The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the Directorate General of Foreign Trade (DGFT) has issued the Export Obligation Discharge Certificate (EODC) under Advance Authorisation Scheme led to the fulfilment of pre import conditions and the demand of Integrated Goods and Service Tax (IGST) is not sustainable.
The bench of Ramesh Nair (Judicial Member) and C L Mahar (Technical Member) has observed that the goods were not available for confiscation and in absence of seizure of goods and non availability of the goods, confiscation of the goods cannot be ordered and consequential redemption fine cannot be imposed.
Table of Contents
Background
The appellant/assessee had imported various input materials without payment of duty of customs under cover of a number of Advance Authorization issued by DGFT. While executing such imports, the importer availed benefit of exemption extended by Notification No. 18/2015-Cus dtd. 01.04.2015, as amended by the Customs Notification No. 79/2017-Cus dtd. 13.10.2017, and did not pay any Customs Duty in the form of Integrated Goods & Service Tax (IGST) levied under Section 3(7) of the Customs Tariff Act, 1975, on such input materials at the time of import.
However, the exemption was extended subject to condition that the person willing to avail such benefit should comply with pre import condition and the finished goods should be subjected to physical exports only.
The department found that appellant failed to comply with the pre-import condition as required under said Notification No. 79/2017-Cus dtd. 13.10.2017. Pre-import condition means that the goods should be imported prior to commencement of export to enable the exporter to manufacture finished goods, which could be subsequently exported under the same Advance Authorization for discharge of Export Obligation.
Accordingly, investigation was initiated by the Officers of ICD, Customs Khodiyar against the Appellant and it appears that the importer have violated such pre-import condition, leading to non-payment of IGST in 122 Bills of Entry under cover of which imports were made involving IGST against the 5 advance authorization.
A show cause notice was issued by the Commissioner of Customs, Ahmedabad to the Appellant proposing recovery of Customs duty in the form of IGST forgone in course of imports of the goods through the above ports along with interest, fine and penalty.
The Commissioner has passed the adjudication order in the show cause notice, and while confirming the demand of duty of IGST with interest, he has also held that the goods imported by the appellant were liable for confiscation and that the appellant is liable for paying redemption fine in lieu of confiscation under Section 125 of Customs Act 1962, penalty under Section 114A of Customs Act 1962 and interest under Section 28AA of Customs Act 1962.
Arguments
The appellant contended that the Commissioner of Customs, Ahmedabad does not have the jurisdiction to issue the impugned show cause notice for the goods imported through Mundra Ports and NehavaSheva Ports. Therefore demand is liable to dropped.
The appellant urged that the requirement of complying with the pre- import condition should be made qua imported materials/inputs and not qua advance authorization. Since the imported inputs are used for exports of finished goods, pre-import condition is satisfied.
The appellant contended that the entire exercise is revenue neutral as the IGST payable is available as credit to the Appellant. Since the whole process is revenue neutral there is no loss to the government exchequer in this scenario. The courts have consistently held that where the demand raised by the Revenue is equal to the credit available to the Assessee, then the demand is not maintainable.
The appellant contended that even if IGST is payable, the demand of interest, penalty and fine is not sustainable as there was no levy of such of amount in terms of Section 3(12) of Customs Tariff Act. He also submits that as regard the confiscation of goods and redemption fine, therefore, the same is not maintainable for the reason that goods were not available for confiscation. Since, the demand itself is not sustainable on ground of revenue neutrality and time bar, the penalty was also not imposable.
Issue Raised – Pre Import Conditions
The issue raised was whether appellant is liable to pay IGST, interest, redemption fines and penalty confirmed by the impugned order in connection with alleged violation of “Pre-import Condition” in the imports made against the advance authorization scheme during the period October 2017 to November 2018, read with Notification No. 18/2015- Cus dated 01.04.2015 as amended by the Notification No.79/2017-cus dated 13.10.2017.
Conclusion – Pre Import Conditions
The tribunal held that in almost all the cases, the appellant has fulfilled the pre-import condition, in some cases the bill of entry was re-assessed and the appellant has paid the IGST for which they are not contesting on the ground that they are eligible for ITC under GST. In view of the above on the factual aspects of the case the demand of IGST along with the interest, fine and penalties are not sustainable. As regard the penalty corresponding to the IGST paid by the appellant since, the same is availed as ITC under GST there is no malafide on the part of the appellant.
The tribunal held that a penalty corresponding to the duty paid by the appellant which is not in contest will also not sustain on the ground of Revenue neutrality.
The tribunal found that the demand of duty, interest, penalty and fine are not sustainable.
Case Details
Case Title: Sakar Industries Pvt. Ltd. Versus Commissioner Of Customs – Customs Ahmedabad
Case No.: Custom Appeal No. 10453 of 2024 – DB
Date: 22.10.2024
Counsel For Petitioner: Manish Jain
Counsel For Respondent: P Ganesan
Click Here To Read Order
