2024 (2) TMI 25 - AT - Customs

Copper concentrate importer wins appeal against confiscation and redemption fine under Notification 18/2015-Cus

The CESTAT Ahmedabad allowed appeals against confiscation of goods and redemption fine. The appellant imported copper concentrate under Advance ... Validity of demand of IGST after provisional assessment where IGST and interest were paid prior to finalization - confiscation and redemption fine in absence of seizure or provisional release under bond - penalty for removal of goods without out of charge where payment of IGST was subsequently made - extended period of limitation for demand where there was no short paymentValidity of demand of IGST after provisional assessment where IGST and interest were paid prior to finalization - extended period of limitation for demand where there was no short payment - Demand of IGST and invocation of extended period quashed as unjustified where IGST and interest were paid before finalisation of provisional assessment and out of charge was later granted - HELD THAT: - The Tribunal found that the importer filed a provisional bill of entry before the new GST regime took effect, the vessel arrived after GST commencement, and on becoming aware of IGST liability the importer recalled the entry, paid IGST and interest and the bill was finally assessed with out of charge granted. There was no evidence of mala fide or short payment; the payment of IGST and interest was made prior to finalisation and was appropriated on final assessment. In these circumstances initiation of fresh demand proceedings invoking extended period was unwarranted and Section 28(4) could not be invoked to sustain the impugned demand.Impugned demand of IGST (and invocation of extended period) set aside.Penalty for removal of goods without out of charge where payment of IGST was subsequently made - Penalty / confiscation imposed for alleged removal without out of charge and related penal consequences are unsustainable in the facts of the case - HELD THAT: - The Tribunal noted that removal and discharge occurred with the knowledge and permission of customs officers during a transitional period, and the importer promptly paid IGST and interest. Prior proceedings against the custodian had resulted in a reduced penalty on the basis of non intentional contravention. Given the supervisory role of customs, absence of mala fide by the importer and subsequent full payment and finalisation of assessment, initiation of penal proceedings against the importer and co noticees was held to be unwarranted.Penalties imposed in the impugned order set aside.Confiscation and redemption fine in absence of seizure or provisional release under bond - Confiscation and imposition of redemption fine quashed because there was no seizure or provisional release under bond - HELD THAT: - Relying on the principle that redemption fine can be imposed only where goods have been seized and provisionally released under bond, the Tribunal observed that the goods had already been cleared and consumed long before the confiscation notice; there was no seizure or provisional release on record. Consequently, confiscation and a large redemption fine could not be sustained.Order of confiscation and redemption fine set aside.Final Conclusion: The impugned order confirming demand, confiscation and penalties is set aside; appeals allowed. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether a show cause notice invoking Section 28(4) of the Customs Act and seeking demand of IGST, interest, penalty and confiscation is maintainable where the importer filed a prior bill of entry under Advance Authorization, the vessel arrived after introduction of GST, and the importer subsequently recalled the bill and paid IGST and interest prior to finalization of provisional assessment. 2. Whether payment of IGST and interest by the importer prior to finalization of provisional assessment and grant of out of charge precludes any subsequent demand under Section 18 or proceedings invoking extended limitation for recovery. 3. Whether penal consequences including confiscation and penalty under Section 114A/Section 111(j) (and related provisions) can be imposed where (a) IGST was paid and appropriated at finalization, (b) no mala fide or intentional default is shown, and (c) goods were not seized or provisionally released under bond. 4. Whether custodial/port authority liability and penalty under HCCAR arise where goods were removed from customs area without out of charge and where the custodian acted in a transitional period and without intent. 5. Whether the concept of 'dutiable goods' in Section 111(j) applies to IGST (leviable under Customs Tariff Act or IGST provisions) as opposed to duties leviable under the Customs Act, and whether Section 111(j) is attracted where out of charge was subsequently granted. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Maintainability of demand and penal show cause where importer recalled bill, paid IGST and interest before finalization of provisional assessment Legal framework: Section 28(4) of the Customs Act (power to assess/demand duties), provisions governing provisional assessment and finalization of bills of entry, and general principles permitting recall/re-assessment and payment of duties; IGST became leviable on imports w.e.f. the GST commencement date. Precedent treatment: Decisions cited by appellant on entitlement to IGST exemption and on levy/penalty (several High Court/Tribunal authorities were relied upon by parties). The Tribunal referred to prior Tribunal authority on redemption fine (Bhagyanagar Metals) and an earlier Tribunal order reducing custodian penalty. Interpretation and reasoning: The Court examined factual sequence: prior bill filed pre-GST, vessel arrival post-GST, appellant filed requests to recall and re-assess, and paid IGST with interest before finalization of provisional assessment; out of charge was later granted and final assessment completed with IGST appropriated. The Tribunal found no mala fide or intentional default; acts occurred with customs supervision and during transitional confusion on GST implementation. Where duty and interest were voluntarily paid before finalization and the bill was thereafter finalized, subsequent invocation of Section 28(4) to demand additional IGST/penalty was unwarranted. Ratio vs. Obiter: Ratio - where importer pays IGST and interest prior to finalization of provisional assessment and the bill is finalized with appropriation of that IGST, a later showcause and demand for the same IGST under Section 28(4) is not sustainable. Obiter - observations about parties being 'un-aware' and transitional practices in the port. Conclusions: Demand under Section 28(4) relating to IGST was not maintainable in these facts; impugned SCN and order confirming such demand lacked basis and were set aside. Issue 2 - Effect of payment and appropriation of IGST/interest on subsequent demands and extended period invocation Legal framework: Customs assessment procedure, finalization of provisional assessments, appropriation of taxes, and limitation for raising demands; principles that payment and appropriation at finalization extinguish outstanding demands for the same duty. Precedent treatment: The Tribunal relied on principles applied in earlier authorities to deny redemption fine where no seizure/provisional release occurred; appellant relied on authorities regarding entitlement to input credit and non-applicability of penalties where duties are correctly paid. Interpretation and reasoning: The Court emphasized that IGST and interest were paid and appropriated at finalization; therefore there was no short payment or outstanding duty that could be the subject of later demand or extended period invocation. Initiating penal and extended-period proceedings after finalization where no duty remains was disproportionate and without legal foundation. Ratio vs. Obiter: Ratio - payment and appropriation of IGST and interest prior to finalization removes the basis for later demand or extended limitation invocation for the same duty. Obiter - commentary on administrative unawareness during transitional tax regime. Conclusions: Extended-period demand and proceedings for IGST were unsustainable once payment and appropriation at finalization occurred; appeals allowed on this ground. Issue 3 - Confiscation and redemption fine where goods were not seized or provisionally released Legal framework: Provisions authorizing confiscation and redemption fines; requirement of seizure or provisional release under bond for imposition of redemption fine; jurisprudence disallowing redemption fine absent such events. Precedent treatment: The Tribunal followed the larger-bench holding that redemption fine cannot be imposed in absence of seizure or provisional release under bond (Bhagyanagar Metals principle quoted and applied). Interpretation and reasoning: Here, goods had been cleared in 2017 and were not available for confiscation at time of showcause; there was neither seizure nor provisional release under bond. Therefore confiscation and redemption fine imposed by the impugned order were not legally sustainable. Ratio vs. Obiter: Ratio - confiscation and redemption fine require antecedent seizure or provisional release; absent those, such measures are unsustainable. Obiter - reference to consumption of goods at factory and lapse of time making confiscation impracticable. Conclusions: Confiscation and imposition of redemption fine were set aside as unlawful. Issue 4 - Applicability of penal provisions (Section 114A / Section 111(j)) and interpretation of 'dutiable goods' vis-à-vis IGST Legal framework: Penal provisions in Customs Act (including Section 114A and Section 111(j)) which contemplate penalties/confiscation for evasion or for imports of dutiable/prohibited goods; distinction between duties under Customs Act and taxes such as IGST leviable under the Customs Tariff Act/IGST provisions; requirement of intent/mala fide for penal consequences. Precedent treatment: Appellant relied on authorities distinguishing IGST treatment and on apex court authority that 'dutiable goods' in certain contexts refers to customs duty under Customs Act; Tribunal considered submissions and factual record showing payment and lack of intent. Interpretation and reasoning: The Tribunal accepted that goods were neither dutiable (for purposes of unpaid customs duty) nor prohibited at conclusion of proceedings, and that IGST was paid and appropriated. Given absence of mala fide, and because IGST issues arise under the tariff/IGST framework rather than basic customs duty regime, invoking confiscation/penalty provisions premised on unpaid customs duty was unwarranted. Moreover, Section 111(j) would be engaged only where out of charge had not been granted; here out of charge was ultimately granted on 30.01.2020. Ratio vs. Obiter: Ratio - penal provisions like Section 111(j) and confiscation cannot be validly invoked where the alleged duty (IGST) has been paid and appropriated, no intent to evade is shown, and out of charge was granted. Obiter - discussion on statutory source of IGST and interplay with Customs Act duties. Conclusions: Penalty and confiscation under provisions directed at unpaid customs duties were not applicable; imposition of penalties under Section 114A/111(j) set aside. Issue 5 - Liability and quantum of penalty on custodian/port authority where removal occurred without out of charge during transitional period Legal framework: Regulations 6(f)/6(q) of Handling of Cargo in Customs Areas Regulation 2009 and penalty under Regulation 12(8); principles of mens rea in administrative penalties and discretion to moderate penalty based on facts and absence of intent. Precedent treatment: Prior adjudication reduced maximum penalty to a nominal amount on facts showing no intentional breach during GST transition; Tribunal applied and relied on that finding in reviewing related consequences on co-noticees. Interpretation and reasoning: The Tribunal noted prior adjudication that the custodian contravened regulations but acted without intent during transitional confusion and therefore merited leniency; penalty had already been reduced to a minimal amount and that order stood. Given that finding and the supervisory role of customs, penal proceedings against the importer founded on the custodian's act were unwarranted. Ratio vs. Obiter: Ratio - custodial contravention proved but where contravention is non-intentional during a systemic transition, penalty may be moderated; earlier adjudication reducing penalty is binding in subsequent proceedings. Obiter - commentary on long-standing port practice and customs supervision. Conclusions: Custodian's penalty was properly moderated; related penal consequences against the importer arising from the same facts could not be sustained. Overall Conclusion The impugned order confirming demand of IGST, interest, penalties and confiscation was set aside: (a) IGST and interest had been voluntarily paid and appropriated before finalization of provisional assessment, precluding later demand; (b) confiscation and redemption fine were unsustainable absent seizure or provisional release; (c) penal provisions premised on unpaid customs duties were inapplicable given payment, lack of mala fide and eventual grant of out of charge; and (d) custodian penalty had been independently moderated for lack of intent, undermining derivative penal action.