The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) overturned the penalties ruling that the Amnesty Scheme does not provide for penalties in cases that have been settled when authorities have issued a closure letter confirming compliance.
Makwuds India Private Limited, the appellant, is a company that imported goods under the Export Promotion Capital Goods (EPCG) scheme and availed duty exemptions under Notification No. 97/2004-Cus dated 17.09.2004.
The Commissioner of Customs issued an order denying the duty exemption and demanded customs duty of Rs. 1,13,36,651 plus interest, and confiscating capital goods under Section 111(o) of the Customs Act, 1962, with a redemption fine of Rs. 10 lakhs. A penalty under Section 112(a) of the Customs Act was also imposed.
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The appellant availed of the Amnesty Scheme introduced by Public Notice No. 2/2023 for settling defaults in export obligations. Under the scheme, the appellant paid the entire customs duty and interest demanded, and the Deputy Director General of Foreign Trade issued a Final Duty Paid Regularization letter dated 01.04.2024, confirming the closure of the case.
The appellant’s counsel challenged the penalty before the CESTAT, arguing that the Amnesty Scheme regularized the case, and no penalties were specified for defaults settled under the scheme.
The appellant’s counsel relied on the provisions of the Public Notice and the closure letter issued by the authority explaining the lack of any indication of malafide intent in the default.
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The revenue counsel argued that the appellant had discharged the duty and interest obligations as per the adjudication order and the Amnesty Scheme but the penalty imposed under Section 112(a) of the Customs Act was still valid.
The two-member bench comprising P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) observed that the scheme was to resolve defaults in export obligations without treating them as irregularities or implying malafide intent. The bench observed that the closure letter issued by the authorities showed full compliance with the scheme and no penalty was prescribed in the Amnesty Scheme.
So, the tribunal ruled that the penalty under Section 112(a) was unsustainable. The impugned order was set aside and the appellant’s appeal was allowed.
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