Retrospective Amendments Inapplicable to Old Imports Where No Bond or Bank Guarantee was Executed: CESTAT [Read Order]

The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that retrospective amendments to exemption notifications cannot be applied to old imports where no bond or bank guarantee was obtained by the department at the time of clearance.

The appellants, LIMAK-SOMA JV, CSCHK-SOMA JV, Soma Enterprise Ltd., and CGGC-SOMA JV had imported machinery and equipment under fifteen Bills of Entry between 2005 and 2007 for projects financed by the Asian Development Bank and approved by the Government of India. These imports were cleared at a nil rate of duty under Notification No. 84/1997-Cus., which at the time of import did not impose any post-import conditions.

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The Principal Commissioner of Customs (Port), Kolkata, later confirmed a differential duty demand of Rs. 4.69 crore with interest and penalties under Section 112A of the Customs Act, 1962. The revenue alleged that the appellants either diverted or sold the imported goods after project completion, without permission or certification, violating conditions introduced through subsequent retrospective amendments to the notification in 2008 and 2014.

The appellants challenged the demand, arguing that the goods were imported and cleared lawfully under an unamended notification, without any requirement to execute bonds or guarantees. They argued that the conditions added later could not be retrospectively enforced, particularly in the absence of any procedural undertakings by the department at the time of clearance.

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The department’s counsel argued that the exemption was contingent upon the goods being used solely for the stated projects. Citing Supreme Court rulings in Mediwell Hospital and Jagdish Cancer & Research Centre, they claimed there was an ongoing obligation to use the goods for the specified purpose and that the post-import conduct justified the demand.

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The two-member bench comprising Rajeev Tandon (Technical Member) and R. Muralidhar (Judicial Member) observed that the appellants had complied with the exemption conditions as they stood at the time of import. Since no bond or bank guarantee was executed, there was no binding post-import obligation that could be enforced. The tribunal observed that imposing retrospective conditions through later notifications could not create fresh liabilities for transactions that had concluded lawfully under earlier terms.

The tribunal found that the reliance on Mediwell and Jagdish Cancer was misplaced, as those decisions involved very different statutory contexts and obligations. It held that fresh conditions introduced years after the fact could not be applied to imports made without such restrictions and that the department's failure to secure bonds or guarantees precluded any ongoing enforcement mechanism.

The tribunal dismissed the revenue’s appeal and disposed of the cross-objections filed by the appellants.

To Read the full text of the Order CLICK HERE

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