The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) clarified that a redemption fine is applicable for the re-export of goods deemed “prohibited” under the Foreign Trade Policy ( FTP ) but the tribunal reduced the fine from Rs. 3 crore to Rs. 5 lakh citing the original amount as “a bit excessive”.
M/s V3 Agencies Pvt. Ltd, the appellant, and an unpaid seller challenged penalties and redemption fines imposed for the re-export of goods abandoned by Agricas LLP, the buyer. The goods, Black Matpe (Urad), were imported into India under two sales contracts in December 2019, with payment terms on a Cash Against Documents ( CAD ) basis.
The Directorate General of Foreign Trade ( DGFT ) had, through a notification, moved pulses, including Black Matpe, from the “free” category to the “restricted” category. Agricas LLP, the importer, challenged these DGFT notifications in the Rajasthan High Court.
The court granted interim relief allowing partial clearance of goods. The goods valued at approximately Rs. 79.43 crore remained uncleared in bonded warehouses due to pending restrictions.
The Customs Department issued a show cause notice under the Customs Act. Following adjudication, the goods were deemed liable for confiscation. The adjudication order allowed re-export upon payment of a redemption fine of Rs. 3 crore under Section 125(1) of the Customs Act and imposed a penalty of Rs. 1.45 crore on the importer under Section 112(a).
When the importer, Agricas LLP, formally abandoned the goods, the unpaid seller, Arvee International (one of the agents of the appellant) was left to bear the redemption fine and penalties to facilitate re-export.
V3 Agencies, representing the unpaid seller, challenged the imposition of the redemption fine and penalty before the Commissioner (Appeals). The Commissioner upheld the original adjudication order.
The matter was brought to the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT). The appellant’s counsel argued that the appellant was not involved in the importation process or in contravening customs laws and the appellant was forced to pay the redemption fine and penalty under protest for the re-export of goods.
The two-member bench comprising S.K. Mohanty ( Judicial Member ) and M.M. Parthiban ( Technical Member ) reviewed the case. The tribunal referenced Supreme Court judgments such as Siemens Ltd v. Collector of Customs (1999) and Sankar Pandi v. Union of India (2002), which held that goods meant for re-export without entering the domestic market should not attract redemption fines.
While acknowledging the cited cases, the tribunal observed that the importers were guilty of importing goods classified as “prohibited” under the Foreign Trade Policy ( FTP ), making them liable for absolute confiscation. So, the tribunal confirmed the imposition of a redemption fine but it deemed the original fine of Rs. 3 crore to be excessive and arbitrary and reduced it to RS. 5 Lakhs
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