TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 1224
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.... that the appellants have an SEZ unit in Parry Infrastructure Co. Pvt Ltd and were engaged in bringing raw sugar for processing into refined sugar. The Customs officers, based on a specific intelligence regarding certain pilferage of dutiable raw sugar from Customs Area of Kakinada Deepwater port/Customs Private Bonded Warehouse of the appellant, intercepted certain trucks on 22.08.2016, apparently, carrying pilfered/ diverted from a warehouse called 'ATR CPBW'. The appellant had obtained as Customs Private Bonded Warehouse license for storage of imported non-duty paid raw sugar in bulk at warehouse of M/s ATR Warehouse Pvt Ltd (ATR). As a follow up investigation, officers recorded statements of certain people involved in the transportation of the goods and handling of goods in the ATR and based on certain documents recovered as well as statements recorded, felt that the quantity of 1073.300 MT of dutiable raw sugar has been received without the cover of proper import documents i.e., Into-bond Bill of Entry from Kakinada Deepwater Port. They also noticed that the said ATR was not having any infrastructure like power supply or were also not maintaining records, etc., as the said rec....
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....be paid. It was also proposed to charge import duty of Rs.1,43,65,912/- on sugar received without cover of Into-Bond BoE and was held liable for confiscation. Similarly, quantity of 7000 MT involving import duty of Rs.9,79,46,218/- was held to be liable for confiscation under section 111(j). It was also proposed that quantity of 14000 MT bagged raw sugar cleared from warehouse without payment of export duty is liable for recovery of export duty of Rs.8,74,43,220/- under section 28(4). Certain penal provisions were also invoked against logistic operators such as transporters, C&F agents, surveyors and Customs Broker including M/s Dr. Amin Controllers Pvt Ltd (C&F Agent & Surveyor) under section 114(ii). Penalty was also proposed under section 114A of Customs Act. 5. On adjudication, demand of export duty and import duty were confirmed and goods were also confiscated with option to pay redemption fine. However, certain penalties were not invoked in view of the statutory provisions. Further, a penalty of Rs.5,00,000/- was also imposed on M/s Amin Controllers Pvt Ltd under section 112(a) and Rs.50,000/- under section 114(ii) of the Customs Act. 6. Learned Advocate for the appellant h....
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....e same and also allowed redemption thereof as well penalty on certain unrelated individuals, who were engaged in such pilferage/theft. He also submits that there is no dispute that exports have taken place in respect of 14000 MT of raw sugar and the only dispute between the appellant and the department is that this 14000 MT has been exported by them from the ATR warehouse directly and not from or through the SEZ unit and therefore, it cannot be considered as SEZ cargo and therefore, liable to export duty. He has also taken various other pleas including non-tenability of confiscation of goods, when goods are not available for confiscation and also imposition of certain penalties relying on certain case laws including Shiv Kripa Ispat Vs CC [2009 (235) ELT 623 (Tri-LB)], Ram Khazana Vs CC [2003 (156) ELT 122 (Tri-Del)] and CC Vs Finesse Creation Inc [2009 (248) ELT 122 (Bom)] as there was no malafide intent and certain procedural irregularities must have occurred due to urgency. 7. Learned AR has taken us through the detailed investigation carried out by the department, which proved that certain non-duty paid goods were brought into warehouse without the cover of proper documents i.....
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.... authorized officer of the SEZ, who used to register and assess the BoE and thereafter, goods were permitted for transfer/transshipment to SEZ. They also used to execute Bond with transshipment authority at Kakinada Deepwater Port and after obtaining transshipment permission shipped to SEZ unit and after receipt of goods at SEZ, the authorized officer of SEZ used to make necessary endorsement in the BoE, which was presented to the Customs officer in charge at the port. During the period relevant to dispute, due to certain overwhelming export orders, the appellants had imported more consignments of raw sugar and hence they were hard pressed for storage and therefore, obtained premises, for which necessary license for operating the said premises as Private Bonded Warehouse was taken. In respect of movement of non-duty paid imported goods to warehouse, they used to file regular Into-Bond BoE at the ICEGATE portal and subsequently, as and when goods were cleared from warehouse to SEZ, they used to file Ex-Bond BoE for home consumption at SEZ portal for bringing the same from warehouse to the SEZ unit by declaring the same as SEZ cargo. It has also been fairly conceded by them that in c....
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....that the SEZ unit was also engaged in clearing raw sugar of Brazilian origin, per se, from their SEZ unit or exported goods were not Brazilian raw sugar and in the light of the same, even though the assessment has been done based on the declaration, the authorized officer would not have allowed, had it been a case where no such goods were being exported directly by the SEZ unit or even when it was exported directly for export. The exporter remains the appellant who, as discussed, is a SEZ unit. There is also no dispute that the remittances in respect of said 14000 MT of raw sugar have been received in foreign exchange by the appellant. We have also perused the Ex-Bond BoE in respect of bagged raw sugar-traded goods of 7000 MT, which was assessed on 22.08.2016 and which also has an endorsement from the Inspector of Customs dt. 06.09.2016 to the effect that the goods covered were cleared from ATR and were admitted into SEZ in full quantity. We also note that there is an allegation that 7000 MT of raw sugar coming from vessel MV Million Bell was not covered under proper BoE for home consumption. 13.1 Therefore, we find that admittedly, 7000 MT of raw sugar out of raw sugar imported b....
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.... also indicate that it was treated as SEZ cargo. The department has not alleged that the resulting sugar after blending has either not been exported or diverted to Domestic Tariff Area. There is no tangible evidence to prove that this export was not made by the exporter themselves, who are SEZ units and that it was not in the nature of trading goods, which is a permissible operation in terms of their LOA. Thus, a holistic view would indicate that both diversion to warehouse and subsequent export under peculiar circumstances by the SEZ unit cannot be disputed. However, in the process, certain procedural irregularities have taken place especially as regards non-filing of BoE in respect of 1073 MT of sugar while being brought to warehouse from port instead of directly to SEZ unit and some dispute as regards bonafide of filing of Ex-Bond BoE from ATR to SEZ unit, however, it is to be noted that Customs Authorities have not made any case where they have alleged that duty-free imported raw sugar has been diverted to DTA and therefore, liable for import duty except to the extent of 1073 MT, where also it is not disputed that the same has not been actually received in the ATR except for so....
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....pairs or testing or calibration or display or processing or sub-contracting or other temporary removal into DTA without payment of duty. Therefore, as held by Hon'ble High Court of Telangana in the case of GMR Aerospace Engineering Ltd Vs UOI [2019 (31) GSTL 596 (AP)], which was further upheld by Hon'ble Supreme Court reported at [2023 (6) CENTAX 155 (SC)], that SEZ Act is a complete code in itself and various provisions and exemptions have been provided under section 26(1), subject to Rules. 14.2 We have noted that there is no denial that appellants are themselves the exporter in respect of 14000 MT of sugar and that they are a SEZ unit. The trading is a permissible activity in terms of LOA. Therefore, even if there are procedural irregularities, as long as it is relatable to the SEZ unit and their activities, the provisions of SEZ would prevail over Customs Act. If there is any unaccountal of either non-duty paid imported or domestic goods by the SEZ unit or resulting export thereof, the action can be taken by the SEZ authorities in terms of provisions under SEZ Act and Rules made thereunder. There is a bond executed by the appellant SEZ unit for meeting all the conditions in re....
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....There is, however, no dispute as regards movement of 7000 MT for which Into-Bond BoE dt. 24.07.2016 has been filed. We find that both these consignments were basically sent to the warehouse after it was imported duty-free, for blending purposes and subsequently they were cleared for export under the cover of shipping bills by vessel MV Rising Eagle. Therefore, while we feel that the duty-free diverted sugar to the extent of 1073 MT was ultimately consumed in blending and also exported, the fact remains that its diversion was without cover of any Into-Bond BoE or any specific permission of the SEZ authorities. We, however, note that department has not brought any fact that SEZ authorities have initiated any action for recovery of any duty in respect of such diverted goods and therefore, it is apparent that they ultimately accounted for the same when the blended sugar was transferred back to the SEZ unit and onwards for export. In the facts of the case, demand of import duty, per se, is not tenable, however, goods are definitely of offending nature as they were not covered under any valid BoE or any supporting authorization from the SEZ authorities. Therefore, we do not find any infi....
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....section 72 & 73A(3) of the Customs Act on said quantity. 17. Insofar as confiscation of 7000 MT of sugar is concerned, we find that since they have not demanded any import duty in respect of the same and also the fact that there is evidence that the said consignment has been sent by Into-Bond under proper document, the confiscation is not tenable. Moreover, confiscation is also not tenable in view of settled legal position that unless the goods are physically available, the same cannot be confiscated and hence, no redemption fine can be imposed thereon. Accordingly, confiscation of 7000 MT and redemption fine thereon is not tenable. We also note that the department has proposed confiscation under section 111(j), where the provisions requires that any good on which import duty has not been paid and which are entered for exportation under claim for drawback is liable for confiscation, whereas, in the present case, the appellants have not claimed any drawback in respect of said export. Therefore, the said provision itself is also not invokable in view of the admitted facts of the case. 18. Therefore, to sum up the above findings, we find that in this case, 7000 MT + 1073.3 MT of dut....
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....s long as nexus is there between the export goods and appellant SEZ units. We have noted that there has been some procedural lapse, insofar as non-filing of Ex-Bond BoE in respect of 1026.7 MT cleared from ATR to SEZ, however, there was no malafide intent in clearing the same. Moreover, there is force in the contention of the appellant that such a huge quantity could not have moved out without Customs official taking note of the fact. Therefore, there is apparently no malafide intent in clearing the bagged sugar from ATR without filing Ex-Bond BoE to the SEZ unit. Therefore, in the facts of the case, section 113(i) would not be invokable and therefore, confiscation is bad in law. We place reliance on the judgment of Hon'ble High Court of Bombay in the case of Commissioner Vs Shiv Kripa Ispat Pvt Ltd [2015 (318) ELT A259 (Bom)], which has been subsequently followed in catena of judgments. 20. As regards confiscation of vehicles under section 115 and imposition of redemption fine, we find that in this case as the goods itself have not been found liable for confiscation, therefore, conveyance cannot be said to have been used for smuggling. Therefore, since we find that we have alread....
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....eriorating and based on export order, they were required to be standardized to prevent further damage to the goods and therefore, they had the right for carrying out these activities and apparently post amendment in the relevant provision, w.e.f. 14.05.2016, there was no such requirement for having any prior sanction of proper officer for carrying out any such activity. It is an admitted fact that no manufacturing activity has taken place in the warehouse by the appellant so as to violate any substantive provisions under section 65. Thus, no penalty is leviable for violation of warehousing provisions for the procedural breach when substantive grounds for demand of import and export duty itself have not sustained. 23. In view of the above, we set aside the order to the extent of demand of export duty of Rs.8,74,43,220/-, demand of import duty of Rs.1,43,65,912/-, order of confiscation of 1026.7 MT of goods under section 111(j), order of confiscation of 7000 MT of raw sugar under section 111(j), order of confiscation of 24 dumpers/trucks valued at Rs.3,17,00,000/- under section 115(2), penalty of Rs.10,18,09,132/- under section 114A and modify the impugned order in respect of confis....
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....antity for the procedural breach, therefore, penalty under section 114(ii) is not sustainable. However, penalty under section 112(a) is upheld as they were into this business of transporting and would have been aware of the legal regulations for movement of goods from port. 26. Department has also relied on certain case laws in support that it was an intentional attempt on their part to evade both import duty and export duty. We have perused the reliance placed on the case of Parry Sugar Industries Ltd Vs Commissioner [2013 (290) ELT A54 (AP)] and we find that the facts are different and therefore, the said judgment has no bearing on the facts of the present case. Similarly in the case of M/s Ajay Wines & Spirits Vs Pr. CC, Ludhiana [2025 (7) TMI 1016 - CESTAT Chandigarh], the coordinate bench had observed that though there was no proof by the department that there has been any clandestine removal, etc., however, penalty under section 117 was imposed and this penalty was upheld. In this case, we find that there is no penalty imposed under section 117 of Customs Act. Moreover, none of these case laws relied upon by department have examined a situation where a SEZ unit has, under au....