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2015 (9) TMI 1369 - CESTAT CHENNAI

2015 (9) TMI 1369 - CESTAT CHENNAI - 2016 (334) E.L.T. 529 (Tri. - Chennai) - Denial of exemption claim - Served From India Scheme - Whether the benefit of exemption notification No.92/2004-Cus. dt. 10.9.94 availed by the appellant in respect of import of restricted goods i.e. Radars, Navigational Equipments, VHF Equipments & DME Equipments etc. under SFIS is correct or otherwise - The appellants contention that DGFTs clarification on import/export shall prevail over customs and customs authorit .....

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ority in his findings at para-30 of order that the department has not challenged the importability of impugned goods under FTP but the dispute is restricted to payment of customs duty on the restricted goods through SFIS scrip under the Notification 92/2004. The appellants are entitled to utilize the SFIS scrips for import of any capital goods which are freely importable. That being the case, there is no overlapping of power of DGFT or Customs vice versa. - It is a fact that SFIS scrips are .....

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ty only on the freely importable goods and the customs notification 92/2002 allows exemption as per the policy in force. Therefore, there is no promissory estoppel attracted in the present case. - SFIS scrip should not allowed to be used for payment of customs duty on the Restricted goods i.e. on Radars, Navigational Equipments, VHF & OME Equipments which are restricted for import under ITC (HS) EXIM code and the exemption provided under Notfn 92/2002-Cus. Is not applicable for use of SFIS .....

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t be brushed aside or ignored as there are voluntary statements from responsible senior executives persons in charge of Finance & Planning including the Executive Director Finance and are fully aware of the legal provisions of FTP and Customs exemptions notifications. Therefore, the adjudicating authority rightly denied the exemption under Notfn 92/2004. - Demand of duty confirmed. - Confiscation and redemption fine - Held that:- When the goods are not available for confiscation, by respectf .....

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f imports made through Chennai and Mumbai. - penalty reduced - Decided partly in favour of assessee. - Appeal No. C/109/2009 - Final Order No.41254/2015 - Dated:- 25-9-2015 - Shri R. Periasami, Technical Member and Shri P.K. Choudhary, Judicial Member For the Petitioner : Shri R. Parthasarathy, Advocate For the Respondent : Ms. Indira Sisupal, AC (AR) Per R. Periasami 1. The appeal is filed against Commissioner of Customs (Seaport-Exports) order dt. 31.1.2009 . 2. The brief facts of the case are .....

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ustoms duty under SFIS certificates in terms of Notification 92/2004-Cus. dt. 10.9.2004. It was alleged that as per para-3.6.4.5 of Foreign Trade Policy (FTP), 2004-09 (w.e.f 1.4.2006) SFIS certificates can be used for import of any capital goods including spares, office equipments etc. related to any service sector business of the service provider which are otherwise freely importable under ITC (HS) Classification of EXIM code. Whereas the appellants imported the above equipments which are rest .....

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d for confiscation of the goods under Section 111 (d) and also proposing for penalty under Section 112 (a) and (b) of Customs Act, 1962. SCN also proposed for appropriation of entire Customs duty already paid by them in respect of all the three imports. The Ministry had appointed the Commissioner of Customs (Exports), Chennai as a common adjudicating authority to decide all the three cases vide Notification No.74/2008-Cus. dt. 23.6.2008. The adjudicating authority after following principles of n .....

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53,885/- under Section 111(d) of Customs Act and imposed redemption fine of ₹ 3 crores under Section 125 and also appropriated an amount of ₹ 8,79,39,477/- and imposed penalty of ₹ 50 lakhs on the appellant under Section 112. (ii) In respect of imports made through Mumbai Customs, covered by B/E 761494 dt. 23.4.2007 and 782829 dt. 27.7.07 confirmed the demand of ₹ 1,34,14,918/- and confiscated the goods valued at ₹ 4,28,29,750/- and imposed redemption fine of ₹ .....

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f ₹ 5000/-. Aggrieved by the impugned order, the appellant filed the present appeal. 3. Ld. Advocate Shri R. Parthasarathy appearing for the appellant submitted a written synopsis and reiterated the same and the grounds of appeal. He submitted that AAI who is a service provider earned ₹ 913.20 crores of foreign exchange in the year 2004-05 from the services provided to air travel passengers, airlines arriving and departing to various destinations from various airports in India owned .....

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plied and obtained licence from Ministry of Communication and Information Technology from the Department of Telecommunications - Wireless and Planning Coordination Wing. He also submits that there is no dispute on the importation of goods under the licences annexed at pages 17 to 21 of appeal paper book-Vol-II. Copy of Grant of Authorization from DGFT for 25 SFIS are annexed at page 12,13,14 and they have correctly used SFIS scrips for payment of customs duty on the said goods and the goods were .....

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growth in export of services so as to create a powerful and unique "served from India" brand instantly recognized and respected world over. He drew our attention to para 3.6.4.3 of SFS Policy and as per the same they are entitled to duty credit of 10% of foreign exchange earned. As per para 3.6.4.5 of FTP 2004-05 as on 31.8.2004, the duty credit may be used for import of any capital goods including spares, office equipments etc. related to the main line of business of the appellant. He .....

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itted import of capital goods and spares etc. The condition that the capital goods must be otherwise freely importable did not exist in 2004-05 and 2005-06 policy. Therefore, the endorsements in the licence issued by SFIS scrip issued by DGFT did not incorporate any condition. 5. He further submits that appellant earned foreign exchange for export of service for the year 2004-05 and the licence was issued in 2006-07 and in the endorsement made in SFIS licence it is clearly indicated that the dut .....

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redit under SFIS scheme as per the policy prevailing during 2005-06 - RE-2005 and also submits that Departments contention that credit cannot be utilized to pay duty on the items imported in 2007-08 is contrary to the clarification given by the DGFT. He relied the following decisions :- 1. Richardson Hindustan Ltd. Vs UOI 1988 (37) ELT 496 (Bom.) 2. CC Vs Oswal Agro Mills Ltd. 1989 (41) ELT 104 (Tribunal) 3. Adani Exports Ltd. Vs ACC Cochin 2006 (199) ELT 613 (Tri.- Bang.) In the above cases, it .....

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. Therefore promissory of estoppel is applicable. In support of this, he relied the following decisions :- 1. Sanjaya Sales Corporation Vs Dy.CCI 1992 (57) ELT 579 (A.P.) 2. Indu-Nissan Oxo Chemicals Pvt. Ltd. Vs CC Kandla 2000 (120) ELT 625 (Tribunal) 3. UOI Vs Himsheel International 2011 (273) ELT 495 4. Jindal Aluminium Ltd. Vs JDGFT 2009 (243) ELT 651 (Kar.) 5. UOI Vs Hindustan Platinum (P) Ltd. 1989 (44) ELT 443 (BOm.) 6. Rizwan International Vs UOI 1994 (73) ELT 804 (Mad.) 7. On the confis .....

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e is no contravention under section 111(d) of Customs Act. He further submits that there was no seizure of goods nor any bond or bank guarantee was executed. Once the goods are not available for confiscation redemption fine cannot be imposed and no penalty can be imposed under section 112. He relied the following decisions :- i) CC Bangalore Vs G.M. Exports 2012 (279) ELT 493 (Kar.) ii) CC Amritsar Vs Raja Impex (P) Ltd. 2008 (229) ELT 185 (P&H) iii) Shiv Kripa Ispat Pvt. Ltd. Vs CCE & C .....

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date of import is relevant as any exemption or any policy provisions prevailing on the date of import of goods is relevant for custom purpose. He referred to para-9 of the order and ITC (HS) EXIM code. He submits that Radars, other equipments are restricted item and the same cannot be imported duty-free and submits that SFIS scheme scrip cannot be used for adjustment of customs duty on the restricted goods. He also submits that in the statements recorded from G.M. and Dy.GM, Executive Directors .....

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licable to the present case. He further submits that DGFT clarification was not produced or submitted before the adjudicating authority during the adjudication proceedings. Granting exemption of customs duty is strictly governed by any exemption issued under section 25 of Customs Act. Therefore, the customs have clearly followed as per the Notfn 92/04-Cus. and the Customs notification stipulates the policy in force and the exemption was correctly denied on the restricted goods. On the confiscati .....

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is utilization of SFIS scrip for customs duty as per Notfn 92/2004. 10. We have carefully considered the submissions of both sides and perused the records. The main issue before us is whether the benefit of exemption notification No.92/2004-Cus. dt. 10.9.94 availed by the appellant in respect of import of restricted goods i.e. Radars, Navigational Equipments, VHF Equipments & DME Equipments etc. under SFIS is correct or otherwise. 11. The period of import involved in the present case is betw .....

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.5 allowed import of any capital goods under this scheme. They also contended that the restriction was introduced in the policy only in 2006-07 (RE 2006) (as on 1.4.2006) and the same is not applicable to the SFIS scrips issued for the exports made in 2004-05. The revenues contention is that as per policy para 3.6.4.5 and as per notification 92/2004, the said goods are restricted items and not freely importable on the date of importation of the said goods and the benefit of exemption notificatio .....

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2004-09 under para 3.6.4.3 and 3.6.4.5 of FTP year 2004-05 and 2006-07 (RE 2006) which is reproduced as under : I) FTP2004-05 (as on 31.8.2004) before amendment Served From India Scheme (SFIS) Entitlement 3.6.4.3 All Service providers (other than hotels and restaurants shall be entitled to duty credit equivalent to 10% of the foreign exchange earned by them in the preceding financial year. Imports Allowed 3.6.4.5 Duty Credit entitlement may be used for import of any capital goods including spar .....

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ng Process Outsourcing (EPO) and Knowledge Process Outsourcing (KPO) service providers; of services listed in Appendix-10 of Handbook of Procedures (Vol. I) (other than service providers covered by Para 3.6.4.4) shall be entitled to duty credit scrip equivalent to 10% of the foreign exchange earned by them in the preceding financial year. However, services or service providers as listed in Para 3.18.1 of Handbook of Procedures (Vol. I) shall not be entitled for benefits under the scheme. Imports .....

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y importable under ITC (HS). As seen from the above the FTP (2004-09) (RE 2006) from 1.4.2006 the imports allowed under SFIS was modified and SFIS scrip can be utilized for import of capital goods that are otherwise freely importable under ITC (HS) classification of export and import items. The goods imported are Radars, Navigational Equipments, VHF equipment and DME equipments etc. classifiable under Chapter 85261000 and Chapter 85269190, 85269110 and 85299020 of Customs Tariff. It is relevant .....

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ver and Differential Global Positioning System (DGPS) Receiver is free ... 8529 Parts suitable for use solely or principally with the apparatus of headings 8525 to 8528 8529 90 20 For communication jamming equipment Restricted 12. It is evident from the above ITC (HS) EXIM code, these items are restricted and not freely importable. Therefore, there is no dispute on the fact that policy provision in force at the time of importation and EXIM code confirms that SFIS scrip is to be utilized for Cust .....

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ion of Customs duty on imported goods is governed under Customs Act and by way of exemption notification issued under Section 25 of Customs Act. The relevant Notfn. No.92/2004-Cus. dt.10.9.2004 fully exempts goods from customs duty on the goods imported against SFIS certificate, the extract of Notfn is reproduced as under:- "Exemption to imports under Served From India Scheme Certificate. -In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1 .....

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ariff Act, 1975 (51 of 1975) and items not permitted to be imported as specified in para 3.12.4 of the Policy; (ii) in the case of service provider other than hotel or stand alone restaurant, or golf resort having catering facility, capital goods including spares, office equipment, professional equipment, office furniture and consumables, related to its service sector business, but excluding the item not permitted to be imported as specified in para 3.12.4 of the Policy. when imported into India .....

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e notification as service provider other than Hotel and the notification exempts from the whole of customs duty & Additional Excise Duty on capital goods and spares etc. imported against SFIS scrip issued under paragraph 3.6.4 of the Foreign Trade Policy(FTP) (Emphasis supplied). Para 3.6.4 of FTP covers SFIS and as per sub para 3.6.4.5 of FTP 2004-09 (RE-2006) which is in force on the date of import is specific and the SFIS scrip can be utilized toward customs duty only for the goods that a .....

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uty only on an item which is freely importable under FTP ITC (HS) EXIM Code. It is not a case here of any contravention of import export regulations but on exemption of customs duty under the notification. The appellants contention that DGFTs clarification on import/export shall prevail over customs and customs authority cannot interpret the policy is not at all relevant to the facts of this case. Rather, we find the Customs is only implementing the FTP Policy provisions envisaged as per para 3. .....

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lemented the FTP policy provision in letter and spirit as existed at the relevant period of import. There is no dispute on the fact that the goods, Radars & VHF & DME are restricted items under ITC (HS) EXIM code and there is no dispute on the fact that para 3.6.4.5 of FTP 2004-09 (RE-2006) stipulated that SFIS can be utilized for customs duty adjustment only on the goods which are freely importable and not to any restricted items. 16. It is relevant to state that as rightly held by the .....

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tations relied by the appellant on this issue is distinguishable and not applicable to the present case for the reasons explained above. 17. Similarly, the appellants relied the DGFT letter dt.19.6.2007 and on perusal of the said letter, we find the JDGFT had issued the said clarification regarding import of Air Field Fire Fighting and Rescue vehicles. It is seen that the JDGFT had clearly stated that utilisation of duty credit for import of Air Field Fire Fighting & Rescue vehicles under SF .....

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ot allowed clearance under the SFIS & other schemes. This confirms that both DGFT and CBEC are implementing in the policy provisions and not against each other as claimed by the appellants. 18. The appellants another plea that promissory estoppels is attracted in the present case as the foreign exchange realized in 2004-05 and the relevant para 3.6.4.5 as existed as on 31.8.2004. Therefore the department is estopped in denying the benefit when the goods are imported in 2006-07. The above con .....

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FTP 2004-09 (Re-2006) w.e.f. 1.4.2006 stipulates the utilization of SFIS scrip for customs duty only on the freely importable goods and the customs notification 92/2002 allows exemption as per the policy in force. Therefore, there is no promissory estoppel attracted in the present case. The citation relied by the appellants are not applicable to the facts of this case. 19. In view of the foregoing discussion, we are unable to accept the appellants plea that SFIS scrip should allowed to be used .....

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it Dubey, Executive Director (Finance) statement dt. 22.11.2007 in charge of import operations of appellant-company wherein they clearly admitted the fact that they inadvertently utilized the said SFIS scrips for payment of Customs duty towards import of Radars, and other equipments which are restricted items under policy. The Executive Director in his statement clearly admitted before the Department that they agreed to pay the entire customs duty and they paid the entire customs duty voluntaril .....

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ed view that the exemption of customs duty under 92/2004-Cus. dt. 10.9.94 not applicable for Radars, Navigational Equipments & VHF & DME equipments, restricted goods for adjustment of customs duty against SFIS scrips. The customs duty of ₹ 10,81,10,330/- confirmed by the adjudicating authority under Section 28 of Customs Act and appropriation of entire customs duty already paid by the appellants is liable to be upheld with interest. 22. As regards the imposition of redemption fine .....

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Hon ble High Court of Bombay in the case of CC Mumbai Vs Finesse Creations Inc., (supra) and Hon ble High Court of Karnataka in the case of CC Bangalore Vs G.M. Exports (supra) clearly held that imposition of redemption fine arises only when the goods are available for confiscation and held that RF not imposable when goods are not available for confiscation and upheld the Tribunal orders. The relevant paragraph of Hon ble High Court of Karnataka in the case of CCE Vs GM Exports (supra) in reprod .....

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ll available and it was not seized, the question of imposition of redemption fine on such goods did not arise. When the authorities imposed redemption fine on the ground that the said goods are liable for confiscation without verifying as to the existence of the goods and the seizure of the goods, the imposition of redemption fine was illegal. Therefore the Tribunal was justified in passing the impugned order which is strictly in accordance with law. 5. Accordingly, the substantial questions of .....

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