IGCR Violation Cannot be Alleged Without Proof of Wrong Clearance: CESTAT Sets aside Customs Duty Demand [Read Order]

The Principal Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, recently set aside a demand of Rs. 31.40 Lakhs, holding that the Revenue could not allege violations of Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 (IGCR Rules) without establishing which official allowed the clearance of excess goods.

M/s K.A. Enterprises, the appellant, filed an appeal challenging the Order-in-Appeal dated 28.02.2024 which upheld the demand for differential duty and penalty. The appellant manufactures sanitary napkins and had imported "super absorbent polymers" and "untreated fluff pulp" claiming concessional duty under Notification No. 50/2017-Cus. To avail this benefit, importers must follow the procedure prescribed under the IGCR Rules.

The Revenue alleged that while the appellant had filed a declaration for only 150 MT of fluff pulp under Rule 5 of IGCR Rules, it had actually imported 452 MT. It was contended that this was a violation of Rule 5, which requires prior intimation of the estimated quantity to the jurisdictional officer and the port officer. A show cause notice was issued proposing to recover differential duty under Section 28(4) of the Customs Act, 1962, invoking the extended period of limitation, along with interest and an equal penalty under Section 114A.

Dr. Prabhat Kumar and Shri Pralabh Mathur, Advocates for the appellant, submitted that the appellant had fully complied with the IGCR Rules and that it was not necessary to declare the exact import quantity under Rule 5. They argued that the appellant had provided the required intimation to the jurisdictional officer, who had forwarded it to the customs authorities, and no objections were raised at the material time. They contended that procedural lapses, if any, could not be a ground to deny the substantive benefit of exemption.

Shri Shiv Shankar, Authorised Representative for the Revenue, supported the impugned order, arguing that the non-compliance of Rule 5 was established as the appellant had filed applications for a lesser quantity than imported.

The Bench comprising Mr. Justice Dilip Gupta (President) and Mr. P.V. Subba Rao (Member Technical) analyzed the mechanism of the IGCR Rules. The Tribunal noted that Rule 5 requires the importer to file a declaration with the jurisdictional officer, who then forwards a copy to the Assistant Commissioner at the port of importation. The Assistant Commissioner at the port allows concessional clearance based on the communication received from the jurisdictional officer.

The Tribunal observed that the jurisdictional officer couldn't have received a declaration for a specific quantity but communicated a much larger quantity to the port officer. It further noted that the Assistant Commissioner at the port would not release goods without appropriate duty unless the declaration received from the jurisdictional officer covered the goods.

The Tribunal held that if the jurisdictional officer transmitted the application for a certain quantity but the port officer allowed clearance for a much larger quantity, the responsibility lay with the port officer. In the absence of any finding in the Show Cause Notice regarding which of the two officers committed the irregularity, the Tribunal held that the demand on the appellant could not be confirmed.

It was presumed that both officers were satisfied with the quantities declared and cleared the goods accordingly. The Tribunal set aside the demand and penalty, allowing the appeal.

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