What happens if post-importation conditions are not fulfilled?

By Vijay Kumar

Certain goods are imported at nil rate or concessional rate subject to the importer fulfilling certain post-importation conditions. After import, the importer is not able to fulfil these conditions. What happens?

1. Demand of duty
2. Confiscation and redemption fine
3. Penalty
4. All the above

This was the subject in a recent case before the CESTAT. A major public sector undertaking, Steel Authority of India Limited imported two cranes under concessional rate of duty under the EPCG scheme. The department issued Show Cause Notice on the grounds that the cranes were not at all capital goods and were not entitled to the benefit of the exemption notification as they were not used in the manufacture of goods. The cranes were used in their stock-yard and not in their factory. As usual the Commissioner confirmed the duty, confiscated the goods and imposed a penalty, of course allowing release of the goods on redemption fine.

The Committee On Disputes (COD) felt that as there was no suppression, the PSU should be permitted to contest imposition of penalty and redemption fine.

In deciding the issue, the Tribunal observed that there are two points for consideration

1. Whether the cranes were entitled for consessional rate of duty

2. Whether the goods are liable for confiscation and consequently fine and penalty.

In a simple logical conclusion, the Tribunal observed that the cranes were not eligible for the concessional rate of duty as held by the adjudicating authority. If that is so, the notification is not applicable and they will have to discharge the full duty which they had already done. Once they have paid the differential duty, the goods go out of the purview of the notification. And once they are outside the purview of the notification, the question of fulfilling the conditions of the notification does not arise and once this question does not arise, the goods are not liable for confiscation and consequently there is no question of fine and penalty.

The logic is the Government cannot have the cake and eat it too. See 2005-TIOL-445-CESTAT-BANG

SNIPPETS

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The Australian prime minister expressed sympathy for Corby but urged Australians to remain calm. He said, "I ask that we all pause and understand the situation and recognize and respect that when we visit other countries we are subject to the laws and rules of those countries. We have neither the power nor the right to intervene." Corby, a beauty school student, was arrested in October after airport authorities found marijuana in her surfboard bag as she arrived on Bali for a family holiday. Her lawyers allege the drugs were planted in her bag by airport baggage handlers in Australia as part of a drug-smuggling operation. But the Indonesian prosecutors are not happy with the verdict. They are going to appeal. They want a life sentence for her. By any chance, is the girl innocent? If so imagine the tragedy!