2024 (10) TMI 1141 - AT - Customs

CESTAT sets aside IGST recovery demands on advance authorization imports due to revenue neutrality and lack of suppression

SAKAR INDUSTRIES PVT. LTD. Versus COMMISSIONER OF CUSTOMS –CUSTOMS AHMEDABAD

CESTAT Ahmedabad allowed the appeal concerning recovery of customs duty as IGST forgone during imports under advance authorization scheme (October ... Recovery of Customs duty in the form of IGST forgone in course of imports of the goods - violation of “Pre-import Condition” in the imports made against the advance authorization scheme during the period October 2017 to November 2018 - Jurisdiction - proper officer to issue SCN - Revenue neutrality - whether Ld. Commissioner of Customs, Ahmedabad does not have the jurisdiction to issue the impugned show cause notice for the goods imported through Mundra Ports and Nhava Sheva Ports? - time limitation - HELD THAT:- In almost all the cases, the appellant have fulfilled the pre-import condition, in some cases the bill of entry was re-assessed and appellant have paid the IGST for which they are not contesting on the ground that they are eligible for ITC under GST. In view of the above on the factual aspects of the case the demand of IGST along with the interest, fine and penalties are not sustainable. As regard the penalty corresponding to the IGST paid by the appellant since, the same is availed as ITC under GST there is no malafide on the part of the appellant. Hence, penalty corresponding to the duty paid by the appellant which is not in contest will also not sustain on the ground of Revenue neutrality. In the facts of the present case the appellant‟s bills of entry were assessed and the same were verified by the custom authority and clearance of goods was allowed. The issue raised in the present show cause notice was very much existing at the time of assessment of bill of entry. The appellant have bonafidely claimed the exemption Notification No.18/2015 as amended. Therefore, nothing prevented the department to raise the objection at the time of assessment of bills of entry and clearance of goods. Moreover, the issue involved interpretation of exemption notification on advance authorization - the suppression of fact cannot be attributed to the appellant. Accordingly, the extended period for demand is prima facie not invokable in the facts of the present case. Therefore, the appellant has made out a strong prima facie case on time bar. Though entire case has been decided on factual matrix as discussed above, the demand of duty, interest, penalty and fine are not sustainable. However, the issue of levy of interest, fine and penalty has been independently considered by this Tribunal in the case of CHIRIPAL POLY FILMS LTD. VERSUS COMMISSIONER OF CUSTOMS-CUSTOMS AHMEDABAD [2024 (9) TMI 940 - CESTAT AHMEDABAD]. In view of the said judgment also, the appellant are also entitled for waiver of interest, penalty and redemption fine. The impugned order is not sustainable - Appeal allowed. Issues Involved:1. Jurisdiction of the Commissioner of Customs to issue the show cause notice.2. Compliance with the pre-import condition under Notification No. 79/2017-Cus.3. Validity of the demand for IGST, interest, redemption fines, and penalties.4. Revenue neutrality and availability of Input Tax Credit (ITC).5. Limitation period for issuing the show cause notice.6. Imposition of redemption fine and penalty.Issue-wise Detailed Analysis:1. Jurisdiction of the Commissioner of Customs:The appellant contended that the Commissioner of Customs, Ahmedabad, lacked jurisdiction to issue the show cause notice for goods imported through Mundra and Nhava Sheva Ports. The tribunal did not specifically address this jurisdictional issue in its final decision, focusing instead on the substantive compliance with the pre-import condition and other legal aspects.2. Compliance with the Pre-import Condition:The core issue was whether the appellant complied with the pre-import condition stipulated under Notification No. 79/2017-Cus. The tribunal found that the adjudicating authority failed to verify whether the imported goods were used in the manufacture of exported goods, which would fulfill the pre-import condition. The tribunal emphasized that the demand was based on assumptions without verifying the actual use of imported inputs in exports. It concluded that if the imported goods were indeed used for manufacturing export goods, the pre-import condition was satisfied, and no duty was payable.3. Validity of the Demand for IGST, Interest, Redemption Fines, and Penalties:The tribunal noted that the appellant had complied with the pre-import condition in most cases and had paid IGST in some instances where reassessment occurred. It held that the demand for IGST, along with interest, fines, and penalties, was unsustainable due to compliance with the pre-import condition and the revenue-neutral nature of the transactions. The tribunal also referenced the Supreme Court's judgment in Cosmo Films Ltd., which allowed for ITC or refund upon payment of IGST if the pre-import condition was not met.4. Revenue Neutrality and Availability of ITC:The appellant argued that the situation was revenue neutral since IGST paid could be claimed as ITC, and the tribunal agreed that this aspect negated any malafide intent. The tribunal found that the appellant's claim of revenue neutrality was valid, as IGST paid could be utilized as ITC, reducing the financial impact on the government exchequer.5. Limitation Period for Issuing the Show Cause Notice:The tribunal considered the appellant's argument that the demand was time-barred under Section 28(1) of the Customs Act, as the show cause notice was issued beyond the prescribed period. It noted that the appellant's actions were based on a bona fide belief, supported by a prior favorable High Court judgment, and that the department could have raised objections during the assessment of bills of entry. Although the tribunal did not conclusively decide on the time-bar issue, it acknowledged the appellant's strong prima facie case.6. Imposition of Redemption Fine and Penalty:The tribunal found that the imposition of redemption fines and penalties was unwarranted, particularly as the goods were not available for confiscation. It referenced the Larger Bench decision in Shiv Kripa Ispat Ltd., which held that confiscation and consequential fines could not be imposed in the absence of seized goods. The tribunal also cited its own decision in Chiripal Poly Films Ltd., which supported the waiver of interest, penalties, and fines.Conclusion:The tribunal set aside the impugned order, allowing the appeal with consequential relief. It concluded that the demand for IGST, interest, fines, and penalties was not sustainable due to compliance with the pre-import condition, revenue neutrality, and the absence of any malafide intent. The tribunal's decision emphasized the importance of verifying factual compliance with legal conditions before confirming demands.