Kolkata CESTAT Affirms Decision by Commissioner (Appeals); Rejects Fraud Claim

Kolkata CESTAT Affirms Decision by Commissioner (Appeals); Rejects Fraud Claim

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) bench in Kolkata has affirmed the decision of the Commissioner (Appeals), overturning the penalty imposition and interest demand on M/s. B R Marbles Pvt. Ltd. (respondent).

In the current case, the respondent had obtained an EPCG Authorisation, allowing them to import capital goods without duty payment for marble mining and export purposes. The value of the duty exempted under this authorisation totalled ₹18,09,396.

However, before commencing mining activities, the Supreme Court issued an order on September 21, 2005, in response to a Public Interest Litigation (PIL) filed by residents in Katni District, Madhya Pradesh, which effectively halted the mining operations. Additionally, the jurisdictional Collector issued orders to cease mining within the area under their jurisdiction.

After the expiration of the export obligation period on March 22, 2012, a demand notice was issued to the respondents to recover the previously foregone duty. During the adjudication proceedings, the demand was confirmed, including interest and penalties. In the subsequent appeal proceedings, the Commissioner (Appeals) upheld only the demand for the originally foregone duty, amounting to ₹18,09,396.

The Revenue argued that the respondents did not ask for more time to meet the export obligation. They said that the respondents kept importing goods even though they knew about the mining restrictions imposed by the Supreme Court. The Revenue said that this showed that the respondents deliberately intended to defraud the revenue by hiding facts and making false statements.

The two-member CESTAT panel consisting of P.K. Choudhary, Member (Judicial), and Rajeev Tandon, Member (Technical), observed that there was no contention regarding the fact that the respondents were unable to carry out any mining operations due to the constraints imposed by the Supreme Court. Consequently, it was deemed unjustifiable to ascribe any ulterior motives to the respondents in such circumstances.

Furthermore, the bench asserted that it could not be argued that the respondents persisted in importing capital goods with the intent to defraud the revenue authorities and deprive the department of its rightful claim.

The bench also highlighted that the authorities had acknowledged the compelling circumstances that were beyond the respondents' control. Consequently, accusing the respondents of harbouring malicious intent to defraud the revenue was deemed unjustified. The bench summarily dismissed the revenue's argument in this regard.

The panel cited the precedent of Taurus Novelties Ltd. Vs. C.C. Bangalore [LQ/CESTAT/2004/2275], in which the importers were unable to meet their export obligations owing to the economic downturn in Korea, which hindered their ability to secure orders and export ceramic products they had produced. In that instance, the Tribunal had approved the exemption of the redemption fine, penalties, and interest.

Furthermore, the bench noted that the revenue had utterly failed to establish any element of mens rea on the part of the respondent.

Consequently, the Tribunal found no flaws in the Commissioner (Appeals)'s orders and dismissed the appeal filed by the revenue.