Legal principle

Customs authorities cannot recover duty under section 28(1)/28AAA or deny benefits on the ground that an import licence or other instrument issued under the FTDR Act was wrongly obtained unless and until the DGFT itself has cancelled or adjudged that instrument invalid.

Court decision

The Tribunal allowed the appeal and set aside the Principal Commissioner's order, holding in favour of the appellant that since the DGFT had not cancelled the import licence, customs could not have decided to recover duty under section 28(1); consequently neither the duty demand (with interest) nor the penalty under section 112(a)(ii) nor the redemption fine in lieu of confiscation could be maintained.

Facts

M/s R.K. Jewels imported gold dore bars from Tanzania under bills of entry dated 12.09.2023 and 15.09.2023 against a DGFT import licence dated 16.09.2021 permitting import of gold dore bars with purity up to 95%, subject to Notification No. 12/2012-Cus dated 17.03.2012 (later superseded by Notification No. 50/2017-Cus dated 30.06.2017). The appellant claimed full exemption from customs duty and AIDC under Notification No. 96/2008-Cus, the duty-free tariff preference scheme for Least Developed Countries, and filed a country-of-origin certificate. Investigation revealed the exemption was claimed wrongly because the licence condition specified clearance under the 2012 Notification. A show cause notice dated 24.04.2024 alleged violation of the licence conditions, confiscability of the goods and evasion of duty, and the Principal Commissioner confirmed the duty demand with interest under section 28AA, penalty under section 112(a)(ii), and redemption fine in lieu of confiscation under section 125 of the Customs Act.

Key provisions

• Section 28(1), Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 28AA, Customs Act, 1962 — Interest on delayed payment of duty
• Section 111(d), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 112, Customs Act, 1962 — Penalty for improper importation of goods
• Section 25(1), Customs Act, 1962 — Power to grant exemption from duty
• Section 3, The Foreign Trade (Development and Regulation) Act, 1992 — Powers to make provisions relating to imports and exports.
• Section 28AAA, Customs Act, 1962 — Recovery of duties in certain cases
• Section 5, The Foreign Trade (Development and Regulation) Act, 1992 — Foreign Trade Policy.
• Section 125, Customs Act, 1962 — Option to pay fine in lieu of confiscation