Customs | Confiscation, Penalty & Fine Can't Be Imposed On IGST Demand Arising From Breach Of Pre-Import Condition: CESTAT

The Mumbai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that confiscation, penalty & fine cannot be imposed on IGST (Integrated Goods and Services Tax) demand arising from breach of pre-import condition under Customs Act. Ajay Sharma (Judicial Member) and C J Mathew (Technical Member) opined that the IGST demand arose because of the breach of the pre-import condition. Although IGST is payable for such a breach, no confiscation or penalty can be imposed merely on that ground. In this case, the assessee/appellant had availed an exemption on imports under the Advance authorisation scheme between October 2017 and December 2018. A pre-import condition was inserted vide notification no. 79/2017 dated 13th October 2017, which was omitted in January 2019, owing to which 'integrated tax', envisaged in section 3(7) of the Customs Tariff Act, 1975, was liable to be discharged thereon. The scheme of 'advance authorisation' was intended to provide the exemption thereon only to the extent that the imported goods are used in the production of goods for export. As per the revenue, the exports were undertaken by the deployment of goods other than those imported without payment of duty. The assessee/appellant had discharged 'integrated tax' of ₹6,84,60,401 along with interest thereon of ₹ 4,94,39,247, despite which the show cause notice was adjudicated by the Commissioner of Customs. The Commissioner, in addition to appropriation of 'integrated tax' and interest towards the confirmation of proposed recovery, also confiscated the goods under section 111 of the Customs Act, 1962, while offering redemption on payment of a fine of ₹ 3,00,00,000 under section 125 of the Customs Act, 1962. The assessee argued that entitlement to exemption from 'integrated tax' had been under dispute with finality rendered by the decision of the Supreme Court in Union of India v. Cosmo Films Ltd [2023 (385) ELT 66 (SC)], which prompted the discharge of liability that enabled regularisation with taking credit thereof, too. It was argued that any undischarged liability under the authority of the Customs Tariff Act, 1975, did not entail all consequences that befall duty liability stemming from section 12 of the Customs Act, 1962, as section 3(12) of the Customs Tariff Act, 1975, presented circumscribed authority and amendment therein was effected only on 16th August 2024. The Tribunal referred to the case of Chiripal Poly Films Ltd v. Commissioner of Customs, Ahmedabad [ (2024) 22 Centax 245 (Tri-Ahmd)] in which it was held that in the absence of specific provision relating to levy of Interest, Redemption Fine and Penalty in respective legislation for levy duty, the same cannot be demanded or imposed or recovered by taking recourse to machinery provisions relating to recovery of the duty. Therefore, the orders for recovery of "Interest, Redemption Fine and Penalty" in these cases are not sustainable considering charging provisions of the Customs Act 1962 and relevant provisions under the Customs Tariff Act, 1975….. The bench further referred to the case of Learned Authorized Representative Sulphonates Pvt Ltd v. Union of India [(2025) 29 Centax 212 (Bom)] where it was stated that It is declared that Circular No.16 of 2023-Customs dated 7th June, 2023, to the extent that it purports to levy interest upon the IGST payment, is beyond the provisions of the Customs Tariff Act, 1975 and is bad in law…. The Tribunal opined that recourse in the impugned order to confiscation under section 111(o) of the Customs Act, 1962 and to imposition of penalty under section 114A of the Customs Act, 1962, as a consequence of imports in breach of the condition of 'pre-import' does not sustain. This condition enabled exemption from 'integrated tax' and, while breach thereof enabled recovery of 'integrated tax', the other consequences not enumerated specifically in section 3(12) of the Customs Tariff Act, 1975 did not attach, added the bench. In view of the above, the Tribunal allowed the appeal. Case Title: G Amphray Laboratories v. Commissioner of Customs (NS-III) Case Number: CUSTOMS APPEAL NO: 87856 OF 2024 Counsel for Appellant/ Assessee: Dr Sujay Kantawala, Shri Anupam Dighe and Ms Chandni Tanna, Advocates and Shri Prathamesh, Chartered Accountant Counsel for Respondent/ Department: Shri AK Shrivastava, Assistant Commissioner Click Here To Read/Download The Order

Customs | Confiscation, Penalty & Fine Can't Be Imposed On IGST Demand Arising From Breach Of Pre-Import Condition: CESTAT

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