2014 (5) TMI 163 - AT - Customs

Entitlement for benefit of Project Import Regulations Confiscation of imported Goods - Redemption fine Requirement of recommendatory letter from DGTD/sponsoring authority Principal-to-principal basis contract - Suppliance of material handling equipment - Differential duty demand - Levy of Penalty - Section 111 (o), 112 (a) of the Customs Act, 1962 Imposition of another penalty - Section 112(a) and 112 (b) - Held that - Recommendatory letter from DGTD/sponsoring authority was required only in respect of imports covered by Open General Licence or imports made by Central Government, State Government, statutory Corporations, public body or government undertakings run as a joint stock company - It was not mandated if the goods were covered by an import trade control licence or the imports were made by importers not covered by the above category of persons. In terms of said contract, M/s. Samsung Co. Ltd. obtained import licence No. 2042567 dated 07/10/1987 for import of the material handling equipment - Project Import Regulations, 1986 did not envisage submission of recommendation letter from the sponsoring authority in the case of goods, the import of which were covered by an Import Licence and when the imports were made by non-governmental authorities Para 288 of the Handbook of Procedures of the Foreign Trade Policy stipulated a condition that for the grant of project import benefits, recommendation from the sponsoring authority was required in addition to the licence - However, this condition was in existence only in the policy provisions relating to 1985-88 and the said condition was deleted when the policy provisions relating to 1988-91 came into force w.e.f. 01/04/1988 - The period of imports in the present case is after 01/04/1988. As per the policy prevailing at the time of importation, there was no requirement of obtaining any recommendation from the sponsoring authority - Thus, both in terms of the Project Import Regulations, as also in terms of the Foreign Trade Policy, there was no requirement of obtaining any recommendation letter from the sponsoring authority and hence this stipulation by the Customs authority on the basis of a public notice issued by them is not sustainable in law - Any requirement with respect to registration has to be in terms of the Project Import Regulations or the Foreign Trade Policy as it stood at the relevant point of time - Further, the Bills of Entries had been filed by M/s. Samsung Co. Ltd in their own name and the customs duty payments have also been made in the name of M/s. Samsung Co. Ltd. as per the documentary evidence available on record Therefore, appellant is rightly entitled for the benefit of Project Import Regulations - Thus, the impugned demand denying the benefit of Project Import concessions to M/s. Samsung Co. Ltd. is clearly not sustainable in law and the same is set aside - Inasmuch as there is no violation of any provisions of law, the confiscation of the goods u/s 111(o) is also not warranted and question of imposing any redemption fine would not arise - Inasmuch as there is no commission or omission on the part of the importer and M/s. JNPT, imposition of penalties on them is also unsustainable in law - Inasmuch as differential duty demand itself is not sustainable, there cannot be any demand towards interest Therefore, the impugned order is set aside Decided against revenue.

Summary

Issues Involved:
1. Denial of Project Imports benefit and confirmation of Customs duty demand.
2. Confiscation of goods and imposition of redemption fine.
3. Imposition of penalties on M/s. Samsung Co. Ltd. and JNPT.
4. Requirement of a recommendatory letter from the sponsoring authority.
5. Appeal by Revenue regarding the interest demand.

Detailed Analysis:

1. Denial of Project Imports Benefit and Confirmation of Customs Duty Demand:
The Customs duty demand of Rs. 48,30,77,904/- was confirmed against JNPT by denying the benefit of Project Imports. M/s. Samsung Co. Ltd. imported Container Handling Equipment and spares for the NSPT Project and sought to avail the project import benefit under the Projects Imports Regulations, 1986. The Assistant Collector of Customs provisionally registered the contract subject to the production of a recommendatory letter from the Ministry of Surface Transport. However, M/s. Samsung Co. Ltd. failed to produce the required letter even after two decades, leading to the demand for differential customs duty.

The Tribunal observed that according to the Project Import Regulations, 1986, at the relevant time, there was no requirement for a recommendatory letter from the sponsoring authority for goods covered by an import trade control licence. The requirement was only for imports covered by an Open General Licence or by government agencies. Since the imports were covered by a specific import licence and were made by M/s. Samsung Co. Ltd., the demand for differential duty was deemed unsustainable.

2. Confiscation of Goods and Imposition of Redemption Fine:
The Commissioner ordered the confiscation of the imported goods under Section 111(o) of the Customs Act, 1962, but allowed redemption on payment of a fine of Rs. 50 lakhs. The Tribunal found that since the denial of the Project Imports benefit was not sustainable, the confiscation of goods and imposition of redemption fine were also unwarranted.

3. Imposition of Penalties on M/s. Samsung Co. Ltd. and JNPT:
Penalties of Rs. 5 crore each were imposed on M/s. Samsung Co. Ltd. and JNPT under Sections 112(a) and 112(b) of the Customs Act, 1962. The Tribunal held that since there was no violation of any provisions of law by the importer or JNPT, the imposition of penalties was clearly unsustainable.

4. Requirement of a Recommendatory Letter from the Sponsoring Authority:
The Tribunal noted that the Project Import Regulations, 1986, did not mandate the submission of a recommendatory letter from the sponsoring authority for goods covered by an import trade control licence. This requirement was only introduced in the amended regulations effective from 10/03/1992. Furthermore, the Foreign Trade Policy for 1988-91 did not require such a recommendation. Therefore, the Customs authority's stipulation based on a public notice was not legally sustainable.

5. Appeal by Revenue Regarding the Interest Demand:
Revenue appealed against the order for not confirming the interest demand, arguing that interest could not be demanded for the period prior to 13/07/2006 due to the absence of a legal provision for recovery of interest in cases of provisional assessment before that date. The Tribunal dismissed the Revenue's appeal, stating that since the differential duty demand itself was not sustainable, there could be no demand for interest.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal with consequential relief, and dismissed the appeal filed by the Revenue. The denial of Project Imports benefit, confiscation of goods, imposition of redemption fine, and penalties were all found to be unsustainable in law. The requirement of a recommendatory letter from the sponsoring authority was deemed unnecessary under the relevant regulations and policy at the time of importation.