2017 (8) TMI 879 - AT - Customs

Tribunal overturns confiscation and penalty under Customs Act, 1962

M/s. Xron Gases P. Ltd Versus Commissioner of Customs, Nhava Sheva II

The Tribunal allowed the appeal, setting aside the absolute confiscation of imported goods and the penalty imposed under Section 112(a) of the Customs ... 100% EOU - Absolute Confiscation - import of restricted item - R-22 Gas - confiscation on the ground that appellant have not obtained the Special Import License for import of R-22 Gas - Held that: - As per FTP, 2009-2014 the goods R-22 Gas is restricted items and the import of the same can be made only after obtaining import license - In the present case, appellant being 100% EOU is under the jurisdiction of Development Commissioner, who is also regional licensing authority, accordingly for all the purposes related to FTP, the development commissioner is the authority incharged of the appellant's unit - From the LOP, it can be seen that except prohibited goods, all items of import and local purchases are permitted. It is undisputed that goods R-22 Gas is not prohibited goods therefore the said goods is permitted to be imported as per LOP dated 3-1-2011. It is clear that once the LOP is obtained by EOU, no further license is required as LOP is authorization of all purposes - in the present case, when development commissioner has specifically allowed the import of R-22 Gas, there is no need of special import license. Cancellation of LOP under which appellant proposed to clear the imported goods - Held that: - right from shipment of goods, import of goods, filing of bill of entry, issue of LOP, broad banding of LOP in respect of R-22 gas and specific permission for import of R-22 gas has taken placed much before the cancellation of LOP i.e. 24-6-2013. Therefore, at the time of import the goods R-22 gas was permitted to be imported and cleared under LOP/permission granted by the Development Commissioner, therefore subsequent cancellation of LOP cannot have retrospective effect. Import shall be governed by the valid license existing at the time of import of goods, subsequent cancellation of the said license will not affect import and clearance of the goods prior to the date of cancellation of license - even though LOP was cancelled on 24-6-2013, the same will not adversely affect the import of the goods taken place prior to 24-6-0013. Accordingly, the goods were not liable for confiscation. Appeal allowed - decided in favor of appellant. Issues Involved:1. Confiscation of imported goods due to lack of Special Import License.2. Validity and effect of Letter of Permission (LOP) issued by Development Commissioner.3. Compliance with Foreign Trade Policy (FTP) and Ozone Depleting Substances (ODS) Rules.4. Retrospective effect of cancellation of LOP on import clearance.5. Imposition of penalty under Section 112(a) of the Customs Act, 1962.Issue-wise Detailed Analysis:1. Confiscation of Imported Goods Due to Lack of Special Import License:The adjudicating authority and Commissioner (Appeals) upheld the absolute confiscation of the imported goods, 'Refrigerant Gas R-22,' on the grounds that the appellant did not obtain a Special Import License as required under the Foreign Trade Policy (FTP) 2009-2014. The goods were classified as restricted items, and import was permitted only under specific conditions, including obtaining an import license. The appellant argued that the Letter of Permission (LOP) issued by the Development Commissioner should be considered as sufficient authorization for the import, citing Policy Circular No. 47/08.02.2006 and relevant judgments.2. Validity and Effect of Letter of Permission (LOP) Issued by Development Commissioner:The appellant contended that the LOP issued by the Development Commissioner on 03.01.2011, which permitted the import of R-22 gas, should be treated as a valid license. The Development Commissioner had granted broad banding of the LOP to include R-22 gas and provided specific permission for its import on 29.05.2012. The Tribunal referred to para 6.2.7 of the Handbook of Procedure, which states that LOP/LOI issued to EOU units would be construed as authorization for all purposes. The Tribunal also cited the case of Geentanjali Woolens Pvt Ltd, where it was held that once an EOU is permitted to import certain goods, the restriction or prohibition under the policy does not apply.3. Compliance with Foreign Trade Policy (FTP) and Ozone Depleting Substances (ODS) Rules:The appellant argued that they had complied with all conditions of the FTP and ODS Rules, 2000. They had obtained necessary permissions, including from the Ozone Cell under the Ministry of Environment and Forests, and had valid Central Excise and District Industrial licenses. The appellant also claimed that the goods were imported from China, a member of the Montreal Protocol, and the activity of repacking the gas from bulk to retail packs amounted to manufacture, thus fulfilling the actual user condition.4. Retrospective Effect of Cancellation of LOP on Import Clearance:The Tribunal examined the timeline of events and found that the import and clearance of the goods occurred before the cancellation of the LOP on 24.06.2013. The Tribunal referred to several judgments, including Blue Blends (India) Ltd and P.T. Impex Pvt Ltd, which established that the validity of a license at the time of import governs the import process, and subsequent cancellation does not have a retrospective effect. Therefore, the goods imported before the cancellation date were not liable for confiscation.5. Imposition of Penalty Under Section 112(a) of the Customs Act, 1962:The Tribunal found that since the appellant had complied with the requirements of the FTP and had valid authorization for the import of R-22 gas, the absolute confiscation of the goods and the imposition of a penalty of Rs. 5,00,000 under Section 112(a) of the Customs Act, 1962, were not justified. The Tribunal set aside the impugned order and allowed the appeal, providing consequential relief to the appellant.Conclusion:The Tribunal concluded that the appellant had valid authorization for the import of R-22 gas and had complied with the relevant provisions of the FTP and ODS Rules. The subsequent cancellation of the LOP did not affect the import clearance of the goods that occurred prior to the cancellation date. Therefore, the absolute confiscation of the goods and the imposition of the penalty were set aside, and the appeal was allowed.