2021 (5) TMI 902 - AT - Customs

Levy of redemption fine and penalty - provisional release of goods - goods declared as as heavy melting scrap but was found to be secondary and defected MS Sheets - HELD THAT - On detection of the goods on being mis-declared by the appellant, the appellant sought provisional release of the goods which was allowed and at that time, the appellant paid differential duty alongwith interest and 15% of duty as penalty in terms of Section 28(5) of the Customs Act, 1962. Later on, the show cause notice has been issued to the appellant to adjust the duty paid by the appellant under Section 18(2) of the Customs Act, 1962. The provision of Section 18(2) speaks that when the duty leviable on such goods is assessed finally (or re-assessed by the proper officer) in accordance with the provisions of this Act, then the amount paid by the assessee at the time of clearance shall be adjusted. On going through the records placed, there is no final assessment order has been placed which means the provisional release of the goods has been treated as final and the duty paid by the appellant has been adjusted under Section 18(2) of the Act. It is very strange that without finalization of the assessment, re-assessment of the bill of entry, how the duty paid by the appellant has been adjusted under section 18(2) of the Act and demanded the interest and imposed the penalty on the appellant. Without demanding duty under Section 28(1) of the Act, how can it be adjusted under section 18(2) of the Act. Technically speaking the demand of differential duty is also not sustainable in the circumstances till finalization of the assessment; as the appellant has not contested the payment of duty and sought conclusion of the matter under Section 28(5) of the Act. Moreover, when the demand of interest has been made under Section 28 AA of the Act, naturally or consequentially the provisions of Section 28(5) of the Customs Act, 1962 have been attracted in the facts and circumstances of the case. Therefore, the duty, interest and penalty paid by the appellant at the time of clearance of the goods shall amounts to be concluded under Section 28(5) of the Customs Act, 1962 Instead of doing so, the officers of the Revenue has gone beyond that, which is not permissible in law. The duty, interest and 15% penalty in terms of Section 28(5) of the Customs Act, 1962 paid by the appellant is sufficient - appeal allowed.

Summary

Issues:
- Imposition of redemption fine and penalties under Sections 112 and 114 AA of the Customs Act, 1962.
- Applicability of Sections 28(1), 28 AA, and 28(5) of the Customs Act, 1962 in the case.
- Final assessment order and provisional release of goods under Section 110A of the Customs Act, 1962.
- Adjustment of duty paid by the appellant under Section 18(2) of the Act.
- Compliance with due process of law and procedural requirements.

Analysis:
1. Imposition of Redemption Fine and Penalties: The appellant appealed against the imposition of a redemption fine of ?1,00,000/- and penalties of ?25,000/- and ?1,50,000/- under Sections 112 and 114 AA of the Customs Act, 1962. The case involved the importation of goods declared as heavy melting scrap but found to be secondary and defected MS Sheets upon physical examination.

2. Applicability of Sections 28(1), 28 AA, and 28(5) of the Customs Act: The appellant contended that the duty, interest, and penalty paid under Section 28(5) of the Act were sufficient, citing a tribunal decision. The appellant argued that the interest demanded under Section 28 AA should trigger the application of Section 28(5) as well, and without the demand under Section 28(1), adjusting duty under Section 18(2) was improper.

3. Final Assessment Order and Provisional Release: The tribunal noted that no final assessment order had been issued, and the provisional release of goods was treated as final without due process. The duty paid by the appellant was adjusted under Section 18(2) without finalization of assessment, raising concerns about the legality of imposing interest and penalties without following proper procedures.

4. Adjustment of Duty under Section 18(2): Section 18(2) of the Act allows for the adjustment of duty paid when goods are finally assessed. The tribunal questioned the adjustment made without a final assessment order and highlighted the necessity of following due process before imposing additional charges on the appellant.

5. Compliance with Due Process of Law: The tribunal emphasized the importance of following due process and the provisions of the Customs Act. It criticized the officers for not demanding duty under Section 28(1) before adjusting duty under Section 18(2) and imposing interest and penalties. The tribunal held that the duty, interest, and penalty paid by the appellant under Section 28(5) were sufficient, setting aside the impugned order.

6. Conclusion: The tribunal allowed the appeal, dropping the redemption fine and penalties imposed on the appellant. The judgment highlighted the necessity of adhering to legal procedures and ensuring proper assessment before imposing additional financial obligations on importers.