No Redemption Fine & Penalty if Customs Notification Compiled: CESTAT Kolkata

Commissioner of Customs (Port) Vs Patna Offset Press (CESTAT Kolkata)

Introduction: Explore the recent CESTAT Kolkata order in the case of Commissioner of Customs (Port) vs. Patna Offset Press. The appeal revolves around the non-imposition of redemption fine and penalty despite the respondent’s failure to fulfill export obligations as per Customs Notification. Delve into the details of the case, the Handbook of Procedures, and the key arguments presented by both parties.

Detailed Analysis: The Commissioner of Customs (Port) filed an appeal against the order where no redemption fine and penalty were imposed on Patna Offset Press. The respondent held a Zero Duty EPCG Authorization, and the dispute arose due to their failure to fulfill export obligations within the specified block periods. The respondent, unaware of the specific condition, paid duty and interest promptly upon investigation.

The Customs Notification (No.102/2009-Cus) outlines the conditions, including the obligation to fulfill export targets within specified blocks. The Handbook of Procedures for Foreign Trade Policy provides guidelines for such cases. The respondent, thinking they had six years to meet obligations, paid duty and interest only after four years. The adjudicating authority refrained from imposing redemption fine and penalty, considering the respondent’s immediate compliance upon being informed.

The revenue argued that violation of Notification conditions warrants redemption fine and penalty. In response, the consultant for the respondent highlighted the confusion arising from the interpretation of the export obligation period. The respondent, acting promptly upon realizing the obligation, paid duty and interest, indicating compliance.

Conclusion: CESTAT Kolkata upheld the non-imposition of redemption fine and penalty, emphasizing the respondent’s quick response to fulfill obligations upon awareness. The confusion regarding the export obligation period played a crucial role, and the immediate payment of duty and interest demonstrated the respondent’s commitment to compliance. This case underlines the significance of clarity in trade policies and acknowledges genuine efforts to rectify unintentional lapses. The order ensures a fair approach to Customs Notification compliance and serves as a precedent for similar cases in the future.

FULL TEXT OF THE CESTAT KOLKATA ORDER

The revenue is in appeal against the impugned order wherein the adjudicating authority did not impose any redemption fine and penalty on the respondent.

2. The facts of the case are that the respondent obtained Zero Duty EPCG Authorization No.2130000128 dated 12.05.2011 was issued by the Asstt.Director General of Foreign Trade, under the Office of Jt. Director General of Foreign Trade, Patna along with the condition sheet (Annexure A), in which the terms and conditions of the said Authorization was incorporated. The said condition sheet states that:

i) The Authorization will be operative as per the provisions of Foreign Trade Poicy (2009-2014) and Handbook of Procedures (Vol.I) 2009-2014 or any other law/provision for the time being in force read with concerned Customs Notification No.102/2009-Cus dated 11.09.2009 as amended from time to time.

ii) The authorization holder shall execute Bank Guarantee/LUT (As the case may be) to Customs Authority before clearance of the first consignment as per Customs Circular No.58/2004 dated 10.2004 as amended from time to time.

iii) The authorization holder shall submit installation certificate to Regional Authority within six months from the date of completion of imports against the subject authorization.

iv) The Authorization holder is under obligation to export item worth US $ 1,442,091.33 i.e. 6 times the duty saved of Capital goods on FOB Basis within a period of 6 years. The export obligation shall be fulfilled by the use of the imported capital

v) The authorization holder is also required to maintain its average of the past three years export performance of the same and similar products.

vi) Authorization holder shall submit statement of export within three months from the expiry of block year duly certified by a chartered Accountant and concerned bank to the Regional He shall also submit yearly performance of export to the RA by 30^th April of every year.

3. Para 5.8 of the Hand Book of Procedures (2009-14) Volume-I, has stipulated that License under the Zero duty EPCG scheme shall fulfill the export obligation over the specified period in the following proportions:-

4. Para 5.8.3 of the Hand Book of Procedures (2009-14), Volume-I, stipulates that where export obligation of any particular block of years is not fulfilled in terms of the above proportions, except in such cases where the export obligation prescribed for a particular block of the year is extended by the regional Authority subject to payment of composition fee of 2% on duty saved amount equal to unfulfilled portion of EO, such Authorization holder shall within 3 months from the expiry of the block of years, pay duties of customs (along with applicable interest as notified by DoR) of an amount equal to the proportion of the duty leviable on the goods which bears the same proportion as the unfulfilled portion of the export obligation bears to be total export obligation.

5. Without payment of duty, the goods were cleared. The authorization was in operation as per the provisions of Foreign Trade Policy (2009-2014) and Handbook of Procedures (Vol.I) 2009-2014 or any other law/provision for the time being in force read with concerned Customs Notification No.102/2009-Cus dated 11.09.2009 as amended from time to time. The condition No.6 of the Notification No.102/2009-Cus dated 11.09.2009, as amended, provides that the importer executes a bond in such form and for such sum and with such surety or security as may be specified by the Dy/Asstt.Commissioner of Customs binding himself to comply with all the conditions of this notification as well as to fulfill export obligation on Free on Board (FOB) basis equivalent to six times the duty saved on the goods imported as may be specified on the authorization, or for such higher sum as may be fixed or endorsed by the Licensing Authority or Regional Authority in terms of Para 5.10 of Handbook Procedures Vol I, issued under Para 2.4 of the Foreign Trade Policy, within a period of six years from the date of issue of Authorization, in the following proportions namely:-

6. Condition (8) of the Notification No.102/2009-Cus dated 11.09.2009, as amended, provides that the importer produces within 30 days from the expiry of each block from the date of issue of authorization or within such extended period as the Deputy/Asstt. Commissioner of Customs may allow evidence to the satisfaction of the Deputy/Asstt. Commissioner of Customs showing the extent of export obligation fulfilled, and where the export obligation of any particular block is not fulfilled in terms of preceding condition, the importer shall within three months from the expiry of the said block pay duties of Customs equal to an amount bears the same proportion to the duties leviable on the goods, but for the exemption contained herein, which the unfulfilled portion of the export obligation bears to the total export obligation, together with interest rate at the rate of 15% per annum from the date of clearance of the goods.

7. As the respondent could not fulfill their export obligation in terms of the condition No.6 of the Notification, therefore, DRI investigated the case and on pointing out by the DRI the respondent paid the duty payable along with interest. But, the proceedings were initiated against the respondent by issuance of the show cause notice to impose redemption fine and penalty along with demand of duty and interest. The matter was adjudicated. The adjudicating authority after recording the fact that on pointing out, the respondent paid duty and interest and refrained from imposing redemption fine and penalty on the Against the said order, revenue is before us.

8. The Ld.AR appearing on behalf of the revenue submits that as the appellant violated the condition of the Notification, therefore, redemption fine and penalty were required to be imposed on the respondent, in that circumstances, the impugned order qua not imposing redemption fine and penalty is to be modified.

9. On the other hand, the Ld.Consultant appearing on behalf of the respondent submits that as per the Handbook Procedure of Foreign Trade Policy Volume-I of Foreign Trade Policy for 2009-2014, the respondent is required to fulfill export obligation within 6-8 years and they were under premise within 6 years they have to fulfill the export obligation, therefore, they did not pay duty after 4 years on account of non-fulfilling the export obligation. But on pointing out, they paid duty along with interest. Therefore, the redemption fine is not imposable on the respondent.

10. Heard the parties, considered the submissions.

11. We find that in this case no doubt the respondent in terms of Notification, has failed to fulfill the export obligation within a block of 4 years, the respondent is required to pay 50% of duty along with interest @ 15% within 30 days from the expiry of each block, but the respondent was not aware of this condition as they were under an impression that they were required to fulfill the export obligation within a period of 6 years. But, as and when investigation started the respondent immediately paid duty and interest. Further, as per the condition of the Notification, the appellant is required to pay duty along with interest. In that circumstances, the adjudicating authority has rightly refrained from imposing redemption fine and penalty on the As the respondent has complied with the condition of the Notification, therefore, we do not find any infirmity in the impugned order. The same is upheld and appeal filed by the revenue is dismissed.

(Operative part of the order was pronounced in the open Court.)