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BEFORE
THE HONOURABLE COMMISSIONER OF CUSTOMS (APPEALS)
Jawaharlal Nehru Custom House, Nhava Sheva, Uran, Raigad, Maharashtra
Appeal No. .of 2010
INDEX
Sr. No. Documents Page No.
1. Appeal in CA-1 1- 272. Stay Application 28-303. Annexure-I (Copy of OIO Dated 02.11.2010) 31-474. Annexure-II ( Copy of SCN Dated
03.12.2008)48-58
5. Annexure-IIIa. Copy of DGFT Circular dated 7.5.2008b. Copy of EPCG Licencec. Copy of relevant B/Ed. Registration Certificate of Vehiclee. Export Obligation Discharge Certificate.f. Letter dated 26.04.08 and 02.05.08
addressed to Customs by the appellantg. Statement dated 27.06.2007 of
Directorh. Copy of case Law: The Commissioner
of Customs Versus Air Travel BureauLtd, AIT-2010-364-HC
59-79
6. Authorisation to Advocate 80
M/s Travel Planners Pvt. Ltd., - AppellantA-244, Mahipalpur Extension,N.H 8, New-Delhi - 110037
V.
Commissioner of Customs - Respondent
JNCH, Nhava Sheva, Raigad, Maharashtra
Arising out of
Order in Original No. 66/2010 dated 02.11.2010 passed by Joint Commissioner ofCustoms (Export), JNCH, Nhava Sheva, Tal-Uran, Raigad
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FORM NO. C.A.-1
[Refer Section 128 of The Customs Act, 1962 read with Rule 3 of The Customs
(Appeal) Rules, 1982]
BEFORE
THE HONOURABLE COMMISSIONER OF CUSTOMS (APPEALS)
Jawaharlal Nehru Custom House, Sheva, Tal-Uran, Raigad, Maharashtra
Appeal No. .of 2010
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M/s Travel Planners Pvt. Ltd, - AppellantA-244, Mahipalpur Extension,N.H 8, New-Delhi - 110037
V.
Commissioner of Customs - RespondentJNCH, Nhava Sheva, Raigad, Maharashtra
Arising out of
Order in Original No. 66/2010 dated 02.11.2010 passed by Joint Commissioner ofCustoms (Export), JNCH, Nhava Sheva, Tal-Uran, Raigad
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Most respectfully showeth,
BRIEF FACTS
1. We M/s. Travel Planners Pvt. Ltd (hereinafter referred as appellant), A 244,
Mahipalpur Extension, NH 8, New Delhi are providing various services such
as travel, ticketing, tourism, logistic Services etc to our clients located in India
as well as abroad. We also earn significant foreign exchange by providing our
various services to clients located outside India.
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2. Name and address of the Appellant M/s Travel Planners Pvt. Ltd,A-244, Mahipalpur Extension,N.H 8, New-Delhi - 110037
3. Designation and address of the officer passingthe decision or order appealed against and the
date of the decision or order.
Joint Commissioner of Customs(Export), Mumbai-II, JNCH,
Nhava Sheva, Tal- Uran,District- Raigad, Maharashtra-400707
Date of Order 02.11.20104. Date of communication of a copy of the order
appealed against.09.11.2010
5. Address to which the notices may be sent tothe appellant.
1. M/s Travel Planners Pvt.Ltd,
A-244, Mahipalpur
Extension, N.H 8, New-Delhi 110037
2. Pramod Kumar Rai
Athena Law Associates
808, L&T Flats, Sec 18B,
Dwarka, New Delhi-110078
6. Whether duty or penalty or both is deposited;if not, Whether any application for dispensing
with such deposit has been made. (A copy ofthe challan under which the deposit is madeshall be furnished).
Duty amount of Rs.7, 62,548/-has been already deposited.
A separate stay application isbeing moved for the penalty.
6A. Whether the appellant wishes to be heard inperson
Yes
7. Reliefs claimed in the A
ppeal As per Prayer Clause
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2. The appellant applied to the DGFT, New Delhi for import of cars under EPCG
scheme, which were to be used as capital goods for providing our basket of
services. The said application is a relied upon document at Sr. No. 1 in the
SCN. It is noteworthy that the various forms designed for EPCG Schemes
were basically designed for manufacturing units as EPCG scheme was
originally available only for manufacturing units and services sector was
added at a later date and forms were not revised. Thus the existing forms
needed to be used mutatis mutandis for import of capital goods under EPCG
for services sector as well.
3. In the said application the appellant made true disclosure that they are
service providers and the end product to be produced and exported will be
services. After being satisfied Joint DGFT, New Delhi has issued EPCG
license No. 0530134097 dated 01.05.2003. The conditions attached to
license are also not specific to services sector, rather they are pre printed
standard conditions primarily meant for manufacturing units, which were
annexed with the license. Thus all these conditions need to be interpreted
with suitable adaptations for services.
4. For capital goods imported under EPCG scheme by a manufacturing unit
following points are note worthy.
I. There is no condition that the export obligation must be fulfilled out
of exported goods directly manufactured on the particular machine
which is imported under EPCG Scheme.
II. There is no condition that capital goods imported under EPCG
scheme must be exclusively used for manufacture of export goods.
In fact capital goods can be used for manufacture of all kinds of
goods whether DTA or Export Goods.
III. The export obligation should be fulfilled by the export of goods
(may not be necessarily manufactured on the machine imported
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under EPCG scheme) by the manufacturing units/business
organizations, who has imported capital goods under EPCG
scheme.
IV. The capital goods are imported with actual user condition. Capital
Goods cannot be disposed until the export obligation is fulfilled.
5. When above conditions are interpreted in reference to services sector, the
export obligation can be fulfilled by providing various services, which may not
be directly rendered with the help of car, imported under EPCG Scheme. The
car imported under EPCG scheme can be used for services which are
consumed 100% within India i.e. for a service other than export services. The
car is imported with actual user condition and it cannot be disposed off until
export obligation is fulfilled.
6. In terms of the aforesaid EPCG license issued to the appellant, the appellant
imported one Toyota Camry ACV 30R motor car under B/E No. 01885 dated
25.07.2003 and cleared it through Nhava Sheva Port, Mumbai. The aforesaid
car, imported under EPCG license was used in the business of Appellant
Company, in which foreign exchange has been earned by providing services
to clients.
7. The conditions of the said EPCG license as given in annexure A of the
license are as under.
I. That we will realize export proceeds in freely convertible currency,
which we have done.
II. That we should have earned foreign exchange of US $ 126650.95
within a period of 8 years which we have exceeded in a period of
around 4 years and obtained export obligation discharge certificate.
There was no condition that foreign exchange should be earned
directly by the use of capital goods. We are in services sector
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where the car has been used and the foreign exchange has been
earned by rendering services.
III. The import was to be effected with actual user condition which we
did and till date the car is in our possession. We have not sold the
car even after obtaining EODC.
8. The appellant fulfilled all the conditions of the said EPCG license and after
achieving the required foreign exchange earning applied to DGFT for
discharge of Export obligation under the said license. The DGFT, New Delhi
after verification and scrutiny of all our records found that all the conditions
laid down in the said EPCG license have been satisfied by us and issued
EODC on 29.05.2007. Thus we fulfilled export obligation within a period of
less than 4 years against the available period of 8 years under the license.
9. Now after expiry of more than a year from the date of EODC and more than
five years from the date of import, the revenue alleges that the EODC
obtained by the appellant is based on the mis-statement. In this backdrop a
show cause notice dated 03.12.2008 has been issued to the appellant by the
honourable Addl. Commissioner of customs as amended of corrigendum of
March 2009, calling upon to show cause to Commissioner of Customs
(Exports), JNCH, Nhava Sheva as to why:
a. The Toyota Camry bearing registration No. DL-9-CG-4200, Chassis
No. JTDBE38K700233942 and Engine No. 2AZ1190622 having
Assessable value Rs, 7,47,400/- imported vide B/E No. 01885 dated
25.07.2003 and cleared at Nhava Sheva Port which was imported
against EPCG License No. 0530134097 by paying 5% Customs duty
only as per EPCG Scheme read with the customs notification No.
55/2003-Cus dated 01.04.2003 as amended should not be confiscated
under section 111(d) and 111(o) of the Customs Act, 1962 read with
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section 46 of the Act ibid and rules 11 and 14 of the Foreign Trade
(Regulation) Rules, 1993.
b. The customs duty amounting to Rs. 7,62,548/- for which exemption
from payment was availed fraudulently against EPCG License No.
0530134097 read with customs notification No. 55/2003 dated
01.04.2003 as amended during customs clearance of the above said
Toyota Camry ACV 30R bearing registration No. DL-9-CG-4200 should
not be demanded and recovered with interest from them in terms of
section 28 of the Customs Act, 1962 read with section 28AB of the Act
ibid read with condition of the EPCG license No. 0530134097 and
customs notification No. 55/2003 dated 01.03.2003.
c. Penalty should not be imposed on us under section 112 and/or
114A of the Customs Act, 1962 on account of omission and
commission rendering the said vehicle, i.e. Toyota Camry ACV 30R
bearing registration No. DL-9-CG-4200 liable to confiscation under
section 111(d) and 111(o) of the Customs Act, 1962.
10. The appellant submitted a detailed reply in response to the above SCN. A
synopsis of submissions was also submitted subsequently. However, the
adjudicating authority without discussing the various submissions made by
the appellant has agreed with the allegations made in the SCN and has
passed the impugned order wherein he has
a. Confirmed the entire duty demand
b. Imposed penalty equal to the differential duty involved
c. Confiscated the car and has imposed a redemption fine of
Rs 5 lakhs as the car has been provisionally released.
GROUNDS OF APPEAL
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11. The Order in Original No. 66/2010 dated 02.11.2010 passed by Joint
Commissioner of Customs (Export), Jawaharlal Nehru Custom House,
Nhava Sheva, Tal-Uran, Raigad is not correct, legal and proper on the
grounds detailed herein below which are in alternative and without prejudice
to each other.
Violation of Principle of natural justice: Non reasoned order
12. It is a cardinal principle of natural justice that the authorities must pass a
reasoned order. The learned Joint Commissioner has passed a non reasoned
order. He has not discussed our various submissions in true spirit and most
importantly the following ones.
a. The demand is time barred.
b. EPCG obligation already stands dischargedby issuance of EODC
by DGFT on 29.05.2007.
c. Under the law at relevant times there was no requirement to get the
vehicle registered as a taxi as per DGFT Circular dated 07.05.2008.
d. There is no requirement under the EPCG scheme to have a one to
one correlation between the foreign exchange earnings and usage of
car.
e. The period of export obligation given under the scheme is yet not
over.
The demand is time barred
13. Once the EODC is issued, the cars become free and there are no conditions
to be fulfilled in respect of the car. The present demand is issued on
03.12.2008 in respect of the import which took place on 25.07.2003 and for
which EODC was issued on 29.05.2007, after expiry of more than a year from
the date of EODC and more than five years from the date of import. No
demand can be raised under section 28 of customs act 1962 beyond a period
of six months unless there is fraud, suppression etc on the part of importer. In
the present case the present demand has been issued after more than a year
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from the date of EODC and thus is time barred. For the sake of clarity
relevant portion of section 28 is reproduced below.
SECTION 28. Notice for payment of duties, interest
etc. (1) When any duty has not been levied or hasbeen short-levied or erroneously refunded, or when any
interest payable has not been paid, part paid or erroneously
refunded, the proper officer may, -
(a) in the case of any import made by any individual for
his personal use or by Government or by any educational,
research or charitable institution or hospital, within one year;
(b) in any other case, within six months,
from the relevant date, serve notice on the person
chargeable with the duty or interest which has not been
levied or charged or which has been so short-levied or part
paid or to whom the refund has erroneously been made,
requiring him to show cause why he should not pay the
amount specified in the notice :
Provided that where any duty has not been levied or has
been short-levied or the interest has not been charged or
has been part paid or the duty or interest has been
erroneously refunded by reason ofcollusion or any willful
mis-statement or suppression of facts by the importer or
the exporter or the agent or employee of the importer or
exporter, the provisions of this sub-section shall have effect
as if for the words one year and six months, the words
five years were substituted.
14.At no point of time we have stated that vehicle will be used as taxi or it will be
registered as a tourist vehicle. There was no mis declaration on our part at
any point of time. Our import of car was not for personal use rather it was for
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the use in business activity and there is no suppression on our part. Therefore
the demand is certainly hit by limitation clause.
15. The finding of Joint commissioner in this regard is erroneous as he has not
categorically stated what was willfully mis declared by us. Appellant has never
submitted that vehicle shall be used as a taxi. It was submitted that vehicle
shall be used by M/s Travel Planner which is a commercial concern with profit
motive and in fact vehicle has been used by Travel Planner. The vehicle has
not been used by any individual in his personal capacity rather it has been
used in business which has earned foreign exchange. His conclusion that
cars have not been used in commercial capacity is based on mere fact that
cars have not been used as taxi and therefore this finding is erroneous. The
statement of director which has been referred in finding clearly says that car
has been used in commercial business. The conclusion drawn in para 4.12
that vehicle has been used as personal conveyance is arbitrary and without
any evidence and it does not follow from the discussion of JC incorporated in
previous paragraphs, more importantly para 4.8. There is no finding that
vehicle has been used for any purpose other than business.
16.Further he has concluded that we have redeemed the EPCG license by mis
statement and fraudulent submission of records. We submit that firstly he has
no jurisdiction to deal with this issue and DGFT alone can decide whether the
license has been redeemed properly or not. Secondly his conclusions are not
based on any factual finding rather they are hollow conclusions devoid of any
kind of supporting evidence.
The EPCG obligation stands fulfilled
17. The allegation of Customs is that we have not fulfilled conditions of EPCG
license. The appellant submits that Export Obligation Discharge Certificate
No. 508516 dated 29.05.2007 issued by DGFT is a proof that we have fulfilled
all conditions of the aforesaid EPCG license. The DGFT is final authority
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when it comes to interpretation of EXIM policy and various schemes such as
EPCG under EXIM policy. Thus once the EODC is issued by DGFT, Customs
cannot raise any objection on our fulfillment of export obligation under the
said EPCG scheme.
Still earning Foreign Exchange
18.We were required to fulfill export obligation within a period of 8 years time
limit which expires in 2011, however we fulfilled our obligation in 2007 itself.
We are still earning foreign exchange by providing our services and we have
not availed any export incentive in respect of our export earnings in past other
than the benefit of said EPCG scheme and currently also we are not availing
any export benefit. The car imported under the said EPCG Scheme is still
under use in our business where we are currently earning foreign exchange.
Therefore until 2011, no action can be taken against us for non fulfillment of
export obligation under the said EPCG license.
The Appellant has made true declaration.
19. The Appellant has made true declaration to Joint DGFT, New Delhi in their
application for obtaining EPCG license. The departments allegation that the
appellant has made wrong declaration is false and baseless. The declarations
made by the appellant are true. The appellant has made following
declarations in their application to the Joint DGFT, New Delhi.
a. The appellant has declared that they are service providers.
It is established beyond dispute that the appellant is a service
provider. We are engaged in travel, tourism and logistic business.
We have sold tickets to foreigners and NRIs and earned foreign
exchange in tourism at the relevant times. We have provided
package tours/services to our clients and earned foreign exchange.
We have provided travel related logistic support to film units who
came from other countries to India and earned foreign exchange.
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The appellant is also registered with service tax department as a
Travel Agent/service provider. Therefore the declaration of the
appellant that he is service provider is very much right and there is
no dispute about it.
b. The appellant has declared that the end product to be produced
and exported will be services.
The appellant in its application for obtaining EPCG license has
declared that the product to be produced and exported shall be
services. It is already explained in the above para that the appellant
is service provider and it earns foreign exchange by providing
services to foreigners and NRIs. The said car imported under said
EPCG license is not registered in the name of any individual but in
the name of appellant (Travel Planners Pvt. Ltd.) and has been
used in the business of the appellants company, which is in
services sector, to earn foreign exchange.
c. The appellant undertook to abide by the provisions of the Foreign
Trade (Development & Regulation) Act, 1992, the Rules and
Orders there under, the Export Import Policy and the Hand Book of
Procedures.
It is pertinent to mention that the appellant has not violated any law
or provisions of the Foreign Trade (Development & Regulation) Act,
1992, the Rules and Orders there under, the Export Import Policy
and the Hand Book of Procedures. The DGFT is fully satisfied with
appellants compliance of Foreign Trade (Development &
Regulation) Act, 1992, the Rules and Orders there under, the
Export Import Policy and the Hand Book of Procedures and that is
why DGFT has issued Export Obligation Discharge Certificate
(EODC) to the appellant.
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The Requirement of registration of vehicle as a tourist vehicle came in 2008
20. There are no provisions under Foreign Trade (Development & Regulation)
Act, 1992 and the Rules and Orders made there under, which requires that
the imported car under EPCG Scheme should be registered as a taxi or
tourist vehicle, at the time of import of the said car. Therefore by registering
the imported car in the name of Appellant Company as a non taxi vehicle, the
appellant company has not violated any law.
21.The requirement of registration of vehicles imported under EPCG Scheme as
a taxi/tourist vehicle has been introduced on 7.5.2008 vide the policy circular
No. 7 under Foreign Trade Policy ( Para 5.1 of FTP) , which is reproduced
below
Policy Circular No. 7 (RE-2008)/2004-2009 Dated 7/5/2008
Import of Motor Car etc. under EPCG Scheme - ( Para 5.1 of FTP)
Attention is invited to Para 5.1 of Foreign Trade Policy wherein Import of Motor
Cars, Sports Utility Vehicles / all purpose vehicles are allowed only to Hotels,
Travel Agents, Tour Operators or Tour Transport Operators and Companies
owning / operating Golf Resorts.
2. In order to ensure proper and intended use of above vehicles under EPCG
Scheme, following course of action would be taken by EPCG authorization
holder, Regional Authorities of DGFT and Custom Authorities in addition toexisting conditions:
(a) Customs authorities will endorse in Bill of Entry while clearing such vehicles
that such vehicles have to be registered as a vehicle for tourist purpose only.
This would make purpose of import of vehicles absolutely clear and would also
facilitate registration.
(b) In all past cases where Export Obligation Discharge Certificate (EODC) has
not been obtained by 30-06-2008 and where vehicles were not registered as
Tourist Vehicles, EPCG authorization holders will get them registered as Tourist
Vehicles, by 31-08-2008. Regional Authorities of DGFT will monitor and ensure
compliance.
3. This issues with the approval of DGFT.
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22.The aforesaid policy circular has come into effect from 07/05/08. The
language of the circular makes it very clear that from 07/05/08 onwards it has
been mandatory for the vehicles imported under EPCG Scheme to be
registered as a vehicle for tourist purpose. The said circular is not with
retrospective effect rather with a prospective effect.
23.Para 2 (b) of the circular gives clarification regarding past cases where Export
Obligation Discharge Certificate (EODC) has not been obtained by 30-06-
2008 and where vehicles were not registered as Tourist Vehicles. The
circular requires in such cases that EPCG authorization holders with non taxi
numbers registration shall get the vehicle registered as Tourist Vehicles, by
31-08-2008. It is pertinent to mention that the DGFT itself acknowledges that
prior to 7/05/08 it was not mandatory or binding on the EPCG holder to get
the vehicle imported under EPCG scheme registered as a tourist vehicle or as
a taxi.
24.By going through the said circular , specially para 2 (b), it becomes very clear
that the said circular requires registration as Tourist Vehicles of the vehicles
imported under EPCG scheme in two conditions
a. Import of Motor Cars, Sports Utility Vehicles / all purpose vehicles
under EPCG Scheme from 07/05/08 onwards.
b. Where Export Obligation Discharge Certificate (EODC) has not
been obtained by 30-06-2008 and where vehicles were not
registered as Tourist Vehicles.
25. We are not covered under aforesaid categories. The appellant has not
imported the car under EPCG Scheme after 7/05/08, therefore the appellant
is not covered under first category. Further the appellant has obtained Export
Obligation Discharge Certificate (EODC) on 29.05.2007 i.e. much prior to
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30/06/2008 and thus the appellant is not required to get the vehicle registered
as a tourist vehicle under second category also.
26. It is noteworthy that there is no irregularity in cases where the vehicles were
not registered as tourist vehicles and where EODC was issued prior to
30.6.2008. It is also noteworthy that there is no irregularity in cases where the
vehicles were not registered as tourist vehicles and where no EODC was
issued provided the vehicles get registered as tourist vehicles prior to
31.8.2008. The cases where EODC was issued prior to 30.6.2008 were
unaffected by this circular. Thus the only natural corollary of this circular is
that the cases where EODC has been issued prior to 30/6/2008 and where
vehicles were not registered as tourist vehicles, there is no irregularity and
EODC issued by DGFT is perfectly in order. Therefore the departments
allegation that by not registering the vehicle as tourist vehicle the appellant
has violated the provisions of the Foreign Trade (Development & Regulation)
Act, 1992, the Rules and Orders made there under is false and baseless.
DGFT is final authority to decide eligibility under EPCG Scheme
27.The DGFT was the final authority to determine whether or not the export
obligation in respect of capital goods imported under the EPCG Scheme had
been fulfilled. The issue of a certificate by the Director General was sufficient
to conclusively prove that the goods had been validly imported and the export
obligation arising from such import satisfied. Customs could not ignore the
certificate issued by the DGFT and act on an unfounded assumption that the
goods had not been imported under the EPCG Scheme or that the condition
subject to which such import was made had been violated.
28. Export Obligation Discharge Certificate No. 508516 dated 29.05.2007 issued
by DGFT is a proof that we have fulfilled all conditions of the aforesaid EPCG
license. Kind attention of the Commissioner (Appeals) is invited to the circular
no. 62/2002 dated 26.9.2002 where CBEC has in a way clarified that the
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stand taken by DGFT has to be honoured by custom officials. This circular
also shows that EPCG scheme covers items which are directly not capable of
earning any foreign exchange rather they have to be used in the business in
which foreign exchange is earned. Relevant para 3 is reproduced below for
clarity.
Para3. The issue has been re-examined in Board and it has
been decided that service providers who actually require
consumer items like carpets, crockery, marble, chandeliers
etc. shall be allowed EPCG benefit. Chairman, CBEC has
ordered that the rider appearing in DOR Circular No.
39/2000-Cus. may, therefore, be deemed to be deleted.
Import of these consumer items should also be allowed
wherever DGFT authorities have issued EPCG Licences for
these items and the same is valid to cover imported goods.
29. Kind attention of the Commissioner (Appeals) is also invited to the Circular
no. 25/2003 dated 1.4.2003, where CBEC has reiterated that redemption of
Bond/BG against license issued under EPCG Scheme shall normally be
allowed by the Custom House on the basis of EO Discharge Certificate
issued by DGFT authorities without insisting for any other document. This has
been reiterated because admittedly the job of monitoring of export obligation
fulfilled under EPCG Scheme is assigned to relevant DGFT authorities and
not to customs authorities. Relevant para of the circular is reproduced below
for clarity.
Last ParaIt is reiterated that redemption of
Bond/BG against license issued under EPCG Scheme shall
normally be allowed by the Custom House on the basis of
EO Discharge Certificate issued by DGFT authorities without
insisting for production of copies of relevant export
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documents including shipping bill etc. This is because the
job of monitoring of export obligation fulfilled under EPCG
Scheme is assigned to relevant DGFT authorities.
30. Kind attention of the Commissioner (Appeals) is also invited to the Circular
no. 46/2004 dated 26.7.2004, where CBEC has reiterated that Customs
authorities cannot issue SCNs unilaterally in cases where EODC has already
been issued by DGFT. Relevant para of the circular is reproduced below for
clarity.
Para2. It has come to the notice of Board that in some
cases, despite issue of EO Discharge Certificate by theDGFT authorities, Customs has issued show cause notices
to the licence holder questioning the value of imported
capital goods/quantum of export obligation. Later, when the
Commissioner increased the CIF value of imported capital
goods by issue of an adjudication order, CESTAT struck
down Commissioners order on the ground that such
unilateral action by customs was bad in law.
Para 4. It is, therefore, reiterated that in all cases pertaining
to EPCG Scheme where Customs have doubts about
valuation, quantum of EO etc., the jurisdictional
Commissioners of Customs scrupulously follow the
instructions contained in DOR Circular No. 24/2002-Cus.
31. The honourable Joint Commissioner in his findings in para 4.10 of the order
has cited the case of Interglobe Enterprises Ltd Versus Union of India & Ors.,
2006 (203) ELT 202 (Del.). It is mentioned in his findings that it was held in
the said case that the issue of certificate by the DGFT may also not
conclusive in such circumstances for any such certificate cannot circumscribe
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the power of the authority to reopen even a concluded matter if it is shown
that such conclusion was vitiated by fraud, concealments of facts,
misrepresentation or mis declaration.
32. It is noteworthy that the honourable court in the abovementioned case has
allowed customs to investigate the cases but it has not allowed customs to
discharge the function of officers of DGFT. It has not allowed customs to
overrule or nullify the certificate issued by DGFT. In case as per Customs
investigation, there is an element of fraud, concealment of facts,
misrepresentation or mis declaration on the part of importer, Customs is still
required to approach DGFT for revocation of EODC. However, in our case
except making the allegations of suppression of fact, the department has not
adduced even single evidence supporting the allegation of fraud,
concealment of facts, misrepresentation or mis declaration.
Vehicle has not been used as personal vehicle
33. The main contention of the customs is that the car imported by the appellant
is registered as a non tourist vehicle and therefore the car was not used to
earn foreign exchange rather they were used as personal vehicles. The
revenue alleges that the appellant have not earned the foreign exchange by
the use of this car as it was registered in non tourist/taxi category and the
insurance was also done in the non-tourist/taxi category.
34.A perusal of the registration certificate shall show that the vehicle is registered
in the name of company and not as a private vehicle in the name of any
particular natural person. It is duly reflected in the books of accounts and
balance sheet of company. The vehicle was meant to be used in the business
and it has been used in the business. Thus the allegation that it has been
used as a personal car in individual capacity is mere presumption on the part
of revenue. We admit that vehicle was not registered as taxi or tourist vehicle
and thus has not been used as a taxi as there was no requirement under the
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EPCG scheme of the relevant time to get the vehicle registered as taxi. A
vehicle which is not registered as a tourist taxi cannot be used as a tourist
taxi.
The vehicle has been used in the business
35.Under motor vehicle act cars can be registered under two categories. A
vehicle which is going to be used in the business but not meant to be plied as
a paid taxi needs to be registered under non taxi category with one time tax
payment. A car which is going to be used as a paid vehicle for strangers
needs to be registered as a taxi/tourist vehicle.
36. The said car was imported for the use in appellants business and was
registered in the name of the appellant company and has been used for the
business purposes and not as a personal car. There is not any evidence on
the record which shows that the car was not used in the business rather it
was used as a personal vehicle. Mr. Shikhar Jain, MD of the appellant
company in his statement dated 27/06/2007 in response to question no. 21
has stated that the said car was used for the business purposes. Therefore
the allegation that the said car is used as the personal car does not stand at
all. The said car was not registered in the name of any individual person
rather it was registered in the name of Appellant Company. The registration
itself makes it very clear that the imported car is going to be used for the
business of the appellant company.
37. The car has been found to be in use in our business during the visits of
custom officer, we have produced it before customs authorities. We have not
disposed off the cars even after fulfillment of Export obligation and cars have
been seized while in use by us. The cars after provisional release also are still
in use in our business. Further copy of certificate issued by chartered
engineer in respect of Toyota Camry have already been submitted with the
department during investigation and this car was duly reflected in the
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accounts and balance sheet of the appellants company verified by customs
officials. The car is physically present with appellant in running condition
which have been physically seen and seized by customs during investigation.
38. The adjudicating authority in para 4.12 of his finding mentions that the car has
been used for the personal conveyance arbitrarily and in contradiction with his
finding in para 4.8 where it is mentioned that car has been used in business.
Imported car has been used in the business by which forex has been
earned.
39. The customs contended that the appellant have not earned the foreign
exchange by the use of said car. We submit that there was no requirement to
earn the foreign exchange by direct use of car. In fact even if a car is used as
a tourist vehicle, it is not going to earn foreign exchange in India as individual
tourist in India pay in Rupee term alone. Even today when vehicles imported
under EPCG are mandatorily required to be registered as a tourist vehicle,
there is no requirement that there should be direct earning of foreign
exchange by the use of the vehicles. There is no requirement under the law of
one to one correlation between the use of car and foreign exchange earned.
40. The appellant has used the car in the business activity as an official transport
for our clients including foreigners and NRIs. The appellant has got overseas
business from these clients who were impressed with the appellant company
during their visits to the appellant company. Thus the car has been used in
business and been instrumental for earning foreign exchange.
41. The revenues interpretation that all the foreign exchange required to fulfill the
export obligation should be directly generated from the capital goods imported
by the appellant is neither reasonable nor legally correct. One to one
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correlation between foreign exchange earned and the use of the car imported
by the appellant cannot be established even if it is used as taxi or tourist
vehicle. For example: In an instance of a lift imported by a hotelier for
installation in the hotel it was impossible to determine the foreign exchange
earnings out of the use of the lift. Once the imported car was inducted into the
business, it would then be a part of the larger establishment which alone
could generate foreign exchange receipts. Foreign exchange obligation could,
therefore, be satisfied even if the capital goods were not themselves
generating or capable of generating any foreign exchange.
42. The requirement of EPCG scheme as elaborated in various judgments is that
the imported capital goods are pumped into and used in the establishment for
whose benefit the same have been imported. An importer cannot import
goods for a use wholly unconnected with the activity out of which he proposes
to generate the foreign exchange. A travel agent cannot, for instance, import
cars in the name of his business of running the travel agency, but use them
for a purpose other than the said activity. In this case the car imported has
been used in the business in which foreign exchange has been earned. A car
which is registered as a tourist vehicle in India catering to the needs of check-
in tourists cannot export tour services while plying on Indian roads and cannot
earn foreign exchange. Thus foreign exchange earnings by rendering
services for the fulfillment of export obligation under EPCG scheme refers to
foreign exchange earnings by rendering services by the firm which will use
the car in its business. It does not contemplate direct export of services
rendered with the use of car. In our case DGFT has been satisfied with the
provision of law, and have issued EODC on 29.05.2007.
There is no violation of para 5.15 of Hand Book of Procedure.
43. The departments allegation that the appellant violated para 5.15 of Hand
Book of Procedure is baseless and false. For the sake of brevity para 5.15 of
Hand Book of Procedure is reproduced below.
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Maintenance of Records
Para 5.15 Every EPCG authorization holder shall maintain, for a
period of 3 years from date of redemption, a true and proper
account of exports / supplies made and services rendered towards
fulfillment of export obligation.
44. The appellant has maintained a true and proper account of exports of the
services rendered towards fulfillment of export obligation and the relevant
records were submitted to the DGFT on the basis of which DGFT has issued
EODC. This fact is again stated by Mr. Shikhar Jain, MD of the appellant
company in response to question no. 12 of his statement dated 27/06/2007.
He has stated that the said records were also provided to the revenue for
their reference and records. Therefore the appellant has maintained his
account as per requirement of the para 5.15 of Hand Book of Procedure and
there is no question of violation of the para 5.15 of Hand Book of Procedure.
Deposit of penalty is not admission by the appellant
45. In para 4.13 of the order the adjudicating authority finds that the appellant
admitted their mis declaration while importing the said vehicles under EPCG
Scheme and misuse of the said vehicles and also deposited the customs duty
amounting to Rs. 7,62,548/-. It is submitted that deposit of duty does not
amount to admission of guilt on the part of the appellant. Moreover, the said
duty has been deposited by the appellant as per the instruction of the
Customs which is evident from the letters dated 26.06.2008 addressed to
Joint Commissioner of Customs, SIIB, ICD,TKD, New Delhi and dated
02.05.2008 addressed to Superintendent , SIIB, ID, TKD, New Delhi (
Annexure III) by the Appellant.
Car not liable to Confiscation
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46. Since neither there was any prohibition on import of car nor any mis
declaration of value nor of description at the time of import and there is not
any violation of any post importation condition, therefore, the car is not liable
to confiscation. Further the obligations under EPCG license already stands
discharged by issuance of EODC by competent authorities, the car cannot be
confiscated at all. For the sake of clarity Section 111(d) and 111(o) invoked
by learned Joint commissioner for confiscation of car is reproduced below. A
bare reading of these provisions shows that they are not applicable in the
present case at all.
SECTION 111. Confiscation of improperly imported goods, etc. The following goods brought from a place outside India shall beliable to confiscation:
(d) any goods which are imported or attempted to beimported or are brought within the Indian customs waters forthe purpose of being imported, contrary to any prohibitionimposed by or under this Act or any other law for the time
being in force;
(o) any goods exempted, subject to any condition, fromduty or any prohibition in respect of the import thereof underthis Act or any other law for the time being in force, in respectof which the condition is not observed unless the non-observance of the condition was sanctioned by the properofficer;
Case laws on the subject matter
47. In the case of COMMISSIONER OF CUSTOMS, NEW DELHI Vs SOM
DUTT BUILDERS LTD 2009 (236) E.L.T. 478 (Tri. - Del.) demand alleging
that separate income as attributable to imported cars under EPCG Scheme is
neither shown nor any separate records for income from the cars maintained
and cars were not registered as taxi was set aside by Commissioner and the
said order was upheld by the tribunal. It was specifically held that export
obligation was met as at relevant time there was no requirement of
registration of vehicle as taxi/tourist vehicle.
48. The above judgment was followed in AIR TRAVEL BUREAU LTD. Versus
COMMISSIONER OF CUSTOMS, NEW DELHI 2009 (7) E.L.T. 283 where
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the tribunal held that understanding of DGFT cannot be brushed aside by
customs authorities. The relevant para of judgment is reproduced below.
6.3 We find that the Customs authorities have taken up the matter with theDGFT expressing their views that there is violation of EXIM Policy provisions and
it appears that the said view has not been accepted by them. According to the
appellant, not only the DGFT had not accepted the view of the Customs
Department but they have also redeemed the EPCG licence after certifying that
they have fulfilled the export obligation as prescribed.
6.4 We agree with the contention of the learned DR that the Customsauthorities are empowered to look into the compliance of the conditions of the
notification independently. However we, in the present case, find that the
notification has a link to provisions of the EXIM policy and the understanding of
the DGFT authorities on the said provisions cannot be brushed aside without
valid reasons.
49. The above order has been upheld by Delhi HC as reported in THE
COMMISSIONER OF CUSTOMS Versus AIR TRAVEL BUREAU LTD AIT-
2010-364-HC. The facts of this case are identical to the present one where
imported car was not registered as taxi and was directly not used for earning
foreign exchange. The relevant para of decision is given below for clarity.
2. It is found as a matter of fact that the respondents are in the business of travel
agency and the cars were utilized for the intended purposes i.e. they were added
attraction for the foreign tourists to come 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 EPCG
license. On this basis, the Tribunal opined that the term tour and travel is a very
wide term and it cannot be said that the EPCG license envisaged only the
amounts collected by use of imported cars to be accounted towards export
obligation under the said license.
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..
..
6. Once we apply this yardstick to the facts of the present case, the conclusion
would be that the respondents have been able to fulfill the obligation under
EPCG license as pointed above, which was the very condition imposed in the
said license by the DGFT. DGFT has redeemed the license and has taken the
view that the respondents have fulfilled their export obligation. No doubt, the
opinion of the DGFT would not be conclusive and any such certificate cannot
press the power of the authority to reopen even a concluded matter if it is shown
that the such conclusion was vitiated by fraud concealment of facts or
misrepresentation or misdeclaration as held by the Apex Court in Sheshank
Sea Foods Pvt. Ltd. v. Union of India & Ors. (1996) 11SCC 755. However, in
the present case, the appellants have not been shown that there is any fraud,
concealment of facts or misrepresentation or misdeclaration on the part of the
respondents.
50. The appellant further rely on the Honble Delhi High Court judgment in the
case of Interglobe Enterprises Ltd Versus Union of India & Ors., 2006 (203)
ELT 0202 (Del.) where the court endorsed the appellants view and held that
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 relevant para of that judgment is
reproduced below.
12. Two interpretations are, thus, being offered by the parties to the terms of the
policy. The one offered by the petitioner if accepted would mean that once the
capital goods are harnessed into the establishment, it is not necessary that the
export obligation should be fulfilled only from out of the earning of the said
goods. Foreign exchange earned generally by the importer can be used for
satisfying the export obligation as had been done in the instant case. The other
view is that export obligation could in the case of the cars imported by the travel
agent be satisfied only by use of the cars and not otherwise. The importer has,
therefore, not only to utilize the goods* but, satisfy the export obligation from out
of foreign exchange earned by such use. The true position appears to us to be
that 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
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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 diverted for some other use without violating the
conditions of actual user which is fundamental to the Scheme. The on-going
investigations would, therefore, unravel whether the imported capital goods, i.e.,
the cars in question were ever inducted into the business of the importer. That
assumes importance because, according to the respondents, the cars were not
even registered for the commercial activity for which the same were imported as
was mandatory under Section 39 of the Motor Vehicles Act. There was,
according to them an unauthorised diversion of goods contrary to the spirit of the
Scheme, which could be investigated and made a basis for further action against
the importer. The investigation instituted by the Directorate of RevenueIntelligence officers may in that above backdrop lead to the discovery of the true
facts which would eventually lead to the issue of a show cause notice to which
the petitioner can respond appropriately. Expression of any opinion by this Court
at this stage would in that view be premature and would amount to pre-judging
the issue which may arise at the appropriate stage in the context of the facts
established in the course of the investigation.
51. The case of Bright Star Hotels Pvt. Ltd decided by Joint DGFT in the exercise
of proper jurisdiction agreeing that there is no need to earn foreign exchange
by direct use of capital goods, namely cars.
52. In the case of Indian Hotels Co. Ltd v. CCE Mumbai 2006 (204) E.L.T 439
(Tri. - Mumbai) it was held that it is for the DGFT to satisfy itself whether
goods are eligible for EPCG scheme and customs function is ministerial in
nature.
53. In the case of Crystal Fashions V. CC Chennai 2007(211) E.L.T 580 (Tri. -
Chennai) it was held that customs cannot ignore the certificate issued by
DGFT.
54. In the case of CC (export) Mumbai V. Rajasthan Spinning & Weaving Mills
Ltd 2008 (229) E.L.T 614 (Tri- Mumbai) it was held that mere declaration of
importer is sufficient unless contrary evidence of mis-utilization is brought on
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record. The burden of proof for mis-utilization of EPCG scheme is on the
revenue.
55. In the case of Kingsway Fashions Pvt. Ltd V. CC Bangalore 2006 (201) E.L.T
292 the honourable tribunal held that revenue cannot issue SCN unless the
period of licenses under which the export obligation needs to be fulfilled
expires. In our case the eight year period expires in 2011 and thus present
SCN needs to be set aside on this ground also.
56. In the case of M FAR HOTELS LTD Versus COMMISSIONER OF
CUSTOMS, COCHIN 2009 (241) E.L.T. 94 (Tri. Bang) it was held that it is
not necessary that assessee is to show the amount of foreign exchange
earned on account of exclusive use of car. Even if the vehicle is registered in
the name of Director of the Company the benefit of exemption cannot be
denied.
57. In KUMARAKAM LAKE RESORTS Versus COMMISSIONER OF
CUSTOMS, COCHIN 2010 (253) E.L.T. 262 (Tri. - Bang.) it was held that
installation in respect of transport vehicle is not appropriate and despite any
technical violation by the assessee the benefit of exemption cannot be
denied.
No Penalty imposable
58.As the demand of duty itself does not survive, no penalty is imposable on
anybody. Further this is a pure case of interpretation of EPCG Scheme and
thus penalty is not imposable on anybody as held by courts in numerous
cases.
Personal Hearing
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59.In any case, we may be given an opportunity of personal hearing before a
final decision is taken in the matter.
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P R A Y E R
60. In view of what is stated above the appellant most humbly prays to the
honourable Commissioner (appeals) that
i. The OIO No. 66/2010 dated 02.11.2010 passed by Joint
Commissioner of Customs (Export), Jawaharlal Nehru
Custom House, Nhava Sheva, Tal-Uran, Raigad be set
aside with consequential relief.
ii. Any other order may be passed as deemed fit in the facts
and circumstances of the case
Appellant
VERIFICATION
I, Shikhar Chandra Jain do solemnly declare that I am filing this appeal in my
capacity as Managing Director of the appellant company and I am competent to
verify it.
That the contents of this appeal are true to the best of my knowledge and belief
and no information relevant to the facts of the case has been suppressed.
Verified today, the 19th day of November, 2010.
Deponent
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BEFORE
THE HONOURABLE COMMISSIONER OF CUSTOMS (APPEALS)
Jawaharlal Nehru Custom House, Nhava Sheva, Tal-Uran, Raigad,
Maharashtra
Stay Application No..................................................of 2010
In
Appeal No.....................................................................of 2010
Arising out of Order-in-Original No. 66/2010 dated 02.11.2010
Passed by Joint Commissioner of Customs (Export), Jawaharlal Nehru CustomHouse, Nhava Sheva, Tal-Uran, Raigad
M/s Travel Planners Pvt. Ltd, - AppellantA-244, Mahipalpur Extension,N.H 8, New-Delhi - 110037
V.
Commissioner of Customs - RespondentJNCH, Nhava Sheva, Raigad, Maharashtra
BRIEF FACTS
1. We M/s. Travel Planners Pvt. Ltd (hereinafter referred as
appellant), A 244, Mahipalpur Extension, NH 8, New Delhi are
providing various services such as travel, ticketing, tourism, logistic
Services etc to our clients located in India as well as abroad. We also
earn significant foreign exchange by providing our various services to
clients located outside India.
2. The appellant is filing an appeal along with this stay application
against Order-in-Original No. 66/2010 dated 02.11.2010 passed by
Joint Commissioner of Customs (Export), Jawaharlal Nehru Custom
House, Nhava Sheva, Tal-Uran, Raigad. The appellant prays that the
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operation of said order be stayed and appeal be heard without insisting
for any further deposit on following grounds.
i. The appellant has a very strong case on merit. The
detailed facts and ground of appeal are already narrated
in appeal and for the sake of simplicity not repeated here.
The appellant prays that grounds of appeal narrated in
appeal be treated as part and parcel of this application.
ii. The entire duty amount confirmed in the said OIO already
stands deposited with the department.
iii. Since appellant has got a very good case on merit, any
further deposit shall cause undue hardship to the
appellant.
iv. The appellant has a permanent establishment at
Mahipalpur, New Delhi and Govt. Revenue is safe.
PRAYER
3. In view of what is stated above the appellant most humbly prays to
the Commissioner (Appeals) that
a. The operation of order passed by Joint Commissioner Customs
(Export) be stayed and recovery of penalty be stayed during the
pendency of appeal.
b. Any other order may be passed as deemed fit in the facts and
circumstances of the case.
Appellant
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VERIFICATION
I, Shikhar Chandra Jain do solemnly declare that I am filing this application in my
capacity as Managing Director of the appellant company and I am competent to
verify it.
That the contents of this appeal are true to the best of my knowledge and belief
and no information relevant to the facts of the case has been suppressed.
Verified today, the 19
th
day of November, 2010.
Deponent