2015 (9) TMI 1369 - AT - Customs

Denial of exemption claim - Served From India Scheme - Whether the benefit of exemption notification No.92/2004-Cus. dt. 10.9.94 availed by the appellant in respect of import of restricted goods i.e. Radars Navigational Equipments VHF Equipments & DME Equipments etc. under SFIS is correct or otherwise - The appellants contention that DGFTs clarification on import/export shall prevail over customs and customs authority cannot interpret the policy is not at all relevant to the facts of this case - Held that - There is no dispute on the fact that the goods Radars & VHF & DME are restricted items under ITC (HS) EXIM code and there is no dispute on the fact that para 3.6.4.5 of FTP 2004-09 (RE-2006) stipulated that SFIS can be utilized for customs duty adjustment only on the goods which are freely importable and not to any restricted items. - It is relevant to state that as rightly held by the adjudicating authority in his findings at para-30 of order that the department has not challenged the importability of impugned goods under FTP but the dispute is restricted to payment of customs duty on the restricted goods through SFIS scrip under the Notification 92/2004. The appellants are entitled to utilize the SFIS scrips for import of any capital goods which are freely importable. That being the case there is no overlapping of power of DGFT or Customs vice versa. It is a fact that SFIS scrips are issued based on foreign exchange remittance received over previous years and the DGFT issued the SFIS scrips to appellant on 4.7.2006 and utilization of scrip should be as per the condition of FTP as existed on the date of import. It is a settled law that any clause policy provision should be strictly enforceable prospectively w.e.f. from the date of such amendment. In the present case para 3.6.4.5 of FTP 2004-09 (Re-2006) w.e.f. 1.4.2006 stipulates the utilization of SFIS scrip for customs duty only on the freely importable goods and the customs notification 92/2002 allows exemption as per the policy in force. Therefore there is no promissory estoppel attracted in the present case. SFIS scrip should not allowed to be used for payment of customs duty on the Restricted goods i.e. on Radars Navigational Equipments VHF & OME Equipments which are restricted for import under ITC (HS) EXIM code and the exemption provided under Notfn 92/2002-Cus. Is not applicable for use of SFIS scrip for adjustment of customs duty on import of the said restricted goods. Assessee inadvertently utilized the said SFIS scrips for payment of Customs duty towards import of Radars and other equipments which are restricted items under policy. The Executive Director in his statement clearly admitted before the Department that they agreed to pay the entire customs duty and they paid the entire customs duty voluntarily under various TR challans. These facts are on record and the same cannot be brushed aside or ignored as there are voluntary statements from responsible senior executives persons in charge of Finance & Planning including the Executive Director Finance and are fully aware of the legal provisions of FTP and Customs exemptions notifications. Therefore the adjudicating authority rightly denied the exemption under Notfn 92/2004. - Demand of duty confirmed. Confiscation and redemption fine - Held that - When the goods are not available for confiscation by respectfully following the ratio of the Hon ble High Court decisions 2012 (9) TMI 386 - KARNATAKA HIGH COURT and 2008 (4) TMI 320 - HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH we hold that the appellants are not liable for redemption fine. Levy of penalty u/s 112 - held that - considering the overall circumstances of the case and also considering the fact that appellant paid entire customs duty during investigation itself and before issue of SCN reduction in penalty is warranted in respect of imports made through Chennai and Mumbai. - penalty reduced - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Eligibility of SFIS scrips for customs duty exemption on restricted goods.
2. Applicability of promissory estoppel.
3. Legality of confiscation and imposition of redemption fine and penalty.

Issue-wise Detailed Analysis:

1. Eligibility of SFIS Scrips for Customs Duty Exemption on Restricted Goods:
The main issue was whether the benefit of exemption notification No. 92/2004-Cus. availed by the appellant for importing restricted goods under the Served From India Scheme (SFIS) was correct. The appellant argued that they were entitled to duty credit of 10% of foreign exchange earned during 2004-05, and the restriction on importing goods under SFIS was introduced only in 2006-07. The customs department contended that the goods were restricted and not freely importable at the time of import, thus not eligible for exemption. The Tribunal held that the relevant policy provision in force at the time of import and the ITC (HS) EXIM code confirmed that SFIS scrips could only be used for goods that were freely importable. The Tribunal upheld the customs duty demand of Rs. 10,81,10,330/- with interest, as the goods imported (Radars, Navigational Equipment, VHF Equipment, etc.) were restricted items under the ITC (HS) EXIM code.

2. Applicability of Promissory Estoppel:
The appellant argued that promissory estoppel should apply because the SFIS scheme, a post-export incentive scheme, promised benefits based on foreign exchange earned in 2004-05. The Tribunal rejected this argument, stating that the utilization of SFIS scrips should comply with the policy in force at the time of import. The Tribunal emphasized that any clause or policy provision should be strictly enforceable prospectively from the date of such amendment. Since the SFIS scrips were issued after the amendment in 2006, the restriction on importing goods that were not freely importable applied. Therefore, promissory estoppel was not applicable in this case.

3. Legality of Confiscation and Imposition of Redemption Fine and Penalty:
The appellant contested the confiscation of goods and imposition of redemption fine and penalty, arguing that the goods were imported under valid licenses and were not seized. The Tribunal referred to several High Court decisions, which held that redemption fine could only be imposed if the goods were available for confiscation. Since the goods were not seized and were already cleared, the Tribunal set aside the redemption fine of Rs. 3,42,30,000/-. However, the Tribunal upheld the imposition of penalties but reduced the amounts considering the circumstances and the fact that the appellant had paid the entire customs duty during the investigation. The penalties were reduced from Rs. 50,00,000/- to Rs. 5,00,000/- for Chennai imports and from Rs. 7,00,000/- to Rs. 70,000/- for Mumbai imports, while the Rs. 5,000/- penalty for Delhi imports was upheld.

Conclusion:
The appeal was partly allowed. The Tribunal upheld the customs duty demand and interest, set aside the redemption fine, and reduced the penalties imposed. The Tribunal emphasized strict adherence to policy provisions and the inapplicability of promissory estoppel in this case.