Import Of Fire Fighting System under EPCG license, Customs - Exim - SEZ

[SNEHAL SHAH]

Dear sir,

We are the manufacturing of Chemical Products and wants to Import fire fighting system from USA .

Can we Import above capital goods under EPCG license ??

Please guide to us .

Thanks and regards,

SNE

Posts / Replies

[MUKUND THAKKAR]

5.01 EPCG Scheme

(a) EPCG Scheme allows import of capital goods for pre-production, production and post-production at Zero customs duty.

accroding to me you can import under EPCG as per above mention clarification.

[SNEHAL SHAH]

But sir according to Capital definition as per FTP chapter NO : 9.8

9.08 "Capital Goods" means any plant, machinery, equipment or accessories required for manufacture or production, either directly or indirectly, of goods or for rendering services, including those required for replacement, modernisation, technological upgradation or expansion. It includes packaging machinery and equipment, refrigeration equipment, power generating sets, machine tools, equipment and instruments for testing, research and development, quality and pollution control.

Can we consider fire fighting system in above definition ??

Thanks and Regards,

SNE

[MUKUND THAKKAR]

I think , Fire Fighting system is covered under equipment. if I am wrong please correct me.

[Rajagopalan Ranganathan]

Sir,

Fire fighting equipment cannot be treated as capital goods since it is not going to be used for amnufacture of final products. Therefore you cannot import it under EPCG scheme since EPCG means 'Export Promotion Capital Goods' scheme. Fire fighting equipment is not going to play any roll in promoting export of any exciable goods.

[YAGAY AND SUN]

Dear Snehal,

Please check appended Notification and discuss this matter with EPCG Committee at DGFT Office.

Cus Ntf NO. 29/1997 Dt. 1-4-97

Exemption to capital goods, components and spares thereof etc., imported under EPCG Scheme.

Regards,

YAGAY and SUN

(Management, Business and Indirect Tax Consultants)

[surya narayana]

Dear Friend,

In my view, the subject equipment can be imported under EPCG without any doubt since the definition itself clearly indicated that the use of Capital goods can be either directly or indirectly. Even otherwise also, the firefighting system is part of plant and it is a mandatory requirement to ensure safe manufacturing activity.

The Notification cited was the one which governs the procedure to be followed and the conditions for availing the exemption under customs for import of equipment under EPCG Scheme and there is no specific view on the subject equipment

Best Regards

Surya

[CS SANJAY MALHOTRA]

Dear Snehal.

EPCG Scheme does not allow the Import of Fire Fighting Equipments under EPCG Licence as a general practice.

If you can present the important aspects that import of such goods is essentially warranted for manufacture of your products then better to file representation with the Chairman EPCG Committee, Udyog Bhawan, New Delhi for approval.

[KASTURI SETHI]

Dear Experts,

After searching and going through a large number of Board's circulars, Notifications and case laws for the past period and current period on EPCG Scheme, I agree with the views of Sh.Mukund Thakkar, Sir and Sh.Surya Narayana Sir.In my view, Fire extinguisher is a capital goods as per definition of 'Capital Goods' laid down in Notification No.29/97-Customs dated 1.4.1997 as amended. Fire Fighting Equipment has been included in the definition of 'Capital Goods' vide Notification No. 60/98-CUS dated 3.8.1998 under EPCG Scheme for Hotel Industry. Earlier this equipment was also added in the definition of Capital Goods vide Notification No.108/94-CUS dated 4.4.1994 under EPCG Scheme for Hotel Industry and Restaurants. Thus it is clear that Fire fighting equipment has been allowed to import free of import duty as Capital Goods in Service Tax. In Central Excise also, Fire extinguisher (8424.10.00) was included in the definition of 'Capital Goods' under erstwhile Rule 57 Q of Central Excise Rules, 1944 vide Notification No.18/99-CE(NT) dated 28.2.1999 though it was for different purpose i.e. availment of Modvat Credit on capital goods. There cannot be two different yardsticks for Service Tax and Customs, especially, in view of the same function/usage and purpose of Fire Extinguisher whether installed in hotel or a factory. It is immaterial whether any capital goods helps in export promotion or not. It is the statutory duty of the legislature to ponder over. We are to examine whether any goods conform to the definition of 'Capital Goods' or not.

Therefore, it appears that it is not the intent of the legislature to deny the benefit of EPCG Scheme on Fire Extinguisher I also agree with M/s.YAGAY AND SUN to the extent that the matter is worth discussion with DGFT Officers before taking final decision by the questioner so as to avoid any risk, if there is any. Thanks to M/s. YAGAY AND SUN for communicating basic notification on this issue.

 

[CS SANJAY MALHOTRA]

Dear Sh. Kasturi ji,

Agree with you that there can;t be different treatment under Service Tax, Customs or Excise laws, but different Acts has defined the definition considering their Policy & Acts, hence as per Apex Court decision, the same legislative intent has to be followed. For e.g. Drawback is sanctioned by Customs on FOB Value which includes Export Commission,whereas FTP benefits excludes export commission from FOB Value as their objective is incentives the net foreign exchange earned. Many others variances too exists under different laws. Group Company definition is other example, varying in Income Tax, Customs, DGFT etc.

Service providers definition is different under DGFT as even the office furniture, office appliances, etc is allowed to them under EPCG, whereas for manufacturer the criteria is entirely different.

Custom Notification is always issued against the FTP. DGFT does not follows Custom Notifications as they go by their own Policy & Act.

Above all agree that party should take up with EPCG Committee as have been stated earlier also, and present importance of its use in manufacturing as you can put up these fire extinguishers at any place even in office, where production is not feasible. In majority of the cases DGFT has disallowed EPCG against Fire extinguishers.

[KASTURI SETHI]

SH. SANJAY MALHOTRA JI,

I agree with all your views on this issue. I would like to comment on the last line, "In majority -------------------------------Fire extinguishers. In my view, whenever any assessee seeks guidance/advice on contentious issue from the officers of Govt., the officers would always give opinion in favour of the department. Why should Govt. officer give anti-revenue opinion ? Everyone wants to save one's skin.None would dare to give anti-revenue opinion whether verbal or in writing. That is why 99% demand cases are confirmed. In such like cases, natural justice can be got through appellate routes only.

I also infer from your views that there is no room for logic in the eyes of law. I would like to reiterate that the purpose of fire extinguisher is the same whether placed in a factory or office or hotel or anywhere.In my view, fire extinguisher is a capital goods and eligible for the benefit of EPCG Scheme.

[CS SANJAY MALHOTRA]

Dear Sh. Kasturi ji,

Let's understand that Legislative and Judicial is altogether different. Law surrounds each facts of the case and not uniformly applicable in all circumstances. Important is the usage of such goods and endorse your fact that Logic has no place.

(Just for info: Refer to EPCG Committee Minutes of Meeting at DGFT site, you will notice that Control Panel / Electrical panel import is not allowed universally to all Importers against EPCG. It's case to case wherein the officer from Ministry of Power & Revenue both are involved, validates use of item whether then same is for power generation / transmission or act as part of machine and then allow the Import under EPCG.

Use of Imported Goods is important and critical factor for determining its eligibility for Import under EPCG scheme.

If Fire Extinguishers use is declared as protection system for property and human beings, its not considered as capital good as not related with either manufacture or production directly and indirectly.

Further Capital Goods are such wherein benefits endure over a period of time and fire-extinguishers may even might not be used within the shelf life of that product if situation would not warranted. Then even if EPCG scheme would have apply, then installation certificate may not be issued by Excise officer thus resulting in payment of duty alongwith interest.

Definition of Consumables, Capital Goods varies for service provider and manufacturer in Excise, Custom & DGFT. It's for the industry to raise voice to have unique definition across all laws to have better compliance.

[KASTURI SETHI]

Dear Sir,

Agreed. The eligibility of fire extinguisher as capital goods may vary from case to case. Can't we say at the whims of ________ ????

[CS SANJAY MALHOTRA]

Dear Sh. Kasturi ji,

Offices in DGFT are better than others as one finds team comprising of cross sectional officers from various Ministries thus doing away monopoly...

For Rest, where monopoly exists, yes 100% in agreement with you.

[KASTURI SETHI]

Sir,

Rightly said, rather satirised.

[Mahir S]

Fire fighting equipment falls under the category of Front Office Equipment and hence does not appear to fall under the definition of capital goods.

[malay pota]

Dear All

Before further discussion in this matter we should clear here one point that Can CENVAT be claimed if the fire fighting system is imported or purchased locally against the relevant duty paid? yes or no.

Malay Pota

[KASTURI SETHI]

Respected MALAY POTA,

 

YES. In Central Excise, Fire extinguisher (8424.10.00) was included in the definition of 'Capital Goods' under erstwhile Rule 57 Q of Central Excise Rules, 1944 vide Notification No.18/99-CE(NT) dated 28.2.1999 . availment of Modvat Credit on capital goods. At present also Cenvat Credit is allowed as capital goods. Factory is not safe without this. Hence this item is absolutely necessary.

[malay pota]

Thank you sir for reply , Then applicant should explain to the Licensing authority and can get certified by the Chartered Engineer (CE), as CE certificate is required for applying EPCG licence, that this is a Capital goods as per the Notification of Central excise and Customs as this item is mandatory for any factory for safety measure.The item is indirectly used in manufacturing of the final products as Safety measure.

Thanks

Malay Pota

[KASTURI SETHI]

Respected MALAY POTA,

Fire extinguisher is also capital goods in Service Tax sector.Notification mentioned above. It is not only for safety of excisable goods but also for the whole factory.This is indispensable capital goods in the factory. It is never intention of Govt or law not to treat as capital goods whether for hotel industry or factory. Common sense or knowledge always prevails while interpreting law.

[Mahir S]

Sir,

With due respect, as submitted in my earlier reply dated 05.0.22016, fire fighting equipments cannot be termed as capital goods for purpose of import under EPCG.

Further, EPCG Scheme allows import of capital goods for pre-production, production and post-production.

However, fire fighting equipments are not been used in the manufacture/production in the factory. They are safety related equipment and cannot be termed as Machineries for purpose of production of goods.

Hence, fire fighting equipment being equipment/appliance cannot be termed as capital goods.

Fire fighting equipments MAYBE eligible for input credit AS INPUTS and for input service credit on their AMC contract/servicing ; But it certainly is not CAPITAL GOODS and hence NOT ELIGIBLE FOR IMPORT UNDER EPCG.