The Mumbai Bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has set aside the confiscation, penalty and redemption fine imposed on G Amphray Laboratories in connection with imports valued at Rs. 54.13 crore made under the Advance Authorisation (AA) scheme during 2017-18.Â
The bench of Ajay Sharma (Judicial Member) and C.J. Mathew (Technical Member) held that although Integrated GST (IGST) was payable due to non-fulfillment of the pre-import condition, other punitive consequences under the Customs Act were not legally sustainable.
The bench noted that the amendment to the provisions of Section 3(12) of the Customs Tariff Act, 1975 by Finance (No.2) Act, 2024 dated 16th August, 2024 is prospective in nature and is applicable only from 16th August, 2024 onwards.
The Finance (No. 2) Act, 2024, amended Section 3(12) of the Customs Tariff Act, 1975, to explicitly include provisions for the levy of interest and penalties on additional duties levied on imports. This amendment, which came into effect from August 16, 2024, was enacted to rectify a legislative gap, as previously, the unamended law did not explicitly grant authority for these charges, leading to legal challenges and court rulings against the government
The appellant/assessee, G Amphray Laboratories had availed exemption from IGST on imports under the AA scheme between October 2017 and December 2018. A ‘pre-import’ condition inserted via Notification No. 79/2017 required that imported inputs be used only for export production before any domestic sale. The condition was later withdrawn in January 2019.
The Department alleged that the company used other inputs for export instead of the duty-exempt imported material, and subsequently issued a show cause notice demanding IGST along with interest, penalty, confiscation and ₹3 crore redemption fine.
The appellant had already paid IGST of ₹6.84 crore and interest of ₹4.94 crore in July 2023 after the Supreme Court’s ruling in Union of India vs Cosmo Films Ltd.
Whether penalty, interest, confiscation and redemption fine could be imposed for non-fulfillment of the pre-import condition when the liability arises under Section 3(7) of the Customs Tariff Act, not under the basic Customs duty provision.
Dr. Sujay Kantawala, the counsel for the petitioner submitted that entitlement to exemption from ‘integrated tax’ had been under dispute with finality rendered by decision of the Hon’ble Supreme Court in Union of India v. Cosmo Films Ltd. which prompted the discharge of liability that enabled regularization with taking credit thereof, too. It was submitted that, in consequence, it was only reasonable to expect closure of proceedings initiated by show cause notice supra. Any undischarged liability under the authority of Customs Tariff Act, 1975 did not entail all consequences that befall duty liability stemming from section 12 of Customs Act, 1962 as section 3(12) of Customs Tariff Act, 1975 presented circumscribed authority and amendment therein was effected only on 16th August 2024.
The Tribunal noted that Section 3(12) of the Customs Tariff Act did not authorize imposition of interest, penalties or confiscation until amended on 16 August 2024, and the amendment was prospective as held by the Bombay High Court in A.R. Sulphonates Pvt Ltd.
The CESTAT relied on its earlier ruling in Chiripal Poly Films Ltd., and the Bombay High Court’s decision in A.R. Sulphonates Pvt. Ltd., which held that in absence of explicit statutory authority, such penal consequences cannot be imposed for IGST recovery under the Tariff Act.
The Tribunal observed that the breach of the pre-import condition allowed only recovery of IGST. Confiscation under Section 111(o) and penalty under Section 114A were without authority of law. Since the IGST liability had already been paid, the proceedings should have been closed.
The Tribunal set aside confiscation of goods, redemption fine of ₹3 crore and penalty under Section 114A.
Case Details
Case Title: G Amphray Laboratories Versus Commissioner of Customs (NS-III)
Case No.: Final Order No: 86721/2025
Date: 22/10/2025
Counsel For Appellant: Dr Sujay Kantawala
Counsel For Respondent: AK Shrivastava, Assistant Commissioner (AR)
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