Tribunal upholds customs duty demand on restricted goods, sets aside redemption fine, reduces penalties

The Tribunal upheld the customs duty demand of Rs. 10,81,10,330/- with interest, as the imported goods were restricted items not eligible for exemption under the SFIS scheme. Promissory estoppel was deemed inapplicable as the utilization of SFIS scrips should align with the policy in force at the time of import. The Tribunal set aside the redemption fine but upheld reduced penalties, emphasizing adherence to policy provisions and denying the applicability of promissory estoppel.

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Issues Involved:
1. Eligibility of SFIS scrips for customs duty exemption on restricted goods.
2. Applicability of promissory estoppel.
3. Legality of confiscation and imposition of redemption fine and penalty.

Issue-wise Detailed Analysis:

1. Eligibility of SFIS Scrips for Customs Duty Exemption on Restricted Goods:
The main issue was whether the benefit of exemption notification No. 92/2004-Cus. availed by the appellant for importing restricted goods under the Served From India Scheme (SFIS) was correct. The appellant argued that they were entitled to duty credit of 10% of foreign exchange earned during 2004-05, and the restriction on importing goods under SFIS was introduced only in 2006-07. The customs department contended that the goods were restricted and not freely importable at the time of import, thus not eligible for exemption. The Tribunal held that the relevant policy provision in force at the time of import and the ITC (HS) EXIM code confirmed that SFIS scrips could only be used for goods that were freely importable. The Tribunal upheld the customs duty demand of Rs. 10,81,10,330/- with interest, as the goods imported (Radars, Navigational Equipment, VHF Equipment, etc.) were restricted items under the ITC (HS) EXIM code.

2. Applicability of Promissory Estoppel:
The appellant argued that promissory estoppel should apply because the SFIS scheme, a post-export incentive scheme, promised benefits based on foreign exchange earned in 2004-05. The Tribunal rejected this argument, stating that the utilization of SFIS scrips should comply with the policy in force at the time of import. The Tribunal emphasized that any clause or policy provision should be strictly enforceable prospectively from the date of such amendment. Since the SFIS scrips were issued after the amendment in 2006, the restriction on importing goods that were not freely importable applied. Therefore, promissory estoppel was not applicable in this case.

3. Legality of Confiscation and Imposition of Redemption Fine and Penalty:
The appellant contested the confiscation of goods and imposition of redemption fine and penalty, arguing that the goods were imported under valid licenses and were not seized. The Tribunal referred to several High Court decisions, which held that redemption fine could only be imposed if the goods were available for confiscation. Since the goods were not seized and were already cleared, the Tribunal set aside the redemption fine of Rs. 3,42,30,000/-. However, the Tribunal upheld the imposition of penalties but reduced the amounts considering the circumstances and the fact that the appellant had paid the entire customs duty during the investigation. The penalties were reduced from Rs. 50,00,000/- to Rs. 5,00,000/- for Chennai imports and from Rs. 7,00,000/- to Rs. 70,000/- for Mumbai imports, while the Rs. 5,000/- penalty for Delhi imports was upheld.

Conclusion:
The appeal was partly allowed. The Tribunal upheld the customs duty demand and interest, set aside the redemption fine, and reduced the penalties imposed. The Tribunal emphasized strict adherence to policy provisions and the inapplicability of promissory estoppel in this case.

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