Case Law Details
New Poly Tech Engineers Vs Commissioner of Customs (CESTAT Mumbai)
The CESTAT Mumbai addressed an appeal by New Poly Tech Engineers, concerning penalties and fines imposed for failing to meet export obligations under the Export Promotion Capital Goods (EPCG) scheme. The appellant had imported a Coordinate Measuring Machine in 2004-2005 without import duty, under the condition they would export goods manufactured using it. Due to market challenges, they failed to meet these obligations, resulting in a duty demand, confiscation of goods, redemption fine, and penalty. Subsequently, the appellant availed the Amnesty Scheme launched by the Department of Commerce in 2023, and received a regularization letter from the Director General of Foreign Trade (DGFT) after paying the due customs duty with interest. The appeal was then restricted to the legality of the penalty and redemption fine.
The appellant’s counsel argued that the Amnesty Scheme, particularly clause (ix), did not specify any penalties or redemption fines. They cited a precedent from the CESTAT Chennai, which held that once duty and interest are paid under the scheme, penalties for non-fulfillment of export obligations should be waived. The tribunal agreed that the amnesty scheme covered appeals pending before them, and that the scheme did not intend to view non-fulfilment of export obligation as an irregularity meriting penalty, given the scheme’s silence on the matter. Therefore, the CESTAT Mumbai allowed the appeal, setting aside the order of the Commissioner of Customs (Appeals) that had confirmed the penalties and fines. The tribunal concluded that once the duty and interest were paid under the amnesty scheme, the penalties and fines were no longer enforceable.
FULL TEXT OF THE CESTAT MUMBAI ORDER
This appeal was originally filed assailing legality of the order passed by the Commissioner of Customs (Appeals), Mumbai-II on dated 25.03.2019 in confirming duty demand of ₹5,66,062/- along with interest as well as confiscation of goods, levy of redemption fine of ₹5,00,000/- with penalty of ₹50,000/- for failure on the part of the Appellant to fulfil export obligation after ailment of EPCG Scheme Subsequently Appellant had availed the benefit of Amnesty Scheme launched on 01.04.2023 by the Department of Commerce, Government of India and received final duty paid Regularization Letter issued by the DGFT (Director General of Foreign Trade) on 28.03.2024, after which it has restricted its scope of appeal to the legality of imposition of penalty and levy of fine.
2. Facts of the case would go to reveal that Appellant had imported Coordinate Measuring Machine without payment of import duty under EPCG license with conditions that it would export certain value of goods to be manufactured with the help of the said imported machine and fulfil export The said purchase was made in 2004-2005 but due to heavy competition from neighboring countries it failed to fulfil export obligation, for which it was put to show-cause notice with proposal for recovery of duty with interest, confiscation of imported capital goods under Section 111(o) and proposal for imposition of penalty under Section 112(a) of the Customs Act, 1962. It had suffered adjudication process and both the Adjudicating Authority vide his order dated 06.03.2018 as well as the Appellate Authority namely Commissioner (Appeals) vide his order dated 25.03.2019, in an appeal filed before him by the Assessee-Appellant, confirmed the duty demand etc. as proposed in the show-cause notice, which Appellant has assailed before this forum.
3. Grounds taken in the appeal memo are completely different and what is being urged by learned Counsel for the Appellant is restricted to challenging validity of such imposition of penalty and redemption fine and its enforcement after Appellant had availed the benefit of Amnesty Scheme by making payment of the entire Customs duty with required interest on 20.03.2024 and after it has receipt regularization letter on 20.03.2024!
4. During course of hearing of the appeal, in drawing attention to Clause (ix) of the said Amnesty Scheme dated 04.2023, learned Counsel had argued that in cases where appeals were pending, once closer letter is submitted before the Adjudicating Authority / Appellate Authority, they will decide on the closer of such appeal and will inform the Appellant and also the concerned RA (Regional Authority) and as because the Scheme does not contemplate payment of any redemption fine or penalty for which such confirmation of fine and penalty, which were to be made when Act or omission had rendered the goods liable for confiscation under Section 111, as provided under Section 112(a) was no more subsisting. He placed his reliance also on several decisions on the issue including the one passed by Chennai Bench of this Tribunal on 17.12.2024 vide Customs Appeal No. 40387 of 2021 in the case of M/s. Makeups India Private Limited Vs. The Commissioner of Customs, Chennai-IV reported in 2024 (12) TMI 1038 – CESTAT Chennai. He , therefore, prayed for setting aside of the penalty and redemption fine as was being confirmed by the Commissioner of Customs (Appeals), Mumbai-II in 2019.
5. Learned Authorized Representative objects the petition and supports the finding of the Commissioner of Customs (Appeals), Mumbai-II and he is of the view that Appellate Authority in Clause (ix) of Amnesty Scheme would mean only the first Appellate Authority and not the Tribunal, for which the order passed by the Commissioner (Appeals) needs no interference by this Tribunal.
6. I have perused the case record, the relevant Public Notice 2/2023 vide which Amnesty Scheme for one time settlement of default in export obligation by advance EPCG authorization holders was launched as well as the decided case laws relied upon by the Appellant. The scheme starts with the heading which indicates that all variants of advance authorization scheme and EPCG Scheme issued under Foreign Trade Policy from 2009 to 2015 including its prior period from 2004- 2009 were covered under the scheme and Clause (ix) of the said Scheme does not indicate that appeal field before the First Appellate Authority can only be covered under the Scheme, since the language in sub-Clause (b) of Clause (ix) would go to say that it would cover cases in which appeals have been filed. For better clarity it is reproduced below:-
“ix (b) In case an appeal has been filed, then this closure letter will have to be submitted to the Appellate Authority. On submission of such closure letter Adjudicating Authority/Appellate Authority will decide on closure of such case/appeal and will inform the same to the Appellant and to the concerned RA.”
Therefore, I am of the view that appeal pending before this Tribunal is also covered under the scheme.
7. This being the observation of this Bench, it would be worthwhile to go with the findings of this Tribunal passed in the case of M/s. Makeups India Private Limited, cited supra, relevant para 7 of which would also be relevant for the purpose of determination of this appeal, it reads:
“7. In view of the above pleadings of the Ld. Advocate and upon consideration of the requirements of Public Notice No.2 (supra), we find that the Authority being satisfied with the remittance of duty and interest as per the Amnesty Scheme, has issued closure letter. Hence, there is no scope to confirm the penalty which is imposed on an alleged violation. Though Ld. Advocate has disputed livability of penalty under Section 112(a) ibid since the violation here is of EPCG scheme, for the reasons which were beyond the reach of the appellant but, however, we find that the whole Amnesty Scheme does not specify anything about the penalty and hence, it is possible that any violation insofar as the non- ulfilment of export obligation is concerned, is not viewed as irregularity or a mala fide intention.”
(Underlined to emphasise)
In view of the above observation since Appellant had sought for deletion of penalty and redemption fine imposed against the Appellant, the part component of which is addressed in the above para and the other part concerning confiscation would no more be valid as the Act or its omission had been regularized through the Amnesty Scheme launched by the Government of India, the order passed by the Commissioner (Appeals) against which appeal has been pending before this Tribunal at the time of ailment of such Amnesty Scheme, becomes unenforceable after irregularity, if any, has been remediated and therefore, the same is required to be set aside. Hence the order.
THE ORDER
6. The appeal is allowed and the order passed by the Commissioner of Customs (Appeals), Mumbai-II vide Order-in- ppeal No. 47 (EPCG Monitoring)/ 2019 (JNCH)/Appeal-I dated 25.03.2019 is hereby set aside.
(Order pronounced in the open court on 25.03.2025)
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