2022 (11) TMI 59 - AT - Customs

Scope for invoking the detriment of confiscation under section 111(o) of Customs Act, 1962 with attendant penalty under section 112 of Customs Act, 1962 - HELD THAT - The appellant had conceded inability to execute export orders within the prescribed period and had, thus, not been in compliance with the conditions in the advance authorization scheme elaborated in the Foreign Trade Policy issued under the authority of Foreign Trade (Development and Regulation) Act, 1992 mirrored in notification no. 96/2009-Cus dated 11th September 2009. It is also on record that the first appellate authority had held the said breach as not attributable to malafide and, therefore, reduced the redemption fine and penalty thereon. The various schemes incorporated in the Foreign Trade Policy are administered, insofar as imports and exports are concerned, though notifications issued under section 25 of Customs Act, 1962 emplacing the same conditions including execution of bond for compliance and, failing which, duty foregone along with interest, is obliged to be deposited besides being liable to appropriate action under Customs Act, 1962. Such stipulation is necessitated as, generally, the period granted for fulfillment of export obligation lies well beyond the normal period of limitation prescribed in section 28 of Customs Act, 1962. Whether the regularization had occurred, as argued by Learned Authorised Representative, to extricate the appellant from the consequence of the show cause notice? - HELD THAT - A decision on the contractual breach of obligation entered into in relation to schemes under the Foreign Trade Policy vests with the licencing authority and it is only upon such occurrence that it may be conclusively held that breach of condition is demonstrated. It is relevant here that the show cause notice has invoked section 143 of Customs Act, 1962 which provides for the execution of bonds for ensuring fulfillment of conditions. It is, therefore, not a demand under section 28 of Customs Act, 1962 following allegation of short payment, non-payment or evasion of duties but for enforcing the obligation under advance authorization scheme of the Foreign Trade Policy - the regularization is complete in all respects and it is only in the absence of such regularization that proceedings under section 111(o) of Customs Act, 1962 could have been brought to conclusion. The decisions of the Tribunal in M/S. GLOBAL BOARDS LTD VERSUS COMMISSIONER OF CUSTOMS (EXPORT) , MUMBAI 2019 (8) TMI 336 - CESTAT MUMBAI and MARUTI UDYOG LIMITED VERSUS COMMISSIONER OF CUSTOMS, KANDLA 2001 (2) TMI 210 - CEGAT, MUMBAI , pertaining to law on invoking of section 111(o) of Customs Act, 1962 in circumstances of the imports having been regularised, must be followed, where the decisions disfavor resort to section 111 of Customs Act, 1962 when breach of conditions of licence had been regularized, and certified to be so, by the competent authority. Appeal allowed.

Summary

Issues:
Challenge against redemption fine and penalty under Customs Act, 1962 for non-compliance with advance authorization scheme.

Analysis:
The appellant disputed the duty foregone on imports against advance authorization, extended fulfillment period, and subsequent show cause notice for duty deposit and confiscation. The duty with interest was deposited, but redemption fine and penalty were reduced, not set aside, by the first appellate authority.

The appellant argued against invoking section 111(o) and penalty under section 112 of Customs Act, citing inability to fulfill export orders within the scheme's period. The Tribunal's decisions in various cases were referenced to support the appellant's stance on regularization of breaches by competent authorities.

The Tribunal deliberated on the scope of invoking confiscation under section 111(o) and penalty under section 112. The breach of conditions under the advance authorization scheme and the authority's power to confiscate goods were analyzed in light of the Customs Act provisions.

The Tribunal referred to precedents like Global Boards Ltd and Maruti Udyog Ltd to clarify the liability for penalty and confiscation under Customs Act sections. The decision emphasized the importance of fulfilling post-importation conditions and the consequences of non-compliance.

The Tribunal highlighted the significance of regularizing breaches by the licensing authority to negate the applicability of section 111(o) of the Customs Act. The completion of regularization and closure by the competent authority were crucial in determining the outcome of the appeal.

The Tribunal differentiated cases of ineligibility due to non-fulfillment of import conditions from instances where imports were regularized by competent authorities. The role of licensing authorities in concluding breaches and the jurisdictional authority of customs officers in enforcing import conditions were discussed to support the decision.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal, emphasizing the importance of regularization by competent authorities in determining the liability for penalty and confiscation under the Customs Act.