Custom, Excise & Service Tax Tribunal
Keshava Fabrics Pvt Ltd vs Cc Sea Ch - Iv on 28 March, 2025
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT No. I
Customs Appeal No. 42173 of 2017
(Arising out of Order-in-Original No. 58645/2017 dated 27.09.2017 passed by Commissioner
of Customs, Custom House, No. 60, Rajaji Salai, Chennai - 600 001)
M/s. Keshava Medi Devices Private Limited ...Appellant
Plot No. 31&36, Industrial Estate,
Settipalli (Post), Renigunta Road,
Tirupathi - 517 506.
Versus
Commissioner of GST and Central Excise ...Respondent
Chennai IV Commissionerate, Custom House, No. 60, Rajaji Salai, Chennai - 600 001.
And Customs Appeal No. 41291 of 2018 (Arising out of Order-in-Original No. 62978/2018 dated 19.04.2018 passed by Commissioner of Customs, Custom House, No. 60, Rajaji Salai, Chennai - 600 001) M/s. Keshava Fabrics Private Limited ...Appellant Plot No. 37 to 39, Industrial Estate, Settipalli (Post), Renigunta Road, Tirupathi - 517 506.
Versus Commissioner of GST and Central Excise ...Respondent Chennai IV Commissionerate, Custom House, No. 60, Rajaji Salai, Chennai - 600 001.
APPEARANCE:
For the Appellants : None For the Respondent : Ms. Anandalakshmi Ganeshram, Authorised Representative CORAM:
HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) HON'BLE MR. AJAYAN T.V., MEMBER (JUDICIAL) 2 C/42173/2017 C/41291/2018 FINAL ORDER Nos. 40407-40408 /2025 DATE OF HEARING : 27.02.2025 DATE OF DECISION : 28.03.2025 Per Mr. VASA SESHAGIRI RAO Customs Appeal No. C/42173/2017 has been filed by M/s. Keshava Medi Devices Private Limited (Appellant A1) assailing the impugned Order-in-Original No. 58645/2017 dated 27.09.2017 passed by Commissioner of Customs, Chennai-IV confirming the demand of differential Customs duty of Rs.60,71,115/- and appropriating the amount already paid towards above demand, besides ordering for payment of interest and imposing a penalty of Rs.20,00,000/- under Section 112(a) of the Customs Act, 1962 (ACT) and ordering for confiscation of goods under Section 111(o) ibid with an option to redeem the goods on payment of redemption fine of Rs. 20,00,000/- under Section 125 ibid.
1.2 Customs Appeal No. C/41291/2018 has been filed by M/s. Keshava Fabrics Pvt. Ltd. (Appellant A2) assailing the impugned Order-in-Original No. 62978/2018 dated 19.04.2018 passed by Commissioner of Customs, Chennai-IV confirming the demand of differential Customs duty of Rs.66,19,513 /- and appropriating the amount of 3 C/42173/2017 C/41291/2018 Rs.66,50,000 recovered by way of enforcing bank guarantee, besides ordering for payment of interest, imposing a penalty of Rs.5,00,000 /- under Section 112(a) ibid and ordering for confiscation of goods under Section 111(o) ibid with an option to redeem the goods on payment of redemption fine of Rs. 25,00,000/- under Section 125 ibid. 1.3 As an identical issue is involved in both these appeals, these are being taken up simultaneously for disposal by this common order.
2.1.1 Facts briefly stated are that in the appeal C/42173/2017, the Appellant A1 have imported certain Capital goods, at concessional rate of Customs duty, availing benefits under the Export Promotion Capital Goods Scheme in terms of two EPCG Licenses (i) 0930001495 dated 06.05.2005 and (ii) 0930001977 dated 10.01.2006 issued in the name of M/s. Kesava Plastics by the DGFT, Hyderabad, claiming exemption from payment of customs duty, in terms of Customs Notification No. 97/2004 dated 17.09.2014.
2.1.2 Investigation conducted by DRI revealed that the Appellant A1 had failed to fulfil the export obligation under the Exports Promotion Capital Goods Scheme (EPCG) within 4 C/42173/2017 C/41291/2018 the stipulated /extended period rendering the Appellant A1 liable for payment of Customs duty of Rs.60,71,115/- along with applicable interest in terms of Notification No. 97/2004- Cus. dated 17.09.2004 and for imposition of penalty, besides rendering the goods imported liable for confiscation. A Show Cause Notice dated 29.09.2016 was issued to the Appellant and the adjudicating authority confirmed the proposals put forth and imposed penalty /redemption fine, besides appropriating the amount paid towards demand. Being aggrieved, the Appellant has filed this appeal before this forum.
2.2.1 In appeal C/41291/2018, the Appellant A2 have imported certain Capital goods, at concessional rate of customs duty, availing benefits under the Export Promotion Capital Goods Scheme in terms 0930003699/3/11 dated 12.12.2007 issued in the name of M/s. Keshava Fabrics by the DGFT, Hyderabad, claiming exemption from payment of customs duty, in terms of Customs Notification No. 97/2004 dated 17.09.2014.
2.2.2 Investigation conducted by DRI revealed that the Appellant failed to fulfil the export obligation under the Exports Promotion Capital Goods Scheme (EPCG) within the 5 C/42173/2017 C/41291/2018 stipulated / extended period rendering the Appellant A2 liable for payment of Customs duty of Rs.66,19,513 /- along with applicable interest in terms of Notification no.97/2004 - Customs dated 17.09.2004 and for imposition of penalty, besides rendering the goods imported liable for confiscation. A Show Cause Notice dated 25.10.2016 was issued to the Appellant A2 and the adjudicating authority confirmed the proposals put forth and imposed penalty /redemption fine, besides enforcing bank guarantee towards duty demand. Being aggrieved, the Appellant A2 has filed this appeal before this forum.
3. The Ld. Counsel for the Appellant informed vide Letters dated 04.01.2025 that the dispute was settled under Amnesty scheme of the Directorate General of Foreign Trade (DGFT), Ministry of Commerce and Industry, Government of India after payment of Customs duty and interest. It was submitted that the DGFT issued final duty paid regularization letters after verification of duty payment and therefore in terms of Notification No. 1/2023-DGFT dated 31.03.2023 read with DGFT public Notice dated 01.04.2023, it was requested to close the appeal. Further, Ms. Anandalakshmi Ganeshram, Authorized Representative on behalf of the Department referred to the written submissions of the Ld. 6 C/42173/2017 C/41291/2018 Counsel and concurred that the dispute was settled under the said amnesty scheme.
4. Heard both sides and carefully considered the rival submissions and evidences on record.
5. The issue that arises for consideration in these appeals is whether the fine and penalties imposed for non- fulfilment of export obligation in the impugned Order-in- Original No. 58645/2017 dated 27.09.2017 and Order-in- Original No. 62978/2018 dated 19.04.2018 would survive or not on production of EODC/Final duty Paid Regularization Letter issued by DGFT under the amnesty scheme on full payment of appropriate customs duty along with interest?
6. We find that the Government announced the new Foreign Trade Policy (FTP) 2023 on 31 March 2023 to provide policy continuity and a responsive framework. The government also announced the issuance of an amnesty scheme to provide relief to the exporters who were unable to fulfil their export obligations (EO) under the Advance Authorizations (AA) and Export Promotion Capital Goods (EPCG) scheme. In this regard, the Directorate General of Foreign Trade Policy (DGFT) notified the 'Amnesty scheme' 7 C/42173/2017 C/41291/2018 for one-time settlement of default in export obligation by advance and EPCG authorization holders. As per the scheme, the EO default can be regularized on the payment of all customs duties exempted in proportion to the unfulfilled EO and payment of interest as applicable under the scheme. The payment of exempted customs duties and interest should be made before the stipulated time frame for availing the scheme. It is not in dispute that the Appellants availed the benefit of the Amnesty Scheme and paid the entire customs duty along with interest. The moot question however is whether that absolves the liability to pay fines and penalty imposed under the Customs Act, 1962. On being enquired with both the parties i.e., the Appellants and the Departmental Representative could not produce any Circular issued by the CBIC as to payment of fine and penalties imposed when the importer availed the benefit of the amnesty scheme and the entire customs duty liability has been discharged along with applicable rate of interest. Further, it has to be pointed out that the investigations were made against the appellants for non-fulfilment of export obligation for duty free import of capital goods under EPCG within the stipulated time periods and as the appellants have obtained the EODC issued by the DGFT under the amnesty scheme, the cause of action no more survives. 8
C/42173/2017 C/41291/2018
7. Further, the Ld. Counsel for the Appellant has relied upon the decision of the Hon'ble Kerala High Court in the case of M/s. Sujee Colour Printers Vs. DGFT, New Delhi, Commissioner (CBIC) [2025 (3) TMI 748] in Writ Petition No.31055 of 2024 dated 08.10.2024 wherein it has been held that: -
"i) The Appellant having regularized the export obligation by paying the duty and interest under the Amnesty Scheme, cannot be subjected to penalties for the same default, and
ii) The imposition of a penalty under Section 112(a) of the Customs Act is not justified once the export obligation is deemed fulfilled through the Amnesty Scheme. The relevant portion of the said order has been reproduced below for ease of reference:
"6. Having heard the learned counsel appearing for the petitioner and the learned Standing Counsel appearing for the respondents, I am certain that the petitioner is entitled to succeed. Ext.P2 Amnesty scheme (to the extent it is relevant) reads thus:-
''Subject: Amnesty scheme for one time settlement of default in export obligation by Advance and EPCG authorization holders - reg In exercise of powers conferred under Paragraph 1.03 of the Foreign Trade Policy (FTP) 2023, as amended from time to time, the Director General of Foreign Trade hereby makes the following amendments in procedure to close cases of default 9 C/42173/2017 C/41291/2018 in Export Obligation under (a) Advance Authorisation Scheme and (b) EPCG Scheme.
II. The Scheme ii. All pending cases of the default in meeting Export Obligation (EO) of authorizations mentioned in para(I) above can be regularised by the authorisation holder on payment of all customs duties that were exempted in proportion to unfulfilled Export Obligation and interest at the rate of 100% of such duties exempted. However, no interest is payable on the portion of Additional Customs Duty and Special Additional Customs Duty.
(Emphasis is supplied) viii. Based on the evidence of such payment and other relevant documents as prescribed under the Handbook of Procedures, concerned RA may examine the request and issue a letter granting Export Obligation Discharge Certificate (EODC).
ix. Even cases which have already been adjudicated (or pending adjudication), either originally or in appeal, can also be regularized under this Public Notice. The procedure for regularization of such cases would be as under:-
a. In respect of cases which have already been adjudicated (or pending adjudication) and where appeal has not been filed, firms will produce a copy of this closure letter from the concerned RA, to the Adjudicating Authority.
b. In case an appeal has been filed then this closure letter will have to be submitted to the Appellate 10 C/42173/2017 C/41291/2018 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. ''
7. It is clear from Ext.P1 that the sum of Rs. 50,23,802/- represents the entire amount of duty forgone under the EPCG Scheme. Rs.
13,35,689/- represents the interest payable on the said amount. The learned Standing Counsel appearing for the Customs Department does not dispute this. If that be the case, the failure to achieve the export obligation has been regularised in terms of the scheme. The inability to fulfill export obligation in terms of the Scheme, no doubt, exposed the petitioner to proceedings for recovery of the Customs Duty and for confiscation/imposition of penalty. However, once a Scheme for settling the liability had been introduced and the petitioner had paid Customs Duty forgone together with interest thereon and had obtained an export obligation discharge certificate (which is to be issued in terms of Ext.P2), the default in not achieving the export obligation was regularized by the proper authority namely, the Directorate General of Foreign Trade, Department of Commerce. There is yet another way of understanding the issue.
8. The only benefit obtained by the petitioner by utilising the benefit of the EPCG Scheme was that he could import goods without paying the full amount of customs duty. In terms of the Amnesty Scheme, the petitioner has to pay the entire amount of duty foregone along with interest up to the date of payment. On payment of the total amount of duty along with interest, it must be deemed that the petitioner has not availed the benefit of the EPCG Scheme. If that were the situation, the liability to achieve export obligation would be discharged, and no penalty/fine could be imposed on the petitioner. Therefore, I hold that the fine imposed under Section 112 11 C/42173/2017 C/41291/2018
(a) of the Act in lieu of confiscation under Section 111 (o) of the Act cannot be recovered from the petitioner. This writ petition is thus allowed in terms of prayer No.(b) in the writ petition."
7. After appreciating the facts and due fully following the above decision of the Hon'ble High Court of Kerala, we are of the considered view that the appellants having discharged the entire customs duty along with applicable interest under the DGFT's Amnesty Scheme, no penalty and fine would be payable by the importers. As such, the fine and penalty imposed in the impugned Order- in-Original No. 58645/2017 dated 27.09.2017 and Order-in- Original No. 62978/2018 dated 19.04.2018 are only ordered to be set aside. There is no interference in payment and appropriation of the applicable duties of customs and interest.
8. In the result, the appeals are allowed on the above terms with consequential benefits, if any, under law.
(Order pronounced in open court on 28.03.2025) Sd/- Sd/-
(AJAYAN T.V.) (VASA SESHAGIRI RAO) MEMBER (JUDICIAL) MEMBER (TECHNICAL) MK