2025 (12) TMI 757 - AT - Customs

Appeal restores AIFTA exemption, quashes unlawful redemption fine u/ss 125 and 28 of Customs Act

CESTAT Mumbai allowed the appeal, setting aside denial of AIFTA exemption and the imposition of redemption fine under s.125 Customs Act, 1962. It held ... Benefit available to goods sourced from Thailand, under the ASEAN India Free Trade Agreement (AIFTA), enabled by N/N. 46/2011-Cus dated 1st June 2011 (at serial no. 966(1)) as amended by N/N. 96/2017-Cus dated 29th December 2017 - discrepancies between contents, as declared, and certification issued by competent authority to facilitate availment of exemption - HELD THAT:- It is settled law that an appellant cannot be placed in a more grievous situation merely from having sought appellate remedy permitted by law. The first proceedings culminated in detriments that did not go beyond determining liability to confiscation and with no consequence of redemption on payment of fine. The foray by the adjudicating authority in that direction is in breach of jurisdiction in de novo proceedings. Moreover, the adjudicating authority appears to have lost sight of that which precluded such action earlier, and probably inspired by the decision in re Creative Finesse, as well as forestalled appeal at the instance of the competent authority for review of adjudication orders. In no uncertain terms, it is held that the fastening of redemption fine under section 125 of Customs Act, 1962 to be not legal. The exemption that was availed factors the situs of production of the goods, viz., one of countries that form the ASEAN economic bloc. The goods were cleared at the relevant times on submission of certification to that effect; denial thereof, and recovery by recourse to section 28 of Customs Act, 1962, would have to be founded on proposition of lack of validation of such claim. There is no finding that the impugned goods did not originate in Thailand. There is no allegation, let alone ascertainment, that the ‘certificate of origin’ corresponding to each of the impugned consignments is not authentic or not issued by the competent authority. There is no reasoning offered for concluding that the description of the impugned goods did not conform to the contents of the certificate or packing lists. The denial of exemption for earlier consignments on such fragile assumption of modus operandi does not sustain in the absence of reference, as prescribed in relevant rules, for questioning validity of the accompanying certificate and, in the absence of such ascertainment, to conclude that origin was not of Thailand. The factual matrix does not hold with the conclusions in the impugned order. The impugned order is set aside - appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether, in de novo adjudication pursuant to remand, the adjudicating authority was empowered to impose redemption fine under section 125 of the Customs Act, 1962, when no such detriment had been imposed in the earlier adjudication, and the appellants could not be placed in a worse position for having exercised appellate remedy. 1.2 Whether denial of exemption under Notification No. 46/2011-Customs (as amended), issued pursuant to the ASEAN India Free Trade Agreement (AIFTA), in respect of ten consignments, and consequential demand of differential duty under section 28, confiscation under section 111(o), and penalties, was sustainable in the absence of any finding that the goods were not of Thai origin or that the Certificates of Origin (COO) were not authentic or invalid. 1.3 Whether the adjudicating authority, in de novo proceedings, complied with the terms of the remand order requiring a speaking order taking into account all submissions made, and whether the perfunctory treatment of the defence vitiated the impugned order. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Scope of de novo adjudication and imposition of redemption fine Interpretation and reasoning 2.1 The Tribunal noted that the initial adjudication, which was the subject of the earlier appeal and remand, had determined liability to confiscation but had not imposed redemption fine under section 125. In de novo adjudication, the adjudicating authority introduced, for the first time, redemption fine on goods no longer available for confiscation. 2.2 The Tribunal reiterated the settled legal principle that an appellant cannot be placed in a more grievous situation merely by having availed appellate remedy. De novo adjudication pursuant to remand cannot be used to aggravate detriment in the absence of a proper challenge to the remand before the competent constitutional court or a statutory review by the department. 2.3 The Tribunal held that the adjudicating authority exceeded its jurisdiction in de novo proceedings by expanding the scope of detriment, and appeared to have disregarded the very limitation which had precluded such action in the earlier round. Conclusions 2.4 The fastening of redemption fine under section 125 of the Customs Act, 1962, in de novo adjudication, was held to be not legal and in breach of jurisdiction, as it worsened the position of the appellants solely because they pursued an appeal. Issue 2: Denial of AIFTA exemption, validity of Certificates of Origin, and sustainability of duty demand, confiscation and penalties Legal framework (as discussed) 2.5 The relevant exemption was Notification No. 46/2011-Customs dated 01.06.2011 (as amended), issued in pursuance of AIFTA, which granted concessional duty based on origin of goods in ASEAN member countries and compliance with conditions including submission of a valid COO in accordance with 'Operational Certification Procedures' under AIFTA Rules. 2.6 The department invoked section 28 of the Customs Act, 1962 for recovery of differential duty, section 111(o) for confiscation on alleged contravention of notification conditions, and sections 112, 114A and 114AA for imposition of penalties. Interpretation and reasoning 2.7 The Tribunal observed that the exemption was predicated on the situs of production in an ASEAN country (Thailand) and that, at the time of import, the consignments were cleared on the basis of COOs certifying such origin. 2.8 The adjudicating authority relied primarily on discrepancies detected in a single 'live' consignment and on the importer's withdrawal of the exemption claim in that consignment (under protest) to infer a common modus operandi and extend the denial of exemption to ten earlier consignments. 2.9 The Tribunal found that, for the ten consignments in dispute, there was: * no finding that the goods did not originate in Thailand; * no allegation, much less ascertainment, that the COOs for those consignments were not authentic or were not issued by the competent authority; and * no reasoned finding that the description of the goods in the bills of entry did not conform to the COOs or packing lists. 2.10 The Tribunal emphasised that denial of exemption and recovery under section 28 must be rooted in a substantiated proposition that the origin claim is invalid, which typically requires reference and verification in accordance with the applicable AIFTA rules and 'Operational Certification Procedures.' No such reference or verification was undertaken. 2.11 The adjudicating authority's conclusion that the importer failed to provide 'valid and complete' COOs, and its reliance on alleged 'discrepancies in description' and silence of the defence, were held insufficient in the absence of any concrete examination of the specific COOs, or a cogent linkage between the single live consignment and the ten earlier consignments. 2.12 The Tribunal characterised the approach as resting on a 'fragile assumption' of common modus operandi rather than on factual and legal validation of non-fulfilment of notification conditions for each consignment, and found that the factual matrix did not support the conclusions drawn. Conclusions 2.13 Denial of the benefit of Notification No. 46/2011-Customs (as amended) in respect of the ten consignments, and the consequent demand of differential duty under section 28, were held unsustainable in law and on facts. 2.14 In the absence of a legally tenable denial of exemption and of findings negating origin or authenticity of COOs, the basis for confiscation under section 111(o) and imposition of penalties under sections 112, 114A and 114AA failed. Issue 3: Compliance with remand directions and adequacy of consideration of defence submissions Interpretation and reasoning 2.15 The earlier remand by the Tribunal required the adjudicating authority to pass a speaking order taking into account all submissions made, including those filed before the Tribunal. 2.16 In the impugned order, the adjudicating authority dwelt on an alleged difference between submissions made before the department and those made before the Tribunal, and questioned the defence's position, instead of confining itself to the directions in remand. 2.17 The adjudicating authority recorded, in general terms, that all materials and defence submissions had been considered, but the Tribunal found the actual treatment of the defence submissions to be 'cursory and peremptory,' with no meaningful engagement or critical examination of the detailed paper book and arguments placed on record. 2.18 The Tribunal held that such perfunctory disposal was 'the antithesis' of the remand direction and, by itself, warranted setting aside the impugned order. Conclusions 2.19 The de novo adjudication did not comply with the terms of the remand requiring a speaking order considering all submissions. The failure to properly examine and address the defence vitiated the impugned order. Overall result 2.20 The impugned order, including the denial of exemption, the demand of differential duty, confiscation, redemption fine, and penalties, was set aside in toto, and the appeals were allowed.