manufacture of goods which are physically incorporated in export product (making normal allowance for wastage). In addition, fuel, oil, energy, catalysts which are consumed/ utilised to obtain export product, may also be allowed. Imports under Advance Authorisation are exempted from payment of Basic Customs Duty, Additional Customs Duty, Education Cess, Anti-dumping Duty, Safeguard Duty etc, applicable. Imports under Advance Authorisation for physica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on a like article if produced or manufactured in India [Section 3 (1) CTA 1975]; (2) levy of such additional duty as would counter-balance the excise duty leviable on any raw materials, components, and ingredients of the same nature as, or similar to those, used in the production or manufacture of such article [Section 3 (3) CTA 1975]; (3) levy of additional duty as would counter-balance the sales tax, value added tax, local tax or any other charges for the time being leviable on a like article on its sale, purchase or transportation in India [SAD, under Section 3(5) CTA 1975]; (4) levy of integrated tax as leviable under Section 5 of the Integrated Goods and Services Tax Act, 2017; [under Section 3 (7) CTA 1975] and; (5) levy of GST compensation cess at such rate as is leviable under Section 8 of the Goods and Services Tax (Compensation to States) Cess Act, 2017 [under Section 3(9) CTA 1975]. 5.6 Thus, in post GST regime, benefit of exemption were available from payment of IGST in terms of the Foreign Trade Policy (2015-20) and the corresponding Customs Notification No. 18/2015-Cus dated 01-04-2015 as amended by Notification No. 79/2017-Cus dated 13-10-2017, subject to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 5.8 In the present cases, confirmation of interest demand, confiscation of goods, imposition of Redemption Fine and Penalty are objected claiming it to be illegal and unjustified. This Hon'ble Tribunal in case of Commissioner V/s. GNFC Ltd. 2010 (262) ELT 829 has held that even in case of voluntary payment of time-barred duty, it was open to contest liability of interest when department proposed to charge duty with interest which assessee paid voluntarily. This decision is upheld by a detailed judgment by the Hon'ble Gujarat High Court in Tax Appeal No. 56 of 2011 in case of GNFC Ltd. V/s. Commissioner, Vadodara 2012 (285) ELT 336 (Guj). Thus, it is open for Appellant to contest liability of Interest, confiscation, Redemption Fine and Penalty, even though the entire amount of Integrated tax is voluntarily paid by this Appellant. 5.9 We find that the Appellant has vehemently made submissions against the Orders for recovery of the amount of Interest, Redemption of Fine and Penalty on the main ground that there is no statutory provision made under section 3 (7) or 3 (12) of Customs Tariff Act, 1975 for such recoveries on delayed payment of duty [IGST] in Imports. Therefore, we als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e find from above provisions that for recovery of IGST on import of goods, provisions are made under section 3 (7) of Customs Tariff Act 1975. However, no specific provision is made for recovery or charging of Interest, Fine and Penalty u/s 3 (7) or 3 (12) of Customs Tariff Act 1975 as compared to such similar provisions made under the Section 8B (9) and Section 9A (8) of Customs Tariff Act 1975. Such provisions u/s 9A (8) were introduced in Statute by The Finance (No. 2) Act, 2009 way back on 19-08-2009. However, while introducing similar provisions post GST Regime under Section 3 (7) or 3 (12) of the Customs Tariff Act 1975, Government of India has not incorporated such provisions for recovery of the Interest, Fine and Penalty under Section 3 (7) or Section 3 (12) of Customs Tariff Act 1975. We are of the view that Interest, Fine & Penalty are separate/independent financial levies, and hence charging provision must be there in statute levying interest, fine, penalty is the mandate of settled law established by provisions for such separate and independent levy and decisions by the courts. Accordingly, we do not find and revenue has also not been able to show us such charging provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or consideration before the Hon'ble Delhi High Court. Section 3 (3) of Additional Duties Act 1957 was similar to Section 3 (12) of Customs Tariff Act, 1975 which is involved in the present case. The provisions of the Central Excise Act and the Rules made thereunder were adopted by virtue of Section 3 (3) of Additional Duties Act, whereas provisions of Customs Act and Rules made thereunder are adopted by virtue of Section 3 (12) of Customs Tariff Act 1975 in present cases. Having recorded the core question in para 8 of judgment, the Hon'ble Delhi High Court conclusively held in para 37 that when penalty was additional tax, constitutional mandate required a clear authority of law for imposition thereof. In para 38, the Hon'ble High Court has held that a penal liability cannot be created by implication or intendment; and that the provision levying penalty must be explicit. Para 39 is important, where the Hon'ble High Court has recorded that interpretation put on Section 3 (3) of Additional Duties Act had grave consequences for Revenue as similar terminology had been used in various other Acts and other enactments, but Article 265 of the Constitution has mandated that no tax shall be l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made only in relation to the refunds and exemptions. It cannot be interpreted to cover penalty and offences as well. In Statutory Interpretation by F.A.R. Bennion (1984 Edition), it is said "where it is doubtful whether a stated term does or does not include a certain class, and words of extension are added which cover some only of the members of the class, it is implied that the remaining members of the class are excluded" (Expressiounius principle : words of extension). Again we have also referred to certain enactments wherein provisions of another enactment have been specifically borrowed in their entirety, and also the enactments where though the terminology used is the same as used in Section 3 (3) of the Additional Duties Act, yet separate provisions have been made for levy of penalties. The Supreme Court has construed the expression "levy" and "collection" in National Tobacco Company's case which would show that levy refers to imposition of tax as well as assessment and that the term "imposition" is generally used for levy of a tax or duty by the legislative provision, and further collection is equated to the recovery of the tax or duty imposed and assessed. Collection is st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and orders dated 10-2-1997 and 26-3-1996, as regards jurisdiction of the authorities under the Central Excise Act, whether it is permissible to resort to penalty proceedings or forfeiture of goods for non-payment of additional duty in terms of the Additional Duties of Excise (Goods of Special Importance) Act , 1957 (for short „the Act') by taking recourse to the provisions of the Central Excise Act and Rules framed thereunder. ... 8. A comparison of the amended provisions with the unamended ones would clearly demonstrate that the words „offences and penalties' have consciously been inserted therein. The cause of action for imposing the penalty and directions of confiscation arose in the present case in the year 1987. The amended Act, therefore, has no application to the facts of this case. ..... 20. The matter may be considered from another angle. The Parliament by reason of the Amending Act 32 of 1994 consciously brought in the expression offences and penalties' in sub-section (3) of Section 3 of the Act. The mischief rule, if applied, would clearly show that such amendment was brought with a view to remedy the defect contained in the unamended provisions of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n where "a like article is not so produced or manufactured" The use of the word "so" implies that the production or manufacture referred to in the second limb is relatable to the use of that expression in the first limb which is of a like article being produced of manufactured in India. .... 12. Section 12 of the Customs Act levies duty on goods imported into India at such rates as may be specified in the Customs Tariff Act, 1975. When we turn to Customs Tariff Act, 1975, it is Section 2 which states that the rates at which duties of customs are to be levied under Customs Act, 1962 are those which are specified in the First and Second Schedules of the Customs Tariff Act, 1975. In Section 12 of the Customs Act there is no reference to any specific provision of the Customs Tariff Act, 1975. In other words for the purpose of determining the levy of customs duty on goods imported into India what is relevant is Section 12 of the Customs Act read with Section 2. 13. On the other hand levy of additional duty under Section 3 is equal to the excise duty for the time being leviable on the like article which is imported into India if produced or manufactured in India. The rate of additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of Sugar Cess under Section 11AA of Central Excise Act on ground that provisions of Central Excise Act and the Rules made, including those relating to refund and exemptions from duty were adopted for levy of Sugar Cess, and interest for late payment of Sugar Cess. The Hon'ble Gujarat High Court has conclusively held that interest was a separate levy and interest could be charged on delayed payment of tax only if the statute levying and charging the tax made a substantive provision in this behalf. The demand for interest under provisions of Central Excise Act has been set aside on the legal proposition that charging provision for interest cannot be adopted from the Central Excise Act. The appeal filed by Revenue was dismissed. This decision on "Cess" of Gujarat High Court is squarely applicable in this case. 5.16 The above mentioned decision in the case of CCE, Surat-I V/s. Ukai Pradesh Sahkari Khand Udyog Mandli Ltd. 2011 (271) ELT 32 (Guj.) is also based upon judgments of Punjab & Haryana High Court in the case of Devi Dass Gopal Krishan Ltd. v. Union of India, 2002 (140) ELT-56 (P&H), dealing with case wherein demand of "interest" had been challenged on the ground that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of CCE, Surat-I V/s. Ukai Pradesh Sahkari Khand Udyog Mandli Ltd reported in 2011 (271) ELT 32 (Guj.) needs to be followed. 5.17 The case of Mahindra & Mahindra Ltd. V/s. Union of India reported in 2022 (10) TMI 212-Bombay High Court = (2023) 3 Centax 261 (Bom.) - is a case relating to Section 3 of the Customs Tariff Act, 1975, which is the provision involved in present case also. In this case before the Hon'ble Bombay High Court, the provisions of the Customs Act and the Rules and Regulations made thereunder were adopted and made applicable for duty, tax and cess levied under Section 3 of the Customs Tariff Act 1975 by sub-section (8), (which has now been renumbered as sub-section (12) with effect from 1.7.2017 in view of the new levy of Integrated tax and Cess. In this case also, the Hon'ble High Court has held that imposing interest and penalty on the demand pertaining to surcharge or additional duty of customs or special additional duty of customs was without jurisdiction. The Hon'ble High Court has considered the relevant provisions of a few other statutes where the Statute had consciously inserted words like "offences, penalties and interest" while applying prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Commercial Tax Officer [1994] 1 SCC 276 relied upon by Mr. Sridharan, any provision made in a statute for charging or levying interest on delayed payment of tax must be construed as a substantive law and not adjectival law. 20. Section 28AB of the Customs Act, 1962 is a taxing provision which creates and fastens the liability on a party. The provision has to be strictly construed and will be governed by the language employed in the section. The Apex Court in the matter of Indian Carbon Ltd. v. State of Assam 1994 SCC (4) 276/1988 taxmann.com 1764 (SC), relied upon by Mr. Sridharan, after quoting paragraph 16 of J.K. Synthetics Ltd. (supra), held that the proposition that may be derived from J.K. Synthetics Ltd. (supra) is interest can be levied and charged on delayed payment of tax only if the statute that levies and charges the tax makes a substantive provision in this behalf. The Court held that where there is no substantive provision requiring the payment of interest, the authorities cannot, for the purpose of collecting and enforcing payment of tax, charge interest thereon. 21. It is petitioner's case, as noted earlier, that provision relating to interest and penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find support for our view in Hyderabad Industries Ltd. v. Union of India 1999 (108) E.L.T. 321 (SC) relied upon by Mr. Sridharan. The Apex Court considered Section 12 of the Customs Act, 1962 and went on to hold that the charging section to impose CVD is Section 3 of the Customs Tariff Act, 1975. Paragraphs 12, 13 and 14 of Hyderabad Industries Ltd. (supra) read as under: 37. In view of the above, imposing interest and penalty on the portion of demand pertaining to surcharge or additional duty of customs or special additional duty of customs is incorrect and without jurisdiction. 39. The finding of respondent no. 2 that it has the inherent authority or power to determine the terms of settlement covering not only the amount of duty but also interest and penalty as well is ex-facie untenable. Reliance by respondent no. 2 upon Section 127C of the Customs Act, 1962 to direct payment of interest is totally misplaced in the case at hand. Section 127C of the Customs Act, 1962 itself provides that the order of the Settlement Commission has to be in accordance with the provisions of the Customs Act, 1962. Respondent no. 2 certainly cannot pass an order beyond the provisions of the Custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paras 21, 24, 25, 26 and 28 that penalty, interest etc. cannot be levied in regard to collection of CVD and SAD. The Tribunal has also observed in para 26 of decision that the entire situation was revenue neutral; and therefore the demand for interest, Confiscation of goods, imposition of redemption Fine and penalty was unsustainable. In Para 29, the Tribunal Chennai has concluded and has held as under :- "In the result, the impugned order is modified to the extent of setting aside, the demand of interest, the order of confiscation of goods, the imposition of Redemption fine, penalties imposed and the appropriation of interest paid by the appellant without disturbing the confirmation of duty." In the present Appeal cases herein also, the appellant has challenged the demand of interest, order of confiscation of goods, imposition of Redemption fine and penalty imposed and the appropriation of interest paid by the appellant. In the present case also the entire situation is revenue neutral, as Revenue has also allowed credit of entire amount of Integrated tax with interest paid by the appellant, pursuant to Re-assessment of Bill of Entry in question after following the procedure lai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asion of duty. Imposition of penalty requires mala fide intention to evade duty, which is not found in these cases. The ingredients required for imposing penalty are not found in these cases. Thus, the orders for imposing Penalty are not sustainable, in terms of the applicable provisions of law and the decisions relied upon by the Appellant. 5.23 As regard the submission made on demand being time barred, we find that the entire case is based upon assessments of the relevant Bills of Entry, cleared on final assessment by proper customs officers, where all the relevant documents and Information were provided by Appellant on facts and Re-assessment of same Bills of Entry are after Hon'ble Supreme Court's decision dt. 28-04-2023 and CBIC Circular dt. 07-06-2023. There is no suppression by appellant. Since the case was made out on the basis of alleged violation of "Pre-Import Condition" in imports under Advance Authorisation scheme, customs authorities were also aware of the said Pre-Import Condition inserted by the Notification on 13-07-2017, hence the department could have taken action within the normal period. Further, the situation was complete revenue neutral for Appellant on avai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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