Penal provisions for violation of FTP provisions regarding port restriction in case import of defective steel items.

PJ/CASE LAW/2015-16/2929

Case:- RAKSHA GLOBAL STEEL PVT. LTD. VERSUS COMMISSIONER OF CUS. (GEN), MUMBAI

Citation:- 2015 (325) E.L.T. 886 (Tri. - Mumbai)

Brief facts:- The appellant is in appeal against order of the Commissioner (Appeals) wherein the redemption fine as well as penalty imposed under Section 112(b) of the Customs Act were reduced.
The brief facts are that the appellant imported goods declared as “M.S. TMPB DEFECTIVE COILS” vide Bill of Entry dated 2-9-2013 at JNCH, Nhavasheva Port. The net weight was declared as 108.708 MTs and the declared unit price as USD 578.852 PMT CIF, the total assessable value as per declaration was Rs. 41,53,332/- and duty payable was computed at Rs. 11,98,313/-. The goods were examined under first check with specific examination order - to state whether the goods are restricted or not in terms of the licensing Note to Chapter 72 of ITC (HSN) of the Foreign Trade Policy 2009-14. On examination the goods were found as declared, except that the goods were restricted item in terms of the Foreign Trade Policy. The Revenue felt that the same cannot be imported at JNCH without valid import licence. However the Licensing Note 1 to Chapter 72 of ITC (HSN), provides that seconds/defectives of items specified is permitted for import free except those in respect of which the C.I.F. Value of import is below the value specified against each of the item. For the Licensing Note 2 to Chapter 72 of ITC provides - prime steel items as specified below is permitted for imports free except those in respect of which the CIF value of imports is below the value specified against each of the item, wherein it is stated that under ITC (HS) Code 7208, HR coils can be freely imported having minimum CIF value of US $ 254 and CR coils/sheets classifiable under ITC Code 7209 can be imported freely having minimum value of US $ 351.
The goods were detained as the Revenue found that there is violation of the Foreign Trade Policy provisions as regards the quantum, port restriction and also in terms of Licensing Note 3 to Chapter 72, which was provided that the goods being second and defectives of steel items will be imported only through Customs Seaport at Mumbai, Chennai and Kolkata. The appellant realising his mistake admitted the same before the authority and vide letter dated 5-9-2013 submitted that there shipping agent due to oversight mentioned the port of destination as Mulund ICD and that it is genuine mistake and prayed for sympathetic consideration. He further submitted that they do not want a show cause notice. Vide Order-in-Original dated 20-9-2013, it was held that the importer had accepted the mistake committed by them and also the importer have not produced any valid import licence and hence the impugned goods were held liable for confiscation under Section 111(d) of the Act and the same was held redeemable on payment of redemption fine of Rs. 10,40,000/- and further penalty, under Section 112(a) of the Act, was imposed for an amount of Rs. 4,20,000/-.
Being aggrieved the appellant preferred an appeal before the Commissioner (Appeals), who vide the impugned order has been pleased to allow the appeal in part and reduced the redemption fine to Rs. 4,20,000/- and also reduced the penalty under Section 112(a) to Rs. 50,000/-. The learned Commissioner (Appeals) also held that penalty and fine can be imposed on the basis of facts, placing reliance on the ruling of the Hon’ble Supreme Court in the case of Jain Exports Private Ltd.v. Union of India - 1993 (66)E.L.T.537 (S.C.), wherein it is laid down that quantum of redemption fine should depend on the facts and circumstances of each case and one point action of the assessee. Further the Commissioner (Appeals) found that there is no deliberate defiance of law and the issue involves a venial breach only. Being aggrieved the appellant is in appeal before this Tribunal.

Appellant’s contention:-The learned Counsel for the appellant Mr. A.K. Prabhakar states that no case of deliberate default and/or contumacious conduct have been made out which is evident from the impugned order. Further the contention of the appellant of having imported the goods under one of a mistake, have not been found untrue and as such prays for setting aside the order of fine and penalty. He further contends, relying on the ruling in the case of Broadway Overseas Ltd. - 2014 (310)E.L.T.597,wherein a Co-ordinate Bench in similar case of import of secondary/defective goods which was imported at ICD, Ludhiana free of duty under the Notification No. 52/2003-Cus being 100% EOU, in contravention of licensing Note No. 4 of Chapter 72 of ITC (HS), it was held that port restriction is provided as expertise for examination of such goods is available only at the designated ports. In this view of the matter, confiscation was held to be correct however the redemption fine and penalty was reduced. The learned Counsel further relies on the ruling in the case of Commissioner of Customsv. Tushar Impex - 2013 (295)E.L.T.610wherein under the facts that the Port of export having not been notified Port for import of cosmetics, which was subsequently declared as authorized port, imported cosmetics found fit for release by the Asst. Drugs Controller and that in view of this technical violations the redemption fine and penalty was reduced.

Respondent’s contention:- The learned AR relies on the impugned order.

Reasoning of judgment:-Having considered the rival contentions, they find that it is an admitted fact that the appellant imported the goods under one of a mistake. The violation of port restriction is only a venial breach. It is also not a fact that the appellant is a repeated offender. In view of the technical breach, and for that taking notice of the fact that the appellant have suffered heavy demurrage of Rs. 8 lakhs, they uphold the order of confiscation but reduced the redemption fine under Section 125 to Rs. 1 lakh and further set aside the penalty imposed under Section 112(a) of the Act. Thus, the appeal is allowed in part as indicated. The appellant will be entitled to consequential benefits if any in accordance with law.

Decision:- Appeal partly allowed.

Comment:- The analogy of the case is that violation of port restriction is only venial breach. Moreover, the assessee is also not repeated offender. In view of technical breach, and fact that assessee has suffered heavy demurrage the quantum of redemption fine was reduced to Rs. 1 lakh under Section 125 of Customs Act, 1962 and penalty imposed under section 112(a) of the Customs Act, 1962 was set aside.

Prepared by:- Monika Tak

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PJ/CASE LAW/2015-16/2929

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