Custom, Excise & Service Tax Tribunal
Angel Starch And Food Pvt Ltd vs Chennai( Port Import) on 14 October, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, CHENNAI
REGIONAL BENCH - COURT No. I
Customs Appeal No. 40762 of 2015
(Arising out of Order-in-Original No. 35019/2015, dated 7-1-2015, passed by Commissioner
of Customs, Chennai)
M/s. Angel Starch & Foods Pvt Ltd., .... Appellant
Plot No.E-1-22, SIPCOT Industrial Growth Centre,
Perundurai Taluk,
Erode - 638 052.
VERSUS
Commissioner of Customs ...Respondent
Custom House, No.60 Rajaji Salai, Chennai - 600 001.
APPEARANCE :
Shri S. Murugappan, Advocate for the Appellant Ms. O.M. Reena, Authorised Representative for the Respondent CORAM :
HON'BLE MR. M. AJIT KUMAR, MEMBER (TECHNICAL) HON'BLE MR. AJAYAN T.V, MEMBER (JUDICIAL) FINAL ORDER No.41140/2025 DATE OF HEARING: 30.06.2025 DATE OF DECISION:14.10.2025 Per Mr. Ajayan T.V.
M/s. Angel Starch Food P Ltd., the appellant herein has preferred this appeal taking exception to Order in Original No. 35019/2015, dated 07-01- 2015, whereby the adjudicating authority has denied the benefit of EPCG scheme to the Appellant on the used imported goods, imported vide Bill of Entry number 6636231 dated 3-9-2014 and after rejecting the declared assessable value of the goods imported, has redetermined the value and directed the goods to be cleared on payment of applicable date of duty under merit. The adjudicating authority has also ordered confiscation of the said imported goods under section 111 (d) and section 111(m) of the Customs Act 1962, while allowing the appellant to redeem the goods on payment of a redemption fine of Rs.50 lakhs only in lieu of confiscation under section 125 of the Customs Act 1962. The adjudicating authority had further imposed a penalty of Rs.62,49,728/- under section 114 A of the 2 Customs Act 1962 for having rendered the goods liable for confiscation under section 111(d) ibid.
2. Relevant facts are that the appellant is a manufacturer of starch and had imported goods declared as "Schugi Fleximix 160 Mix and Agglomerier Machine, T 24184 MINOX Heating - Colling Mixer, etc. When the goods were examined after import by the customs authorities they found them to be second hand goods and it appeared that the appellants had attempted to clear the goods under zero duty EPCG scheme by willfully suppressing the facts. The department was also of the view that the importer has misdeclared the value of the imported goods and consequently these goods were got evaluated by a certified/empanelled chartered engineer. The appellant waived the requirement for show cause notice and requested for personal hearing. In the course of personal hearing the appellant submitted in writing that they had imported the capital goods for the first time for setting up manufacturing facility and were under the bona fide belief that the second hand goods are allowed under EPCG scheme and pointed out that in the list of capital goods under the EPCG authorization, second item, the year of manufacture was mentioned as 1992. They submitted that the value declared in invoices correctly represented the transaction value. However, they submitted that since the matter has been pending for more than 3 months and since they have incurred heavy detention charges, they are not contesting the valuation and are prepared to pay the duty on the value as fixed by the chartered engineer. However, they pleaded that the enhancement in the value should not lead to any penal action against them and requested for a lenient view. The adjudicating authority, however, upon adjudication, however held that the appellant had wilfully suppressed the facts that the goods are used machinery and misdeclared the goods imported as new machineries and thus after rejecting the declared value and redetermining the same and directing the goods to be cleared on payment of merit rate of duty also ordered confiscation of the goods while imposing redemption fine and penalty vide the impugned order in original as above mentioned. Aggrieved and dissatisfied by the same, the appellant having preferred this appeal, is now before this Tribunal.
33. Shri. S. Murugappan, Advocate appeared on behalf of the appellant and submitted that the appellants were unaware of the fact that by an amendment of the policy on 18th April 2013, second hand machines were not allowed under the EPCG scheme, Ld. Counsel submitted that there was no deliberate suppression of the nature of the goods and that for one of the machines, it was clearly mentioned that the year of manufacture was 1992. It was also submitted that the machines imported were not for sale but for actual use in manufacture of starch meant for export. Since the goods were under detention for several months, the appellant had incurred huge demurrage and detention charges to extend up to Rs.13.36 lakhs.
4. Drawing attention to para 2.17 of the Foreign Trade Policy, 2009-2014 w.e.f 05-06-2012 and para 2.17 of the FTP for the subsequent period of 2015-2020, Ld. Counsel submits that the import policy for second hand capital goods as provided in para 2.17 of both periods of FTP, while having personal computers/laptops, photocopiers/Digital multifunction Print & copying machines, Air conditioners and Diesel generating sets under the restricted category allowed to be imported only as per provisions of FTP, ITC (HS), Handbook of Procedures volume 1, Public Notice or an Authorisation issued for import of the specified second hand item, nevertheless allowed all other second hand capital goods to be imported free. Thus, the submission is that there was no reason for the appellant to have deliberately suppressed the nature of the goods. It is the submission of the Learned Counsel that the fine imposed is disproportionate and the imposition of penalty was also not warranted in these circumstances. The quantum of redemption fine, the demurrage and detention charges incurred were not taken into consideration while arriving at the quantum of redemption fine. Reliance was placed on the decision in Jain Exports Private Limited, Vs Union of India - 1990 (47) ELT 213 (SC) and CC Amritsar Vs. Santan Sales & Services, 2010 (252) ELT (382) Tribunal (New Delhi). Ld. Counsel also submitted that the claim for assessment under the EPCG Scheme was rejected and the goods were assessed to duty before their clearance. Duty was also paid as assessed. Thus, there was no demand in terms of Section 28 of the Customs Act. Under such circumstances imposition of penalty under section 114 A of the Customs Act is not legally sustainable. Reliance was placed on the decision in Armaity S Patel Vs CC (Imports) Mumbai, 2014 (310) ELT 4 313 (Tribunal - Mumbai) in this regard. Ld. Counsel prays that the impugned order may be modified with substantial reduction of redemption fine and setting aside the penalty and thus render justice.
5. Ld. AR Ms. O.M. Reena appeared for the respondent and reiterated the findings of the adjudicating authority. It is submitted that no leniency was warranted in this matter.
6. Heard both sides. Carefully perused the appeal records and the case laws submitted as relied upon.
7. Admittedly second hand capital goods could not have been imported by the appellant under the EPCG Scheme. The amendment made in chapter 5 of the Foreign Trade Policy, 2009-14 vide DGFT Notification No. -1(RE- 2013) 2009-14 dated 18-04-2013, para 5.1 (e) clearly stipulated that second hand capital goods shall not be permitted to be imported under EPCG Scheme. The condition sheet at Annexure A to the EPCG Authorisation No.3230020672 dated 02.07.2014 issued to the appellant also has at para 14 stipulated that import of second hand capital goods are not allowed under EPCG Authorisation.
8. Nevertheless, the fact remains that the item list attached to the said EPCG Authorisation issued to the appellant, at Sl.No.2 in the description of the capital goods being imported, clearly indicated the year of manufacturing as 1992. Whether it has been so indicated by the licensing authority by oversight or otherwise, the fact remains that the list attached reflects the aforesaid detail. It is also a fact that the FTP policy for the relevant period, save for the capital goods and other second hand goods, stipulated under the restricted category allowed to be imported only as per provisions of FTP, ITC (HS), Handbook of Procedures volume 1, Public Notice or an Authorisation issued for import of the specified second hand item, nevertheless provided in the table under para 2.17 that all other second hand capital goods can be imported free, without any conditions. That apart, we do not find that the Adjudicating Authority has attributed any manipulation or fraud in the invoices that the appellant had submitted. On the contrary, the invoice for the item at sl.No.2 of the List of goods attached 5 to the EPCG Licence also tallied with the year of manufacture declared as 1992 in the said list. These factors, coupled with the fact that the appellant was importing these capital goods for the first time to set up a manufacturing facility and as such was not entirely conversant with the applicable provisions of EPCG Scheme, lend credence to the appellant's claim of bonafide belief that such goods are importable under the EPCG Scheme, as otherwise the authorisation indicating the same in the list, would not have been issued to them.
9. Be that as it may, the liability of these goods to confiscation and their disentitlement to the benefit under the EPCG Scheme while not disputed, the grievance of the appellant is in respect of the quantum of redemption fine and penalty imposed, the former being contested as disproportionate, and the latter is opposed as unwarranted in the given circumstances.
10. We notice that in this case the appellant has, while averring that their invoice value declared reflects the correct transaction value, nevertheless submitted that they are not contesting the valuation, given that the matter was then pending for more than three months and the goods were incurring huge detention charges. It was also pointed out that the appellant had incurred huge storage and liner charges and a copy of their detention advice was also produced. They have stated that it is for these reasons that they were prepared to pay the duty on the value fixed by the chartered engineer. We are therefore of the view that the mere fact that the appellant in such circumstances were prepared to pay the duty in itself does not mean that they have not declared the true value of the imported goods thereby inviting penal consequences. Equally, we also notice that the impugned order in original is bereft of any reasons as to the basis for having arrived at the conclusion that the value declared by the appellant in the said invoices are incorrect and are to be rejected. Only a mere ipse dixit that the importer is found to have misdeclared the value of the goods is seen stated. While even as per the chartered engineer the imported goods were a mixture of new and second hand goods, the appellant had paid duty on the enhanced assessable value of Rs.2,65,38,299/-. Moreover, the machines imported are not for sale but for the actual use in manufacture of starch by the appellant 6 which is meant for export. In such circumstances, the reliance placed by the appellant on the decision in Jain Exports Private Limited, Vs Union of India - 1990 (47) ELT 213 (SC) is appropriate, wherein it was observed that the Tribunal committed apparent error in refusing to take into account the extenuating circumstances leading to the import of the disputed goods for purposes of determining the quantum of redemption fine. The Apex Court also observed that while determining the question of quantum of redemption fine it is essential to consider the facts and circumstances relevant to the bona fide conduct of the importer in importing the goods. As we have already held that the reasons stated by the appellant for its import of these goods are not implausible and given the aforesaid extenuating facts and circumstances noticed, we are of the considered view that the redemption fine that has been imposed is disproportionate and hence we reduce the redemption fine imposed to Rs.26,50,000/-.
11. As regards the imposition of penalty under Section 114A, we have already found that the appellant's explanation of bonafide belief in importing these goods under the EPCG Scheme is not implausible and absent any finding of manipulation of fraud in the invoices under which the goods were imported, we are unable to concur with the adjudicating authority's finding that the appellant had wilfully suppressed or misdeclared the goods. That apart, we find that the appellant is right in its submission that the claim for assessment under EPCG Scheme having been rejected and goods assessed to duty before their clearance and when duty as assessed was paid, absent a demand of duty that has been determined under subsection (8) of Section 28 of the Customs Act, 1962, imposition of penalty under Section 114A is untenable. The reliance placed by the appellant on the decision in Armaity S Patel Vs CC (Imports) Mumbai, 2014 (310) ELT 313 (Tribunal - Mumbai) is apposite in this regard. We also find that this Tribunal in its decision in Commissioner of Customs, Trichy v. Standard Fire Works, 2007 (216) ELT 71 (Tri-Chennai) has also taken the same view finding that penalty under section 114A can be imposed on a person only where the impugned order makes a determination of duty under Section 28(2) of the Customs Act ibid. Judicial discipline warrants that we adhere to the view of the coordinate benches of the Tribunal in the decisions above. We are 7 therefore of the considered view that the penalty imposed under Section 114A on the appellant vide the impugned order in original is unsustainable and is liable to be set aside.
12. In sum, while we leave the rejection of declared value and its consequent redetermination along with duty determined as well the confiscation of goods under Section 111(d) & (m) of the Customs Act, 1962 as made in the impugned order in original undisturbed, we reduce the redemption fine imposed in lieu of confiscation under Section 125 of the said Act to Rs.26,50,000/- and set aside the penalty imposed under Section 114A.
The appeal stands allowed partly in the aforesaid terms.
(Order pronounced in open court on 14.10.2025)
(AJAYAN T.V.) (M. AJIT KUMAR)
Member (Judicial) Member (Technical)
psd