2010 (5) TMI 860 - AT - Customs

Tribunal Remands Customs Case for Reconsideration

The Tribunal set aside the impugned orders and remanded the case to the Commissioners of Customs for reconsideration. The appellant was granted the ... - ISSUES PRESENTED AND CONSIDERED 1. Whether the licensing authority (DGFT) has power to amend or re-validate an EPCG licence retrospectively. 2. Whether the Customs authorities may scrutinise or challenge the competence or correctness of an amendment made by the licensing authority to an EPCG licence. 3. Whether a conversion of an EPCG licence from the '0% duty' option to the '10% duty' option, ordered by the licensing authority after importation, operates retrospectively to affect earlier imports. 4. Whether an importer originally operating under the '0% duty' EPCG Scheme may claim benefits of a subsequent policy amendment (Notification amending Condition No.5 reducing minimum import threshold) with retrospective effect. 5. Whether Special Additional Duty (SAD), levied under Section 3A of the Customs Tariff Act during the period in dispute, is recoverable after omission of Section 3A by later Finance Act provisions and whether recovery proceedings are saved by the General Clauses Act. 6. Whether ancillary measures (confiscation, redemption fines, penalties) premised on denial of notification benefits must be reconsidered if substantive entitlement is re-examined. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Power of licensing authority to amend or re-validate licence retrospectively Legal framework: DGFT issues and amends EPCG licences under the foreign trade policy and notification regime; licensing amendments may affect customs reliefs claimed at import. Precedent Treatment: A Larger Bench of the Tribunal has held that licensing authorities do not possess power to amend any licence retrospectively. Interpretation and reasoning: The Court accepts the Larger Bench view as binding and concludes that retrospective amendment power is absent. Consequently, an amendment made by the licensing authority after the date of import cannot be given retrospective effect to alter the scheme applicable at the time of import. Ratio vs. Obiter: Ratio - licensing authorities lack power to effect retrospective amendment/re-validation of licences; this is binding for subsequent adjudication. Conclusion: The licensing authority cannot amend an EPCG licence with retrospective effect; retrospective re-validation is not permissible. Issue 2 - Whether Customs may challenge competence or correctness of DGFT amendment Legal framework: Interaction between licensing authority decisions and Customs adjudication; limits on inter-departmental review. Precedent Treatment: The Larger Bench held that Customs authorities cannot challenge the powers of the licensing authority for amendment of the licence. Interpretation and reasoning: Where DGFT acts within its authority to amend a licence (prospectively), Customs is not competent to litigate the DGFT's power to amend; the correctness/competence of such amendment is not to be re-opened by Customs adjudication. Ratio vs. Obiter: Ratio - Customs cannot contest DGFT's competence to amend licences; that aspect is not open in customs recovery proceedings. Conclusion: Customs cannot challenge the licensing authority's power to amend an EPCG licence. Issue 3 - Effect of conversion from '0% duty' to '10% duty' EPCG Scheme ordered after importation Legal framework: Two alternative EPCG options have differing obligations and notification entitlements; conversion by DGFT was ordered after importation. Precedent Treatment: Larger Bench bindingly established absence of retrospective amendment power by licensing authority. Interpretation and reasoning: Because retrospective amendment is not permitted, the conversion ordered later cannot alter the scheme applicable at the time of import. The imports made in 1998 remain governed by the 0% duty option despite a later conversion order. Ratio vs. Obiter: Ratio - a post-facto conversion by DGFT does not retrospectively change the applicable import scheme. Conclusion: The licence conversion dated after imports has no retrospective effect; the original '0% duty' scheme continues to govern the contested imports. Issue 4 - Entitlement to benefit of subsequent policy amendment (Notification relaxing Condition No.5) and its retrospective operation Legal framework: Notification amending Condition No.5 (reducing minimum import threshold or otherwise relaxing requirement) was issued subsequently; question whether importer may claim benefit where imports occurred prior to amendment. Precedent Treatment: No final determination by the Larger Bench on retrospective operation of this particular policy change; parties had not previously advanced this plea before lower authorities. Interpretation and reasoning: The Court recognizes the policy amendment and that it relaxed the eligibility condition for certain sectors. However, a plea asserting retrospective effect of that amendment was not previously raised before adjudicating authorities. Given the binding Larger Bench rule that DGFT cannot amend licences retrospectively, and the fact that the policy amendment's retrospective operation is contested, the correct course is remand for the lower authority to consider the alternate plea afresh, with an opportunity to be heard. Ratio vs. Obiter: Obiter on retrospective effect - unresolved and remitted for adjudication; core ratio is procedural: new substantive plea not previously raised must be considered by the authority of first instance. Conclusion: The question whether the policy amendment operates retrospectively is left open for fresh adjudication by the Customs/ licensing authorities; appellant must be given opportunity to press this alternative contention before the lower authority. Issue 5 - Recoverability of SAD after omission of Section 3A and effect of General Clauses Act Legal framework: SAD levied under Section 3A of the Customs Tariff Act during the disputed period; Section 3A was later omitted by Finance Act without an express saving clause; General Clauses Act potentially relevant to transitional saving. Precedent Treatment: The Tribunal's Larger Bench decision in Surana Metals was cited as supporting the department's position that recovery proceedings may be saved by General Clauses Act provisions. Interpretation and reasoning: Rival contentions exist - appellant contends omission is distinct from repeal and no saving clause exists; Revenue relies on General Clauses Act to save recovery. Because this issue was not fully ventilated earlier, and given interlinkage with substantive entitlement to notification benefits, the Court directs fresh consideration by the lower authorities so that both sides' arguments (including reliance on Surana Metals authority) can be examined. Ratio vs. Obiter: Procedural ratio - issue remitted for adjudication by the lower authority; substantive resolution of whether SAD is recoverable post-omission is left to that adjudication. Conclusion: Recoverability of SAD is remitted to the lower authorities for fresh consideration in light of parties' submissions and relevant precedent. Issue 6 - Treatment of ancillary measures (confiscation, redemption fines, penalties) where substantive entitlement is remanded Legal framework: Confiscation and penalties flow from denial of notification benefits and resultant duty liability under Customs Act provisions. Precedent Treatment: Where substantive liability is reopened or remanded, ancillary sanctions require re-examination. Interpretation and reasoning: Because the Tribunal remands substantive issues (entitlement to notification benefit, SAD recovery), confiscation, redemption fines and penalties premised on the earlier findings must be reconsidered in the fresh adjudication to ensure consistency with any revised duty determination. Ratio vs. Obiter: Ratio - ancillary sanctions must be reconsidered if the substantive determination that underpinned them is remitted. Conclusion: Confiscation, redemption fines and penalties are remitted for fresh adjudication by the Commissioners of Customs; the importer must be given a reasonable opportunity of being heard.