Introduction: The case of Commissioner of Customs (Port) vs. B R Marbles Pvt Ltd, adjudicated by CESTAT Kolkata, highlights a situation where no penalties were imposed on an importer. This article provides a detailed analysis of the case, including the background, arguments presented, and the ultimate decision.
Background: This case revolves around M/s. B.R Marbles Pvt. Ltd., Jabalpur, who had obtained an EPCG (Export Promotion Capital Goods) Authorization to import duty-free capital goods for marble mining and subsequent export. The duty saved under this authorization amounted to Rs. 18,09,396/-. According to the terms of the authorization, the company was required to export marbles mined using the imported capital goods, equivalent to eight times the duty foregone.
However, before the mining activity could commence, it was halted due to a court order issued on 21.09.2005, following a PIL (Public Interest Litigation) filed by local residents of Katni District, Madhya Pradesh. The jurisdictional Collector also issued orders to restrict mining activities within the jurisdiction. Consequently, the export obligation period expired on 22.03.2012, leading to a demand notice for the recovery of the duty foregone, including interest and penalties.
In the subsequent adjudication proceedings, the demand was partially confirmed, covering the duty foregone but not interest and penalties. The case was then appealed, and the Commissioner (Appeals) upheld only the demand for the duty foregone.
Analysis: The crux of the issue was whether the importer, M/s. B.R Marbles Pvt. Ltd., should be penalized for failing to meet the export obligation due to circumstances beyond their control, such as court-ordered delays. The revenue argued that the importer continued to import goods despite being aware of the restrictions on mining activities, alleging deliberate intent to defraud the revenue through suppression of facts and misrepresentation.
However, the Tribunal noted that it was not disputed that the company could not undertake any mining activity due to the orders of the Hon’ble Apex Court and subsequent restrictions imposed by the jurisdictional Collector. To ascribe malicious intent to the importer under these circumstances was deemed unwarranted. Moreover, the revenue failed to produce evidence supporting the allegations of misrepresentation and deliberate suppression of facts.
The Tribunal also considered that the importer had approached the department to request permission to make installment payments for the duty foregone and to waive interest and penalties, which were initially proposed in the show-cause notice. The importer had already paid a significant portion of the total duty due in two installments.
The case was compared to past scenarios where importers couldn’t fulfill export obligations due to circumstances beyond their control, such as global economic crises. In such cases, penalties, interest, and fines were waived by the Tribunal.
The revenue’s argument that the importer had malicious intent was summarily rejected. The Tribunal noted that no mens rea (criminal intent) on the part of the importer was established. The precedents of similar cases were found to be applicable to this matter.
Conclusion: In conclusion, the CESTAT Kolkata upheld the decision of the Commissioner (Appeals) to waive penalties, interest, and fines on the importer, M/s. B.R Marbles Pvt. Ltd., due to circumstances beyond their control. The court-ordered delays in mining activities, coupled with the lack of evidence supporting allegations of misrepresentation, led to this outcome. This case underscores the importance of considering the context and factors beyond the importer’s control when assessing penalties and interest in customs cases.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The impugned appeal has been filed by the revenue assailing the order passed by learned Commissioner (Appeals) vide Order in Appeal No. KOL/CUS(PORT)/AA/1301/2017 dated 5.10.2017, whereby he has set aside the order for imposition of penalty and demand of interest on the respondents.
2. Briefly, the facts of the case are that the respondent M/s. B.R Marbles Pvt. Ltd. Jabalpur, obtained an EPCG Authorization to import duty free capital goods for mining of marbles and exporting the same. The duty saved/foregone in terms of the said EPCG Authorization was Rs.18,09,396/-(Rupees Eighteen lakh nine thousand three hundred ninety six only) and the respondent was obligated to export, the marbles mined using the said imported capital goods to the tune of eight times the duty foregone. However, even before the mining activity could actually start, the mining activity was stayed by the orders of the Hon’ble Apex Court, issued on 21.09.2005, pursuant to a PIL filed by the local residents/body of Katni District of Madhya Pradesh. This order of the Apex Court was followed up by the orders of the jurisdictional Collector, staying the mining activities within the jurisdiction. Subsequently, a demand notice was served on the respondents, seeking recovery of the duty foregone, once the export obligation period expired on 22.03.2012. In adjudication proceedings, the said demand was confirmed alongwith interest and imposition of penalty. In appeal proceedings the learned Commissioner (Appeals) confirmed only the demand amount towards the duty foregone of Rs.18,09,396/- (Rupees Eighteen lakh nine thousand three hundred ninety six only).
3. We have heard the rival submissions on both sides of the divide.
4. The Revenue, contends that the respondents never sought an extension of the period for fulfillment of export obligation. They state that the respondents however, continued to import the goods despite being aware of the restrictions on mining activities imposed in terms of the Hon’ble Supreme Court‘s order. They contend that the respondents were thus in a deliberate act of import, with intent to defraud the revenue through suppression of facts and deliberate mis-representation. Further, as the duty amount had been confirmed, the Commissioner (Appeal) was obligated to automatically uphold the leviability of interest as per the provisions of Section 28 of the Customs Act which were automatic. They state, that but for the department’s vigilance the revenue would have been defrauded of the aforesaid amount of duty saved in terms of the said EPCG License granted.
5. We have heard both sides. It is not in dispute that the respondents could not undertake any mining activity because of the aforesaid restrictions imposed by the Hon’ble Apex Court. To attach motives on part of the appellant under such circumstances is certainly not called for. It cannot be anybody’s case that the respondents continued to import the capital goods with intentions of defrauding the revenue and depriving the department of its rightful claim. In any case the department has not been able to adduce any evidence in support of this proposition of theirs of mis-representation and deliberate suppression of facts. The fact that the respondents could not discharge their export obligation and hence failed to meet the export commitments leading to nonissue of the EODC is understandably beyond the control of the respondent. It is also on record that the respondent did approach the department to permit them to make the payment of duty foregone in terms of the EPCG Licence issued, in installments and waive the requirement/imposition of interest and penalty as was proposed in the show cause notice. It is on record that the respondent has paid the total duty due in terms of the EPCG in two installments Rs.18,00000/- (Rupees Eighteen lakh only) before filing of the appeal before the Commissioner (Appeals) and the balance amount of Rs. 9,396/- (Rupees Nine thousand three hundred ninety six only) on 2nd November 2017, pursuant to the order passed by learned Commissioner (Appeals).
6. The compelling circumstances beyond their control pointed out by the respondents, have been admitted by the authorities. Therefore, no blame or aspersions can be cast on the respondents that they had malicious intent to defraud the revenue. This argument of the revenue is rejected summarily. We also note that this is not the first time that any importer has not been able to fulfill the export obligation for reasons beyond his control. Thus in the wake of global economic crisis in Asia and particularly so in Southeast Asia, this Tribunal in the case of Sanghi Industries Ltd. Vs. CC (Export Promotion), Mumbai1, had set aside the penalty interest and fine imposed where export obligation under the EPCG Licence could not be fulfilled by the importer due to global economic crisis. Likewise, in the case of Taurus Novelties Ltd. Vs. C.C. Bangalore2, wherein the importers had not met the export obligation cast upon them, due to collapse of the Korean economy and therefore, could not procure the requisite orders and export the Ceramic goods manufactured, this Tribunal had allowed the plea for waiver of redemption fine, penalty as well as interest. We also note that the revenue has totally failed to establish any aspect of mens rea on part of the respondent. The ratio of the aforesaid case laws is thus squarely applicable to the present matter.
7. In view of our discussions as aforesaid, we do not find any infirmity in
the orders of the learned Commissioner (Appeals). We therefore dismiss the appeal filed by the revenue.
(Operative part of the order was pronounced in the open Court)
1. 2010(259) ELT 223(Tri.-Bang).
2. 2004(173) ELT 100 (Tri-BNG).