The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) ruled that penalties and confiscation become unwarranted once an importer voluntarily accepted the enhancement of goods’ value to comply with the Minimum Import Price (MIP) stipulated by the Directorate General of Foreign Trade ( DGFT ).
Sree Sudharsan Trucking Private Ltd., the appellant imported marbles and mosaics with CIF values below $60 and $80 per square meter, the thresholds specified in DGFT Notifications No. 38(RE-2013) and 65(RE-2010).
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Customs authorities found these imports allegedly violating the DGFT import policy which required goods to meet the Minimum Import Price (MIP) to be freely importable. The goods were classified as restricted, initiating confiscation proceedings under Section 111(d) of the Customs Act, 1962, and penalties under Section 112(a).
The appellant accepted an enhanced valuation for the goods bringing them in line with the MIP and paid duties on this revised valuation. The customs authorities used the acceptance as evidence of wrongdoing justifying penalties and fines.
Aggrieved, the appellant challenged the decision before the CESTAT arguing that the DGFT notification did not specify that imports below MIP would be restricted making the order unsustainable and penalties and fines imposed failed to consider the appellant’s financial losses due to the loss of goods and the urgency to clear the imports.
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The appellant’s counsel requested that the penalties and redemption fines should have been reconsidered as the valuation had been enhanced to meet the MIP.
On the other hand, the department counsel argued that the importer voluntarily accepted the enhanced value and waived the right to challenge the valuation. The department justified that the confiscation and penalties were rightly imposed citing the imports were below the MIP violating import restrictions.
The two-member bench comprising P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) observed that DGFT is empowered to impose restrictions under Section 3 of the Foreign Trade (Development and Regulations) Act, 1992 including fixing Minimum Import Prices (MIP) to regulate imports.
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The tribunal explained that once the importer voluntarily accepted the enhanced valuation to align with the MIP, the goods were no longer in violation of the import policy. The tribunal observed that treating the goods as restricted and imposing penalties was inconsistent after compliance with the MIP requirement.
So, the tribunal set aside the confiscation & penalties and upheld the duty demand on the enhanced value based on the Minimum Import Price fixed. The appellant’s appeal was partly allowed with consequential relief.
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