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2015 (6) TMI 185 - CESTAT MUMBAI

2015 (6) TMI 185 - CESTAT MUMBAI - 2015 (328) E.L.T. 282 (Tri. - Mumbai) - Violation of Export Promotion Capital Goods (EPCG) Scheme in import of vehicle - benefits of exemption from payment of Customs Duty under the EPCG Scheme - Exemption Notification No.103/2009-Cus dated 11.09.2009 - Held that:- The DGFT Policy Circular No. 26/2009-14 dispenses with the production of installation certificate for moveable capital goods such as vehicles imported under EPCG scheme by Service Providers, as they .....

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ular place, or to seek its registration only from any particular RTO office. Mere parking of the vehicle at a particular place cannot be considered as violation of actual user condition or proof of the usage of vehicle in a particular manner or of transfer of ownership. - Neither there is any documentary evidence of sale of the vehicle to any other person / entity with any evidence of corresponding payment, nor has the Appellant claimed having sold the vehicle in question. It is not in dispute t .....

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aid that the vehicle has already been sold and transferred in violation of the actual user condition.

"Export Item Name" for the Appellant Company as seen from the Condition Sheet attached to their EPCG license is "Hotel and Tourism related services". The vehicle is accordingly registered for "Tourist purpose" in the name of the Appellant Company owning a "Hotel" in State of Karnataka at Bangalore. In view of the above binding precedents in Interglobe Enterprises Ltd (2006 (1) TMI 145 .....

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Tourist Permit, neither it is in violation of any mandatory condition of the EPCG License nor of the Exemption Notification. Neither the person in whose name the visitor pass was issued has been questioned, nor can such a Pass be a conclusive evidence to prove that the vehicle was not being used by the Hotel for providing services - Driver whose statement was recorded has been driving four different vehicles and was not kept to exclusively drive the subject vehicle. He admits having attended to .....

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inference can be derived from the version of the driver.

None of the statements contain any positive admission that the Appellant Company actually intended to import the car only for personal use of Shri Prakash Shetty. These statements and the records do not dispute the fact that after importation, the vehicle is actually registered in the name of "Goldfinch Hotels Pvt Ltd" and for "Tourist purpose" only. None of these statements even remotely allege any sale or transfer of the vehi .....

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upport the basic charge in the Show Cause Notice for demanding duty. Some of these statements at the most give room for suspicion, but cannot replace the tangible proof required in such cases.

The benefits conferred under the FTP therefore cannot be denied to the Appellant. We find that neither the Foreign Trade Policy nor the Exemption Notification lay down the nature of day to day record to be maintained by the licensee in respect of foreign exchange earned from the imported capital .....

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which is not disproved, by the department. The vehicle has not been sold or transferred to any other person by the importer It is not proved even on preponderance of probability that the vehicle was imported solely for personal use of the CMD of the Hotel. In these circumstances, we find that even if the mandatory conditions of Exemption Notification are construed strictly, there is no violation of any condition of the EPCG license, FTP or the Customs Notification.

The appellant has a .....

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n or imposition of penalty thus made out. The impugned Order-in-Original is therefore erroneous and is set aside. - Decided in favour of assessee. - Appeal Nos. C/85309, 85310, 85358/15-Mum - Final Order Nos. A/1113-1115/2015-WZB/CB - Dated:- 27-3-2015 - M V Ravindran, Member (J) And P S Pruthi, Member (T),JJ. For the Appellant : Shri Prasad Paranjape, Adv. For the Respondent : Shri A K Singh, Addl. Comm. (AR) ORDER Per: M V Ravindran: 1. These two appeals are concerning alleged violation of Exp .....

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licy. Revenue is also in appeal against the impugned order. Accordingly, we dispose of all the three appeals by a common order. 2. On 29.09.2010, EPCG Licence No.0330027356 was issued to the Appellant Company, under Chapter 5 of the Foreign Trade Policy, for import of one "Rolls Royce Ghost" model car at concessional rate of duty with obligation of export of services, namely "Hotel & Tourism related services" to be completed in 8 years. The condition sheet dated 29.09.201 .....

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dated 29.9.2010. A bond was submitted by the Appellant Company, which binds them inter alia to observe all conditions of Notification No.103/2009-Cus dated 11.09.2009. The proper Officer assessed the Bill of Entry under EPCG Scheme and the vehicle was cleared from Customs by endorsing the Bill of Entry for registration for Tourist purpose only. 4. On 23.05.2013, the Customs Preventive Unit commenced investigations with search/seizure and recording of statements. The vehicle was seized from the .....

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d mala fide intention in importing the vehicle only for personal use of Shri Prakash Shetty, the Chairman & Managing Director (CMD) of the Appellant Company. For upholding the said allegation the adjudication order seeks to draw inference from statements of Shri Vinay Kumar, Chief Security Officer, Shri Bhaskar V.S., General Manager (Finance), Shri S.M. Doss, General Manager, Shri Zaheer Ahmed, Front Office Manager, Shri Basavaraju, Driver, Shri Vijayath Babu, Cook and Shri Prakash Shetty, t .....

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r any other trip. He submitted that statements of various persons were confirming the allegations; all India Permit sign was not displayed on the car. According to him the transfer of registration from RTO Chitradurga to RTO Bangalore was a transaction of sale. The address of Chitradurga was not declared to the DGFT. The vehicle was not mentioned on the official website of the Appellant Company and that a Visitor Pass sticker, not connected to the Hotel, was found in the car. He submitted that i .....

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Appellants. 7. We have carefully considered the submissions of both the sides and have perused the records and the relevant provisions and conditions of exemption. 8. The relevant conditions under the EPCG licence, provisions of the Foreign Trade Policy and the conditions of the Exemption Notification are as under- (A)Conditions of EPCG Licence (Para 18.2 and 18.3.2 of the impugned Order): "1. This Authorisation has been issued under Chapter 5 of Foreign Trade Policy 2009-2014 and carries .....

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954.68 i.e. 8 times the duty saved of Capital Goods on FOB basis within a period of 8 years (12 years in case duty saved is ₹ 100 Crore or more) from the date of issue of authorisation. The Export Obligation shall be fulfilled by the use of the imported Capital Goods." "6. Import of Capital Goods under this authorisation shall be subject to actual user condition." "8. The CG is to be installed at the following address: Name and Address of the Supporting Manufacturer Sl. .....

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2 ................. However, import of motor cars, sports utility vehicles/all purpose vehicles shall be allowed only to hotels, travel agents, tour operators or tour transport operators and companies owning/operating golf resorts, subject to the condition that: (i) total foreign exchange earning from hotel, travel & tourism and golf tourism sectors in current and preceding three licensing years is ₹ 1.5 crores or more. (ii) 'duty saved' amount on all EPCG Authorizations issued .....

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vehicles/ all purpose vehicles such as chassis etc. cannot be imported under the EPCG Scheme. Eligibility 5.3 EPCG scheme covers manufacturer exporters with or without supporting manufacturer(s)/ vendor(s), merchant exporters tied to supporting manufacturer(s) and service providers..... Conditions for import of Capital Goods 5.4 Import of capital goods shall be subject to Actual User condition till export obligation is completed. Para 5.8 and 5.15 of the Handbook of Procedures: Conditions for f .....

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on, a true and proper account of exports/ supplies made and services rendered towards fulfillment of export obligation. 4. Relevant conditions of Exemption Notification 103/2009-Cus dated 11.9.2009 "2. The exemption under this notification shall be subject to the following conditions, namely:- (1) that the goods imported are covered by a valid authorization issued under the Export Promotion Capital Goods (EPCG) Scheme in terms of Chapter 5 of the Foreign Trade Policy permitting import of go .....

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tourism sectors in current and preceding three licensing years is rupees one crore fifty lakhs or more; (ii) the duty saved amount on all EPCG authorizations issued in a licensing year for import of motor cars, sports utility vehicles or all purpose vehicles shall not exceed 50% of average foreign exchange earnings from hotel, travel and tourism and golf tourism sectors in preceding three licensing years; and (iii) the vehicles imported shall be so registered that the vehicle is used for tourist .....

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or lease or any other manner till export obligation is completed. (3) that the importer executes a bond in such form and for such sum and with such surety or security as may be specified by the Deputy Commissioner of Customs or Assistant Commissioner of Customs binding himself to comply with all the conditions of this notification as well as to fulfill export obligation on FOB basis equivalent to eight times the duty saved on the goods imported as may be specified on the authorisation, or for su .....

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o that export obligation of a particular block may be set off against the excess exports made in the said preceding block(s); ....... (7) that the capital goods imported, assembled or manufactured are installed in the importer's factory or premises and a certificate from the jurisdictional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise, as the case may be, is produced confirming installation and use of capital goods in the importer's factory or premises .....

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stallation and usage issued by an independent Chartered Engineer: ........." 9. There is no dispute as to the fact that the Appellant Goldfinch Hotels Pvt. Ltd owns a Hotel and had earned the requisite foreign exchange by providing "Hotel and Tourism related services" for being eligible for obtaining EPCG licence. The annual average of such past export performance, on the basis of which the EPCG license was issued, is also not in dispute. As per condition 2 & 3 of the Conditio .....

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ock of 6 years. The vehicle was seized on 23.05.2013 i.e. within 2 1/2 years from the date of import under EPCG Scheme. Neither the appellants claim of having fully discharged the Export Obligation, nor have they applied for issuance of any Export Obligation Discharge Certificate. 10. It is undisputed position that the vehicle imported under the EPCG license was registered only for Tourist Purpose in the name of the Appellant Company which admittedly provides "Hotel and Tourism related Serv .....

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, as they are movable capital assets and cannot be installed at one particular location. All Customs Authorities have been instructed by this Policy Circular no. 26/2009-14, not to insist on the 'installation certificate' for such movable capital assets / goods, if imported under EPCG scheme. Therefore, non-production of installation certificate of the vehicle is not in contravention of the EPCG scheme. 12. It can neither be presumed at this stage that the Appellants cannot or would not .....

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he vehicle at a particular place cannot be considered as violation of actual user condition or proof of the usage of vehicle in a particular manner or of transfer of ownership. The said seized vehicle was provisionally released by the adjudicating authority to the Appellant Company against bank guarantee of ₹ 1,25,53,394/-, which was reduced by the Hon'ble High Court of Karnataka, vide Order dated 09.10.2013 to ₹ 75 lakhs, and was furnished on 14.10.2013. This provisional release .....

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of the Appellant Company. Most importantly, no evidence of any change of ownership of the vehicle in the name of any other person / entity is forthcoming from the records of RTO. The record of registration with the RTO conclusively shows that the ownership of the vehicle remains with the Appellant Company and continues to be for "Tourist Purpose". These are not even disputed by the adjudicating authority. It cannot therefore be said that the vehicle has already been sold and transferre .....

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at while capital goods may or may not be capable of generating convertible foreign exchange by their independent use as is the position in the case of the lift in a hotel or the cars imported by the travel agent the least that the importer must demonstrate is that the goods were put to use for the business activity for which the same were imported. The scheme does not in our view envisage imports where the goods are not meant for use in the business activity of the importer nor can the goods be .....

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There was, according to them an unauthorized diversion of goods contrary to the spirit of the Scheme, which could be investigated and made a basis for further action against the importer......" There is no dispute that thereafter on similar lings, the office of DGFT has already clarified vide File no. 01/94/180/518/AM07/PC-1/770 dated 27.12.2006. in another case of import of vehicle under EPCG scheme as follows- "4. As regards 2nd issue at 2(ii) above, in the working of hotel, tourism .....

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fits including all earnings for providing hotel accommodation, sale of food and beverages apart from transportation of the tourist, should be considered towards discharge of export obligation against vehicles imported under EPCG scheme. This is however subject to the condition that no part of the sale proceeds have been paid in free foreign exchange to any other service provider for providing add on services for hotel accommodation etc." (Emphasis ours) Thereafter, the Hon'ble Delhi Hig .....

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to India and the respondents rendered the services of arranging/booking air and train tickets, accommodation, site-seeing and booking train tickets etc. Without these services, rendered by the respondents, incremental foreign exchange earnings could not have been achieved. Another finding of fact which is recorded by the Tribunal is that it has not been shown before the Tribunal that the imported vehicles had been used for any purpose other than those related to travel and tour as stipulated in .....

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change earned through the foreign tourists would be treated as earning of foreign exchange by using those cars as well." (Emphasis ours) The SLP (Civil) CC no. 6483-6484 of 2011 filed by the department against the said judgment was also dismissed by the Hon'ble Supreme Court on 18.4.2011, as reported in 2011 (268)ELTA110 (SC). We therefore find no impediment in use of the vehicle by or under the directives of the CMD for promotion of "Hotel and Tourism related services". Just .....

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from the Condition Sheet attached to their EPCG license is "Hotel and Tourism related services". The vehicle is accordingly registered for "Tourist purpose" in the name of the Appellant Company owning a "Hotel" in State of Karnataka at Bangalore. In view of the above binding precedents in Interglobe Enterprises Ltd (supra), Air Travel Bureau Ltd (supra) and the clarification from the office of DGFT, it is not mandatory that the Hotel of the Appellant Company should .....

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nt company that the guests are VVIPs for the company's business activities, which is "Hotel and Tourism related services". 17. We find that when the vehicle was seized, neither the period for completion of Export Obligation had expired, nor any proceedings were initiated against the appellant by DGFT for non-fulfilment of Export Obligation or for any failure in submission of any mandatory details prescribed by DGFT by way of any Public Notice. There is no statutory requirement for .....

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hri Prakash Shetty stated that the special unleaded petrol was available only at a particular petrol station and hence he was getting the fuel from that place. It is not disputed that the Appellant Company which is owning the hotel is a private limited company where the majority shares are held by another private limited company along with the family members of the CMD. Substantial shares of the second private limited company are again held by the family of the CMD. Hence, we find merit in the s .....

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the Exemption Notification. Neither the person in whose name the visitor pass was issued has been questioned, nor can such a Pass be a conclusive evidence to prove that the vehicle was not being used by the Hotel for providing services. The General Manager - Finance, Shri Bhaskar VS in his statement dated 23.5.2013 inter alia stated that the said vehicle was being parked at the residence of CMD of the Hotel for security reasons and that the said vehicle was given to guests on complimentary basis .....

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e guests, and that since there is no safe and sufficient parking at Hotel, the Rolls Royce car is parked at the residence of the CMD and sometimes at the premises of Hotel. This driver cannot be presumed to be competent to identify the nationality of the guests. Guests of Indian origin from Asian countries do not look different from resident Indians. Further, the non-resident Indians are also bound to spend in foreign exchange during the short periods of stay in India. Hence no conclusive infere .....

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chitects, etc. who do stay in the hotel, but visit for the purpose of up-gradation of the hotel, and that he authorizes the use of the Rolls Royce car by informing the front office or the driver. On a specific query, the CMD in his statement dated 27.05.2013 has denied that no foreign exchange was earned by providing the vehicle and had stated that - "In the last 2 years 2011-12 and 2012-13 we have earned foreign currency to the tune of ₹ 2,62,56,060/- which is the earning earned as p .....

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e or any misuse of the EPCG scheme by violating actual user condition. Even the allegation that the vehicle was meant only for personal use of CMD-Shri Prakash Shetty and that the actual use of the imported vehicle was mis-stated at the time of importation are not established on facts. 22. In view of the above, we cannot expect that in the Corporate Sector one can expect the employees to meddle in every affair and to keep themselves abreast of all the developments of a company. When certain peop .....

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t the vehicle was registered as "tourist cab" that is for Tourist purpose, and a Tourist Permit was obtained from RTO. Later on it was migrated to RTO Bangalore from RTO Chitradurga (both within the State of Karnataka). However, there is no dispute that it remains registered in the name of the Appellant Company and for "tourist purpose". It is also undisputed that the vehicle is neither registered in the name of the CMD of the Company, nor is there any allegation of such atte .....

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entity, and moreover the registration with RTO stands in the name of the Appellant Company. It is also not in dispute that the balance sheet of the appellant company filed with the Registrar of Company also shows the vehicle in the fixed assets of the company. Some statements also positively assert that the vehicle was actually being used by the WIP guests and thus were used for providing Hotel and Tourism related services. Therefore, there is no tangible evidence to support the basic charge in .....

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DCCT cannot be upheld. The primary facts relating to the processes undertaken by the appellant at its unit were known to the Department of Industries and Commerce and the DCCT. The only question was what was the proper conclusion to be drawn from these. The Department of industries and Commerce which was responsible for the issuance of the 1993 G.O. accepted the appellant as an eligible industry for the benefits. Apart from the fact that it can be assumed that the Department of Industries was in .....

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nt yardsticks are being applied by two different wings of the Central Government. The Central Government through Ministry of Commerce has notified the Foreign Trade Policy under the provisions of FTDR Act, 1992, which confers the right of beneficial exemption from payment of custom duty on fulfilment of conditions mentioned therein, and upon following the procedure published by way of Public Notice in the Handbook of Procedure. Neither any condition imposed either in the Foreign trade Policy or .....

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inistry of Commerce which was responsible for the issuance of the Foreign Trade Policy was in the best position to construe its own provisions, Public Notices and the Policy Circulars. It is to be presumed that while formulating the Foreign Trade Policy even the Departments of Revenue must have been duly consulted. Therefore, with regard to the language used in Para 2.4 of the Foreign Trade Policy, it is the view expressed by the Ministry of Commerce, which must be taken to be that voice. Para 2 .....

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tification in the Official Gazette, that an exporter or importer or any licensing or any other competent authority (which shall necessarily include the officers of Ministry of Finance/Customs Authorities), would be bound by the procedure specified by DGFT for implementing the provisions of FT (D&R) Act, the Rules, the Orders made thereunder and FTP, published by means of a Public Notice. Thus all procedural aspects whether or not notified by the Ministry of Finance, if contrary to what is sp .....

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t, the benefit of such legislation are to be made available by another Department of Central Government namely the Customs Department for which purpose Notifications and Circulars are issued under the Customs Act, 1962. Neither such Notifications and Circulars can be interpreted to take away the benefit which is otherwise available under the FTP and HBP, nor any further clarification or instructions may be insisted by the Customs Department, when the provisions of the FTP and HBP mandate grant o .....

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ty credit in respect of the goods imported under Exts. P9 to P15 referred to above. In view of this clarification, the petitioner is also entitled to avail of the benefit of the duty credit certified under Exts. P5 to P5(d) and P6 licence as well. 4. In the light of Exts. PI7 and P18 clarifications issued by the Director General of Foreign Trade, this writ petition is disposed of clarifying that the petitioner will be entitled to duty credit for the goods imported under Exts. P9 to P15 and the B .....

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have issued Exts. P17 and P18, / do not think it will be reasonable to require the petitioner to wait until any notification is issued by the Customs Department to get the benefit. Therefore, there is no substance in this objection." 26. The benefits conferred under the FTP therefore cannot be denied to the Appellant. We find that neither the Foreign Trade Policy nor the Exemption Notification lay down the nature of day to day record to be maintained by the licensee in respect of foreign e .....

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registered for tourist purpose only, and should not be sold or transferred. The Department has not produced any tangible evidence to prove that the actual user condition has been violated or the vehicle has been sold / transferred. In any case foreign guests staying in hotels do not pay separately for their travel and the Appellant Company claims to provide complementary facility to their VVIP guests, which is not disproved, by the department. The vehicle has not been sold or transferred to any .....

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