2025 (4) TMI 73 - AT - Customs

Levy of redemption fine and penalty - non-fulfilment of export obligation - production of EODC/Final duty Paid Regularization Letter issued by DGFT under the amnesty scheme on full payment of appropriate customs duty along with interest - HELD THAT - The appellants having discharged the entire customs duty along with applicable interest under the DGFT s Amnesty Scheme no penalty and fine would be payable by the importers. As such the fine and penalty imposed in the impugned Order-in-Original No. 58645/2017 dated 27.09.2017 and Order-in-Original No. 62978/2018 dated 19.04.2018 are only ordered to be set aside. There is no interference in payment and appropriation of the applicable duties of customs and interest. Appeal allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The primary issue considered in these appeals is whether the fines and penalties imposed for non-fulfillment of export obligations under the Export Promotion Capital Goods (EPCG) scheme should be sustained after the appellants have settled their customs duty and interest liabilities under the Amnesty Scheme announced by the Directorate General of Foreign Trade (DGFT). Specifically, the question is whether the production of an Export Obligation Discharge Certificate (EODC) and a final duty paid regularization letter under the amnesty scheme absolves the appellants from the penalties and fines imposed under the Customs Act, 1962.

ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents:

The legal framework involves the Customs Act, 1962, specifically Section 112(a) concerning penalties for improper importation of goods, and Section 111(o) regarding the confiscation of goods. The EPCG scheme allows importation of capital goods at concessional duty rates provided the importer fulfills certain export obligations. The Amnesty Scheme, introduced under the Foreign Trade Policy 2023, allows for regularization of defaults in export obligations by paying the exempted customs duties and applicable interest.

Court's interpretation and reasoning:

The Tribunal examined the applicability of the Amnesty Scheme, which facilitates the settlement of customs duty and interest liabilities for exporters who failed to meet their export obligations under the EPCG scheme. The Tribunal emphasized that the DGFT's issuance of an EODC and a final duty paid regularization letter under the Amnesty Scheme indicates that the appellants have settled their customs duty liabilities. The Tribunal also considered the decision of the Kerala High Court in M/s. Sujee Colour Printers, which held that regularization of export obligations through the Amnesty Scheme precludes the imposition of penalties under the Customs Act.

Key evidence and findings:

The key evidence includes the DGFT's final duty paid regularization letters and the EODC issued to the appellants, confirming the payment of customs duties and interest under the Amnesty Scheme. Additionally, the Tribunal noted the absence of any circular from the Central Board of Indirect Taxes and Customs (CBIC) addressing the imposition of penalties when the Amnesty Scheme is availed.

Application of law to facts:

The Tribunal applied the legal principles established in the Kerala High Court decision, which clarified that once the customs duty and interest are paid under the Amnesty Scheme, the importers are deemed to have not availed the EPCG scheme benefits, thus nullifying the basis for penalties. The Tribunal found that the appellants had fully complied with the Amnesty Scheme requirements by paying the necessary duties and interest, thereby regularizing their export obligations.

Treatment of competing arguments:

The Tribunal considered the arguments from both the appellants and the Departmental Representative. While the appellants argued for the setting aside of penalties based on the Amnesty Scheme compliance, the Departmental Representative did not provide any counter-evidence or circular supporting the continued imposition of penalties post-compliance with the Amnesty Scheme.

Conclusions:

The Tribunal concluded that the penalties and fines imposed under the Orders-in-Original should be set aside, given the appellants' compliance with the Amnesty Scheme and the issuance of the EODC by the DGFT.

SIGNIFICANT HOLDINGS

The Tribunal held that:

• "The appellants having discharged the entire customs duty along with applicable interest under the DGFT's Amnesty Scheme, no penalty and fine would be payable by the importers."
• The fines and penalties imposed in the impugned Orders-in-Original were ordered to be set aside.
• There would be no interference with the payment and appropriation of the applicable customs duties and interest.

The core principle established is that compliance with the Amnesty Scheme, resulting in the issuance of an EODC, effectively regularizes the export obligation default, thereby nullifying the grounds for penalties under the Customs Act. The Tribunal's final determination was to allow the appeals, setting aside the penalties and fines, with the appellants entitled to any consequential benefits under the law.