License Condition "Subject to Notification" Not a Mandatory Payment Clause: CESTAT Quashes Customs Duty Demand on Gold Dore Bars [Read Order]

The Principal Bench ofCustoms, Excise & Service Tax Appellate Tribunal (CESTAT) at New Delhi, held that a licence condition stating imports were “subject to” a notification did not mandate duty payment or bar other exemptions. It quashed customs duty demand where the importer claimed NIL duty under the LDC exemption instead of a concessional rate in the DGFT licence. Thus, the Tribunal clarified that the phrase only indicates compliance and does not prohibit availing more beneficial exemptions.

The Appeal was filed by the Appellant, M/s. Narrondass Manordass, against the order dated 19.02.2025 passed by the Principal Commissioner of Customs confirming customs duty demand with interest under Section 28AA and penalty under Section 112(a)(i) of the Customs Act, 1962 for imported goods.

The Appellant was issued an Import License by DGFT on 13.06.2022 to import Gold Dore bars with purity up to 95%. The license condition specified that imports were "subject to Customs Notification No. 12/2012 dated 17.03.2012."

On 26.06.2023, the appellant filed a Bill of Entry for importing Gold Dore bars from Tanzania and claimed NIL duty exemption under Notification No. 96/2008 (LDC exemption for Least Developed Countries) instead of concessional duty under Notification No. 12/2012 (later superseded by Notification No. 50/2017).

Customs authorities alleged that the appellant wrongly availed the LDC exemption as the license condition mandated compliance with the 2012 Notification, and Gold Dore bars being restricted items, only one exemption could be claimed at a time. A show cause notice was issued on 24.04.2024 demanding customs duty of Rs. 50,92,209/- under Section 28(1) of the Customs Act.

The Principal Commissioner confirmed the duty demand with interest under Section 28AA and penalty under Section 112(a)(i), holding that the license condition required mandatory duty payment under the 2012 Notification and barred simultaneous availment of the LDC exemption.

The Counsel for the Appellant, Kishore Kunal, Runjhun Pare and Govind Gupta, submitted that the demand was without jurisdiction as the DGFT license remained valid and uncancelled, and only the licensing authority could allege violations, relying on Titan Medical Systems Pvt. Ltd. vs. Collector of Customs, New Delhi 2003 (151) E.L.T. 254 (S.C.).

Further, the Counsel stated that the license condition stating imports are "subject to" Notification No. 12/2012 does not mandate duty payment or restrict availment of other exemptions and argued that simultaneous availment of multiple exemption notifications is permissible under settled law when no express bar exists. Subsequently, interest under Section 28AA and penalty under Section 112 were unsustainable.

On the other hand, the Authorized Representatives for the Respondent, Ranjan Prakash and Nikhil Mohan Goyal, submitted that the DGFT license explicitly mandated compliance with Notification No. 12/2012 (superseded by Notification No. 50/2017), which was non-negotiable as Gold Dore bars are classified as "restricted" items under the Foreign Trade Policy, requiring strict adherence to license terms. The appellant's claim for NIL duty under the 2008 LDC Exemption Notification violated the license condition and rendered the import ineligible.

Further, the Counsel stated that the non-compliance rendered goods liable to confiscation under Sections 111(d) and 111(o), justifying penalty under Section 112(a) and mandatory interest under Section 28AA of the Customs Act.

The Tribunal consisted of Justice Dilip Gupta, President and Technical Member, P.V Subba Rao, heard and reviewed the matter.

The Tribunal, after considering the submissions made, held that the license condition stating imports are "subject to" Notification No. 12/2012 does not prohibit availment of other exemptions otherwise available to the appellant. The phrase does not create a mandatory duty payment obligation under the 2012 Notification if another notification exempts such payment.

Further, the Tribunal ruled that customs authorities cannot question or deny benefits under a valid DGFT license without prior cancellation by the licensing authority. Only if the DGFT had cancelled the license could customs recover duty under Section 28(1).

Accordingly, the Tribunal declared the Customs duty demand and penalty under Section 112(a)(i) of the Customs Act, 1962, were unsustainable, set aside the impugned order and allowed the appeal filed. The Order was Pronounced on 07.01.2026.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates