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2024 (11) TMI 744 - AT - CustomsCompetence of the customs authorities to proceed against goods imported into a Free Trade and Warehousing Zone (FTWZ) for non-compliance with the prescriptions in the Foreign Trade Policy (FTP) and other laws - Assessee is an entity based in Hong Kong and had availed warehousing facility offered by a unit issued with Letter of Approval (LoA) by the jurisdictional Development Commissioner to operate in Ashriya Free Trade and Warehousing Zone, established under the Special Economic Zone Act, 2005 - HELD THAT - It is not the case of lower authorities that import of old and used computer parts is not within the authorized operations of the unit or, for that matter, even barred from being brought into a special economic zone (SEZ). It is on record that no bill of entry had been filed under rule 47 of Special Economic Zone Rules, 2006 and, hence, the intendment of clearance of goods inappropriately into the domestic tariff area (DTA), even if such intendment sufficed to invoke section 111 of Customs Act, 1962, was unevidenced. As per section 53 of Special Economic Zone Act, 2005, such zones are deemed to be outside the customs territory. The jurisdiction of the Customs Act, 1962 comes into play either in connection with import contrary to requirement for undertaking authorized operations or upon removal from the special economic zone without payment of duty or in contravention of any prohibition on import into India. There is no evidence on record; even preponderance of probability does not offer such. Also clear from section 51 of Special Economic Zone Act, 2005 that, in the event of conflict, the provisions of Special Economic Zone Act, and 2005 will prevail. In these circumstances, the finding of the lower authorities that the goods are liable to confiscation under section 111 of Customs Act, 1962 is patently erroneous. The imposition of penalty under section 112 of Customs Act, 1962 is, therefore, not correct. We set aside the impugned order and allow the appeal.
Issues:
Competence of customs authorities to proceed against goods imported into a Free Trade and Warehousing Zone (FTWZ) for non-compliance with the prescriptions in the Foreign Trade Policy (FTP) and other laws. Detailed Analysis: 1. Competence of Customs Authorities: The appeal addressed the limited issue of whether customs authorities had the competence to take action against goods imported into a Free Trade and Warehousing Zone (FTWZ) for non-compliance with Foreign Trade Policy (FTP) and other laws. The appellant, an entity based in Hong Kong, transferred 'ATX CASES - OTHERS' to a unit in the FTWZ, which were later found to be old and used 'central processing unit (CPU)' and 'hard disk drives (HDD)' valued at &8377; 6,15,89,600. The customs authorities initiated proceedings against the appellant for importing these goods without the appropriate license and for alleged breach of E-Waste (Management) Rules, 2016. The adjudicating authority confiscated the goods under section 111 of the Customs Act, 1962, and allowed redemption on payment of a fine. The appellant challenged this action, arguing that the goods were beyond the customs territory as per the Special Economic Zone Act, 2005, and thus, section 111 of the Customs Act, 1962 could not be invoked. 2. Invocation of Customs Act, 1962: The appellant contended that the provisions of section 111 of the Customs Act, 1962 could not be applied as the goods were within a special economic zone (SEZ) established under the Special Economic Zone Act, 2005, which falls outside the customs territory of India. The appellant emphasized that no bill of entry had been filed for clearance into the domestic tariff area (DTA), and the procedure for clearance into DTA from an FTWZ is governed by the Special Economic Zone Rules, 2006. The appellant argued that the intent to clear goods into the DTA was not evidenced, and the lower authorities erred in invoking section 111 of the Customs Act, 1962. 3. Conflict of Laws and SEZ Act: The crux of the issue revolved around the conflict between the Customs Act, 1962, and the Special Economic Zone Act, 2005. The SEZ Act establishes that SEZs are outside the customs territory of India, and the Customs Act, 1962 does not apply to authorized operations within SEZs. The appellant highlighted that the import of 'old and used computer parts' was not prohibited within the authorized operations of the SEZ. The tribunal noted that the lower authorities' finding that the goods were liable to confiscation under section 111 of the Customs Act, 1962 was erroneous, and penalties imposed were unjustified. The tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal. This detailed analysis of the judgment highlights the legal intricacies surrounding the competence of customs authorities in dealing with goods imported into a Free Trade and Warehousing Zone (FTWZ) and the conflict between the Customs Act, 1962, and the Special Economic Zone Act, 2005.
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