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TMI Blog2023 (12) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... Brief facts are that M/s. Ashok Leyland Nissan Vehicles Ltd. (ALNVL) is a joint venture between M/s Ashok Leyland Ltd. (ALL) and M/s Nissan Motors Co Ltd (NMCL) with a share holding pattern, in the ratio of 51% : 49% to manufacture Passenger Cars / Light Commercial Vehicles (LCV). M/s. ALNVL was incorporated as a Private Limited Company during May, 2008. It does not have any manufacturing facility of its own, and was getting vehicles manufactured by M/s. Renault Nissan Automotive India Pvt. Ltd, Chennai (M/s RNAIPL) and M/s ALL, Hosur under a Contract Manufacturing arrangement entered into with the said manufacturers. The passenger cars like 'Evalia and 'Stile' were being manufactured at M/s RNAIPL and the LCVs like 'Dost, 'Partner' and 'Mitr' were being manufactured at M/s ALL, Hosur. 'Evalia' models manufactured at M/s RNAIPL were being marketed by M/s. Nissan Motor India Private Limited (M/s.NMIPL) through their dealer network, while 'Stile' model manufactured at M/s RNAIPL and the LCVs manufactured at M/s ALL were being marketed by M/s ALL through their dealer network. 3. Based on intelligence, the Officers of DGCEI-CZU visited the premise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... censes issued during the period 2011 to 2013. Further it is seen that M/s ALNVL had exported 286 'Evalia'/'Stille' vehicles under EPCG Scheme vide 23 shipping bills through M/s NMIPL and M/s. ALL, respectively, totally valued at FOB Rs. 25.79 Crore through various shipments. 7. The investigation revealed a case of violation of the provisions of EPCG licenses on the main ground that M/s.ALNVL had failed to fulfil the Export obligation. The DGCEI-CZU had registered a case of violation of the provisions of the Export Promotion Capital Goods Scheme (EPCG Scheme, for short) in the import of capital goods for the manufacture of 'Evalia' and Stile Model vehicles by M/s Ashok Leyland Nissan Vehicles Ltd. Subsequently, during February, 2016, the case was transferred to the Directorate of Revenue Intelligence, Chennai Zonal Unit (DRI-CZU) for carrying out further investigation. Documents were verified and statements recorded. During the course of investigation, M/s ALNVL had voluntarily deposited a total amount of Rs 11.92 Crore by submitting demand drafts towards their Customs duty liability for non-fulfilment of Export obligation as detailed in paragraph 11.0 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Nissan Vehicles Ltd., Kochar Towers, # 19, Venkatanarayana Road, T. Nagar, Chenai - 600017 for imports in Sea Customs, Chennai, I order as below : (i) I demand customs duty of Rs.21,43,78,078/- (Rupees Twenty One Crore, Forty Three Lakh, Seventy Eight Thousand and Seventy Eight only) as detailed against fourteen licenses in Table-2 at para no.34.1 of this order from M/s Ashok Leyland Nissan/Ashok Leyland Limited under section 143(3) of the Customs Act, 1962 read with Notification no. 102/2009- Customs dated 11/09/2009 and the bonds furnished thereof, for non- fulfilment of export obligation; (ii) I demand Interest at the rate of 15% from Ashok Leyland Nissan as per Notification No. 102/2009-Customs dated 11.09.2009 on the duty demanded at (1) above from the date of import of the goods; (iii) the exemption availed under notification no.102/2009-Customs dated 11/09/2009 in respect of the capital goods imported as detailed against three licenses mentioned in Table-3 at para no.374 of this order. I demand customs duty of Rs.4,17,93,473/- (Rupees Four Crore, Seventeen Lakh, Ninety-Three Thousand, Four Hundred and Seventy-Three, only) from Ashok Leyland Nissan/Ashok Leyland under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,00,00,000/- (Rupees Fifteen Crores Only); (x) I order confiscation of the goods other than the seized goods mentioned at (b) above, valued at Rs.32,28,71,910/- (Rupees Thirty-Two Crore, Twenty-Eight Lakh, Seventy-One Thousand, Nine Hundred and Ten, only) (A.V.), under section 111(d) and 111(0) of the Customs Act, 1962. However, I give option for redemption of the said goods U/s 125 of the Customs Act 1962, on payment of redemption fine of Rs. 3,00,00,000/- (Rupees Three Crores Only); (xi) I Impose a penalty of Rs. 5,00,00,000/-(Rupees Five Crores Only) on Ashok Leyland Nissan/Ashok Leyland Limited under section 112 (a) of the Customs Act, 1962; (xii) I order appropriation of an amount of Rs.11,92,05,288/- (Rupees Eleven Crore, Ninety Two Lakh, Five Thousand, Two Hundred and Eighty Eight, only) voluntarily deposited by them, towards the duty demanded above; and (xiii) I order enforcement and adjustment of the bank guarantees executed by them, with the Customs, at the time of registration of the EPCG licenses towards the duty and interest, demanded above." 2) I impose penalty on the following manufacturers / sub contractors under section 112 (b) of the Cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing installed the diverted Impugned capital goods Imported under the EPCG Scheme In an unauthorised premises. 3) In respect of M/s Ashok Leyland Nissan Vehicles Ltd, Kochar Towers, # 19, Venkatanarayana Road, T. Nagar, Chennai-600017 for Imports in Air Customs, Chennai following orders are passed: (i) I demand customs duty of Rs.38,59,980/- (Rupees Thirty Eight Lakh, Fifty Nine Thousand, Nine Hundred and Eighty only) as detailed against three licenses In Table-2 at para no. 34.1of this order from M/s Ashok Leyland Nissan/Ashok Leyland Limited under section 143(3) of the Customs Act, 1962 read with Notification no. 102/2009- Customs dated 11/09/2009 and the bonds furnished thereof, for non-fulfillment of export obligation; (ii) I demand interest at the rate of 15% from M/s Ashok Leyland Nissan/Ashok Leyland Limited as per Notification No. 102/2009 Customs dated 11.09.2009 on the duty demanded at (1) above from the date of Import of the goods; (iii) I deny the exemption availed under Notification no. 102/2009-Customs dated 11/09/2009 In respect of the capital goods imported as detailed against three Licenses in Table-6 at para no.39.1of this order. I demand customs duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,77,24,468/- 71,47,851/- M/s Renault Nissan NA NA 10,00,000/- M/s Gestamp Automotive Chennai NA NA 10,00,000/- M/s Myoung Shin India Automotive NA NA 10,00,000/- M/s Daejoo Automotive NA NA 10,00,000/- M/s MS Global India Automotive NA NA 10,00,000/- M/s Cosma International NA NA 10,00,000/- M/s CAparo Engineering India NA NA 10,00,000/- II. Air cargo, Chennai M/s Ashok Leyland 38,59,980/- 30,00,000/- 6,00,000/- 12,26,700/- 6,00,000/- III. M/s Renault Nissan NA NA 20,00,000/- For the Appellant: 10. Learned counsel Dr. C. Manickam appeared and argued for appellant. It is submitted that M/s Ashok Leyland Ltd, headquartered at Chennai, are the second largest manufacturer of Automobile Commercial vehicles in India and exports to overseas countries besides catering to the needs of the Defence Sector of the Government of India and Various State Transport Corporations across the country. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be fulfilled equivalent to 50% in value during first block of 4 years /6 years and the balance 50% in the second block of 6years/ 8 years as the case may be. While the appellants were able to fulfil the 50% obligation in time for the Commercial vehicles they could not meet the deadline in respect of passenger vehicles, though there had been exports of few quantity of passenger vehicles as well. Further, in few cases, the supporting manufacturers, instead of installing the goods in the premises endorsed in the authorizations, had installed in a different location; which was their own different unit or their sister concern. The supporting manufacturers did not keep the appellants informed about such installation in a different location as they did not know about the compliance requirements. However they had been issued the installation certificates indicating the installation as required. This fact of installation of imported duty free capital goods in a different location or non fulfilment of 50% of the export obligation in the first block period was not intimated to the JDGFT authorities. In fact, the so called unauthorized premises as alleged in SCN where the capital goods were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 73 (iv) Duty in respect of the unavailable goods 83,74,551 Total Demand 37,61,30,550 Besides the above duty demand, the notice also sought to impose interest and penalties besides proposal for confiscation of the seized goods and invocation of Bank guarantees executed with customs at the time of import. The notices were sent to seven supporting manufacturers proposing penalties on them for non-compliance at their end. Merger of the JV Company with Ashok Leyland 15. The Ld. Counsel submitted that, a commercial dispute arose between the JV Partners - viz. Ashok Leyland and Nissan Motor which resulted in dissolution of the JV and acquisition of the rights and liabilities by Ashok Leyland with the existing Nissan through its entity - Ashok Leyland Vehicles Limited (which became a subsidiary of Ashok Leyland). This development happened on 16.12.2016. Subsequently, the management of Ashok Leyland decided to merge its subsidiary Ashok Leyland Vehicles Limited with Ashok Leyland and this happened through NCLT proceedings on 17.12.2018. The above developments were in public domain and informed to ROC authorities and all the stake holders including the DGFT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period unconditionally. 16.4 The Ld. Counsel argued that DGFT, Delhi which is the Competent Authority in respect of FTP, had seen merits in the request made by appellant and granted extension of export obligation in respect of all the 26 licenses and condoned the procedural lapses in respect of 12 out of the 26 licenses as well. While there had been no directions by the RA for granting the relief in respect of 12 licenses, the conditions imposed in respect of 14 licenses are all generic in nature. Compliance in terms of the decisions of the EPCG/PRC Committees by the appellants 17. The appellants then complied with the conditions imposed by the EPCG Committee in respect of the 14 authorizations by paying the composition fee on various dates between 22.05.2019 and 20.06.2019 and submitted the documents evidencing such payments to JDGFT, Chennai (RA) on 26.06.2019. 17.1 The appellants also complied with the provisions of the FTP in paying the composition fee for the 12 authorizations and submitted their claims for discharge of EO on 19.01.2021 / 20.01.2021. Orders passed by the Adjudicating Authority: 17.2 It is submitted that immediately after the merger of ALNVL/ ALV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere kind enough to adhere to their decision and advised the appellants to go ahead and complete the EO which the appellants did complete. 18. It is argued by the Ld. Counsel that the Adjudicating Authority had passed the order in haste without considering the facts and the approvals granted by the Competent Authority (i.e DGFT) in this matter. The Adjudicating Authority was very well aware of the decisions of the EPCG Committee and PRC Committee in allowing extension of time for fulfilling export obligation for two years and condoning all the procedural lapses vis installation of capital goods in places other than the ones endorsed in the authorizations. 18.1 In spite of being aware of these facts, the Adjudicating Authority had proceeded to confirm the entire demands and penalties (not only on the appellants but also on their supporting manufacturers) on the ground that the appellants had not produced evidence complying with the conditions of the FTP for getting such extensions which in fact the appellants had complied well before passing the adjudication order. 18.2 The Ld. Counsel submitted that though there was some delay in compliance of the condition of payment of composit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e FTP and the Customs notifications as well. The SCN refers to only 50% of non-fulfilment of EO. The appellants state when substantive provisions of the law have been complied with (Exports have happened and precious foreign exchange has been realised), it is incorrect on the part of the adjudicating authority to deny the benefit earned by appellants alleging procedural non-compliance; which in fact has been complied. The reason for passing the impugned order is that appellants failed to inform about the compliance. In fact, appellants had informed about the order dt.13.02.2019 passed by DGFT extending the time and were taking steps for compliance of payment of composite fee. Meanwhile the adjudicating authority has passed the order in a haste. 19. The Foreign Trade Policy of the GOI and the Hand book of procedures therein (Paragraph 5) provide for extension of time for fulfilment of export obligation, generally ,by default , on application by the exporters by paying a composition fee at a prescribed percentage of the unfulfilled export obligation value in respect of export promotion schemes like EPCG. This time limit is generally two years from the date of expiry of the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fulfil the Export obligation and also condoned the procedural lapses in toto, and the appellants having fulfilled the Export obligation in full in respect of all the 26 cases of Authorizations and obtained EODC in respect of 12 out of the 26, it is prayed that by the Ld. Counsel that impugned Order-in-Original No. 69637/2019 dt 21.06.2019 may be set aside. 22. In addition, the Ld. Counsel for appellants submitted that the SCN is issued by DRI. However, they do not intend to contest the issue whether the SCN issued by DRI is proper and valid. The appellant has filed affidavit to the effect that they give up the contest on this issue in this appeal before the Tribunal and that they would not be contesting the issue before any other forum in regard to this appeal. 23. On behalf of the Department, learned Special Counsel Sri S. Ponnusamy appeared and argued the matter. The learned Special Counsel adverted to para-7 of the Notification No.102/2003Cus. dt. 11.09.2009 and submitted that the importers are required to execute the bond binding themselves with all the conditions of the notification as well as for fulfilling export obligation worth FOB value @ six times of the duty for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od which ended during April 2016 and the request was rejected by the EPCG Committee on 20.02.2018, for the reason by which that the matter was under adjudication by Customs. 26. In spite of making repeated representations for review of the order of rejection of the request for extension, however, on 13.02.2019 the DGFT authority had granted extension of 2 years in respect of 14 license subject to certain conditions. One of the conditions was that the adjudication proceedings should not have been completed by the Customs. Ld. Special counsel argued that even after getting approval for extension in respect of 14 licenses on 13.02.2019 and for another 12 licenses on 02.04.2019, the importer / appellant did not furnish any evidence to prove fulfilment of export obligation. In other words, even after exhausting 7 years from the date of licenses for the first block period they have not fulfilled export obligation. In letter dt. 25.03.2019 while informing the decision of DGFT authority they have only requested the adjudicating authority more time for complying with the conditions imposed by EPCG Committee for granting extension of time and have not furnished any i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondoned. In the case of Mangalore Chemicals Vs Deputy Commissioner - 1991 (55) ELT 437 (SC) the Hon'ble Supreme Court had held that distinction has to be made between procedural condition of a technical nature and the substantive condition. Non-observance of the former is condonable while that of the latter is not condonable as likely to facilitate commission of fraud and introduce administrative inconvenience. Learned special counsel prayed that the appeals may be dismissed. 32. Heard both sides. 33. The issues that arises for consideration are - (i) whether the demand of duty alleging violation of conditions of notification 102/2009-Cus. dt. 11.09.2009 and notification 103/2009Cus. dt. 11.092009 are sustainable or not. (ii) whether the demand of interest is sustainable or not. (iii) whether the denial of exemption availed under notification 102/2009-Cus. dt. 11.09.2009 in respect of capital goods imported as per EPCG licenses is sustainable or not. (iv) whether the order for confiscation of the goods and imposition of Redemption fine is legal and proper. (v) whether the penalties imposed are sustainable or not. 33.1 On the basis of the SCN, the three issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; 33.3 The Ld. Counsel for appellant has explained that due to demerger of JV, its' further merger and due to bad market conditions there was some difficulty in fulfilling the export obligation within the time period. The FTP provides for condonation of such lapses and extension of time for fulfilment of EO. However, due to dissolution of earlier JV and constitution (merger) of the new entity the appellants had to get the statutory documents amended before ROC, Income Tax Pan, Customs IEC, DGFT etc. amended accordingly to make an application seeking extension of time. 33.4 From the records, we find that the EPCG Committee vide its decision dated 13.02.2019 had approved the request of appellants and granted extension of time for fulfilment of obligation for a period of two years in respect of 14 EPCG licenses subject to certain conditions. For the remaining 12 EPCG licenses, the Policy Relaxation Committee vide its' decision dated 02.04.2019 has condoned all the procedural irregularities like diversions and installation of capital goods in other locations, unconditionally. It is submitted by the Ld. Counsel that appellant has fulfilled the Export Obligations of all EPCG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCN is dated 15.09.2016. The adjudication was kept pending on the repeated requests made by appellants that they were taking steps with the DGFT authorities. The decision was passed by DGFT authorities approving the extension of time and condoning lapses in February and April 2019 as stated above. The adjudicating authority has been in a hurry to pass the adjudication order so as to deny to the appellants the benefits of the order passed by EPCG Committee. In para 35.1 the adjudicating authority has extracted the copy of the order passed by EPCG Committee on 13.2.2019. In para 36.3 it is observed by the adjudicating authority that the appellant has not produced EODC for the 14 licenses for which EOP (Extension of Period) is unconditionally granted. The discussions of adjudicating authority is as under : "36.3 Ashok Leyland Nissan claimed in their letter dated 25.3.2019 that they have applied for various relaxations in respect of 26 EPCG licenses. But from the Minutes of Meeting dated 13.2.2019 of EPCG Committee, it is evident that the EOP extension was granted to 14 licenses with the condition that RA shall verify the installation certificates and also sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... installation of the Capital goods covered from Serial No.18 to 26 may be condoned and regularized, however, at this stage all the capital goods covered from Serial No.1 to 26 may be allowed to be shifted to the premises as mentioned above; (iii) That extension in EOP for 2 years may be granted for all the 26 Authorisations for fulfilment of EO. 8. In view of the above, the Committee after deliberations was of the opinion that as far as 14 EPCG authorisations bearing numbers 0430010495 dated 15.11.2011; 0430010607 dated 13.12.2011; 0430010683 dated 03.01.2012; 17.01.2012; 03.02.2012; 09.02.2012; 02.03.2012; 02.03.2012; 0430010755 dated 02.03.2012; 0430010806 dated 0430010837 0430010851 14.02.2012; 0430010916 dated 0430010917 0430010919 dated dated 0430010929 dated dated 0430010928 dated 06.03.2012; dated 06.03.2012; 0430010932 dated 07.03.2012 and 0430010990 dated 19.03.2012 where the goods were installed at the premises duly endorsed on the authorisations and the request is for only extension of the export obligation period to fulfil the export obligation, there is merit in the request of the party to allow them such extension. On the other requests, the Committee decided not to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the object of issuing such beneficial schemes. It should not be a tug of war so as to drive the assessee from pillar to post and getting their resources tied up in litigations. We therefore find that the changed circumstances as to the extension of period and compliance has to be taken into consideration. 33.14 The EPCG Committee has not stated any time period to comply wit the conditions. There is no mention in the order of EPCG Committee that the extension of two years is to be applied retrospectively. When there is no specific mention of such event in the decision of EPCG Committee, the extension has to be construed as intended in the decision itself, which is nothing but extension of time by two years to fulfil their export obligation. 34. The adjudicating authority has imposed penalty on the supporting manufacturers viz. M/s.Renault Nissan, M/s.Gestamp Automotive Chennai, M/s.Myoung Shin India Automotive, M/s.Daejoo Automotive, M/s.Global India Automotive, M/s. Magna Automotive, M/s.Caparo Engineering India on the ground of installation of imported capital goods in other premises. The competent authority vide decision dt. 02.04.2019 has condoned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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