2025 (2) TMI 1294 - AT - Customs

Customs tribunal slashes penalty and redemption fine on restricted pulse imports amid DGFT notification challenge and stays

The CESTAT Kolkata partly allowed the importer's appeal concerning confiscation of restricted pulses imported during the period when DGFT notifications ... Confiscation of goods imported for noncompliance of the pre-deposit - levy of penalty on the importer for his acts of omission or commission - levy of redemption fine - importation of Toor, Green Peas, Yellow Peas and Black Matpe - restricted goods or not - HELD THAT:- Since, the amendment in the EXIM policy was brought by way of Notifications, the appellants contested the amendment of import policy in the High Court of Calcutta vide Writ Petition No. 25164 (w) of 2018, wherein Commissioner of Customs, Kolkata was also respondent, on the ground that such an amendment in Foreign Trade policy is the sole prerogative of the Central Government. The Honourable High Court of Calcutta vide their Interim Order dated: 14.12.2018 in terms of the prayer to the writ petition granted stay on the DGFT Notifications. The Honourable Supreme Court in the case of Agricas LLP and Others [2020 (8) TMI 705 - SUPREME COURT], upheld the impugned notifications and rejected the challenge made by the importers inter alia stating that 'the impugned Notification and Trade Notices and reject the challenge made by the importers. The imports if any relying on Interim order(s) would be held to be contrary to the Notifications and Trade Notices issued under the FTDR Act and would be so dealt with under provisions of the Customs Act, 1962.' As the goods were perishable in nature, the appellants moved a Misc. Application before the Hon'ble High Court Calcutta. After considering the factual position of the case the Honourable High Court on Misc. App; 25164 (w) 2018 passed an interim order to the effect that the goods imported should be released. Accordingly, goods were allowed clearance provisionally with the appellants keeping security deposit of 10% of the assessable value towards probable fine and 10% of duty towards penalty. For the Assessable Value component of Rs.21,52,71,425, they have given security deposit of Rs.2,15,27,142 and for the Duty component of Rs.10,76,35,714, they have given security of Rs.1,07,63,571/-. In the present case, the Assessable value is Rs.21.52 crores and Duty component is Rs.10.76 crores. The appellant is before the Tribunal, being aggrieved with the penalty of Rs.2.15 crores of penalty and Rs.2.15 crores of redemption fine. Since the facts are identical in the present case, following the same lines taken by the Tribunal in the case of Rahul Agro [2024 (9) TMI 469 - CESTAT KOLKATA], the ends of justice would be met if the these amounts are modified to Rs.20 lakhs of penalty and Rs.20 lakhs of Redemption fine. Appeal allowed in part by reducing the Penalty to Rs.20 Lakhs and Redemption Fine to Rs.20 lakhs. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the statutory pre-deposit requirement under section 129E of the Customs Act, 1962 was satisfied by the security deposits made pursuant to directions of the High Court, thereby rendering the dismissal of the appeal by the first appellate authority on the ground of non-compliance with pre-deposit unsustainable. 1.2 Whether, in the facts of import of restricted goods (various types of peas) under interim protection granted by a High Court, and in light of subsequent upholding of DGFT notifications by the Supreme Court and a coordinate Bench decision in an identical matter, the redemption fine under section 125 and penalty under section 112(a) of the Customs Act, 1962 imposed for confiscation under section 111(d) should be reduced, and if so, to what extent. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Compliance with pre-deposit requirement under section 129E of the Customs Act, 1962 Legal framework (as discussed) 2.1 The Tribunal referred to section 129E of the Customs Act, 1962 regarding mandatory pre-deposit for maintainability of appeals against orders imposing penalty. It noted that section 129E does not prescribe any pre-deposit in respect of redemption fine. Interpretation and reasoning 2.2 The appellant's consignments were provisionally released pursuant to interim orders of the High Court, subject to security deposits of (a) 10% of the assessable value towards probable fine and (b) 10% of the duty amount towards probable penalty. On this basis, the appellant had deposited a total security of Rs. 3,22,90,744/-, comprising Rs. 2,15,27,142/- against assessable value of Rs. 21,52,71,425/- and Rs. 1,07,63,571/- against duty of Rs. 10,76,35,714/-. 2.3 The penalty imposed in adjudication was Rs. 2,15,28,000/-. The Tribunal observed that 10% of this amount, which is the quantum required as pre-deposit under section 129E, comes to Rs. 21,52,800/-. It found that the security deposit lying in favour of the Government (Rs. 3,22,90,744/-) was far in excess of the mandatory pre-deposit requirement. 2.4 The Tribunal further held that there is 'no provision to call for pre-deposit when the litigation is towards the Redemption Fine', confirming that section 129E applies only to duty, interest, and penalty, and not to redemption fine. 2.5 On these facts and the statutory scheme, the Tribunal held that the Commissioner (Appeals) erred in dismissing the appeal on the ground of non-fulfilment of pre-deposit requirements, as the requisite pre-deposit stood effectively complied with through the security already deposited pursuant to the High Court's order. Conclusions 2.6 The statutory pre-deposit requirement under section 129E stood satisfied by the security deposits made pursuant to the High Court's directions. No pre-deposit was legally demandable for the redemption fine. The dismissal of the appeal by the Commissioner (Appeals) for alleged non-compliance with pre-deposit was erroneous. The Tribunal, being satisfied that pre-deposit conditions were met, proceeded to decide the appeal on merits. Issue 2 - Quantum of redemption fine and penalty for import of restricted goods under DGFT notifications Legal framework (as discussed) 2.7 The Tribunal proceeded on the basis of confiscation under section 111(d) of the Customs Act, 1962 for import of goods in violation of DGFT notifications rendering the goods 'restricted'. Penalty had been imposed under section 112(a), and redemption fine under section 125. 2.8 The background involved DGFT notifications and Trade Notices restricting import of peas under the Foreign Trade (Development and Regulation) Act, 1992, and challenges thereto before various High Courts, including by the appellant, with reference to sections 3, 5 and 6 of that Act. The Supreme Court, in a batch matter (Agricas LLP & Others), ultimately upheld the DGFT notifications and held that imports made relying on interim orders would be treated as contrary to the said notifications and Trade Notices and dealt with under the Customs Act. 2.9 The Tribunal also expressly relied upon its earlier Final Order in an identical matter involving another importer (Rahul Agro Industries), where, on similar facts, redemption fine and penalty had been substantially reduced, taking a 'sympathetic view'. Interpretation and reasoning 2.10 The Tribunal noted that the appellant was a regular importer of peas and had entered into firm contracts with foreign suppliers prior to the DGFT amendments which converted free imports into restricted imports with specified quotas and time-limited restrictions. The appellant challenged these amendments before the High Court, which granted interim relief staying the operation of the impugned DGFT notifications and directing provisional release of the perishable goods upon security deposits. 2.11 Subsequently, the Supreme Court, in Agricas LLP, upheld the DGFT notifications and held that imports effected in reliance on interim orders would be treated as contrary to the notifications and dealt with under the Customs Act. Following this decision, show cause proceedings culminated in confiscation under section 111(d) and imposition of equal amounts of penalty and redemption fine, each quantified at Rs. 2,15,28,000/-. 2.12 The Tribunal did not disturb the finding that the goods were liable to confiscation in view of the Supreme Court judgment and the validity of the DGFT notifications. It confined its scrutiny to the quantum and proportionality of the redemption fine and penalty. 2.13 The Tribunal took particular note that the appellant, like similarly placed importers, had acted under interim orders of the High Court, that the goods were perishable, and that the legal position regarding validity of DGFT notifications had been under serious contest across multiple High Courts and was only finally settled by the Supreme Court. These factors, in the Tribunal's view, warranted leniency in the quantum of redemption fine and penalty, even though the imports ultimately stood in violation of the restrictions. 2.14 The Tribunal relied heavily on its coordinate Bench decision in Rahul Agro Industries, where on substantially similar facts-imports of peas under interim High Court orders, eventual upholding of DGFT notifications by the Supreme Court, and very high assessable value and duty-the redemption fine and penalty imposed by the adjudicating authority (Rs. 2.10 crores and Rs. 4 crores respectively) had been reduced to Rs. 25 lakhs each. The Tribunal extracted and adopted the reasoning from that decision, where a 'sympathetic view' was taken in light of the litigation background and interim protections granted by courts. 2.15 The Tribunal compared the monetary parameters in the earlier case and the present one. In Rahul Agro Industries, the assessable value was Rs. 96.65 crores and duty Rs. 44.83 crores; in the present case, the assessable value is Rs. 21.52 crores and duty Rs. 10.76 crores. In the earlier case, despite much higher transaction values, the Tribunal had settled the penalty and redemption fine at Rs. 25 lakhs each. In the present case, the adjudicating authority had imposed Rs. 2.15 crores each as penalty and redemption fine. 2.16 Applying the same line of reasoning and striving for proportionality and parity with the earlier decision, the Tribunal held that the quantum imposed in the instant case was excessive and that a further reduction, calibrated to the lower assessable value and duty in this appeal, was appropriate. It therefore considered that the 'ends of justice would be met' by reducing both penalty and redemption fine to Rs. 20 lakhs each. Conclusions 2.17 The finding that the goods were liable to confiscation under section 111(d) in view of the Supreme Court's decision upholding the DGFT notifications was accepted; the Tribunal did not interfere with the fact of confiscation. However, in determining the quantum of redemption fine and penalty under sections 125 and 112(a), the Tribunal held that: (a) The very high amounts initially imposed (Rs. 2.15 crores each) were disproportionate in light of the factual matrix, including pre-existing contracts, interim High Court orders, the perishable nature of the goods, and the then-uncertain legal position pending final adjudication by the Supreme Court. (b) Consistency and parity with the coordinate Bench's decision in Rahul Agro Industries, which involved identical legal issues and a substantially higher scale of imports, warranted significant reduction. 2.18 Accordingly, the Tribunal modified the order to reduce the redemption fine to Rs. 20 lakhs and the penalty under section 112(a) to Rs. 20 lakhs, while maintaining the confiscation under section 111(d). The appeal was partly allowed to this extent, with consequential relief to follow in accordance with law.