Legal principle

Where newsprint is imported and warehoused by a non-RNI registered entity prior to the amendment of FTP policy on 03.06.2016, and subsequently sold to RNI-registered actual users who clear it on filing ex-bond Bills of Entry, the import cannot be held to be in violation of the Foreign Trade Policy or Customs Act, especially when: (a) the applicable customs exemption notification (Notification No. 12/2012-Cus., Sl. No. 264) did not impose any RNI-registration or actual user condition; (b) the policy amendment requiring RNI registration at the time of import applies prospectively from 03.06.2016 and not retrospectively; (c) the goods are not notified under Section 123 or Chapter IVA of the Customs Act, placing the burden of proof on the department to establish illicit import with foundational facts; (d) the department fails to discharge this burden with cogent evidence; and (e) the goods are duly accounted for and covered by valid import and clearance documents produced by RNI-registered newspaper publishers. Non-tallying of reel serial numbers alone, without evidence of excess stock or illicit import, does not support confiscation or imposition of penalties. Foundational documents including show cause notice and relied upon documents must be filed along with the appeal memorandum; failure to do so constitutes a serious deficiency. Disputed FTP policy positions should be referred to DGFT for determination before Customs authorities proceed to hold an import in contravention of the policy.

Court decision

The appeals filed by the department are rejected. The Tribunal upheld the order of the Commissioner (Appeals) which set aside the Order-in-Original confiscating newsprint reels and imposing penalties on the respondent and its Managing Director. Confiscation and penalties are not sustainable.

Facts

Respondent Poddar Global Ltd. imported newsprint under CTH 4801 0010/4801 0090 and stored it in bonded warehouses. The department alleged that although the respondent was not RNI-registered, it imported newsprint and sold it to purported/dummy RNI-registered actual users who filed Bills of Entry claiming exemption under Notification No. 12/2012-Cus., Sl. No. 264. The Managing Director allegedly procured names and RNI registrations for monetary consideration to devise a modus operandi to clear newsprint duty-free, including in the names of reputed newspapers. Search operations were conducted by DRI in July 2015 at various godowns. Newsprint reels at various premises were seized and confiscated by the Adjudicating Authority. Penalties were imposed on the respondent under Section 112(a) of the Customs Act, 1962, and on its Managing Director. The Commissioner (Appeals) set aside the Order-in-Original. The department appealed. The applicable FTP periods were 2009-2014 and 2015-2020, and imports pertained to a period prior to July 2015. The respondent imported newsprint, warehoused it, and executed contracts with RNI-certificate holders for sale, intimating Customs for change in ownership to allow RNI-certificate holders to file ex-bond Bills of Entry in their names. RNI-registered actual users cleared goods on payment of applicable duty. Concerned newspaper publishers confirmed that seized goods belonged to them, had been cleared by them, and were stored with the respondent for delivery.

Key provisions

• Section 112(a), Customs Act, 1962 — Penalty for improper importation of goods
• Section 123, Customs Act, 1962 — Burden of proof in certain cases
• Section 3, The Foreign Trade (Development and Regulation) Act, 1992 — Powers to make provisions relating to imports and exports.