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2022 (6) TMI 558 - AT - CustomsDemand of Interest and penalty on amount already recovered towards duty foregone - advance licence scheme - import of sodium cyanide and dimethyl urea - non-qualified licence - N/N. 31/97-Cus dated 1st April 1997 and N/N. 96/93-Cus dated 2nd March 1993 - HELD THAT - The interest liability on duty recovered subsequently may be under the authority of Customs Act, 1962, the relevant notification issued under section 25 of Customs Act, 1962 for implementing exemption or concession scheme in Foreign Trade Policy or by reference to such authorizing provision of the Foreign Trade Policy in the said notification; the essence is an authority, direct or remote, attributable to an empowering statute. There can be no doubt that such condition was not in existence at the time of import and the show cause notice is also conspicuously silent on the availability of section 28AB of Customs Act, 1962 for such charging. The licence and the exemption notification are silent on such contingent charging; the sole provision cited by lower authorities is paragraph 128 of Handbook of Procedures which can hardly be claimed as a statutory prescription of the Foreign Trade Policy. It is a beneficial provision that enables a licence-holder to lay claim to regularization for breach of fulfilment of target of export obligation subject to compliance with the conditions therein. That is an internal disposal by the competent authority under the Foreign Trade (Development Regulation) Act, 1992 a far cry from the proceedings leading to the order impugned and not applicable to the present circumstances. It is clear that the appellant was not contracted, either directly or directly, to be liable for recovery of interest as laid down in COMMISSIONER OF CUSTOM VERSUS WIPRO LTD. 2011 (11) TMI 334 - KARNATAKA HIGH COURT by the Hon ble High Court of Karnataka. The charging of interest and imposition of penalty is set aside - Appeal is allowed.
Issues Involved:
1. Recovery of duty foregone on imported raw materials. 2. Charging of interest on the duty recovered. 3. Imposition of penalty under Section 112 of the Customs Act, 1962. 4. Confiscation of goods under Section 111 of the Customs Act, 1962. Detailed Analysis: 1. Recovery of Duty Foregone: The appellant, M/s Yenkay Medico Drugs Pvt Ltd, accepted the duty liability on imported raw materials used for manufacturing goods that were cleared into the domestic market instead of being exported. The original authority ordered the recovery of duty foregone amounting to ?5,02,770 due to non-compliance with the conditions in the relevant exemption notification and the Foreign Trade Policy provisions. 2. Charging of Interest: The appellant contested the interest charged on the recovered duty, arguing that Section 28AB of the Customs Act, 1962, which empowers the charging of interest, was incorporated only on 28th September 1996, after the date of import. The Tribunal noted that the exemption notification did not stipulate an obligation to pay interest. The Tribunal relied on the decision in Wipro Ltd (Infotech Group) [2012 (280) ELT (174) (Kar)], which held that in the absence of a provision in the notification, there is no liability to pay interest. The Tribunal concluded that the absence of a statutory or contractual obligation barred the recovery of interest. 3. Imposition of Penalty: The penalty of ?1,00,000 was imposed under Section 112 of the Customs Act, 1962, for goods liable for confiscation under Section 111 of the Act. The appellant argued that the penalty was unjustified as the import was regularized upon payment of duty. The Tribunal referred to the decision in Sanghi Industries Ltd., which distinguished between the duty liability and the liability to confiscation and penalty. The Tribunal held that with the recovery of duty, the requirement to comply with the post-importation condition ceased to exist, making Section 111(o) of the Customs Act inapplicable. Consequently, the imposition of penalty was deemed unsustainable. 4. Confiscation of Goods: The Tribunal examined the applicability of Section 111(o) of the Customs Act, 1962, which empowers confiscation for non-fulfilment of post-importation conditions. The Tribunal referenced the decision in Philips (India) Ltd., which stated that failure to fulfil export obligation is remedied by the recovery of duty, negating the applicability of Section 111(o). The Tribunal concluded that with the recovery of duty, the imports were regularized, and the confiscation and penalty provisions were not applicable. Conclusion: The Tribunal set aside the charging of interest and the imposition of penalty, allowing the appeal. The judgment emphasized that the absence of a statutory or contractual obligation for interest recovery and the regularization of imports upon duty payment negated the applicability of confiscation and penalty provisions under the Customs Act, 1962. The order was pronounced in the open court on 09/06/2022.
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