In a ruling recently, the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) in Kolkata reduced the redemption fine and penalty imposed on an assessee, M/s Rahul Agro Industries, to Rs. 25 lakhs each, as extension of import restrictions by the Customs department was observed to be excessive amidst the assessee’s suffering of detention and demurrage charges.
The case arose after the assessee-company’s import of green and yellow peas during a period when import restrictions were in place. These restrictions had been implemented and extended through a series of government notifications, turning the previously unrestricted imports into a controlled category. The Department limited imports of certain agricultural commodities like pigeon peas, moong dal, and yellow peas, changing their status from “free” to “restricted.”
However, the assessee, a regular importer of peas, had already entered into a contract with a foreign supplier, Total Trade Global FZE, for the shipment of 27,000 metric tons of yellow peas.
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The consignments arrived at Kolkata Port between October and December 2018, but customs officials detained the goods due to the import restrictions. In response, the assessee challenged the validity of the notifications before the Rajasthan High Court, who temporarily stayed the enforcement of the restrictions. Despite the stay, the consignments remained held up, causing the importer to incur significant detention and demurrage charges.
The issue was further complicated by conflicting rulings from other courts. While the Rajasthan High Court granted interim relief to the importer, the Gujarat High Court and the Supreme Court upheld the restrictions in related cases, validating the notifications. Ultimately, the Supreme Court’s ruling in the case of Union of India vs. Agricas LLP validated the restrictions, confirming that the goods were liable for confiscation under Section 111(d) of the Customs Act.
Following this decision, the assessee received a show-cause notice, and the adjudicating authority ordered the confiscation of the goods. However, the goods were allowed to be redeemed on payment of a steep fine of Rs. 2.1 crores and a penalty of Rs. 4 crores.
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The assessee-company, however, appealed against the quantum of the fine and penalty before the Commissioner (Appeals) arguing that the ongoing litigation, delays, and the imposition of charges like detention and demurrage had already caused significant financial strain.
The Commissioner (Appeals) reduced the redemption fine and penalty to Rs. 52 lakhs and Rs. 50 lakhs, respectively.
However, the Customs Department challenged this reduction, arguing that the Commissioner (Appeals) had failed to justify the revised amounts adequately, as the original adjudicating authority had based the penalty and fine on the calculated profit margin.
CESTAT, taking into account the assessee-company’s situation held that while the goods were ultimately deemed restricted, a degree of leniency was appropriate. The Tribunal acknowledged that during certain periods, the restrictions were temporarily lifted or unclear, which led to the company incurring significant additional costs. The bench of Mr Ashok Jindal and Mr K Ankazhakappan acknowledged that the assessee-company’s goods were imported in a good-faith belief that the restrictions would not apply, particularly given the initial stay order from the Rajasthan High Court.
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In light of these circumstances, CESTAT further reduced the redemption fine and penalty to Rs. 25 lakhs each, providing some relief to the assessee while maintaining the authority’s stance on the restricted status of the imported goods.
In result, the revenue’s appeal was dismissed.
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