2024 (7) TMI 771 - HC - Customs

Failure to fulfil the conditions of Notification No. 27/2002 Cus dated 01.03.2002 - imposition of redemption fine, interest and penalty upon the respondent - respondent admitting his fault has voluntarily paid the interest as per condition No. 5(c) of the Notification dated 01.03.2002 - liability to pay interest - section 27 and 27A of the Customs Act, 1962 - HELD THAT - The respondent candidly admitted that they could not fulfil the export obligation due to circumstances which were beyond their control. This aspect has not been doubted by the department not shown to be factually incorrect. In such circumstances, the manner in which the respondent has been dealt with by the department right from the inception i.e. from the date of import is wholly unsustainable, unreasonable and arbitrary. Under the notification there was no power of confiscation. Furthermore, the notification does not provide for confiscation of the goods in the event the goods are not exported within the timeframe stipulated under the notification or the extended period thereof. Therefore, the question of confiscation of the goods also would not arise. The Tribunal was right in holding that the respondent was not liable for payment of any interest, till the payment of the duty as the entire amount of Rs. 73,65,624/- was with the appellant department - appeal dismissed.

Summary

Issues:
1. Interpretation of Notification No. 27/2002 Cus dated 01.03.2002
2. Imposition of redemption fine, interest, and penalty
3. Eligibility for refund of interest and penalty
4. Contravention of Customs Act, 1962 provisions
5. Unauthorized collection of security deposit
6. Failure to fulfill export obligation
7. Confiscation of goods in case of non-export

Analysis:
1. The case involved the interpretation of Notification No. 27/2002 Cus dated 01.03.2002 regarding the conditions for availing benefits related to customs duty payment.
2. The issue of imposition of redemption fine, interest, and penalty arose due to the respondent's failure to fulfill the conditions of the notification, leading to a dispute over the correctness of the adjudicating authority's actions.
3. The eligibility for refund of interest and penalty was questioned by the revenue, especially concerning the voluntary payment of interest by the respondent and the Tribunal's decision on consequential refund.
4. The observation of the Tribunal regarding the provisions of section 27 and 27A of the Customs Act, 1962 was challenged, raising concerns about the correctness of the Tribunal's decision.
5. The unauthorized collection of a security deposit by the Customs department, which was not provided for in the notification, was a crucial point of contention, highlighting jurisdictional issues.
6. The respondent's failure to fulfill the export obligation due to circumstances beyond their control was a significant factor in the case, impacting the decision on the payment of interest and penalty.
7. The question of confiscation of goods in case of non-export was addressed, emphasizing that the notification did not provide for confiscation and that the duty amount had already been collected by the department.

The High Court, after hearing arguments from both sides, upheld the Tribunal's decision, emphasizing that the respondent was not liable for payment of interest due to the duty amount being with the department. The Court found the Tribunal's reasoning legally sound and justified, leading to the dismissal of the appeal. The substantial questions of law were answered against the revenue, and the application was disposed of accordingly.