2025 (11) TMI 262 - AT - Customs

Brief delay in PIMS upload deemed directory requirement, no confiscation or penalty for importer's late certificate filing

CESTAT NEW DELHI - AT allowed the appeal, setting aside orders of confiscation and penalty. The tribunal held that the PIMS registration timeline framed ... Violation of import condition prescribed under the Notification No.11/2015 - The PIMS required importers to submit advance information in an online system for import of the notified items of Chapter 48 of ITS (HS), 2022 and obtain an automatic Registration Number by paying registration fee of Rs.500. - failure to upload the PIMS certificate later than the fifth day of arrival of the consignment - Confiscation. - penalty - HELD THAT:- The time line for obtaining the registration, not earlier than 75th day and not later than fifth day before the expected date of arrival of import consignment has been couched by using the expression, “the importer can apply for registration”. The term ‘can’ has to be construed as ‘may’, which has been interpreted to imply as directory as against the term ‘shall’ which denotes the mandatory nature of the requirement. Perusal of the notification, although speaks of requiring the importer to submit an advance information in an online system for import of items and obtain an automatic Registration Number however, the later part of the said para while giving the timeline by using the term ‘can’, leaves room for an intendment that non-adherence to the prescribed time shall not disentitle the party and the goods shall not be liable to confiscation. It is in that view of the matter, that the Adjudicating Authority had observed that the submission of the PIMS certificate by the appellant being beyond the cut-off date is only a procedural lapse as the importer had submitted the certificates subsequently. The goods arrived at ICD Kathuwas on 5.10.2022, and 6.10.2022 and the PIMS certificate was obtained on 7.10.2022 and 10.10.2022, which is later than 5th day before the expected date of arrival of the imported consignment. The submission of the learned Counsel is that the appellant could not complete the PIMS registration five days prior to shipment arrival in terms of the notification due to late receipt of documents from the shipper. The reason given by the appellant cannot be said to be unjustified so as to hold the appellant liable for violation of the condition of the notification and the goods liable for confiscation. In the case of Siddharth Enterprises Vs. Nodal Officers [2019 (9) TMI 319 - GUJARAT HIGH COURT], the High Court of Gujarat was considering the issue, where the writ petitioners had prayed for a declaration that the due date contemplated under Rule 117 of the CGST Rules to claim transitional credit is procedural in nature and, therefore, being merely directory and not a mandatory provision, they should be permitted to file the declaration in Form GST TRAN-I and GST TRAN-2 to enable them to claim transitional credit. Applying the above principle in the facts of the present case, it is inclined to hold that the minuscule delay in uploading the PIMS Certificate will not substantially affect the compliance of the condition. Especially so long as the same stands uploaded before the clearance of the goods whereby the purpose of contemplating such an import condition is fulfilled. The authorities below having held that submission of the PIMS certificate by the importer being a procedural lapse, there was no scope for ordering for confiscation of the goods on account of violation of the import policy condition as notified by the notification. The impugned order is, therefore set aside - appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether failure to obtain Paper Import Monitoring System (PIMS) registration within the timeline 'not earlier than 75th day and not later than 5th day before the expected date of arrival' renders the import contravention so as to attract confiscation under Section 111(d) read with Section 46(4) of the Customs Act, 1962 and penalty under Section 112(a)(i). 2. Whether the timeline in the PIMS notification couched by the expression 'the Importer can apply for registration...not earlier than 75th day and not later than 5th day' is mandatory or directory in character, and the legal consequences of treating it as procedural non-compliance. 3. Whether subsequent upload/production of the PIMS registration certificate after filing of Bill of Entry but before clearance of goods cures the alleged non-compliance and prevents confiscation/penalty. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Whether delayed PIMS registration attracts confiscation and penalty Legal framework: The impugned import condition requires importers to submit advance information and obtain an automatic registration number under PIMS within specified timelines. Section 46(4) of the Customs Act prescribes compliance with documentary requirements for clearance; Section 111(d) provides for confiscation of goods imported without required authorization; Section 112(a)(i) contemplates penalty for omission or commission relating to importation without valid authorization. Precedent Treatment: Authorities below treated non-submission of PIMS certificate within the timeline as a breach warranting confiscation and penalty. The Tribunal considered precedents distinguishing substantive mandatory conditions from procedural/directory provisions (referenced High Court and Supreme Court decisions considering timelines in indirect tax procedure rules and transitional credit claims). Interpretation and reasoning: The Tribunal examined the text of the notification and noted that while the notification requires submission of advance information and obtaining registration, the timeline provision uses the expression 'the Importer can apply...not earlier than 75th day and not later than 5th day.' The Tribunal construed 'can' as permissive ('may') indicating a directory/procedural requirement rather than a peremptory/mandatory condition for confiscation. The Tribunal further observed that the consignments were cleared only after the PIMS certificates were uploaded (i.e., registration obtained before clearance), and therefore substantive purpose of the notification - monitoring imports - was satisfied. Ratio vs. Obiter: Ratio - A timeline expressed as 'can apply...not later than 5th day' in the PIMS notification is directory; failure to meet that timeline, when remedied before clearance, does not amount to importation without valid authorization attracting confiscation under Section 111(d) and penalty under Section 112(a)(i). Obiter - Observations comparing broader policy considerations and general treatment of procedural vs. substantive conditions in customs/import controls. Conclusions: The delayed PIMS registration did not render the imports unauthorized for purposes of confiscation and penalty since certificates were obtained before clearance and the timeline in the notification is directory. Issue 2 - Characterisation of the PIMS timeline as mandatory or directory Legal framework: Statutory interpretation principles distinguishing mandatory ('shall') and permissive ('may/can') language; doctrine that not all statutory or regulatory conditions are of equal consequence - some are substantive and mandatory, others procedural/directory. Precedent Treatment: The Tribunal relied on judicial authorities holding that procedural timelines may be directory (examples cited involved rule-based timelines for transitional credit and procedural provisions in indirect tax rules), approving the approach that non-observance of a procedural condition that does not affect substantive rights should not attract penal consequences. Interpretation and reasoning: The Tribunal analysed the specific wording of the notification, emphasising the use of 'can' and construing it as permissive. It held that while the notification generally requires registration, the timeframe clause's permissive wording demonstrates legislative/administrative intent that the timeline is directory. The decision reasons that the object of PIMS - advance information and monitoring - was fulfilled where registration existed before clearance, notwithstanding prior non-compliance with the preferred timeline. Ratio vs. Obiter: Ratio - The use of permissive language in a regulatory timeline supports a directory construction; a directory timeline, if complied with before clearance and if the substantive purpose is met, will not trigger confiscation/penalty. Obiter - Broader policy implications for other notifications or timelines using similar language may require case-by-case analysis. Conclusions: The timeline using 'can' is directory; thus failure to comply strictly with the 75-to-5-day window is not automatically fatal provided the regulatory objective is achieved before clearance. Issue 3 - Effect of subsequent upload of PIMS certificate before clearance Legal framework: Customs clearance regime requires documentary compliance for release; where documentary deficiency is procedural and remedied prior to clearance, the remedial act may cure the deficiency and prevent invocation of confiscation/penalty provisions premised on import without authorization. Precedent Treatment: The Tribunal applied the principle from precedent that procedural breaches remedied before the relevant substantive act should not attract penal consequences; earlier authorities were invoked to support that procedural timelines do not always affect substantive rights. Interpretation and reasoning: The Tribunal found that the PIMS certificates, though obtained after the Bills of Entry were filed and after arrival, were uploaded before the goods were cleared from the port. The Tribunal emphasised that the crucial point for meeting the import condition is whether registration existed prior to clearance and whether the monitoring purpose was achieved. Because the certificates were available before clearance, the Tribunal found no contravention of Section 46(4) resulting in import without valid authorization. Ratio vs. Obiter: Ratio - Subsequent compliance with a procedural import-registration requirement, effected before clearance and fulfilling the regulatory object, cures the procedural lapse and precludes confiscation/penalty under the cited provisions. Obiter - The Tribunal's acceptance of reasons (e.g., late receipt of documents from shipper) as justifying delay is contextual and may not be universally dispositive. Conclusions: Uploading the PIMS certificate before goods were cleared cured the procedural non-compliance; confiscation and penalty imposed for the delay were not justified. Outcome and Orders The Tribunal set aside the orders of confiscation and penalty imposed for delayed PIMS registration, holding that the delay was a procedural lapse cured prior to clearance, allowed the appeal, and held that confiscation/penalty under Sections 111(d) and 112(a)(i) were not warranted on the facts.