‘Prohibition’ Under Section 111(d) Of The Customs Act Includes Restricted Imports; CESTAT Chennai Upholds Confiscation, Reduces Penalty
Pranav B Prem
The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that for the purposes of Section 111(d) of the Customs Act, 1962, the expression “prohibition” is wide enough to include not only absolute prohibitions but also conditional or partial restrictions imposed under the Foreign Trade Policy. The Tribunal ruled that where restricted goods are imported without fulfilling the mandatory conditions prescribed under the policy, such goods are to be treated as prohibited, making them liable for confiscation and penalty under the Customs Act. The Bench comprising Vasa Seshagiri Rao, Technical Member, was considering an appeal filed by a 100% Export Oriented Unit (EOU) challenging the confiscation of imported rough granite blocks and the imposition of penalty under Section 112(a) of the Customs Act.
The appellant had imported rough granite blocks, which remained uncleared from September 10, 2013 onwards. It was undisputed that the appellant failed to file the required Bills of Entry under Section 46 of the Customs Act for clearance of the goods. In view of the prolonged non-clearance, the custodian of the goods issued a notice under Section 48 of the Customs Act, calling upon the appellant to clear the goods within 15 days.
During scrutiny, the Customs authorities noted that rough granite blocks were classified as restricted items under the Foreign Trade Policy for the period 2009–2014 and could be imported only against a valid licence or import authorisation issued by the competent regional authority. As the appellant had not produced any such licence, a show cause notice was issued proposing confiscation of the goods under Section 111(d) of the Customs Act and imposition of penalty under Section 112(a).
Before the adjudicating authority, the appellant contended that it was unable to clear the goods due to non-waiver of 100% detention charges by the shipping line and therefore sought permission to relinquish or abandon the goods under Section 23(2) of the Customs Act. It was argued that restricted goods are permissible for import by an EOU and that only absolutely prohibited goods fall within the mischief of Section 111(d). According to the appellant, rough granite blocks could not be treated as prohibited goods merely because a licence had not been obtained.
The Original Authority rejected these submissions, holding that abandonment or relinquishment of goods is not an automatic right and can be permitted only when the import itself is otherwise lawful. It was noted that since the goods were restricted and the appellant had failed to produce the mandatory licence, the import was contrary to the Foreign Trade Policy. The authority therefore ordered absolute confiscation of the goods and imposed a penalty of ₹4,00,000 under Section 112(a) of the Customs Act. The appeal filed by the assessee before the Commissioner (Appeals-II) was dismissed, prompting the present appeal before the Tribunal.
Examining the issue, the Tribunal addressed the core question as to whether the term “prohibition” used in Section 111(d) of the Customs Act includes restrictions imposed under the Foreign Trade Policy. The Bench held that the expression “prohibition” cannot be given a narrow interpretation. It observed that once goods are placed under the restricted category, whether subject to conditions or otherwise, failure to comply with such conditions renders the import prohibited in law.
The Tribunal opined that prohibition under Section 111(d) is not confined only to goods that are absolutely banned. It would also extend to goods whose import is permitted only upon fulfilment of specified conditions. When such conditions are not met, the import becomes contrary to law, thereby attracting confiscation.
On the issue of abandonment of goods under Section 23(2), the Tribunal held that relinquishment before clearance from customs is not an automatic facility available to an importer. It is subject to the importer demonstrating that the importation was otherwise valid. The Bench noted that no evidence had been produced by the appellant to show that it had sought cancellation of the import from the supplier or that the import was lawful in the absence of a licence.
However, while upholding the finding of confiscation under Section 111(d), the Tribunal took a lenient view on the quantum of penalty. Considering the facts and circumstances of the case, it reduced the penalty imposed under Section 112(a) from ₹4,00,000 to ₹1,00,000. In view of the above, the CESTAT partly allowed the appeal by sustaining the confiscation of the restricted goods and the applicability of Section 111(d) of the Customs Act, while granting relief to the appellant by reducing the penalty amount.
Appearance
Counsel for Appellant/ Assessee: Priyadarsini
Counsel for Respondent/ Department: N. Satyanarayana
Cause Title: M/s. Jennex Granite Industries v. Commissioner of Customs
Case No: Customs Appeal No. 41068 of 2015
Coram: Vasa Seshagiri Rao, Technical Member
