2024 (9) TMI 940 - AT - Customs

Recovery of IGST customs duty interest and penalty unsustainable without statutory authority under sections 3(7) and 3(12)

CESTAT Ahmedabad allowed the appeal challenging recovery of IGST, customs duty, interest, redemption fine and penalty on imports under Advance ... Charging section and separate levy - applicability of machinery provisions by reference - pre-import condition under Advance Authorization - revenue neutrality - extended period/time-bar under section 28(4) - levy of interest, penalty and redemption fine - confiscation where goods released on final assessment - precedential value of judicial decisions over CBIC CircularsPre-import condition under Advance Authorization - revenue neutrality - Recovery of integrated tax (IGST) in respect of imports made under Advance Authorization for the period 13-10-2017 to 09-01-2019. - HELD THAT: - The Tribunal recorded that IGST became payable where the pre-import condition was not complied with for the period 13-10-2017 to 09-01-2019 and that the Supreme Court (para 75) and CBIC Circular No.16/2023 directed importers to be permitted to pay IGST and claim refund or input tax credit. The appellant paid IGST pursuant to the directions and has been allowed input tax credit; the Bench therefore refrained from disturbing the confirmation of duty and declined to pass a detailed order on the duty confirmation given the admitted revenue-neutral position. [Paras 5]Confirmation of duty (IGST) is recorded and not disturbed by the Tribunal; appellant's payment and allowance of credit render the situation revenue neutral and the Tribunal refrained from detailed adjudication on the duty confirmation.Charging section and separate levy - levy of interest, penalty and redemption fine - applicability of machinery provisions by reference - Whether interest, penalty and redemption fine could be levied in respect of IGST under Section 3(7)/3(12) of the Customs Tariff Act, 1975 by invoking provisions of the Customs Act. - HELD THAT: - The Tribunal held that IGST payable under Section 3(7) of the Customs Tariff Act, 1975 is a separate and independent levy and that interest, penalty and redemption fine are distinct financial levies which require a clear charging provision in the statute imposing that levy. The Tariff Act does not contain specific charging provisions for interest, penalty or redemption fine in respect of the IGST under Section 3(7)/3(12), unlike other provisions (e.g., Section 9A(8) or Section 8B(9)) where such machinery was expressly made applicable. Reliance on the Customs Act machinery alone cannot create substantive charging provisions for interest, penalty or fines. Consequently, demands of interest, redemption fine and penalty imposed by the adjudicating authority were found to be without authority of law and unsustainable, following binding principles in Supreme Court and High Court decisions cited by the Tribunal. [Paras 5]Demands and recovery of interest, redemption fine and penalty in relation to IGST under Section 3(7)/3(12) CTA are without authority of law and are set aside.Confiscation where goods released on final assessment - revenue neutrality - Whether the imported goods could be confiscated and redemption fine imposed where the goods were released on final assessment and not physically available. - HELD THAT: - The Tribunal held that confiscation and imposition of a redemption fine cannot be sustained where the goods in question were cleared on final assessment and were not available for confiscation. In addition to the absence of a statutory basis for confiscation/redemption fine in the Tariff Act for IGST, the facts showed no intent to evade duty and the situation was revenue neutral; therefore orders of confiscation and redemption fine lacked jurisdiction and were set aside. [Paras 5]Orders of confiscation and imposition of redemption fine are unsustainable and are set aside.Extended period/time-bar under section 28(4) - revenue neutrality - Whether the demands raised by issue of show cause notices were barred by limitation and whether extended period under Section 28(4) was rightly invoked. - HELD THAT: - The Tribunal found no evidence of suppression or mala fide conduct by the appellant; the matters arose from interpretation of the pre-import condition and were dealt with by higher courts. Given that the department was aware of the pre-import condition and the case was revenue neutral, the Tribunal held there was no justification to invoke the extended period under Section 28(4). Consequently, demands beyond the normal limitation period were time-barred and liable to be set aside, absent deliberate omission or intention to evade duty. [Paras 5]The demands are time-barred; invocation of extended period is not justified in these facts.Precedential value of judicial decisions over CBIC Circulars - applicability of machinery provisions by reference - Whether CBIC Circular No.16/2023 could validate charging of interest and related levies contrary to statutory position and judicial precedents. - HELD THAT: - The Tribunal observed that a departmental circular cannot override the statutory charging provisions or settled judicial interpretations. While Circular No.16/2023 facilitated procedural compliance after the Supreme Court's direction, it could not create or validate substantive charging provisions for interest, penalty or redemption fine where the Tariff Act lacks them. Accordingly, reliance on the Circular to collect interest and other levies contrary to the statutory scheme and binding precedent was rejected. [Paras 5]CBIC Circular cannot be read to create substantive charging provisions for interest, penalty or redemption fine where the statute does not provide them; circular cannot prevail over law and binding judicial precedent.Appropriation of amounts paid - revenue neutrality - Whether amounts deposited by the appellant towards IGST and interest could be appropriated and whether such appropriations are to be refunded. - HELD THAT: - The Tribunal recorded that the appellant paid IGST and interest pursuant to the Supreme Court's directions and the CBIC Circular; however, because demands of interest, redemption fine and penalty were held to be unsustainable, the adjudicating authority's appropriation of amounts towards those liabilities could not stand. The Bench allowed the appeals and granted consequential reliefs, thereby setting aside the impugned orders insofar as they confirmed recovery/appropriation of interest, redemption fine and penalty. [Paras 5, 7]Appropriation and recovery of interest, redemption fine and penalty are set aside; consequential reliefs granted to appellant.Final Conclusion: The appeals are allowed. While confirmation of IGST as paid and credited is recorded (revenue-neutral outcome), the Tribunal set aside the adjudicating authority's demands and appropriations insofar as they related to interest, confiscation/redemption fine and penalty-holding such levies unsupported by charging provisions in the Tariff Act, unsustainable on the facts, and time-barred where applicable-and granted consequential reliefs. Issues Involved:1. Whether customs duty (in nature of Integrated Tax) was recoverable from the appellant, considering the time-bar demands under the extended period.2. Whether interest is chargeable, whether goods are liable to confiscation entailing imposition of redemption fine, and whether penalty is imposable.3. Whether the liabilities of interest, confiscation/redemption fine, and penalty imposed are without jurisdiction and untenable due to the absence of statutory provisions.4. Whether the amount deposited towards interest is liable to be refunded, and whether liabilities of penalty and confiscation/redemption fine are liable to be set aside.Issue-wise Detailed Analysis:1. Recovery of Customs Duty (Integrated Tax):The appellant paid the IGST as per the Supreme Court's directions and CBIC Circular No. 16/2023-Cus dated 07-06-2023. The situation was revenue-neutral, as the appellant was allowed to take credit of the entire amount of tax paid. Despite the duty being potentially unsustainable on other grounds, the appellant did not seriously object to the demands of IGST deposited after 07-06-2023. The Tribunal refrained from passing a detailed order on the confirmation of duty, which was allowed as credit by the Revenue.2. Interest, Confiscation, Redemption Fine, and Penalty:The appellant contested the imposition of interest, redemption fine, and penalty on the grounds that there is no statutory provision under Section 3 (7) or 3 (12) of the Customs Tariff Act, 1975 for such recoveries. The Tribunal agreed, noting that interest, fine, and penalty are separate financial levies requiring specific charging provisions in the statute. The provisions of the Customs Act, 1962 for levying interest, penalty, and fine were not applicable to the IGST levied under Section 3 (7) of the Customs Tariff Act, 1975.3. Jurisdiction and Statutory Provisions:The Tribunal found no charging provision for interest, fine, and penalty under Section 3 (7) or Section 3 (12) of the Customs Tariff Act, 1975. The Tribunal cited various judgments, including those of the Supreme Court and High Courts, which established that additional levies like interest and penalty cannot be imposed without explicit statutory provisions. The Tribunal concluded that the orders for recovery of interest, fine, and penalty on late payment of IGST were without authority of law and unsustainable.4. Refund of Interest and Setting Aside Penalties and Fines:The Tribunal held that the appellant could contest the liability of interest, confiscation, redemption fine, and penalty even though the IGST was voluntarily paid. The Tribunal found that the orders for recovery of interest, fine, and penalty were not sustainable due to the absence of specific charging provisions in the Customs Tariff Act, 1975. The Tribunal also noted that the entire situation was revenue-neutral, and there was no evidence of intent to evade duty. Consequently, the Tribunal set aside the orders for confiscation of goods, imposition of redemption fine, and penalty, and allowed the appeals with consequential reliefs.Conclusion:The Tribunal allowed the appeals, set aside the orders for recovery of interest, confiscation of goods, imposition of redemption fine, and penalty, and ordered the refund of the interest recovered/collected from the appellant. The Tribunal's decision was based on the absence of statutory provisions for levying interest, fine, and penalty under the Customs Tariff Act, 1975, and the revenue-neutral nature of the situation.