Ashok Leyland Limited Vs Commissioner of Customs (CESTAT Chennai)
CESTAT Chennai held that demand of duty alleging violation of provisions of EPCG licenses on ground of failure to fulfill export obligation unsustainable as EPCG Committee granted extension of export obligation period for two years.
Facts- 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 shareholding 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 in 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.
Based on intelligence, the Officers visited the premises of M/s ALNVL and other companies. During the course of verification, it was revealed that M/s ALNVL had imported capital goods under the EPCG Scheme at Zero duty / 3% concessional rate of duty and installation certificates had been obtained for installing the said capital goods at nine premises of supporting manufacturers of M/s ALNVL including M/s RNAIPL.
The documents and the customs data showed that M/s. ALNVL had imported Capital goods at zero duty / 3% concessional rate of customs duty under the EPCG scheme under the cover of 65 EPCG Licences.
On verification of the 51 EPCG licenses issued to M/s ALNVL by DGFT, it revealed that the licences had been issued for the Import of dies, Jigs checking fixtures etc for manufacture of “Passenger Motor Vehicles (Chassis/fully built – goods/passenger)” falling under ITC HS Code 87033110, 87033119 and also under 87033199 (In some of the licenses). M/s Renault Nissan Automotive India Pvt Ltd, Oragadam (M/s RNAIPL) and M/s Nissan Motor India Private Limited, Oragadam along with some other companies have been endorsed as supporting manufacturers in respect of all the 51 licenses. M/s ALNVL had executed bank guarantees amounting to Rs. 14,35,55,000/- at the time of registration of the 51 EPCG licences with Custom House, Chennai. 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.
Thus Show Cause Notice was issued to the appellants proposing to demand differential duty denying the exemption under Notification No. 102/2009 dated 11.09.2009 along with interest, for imposing penalties, for confiscation of goods u/s. 111(d) & 111(o) of Customs Act 1962 etc. The Show Cause Notices were issued in respect of 51 EPCG licenses. After due process of law, the original authority found lapses with 26 EPCG licenses.
Conclusion- The DGFT and Customs have to act hand in hand to give effect to 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.
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.
FULL TEXT OF THE CESTAT CHENNAI ORDER
These appeals arise out of a single impugned order. The issue involved in all these appeals being similar and connected they were heard together and are disposed of by this common order.
2. 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 premises of M/s ALNVL and other companies on various dates and caused verification of records/documents. During the course of verification, it was revealed that M/s ALNVL had imported capital goods under the EPCG Scheme at Zero duty / 3% concessional rate of duty and installation certificates had been obtained for installing the said capital goods at nine premises of supporting manufacturers of M/s ALNVL including M/s RNAIPL.
4. The documents and the customs data showed that M/s. ALNVL had imported Capital goods at zero duty / 3% concessional rate of customs duty under the EPCG scheme under the cover of 65 EPCG Licences as under :
a) 14 EPCG Licences valued at around Rs. 75.45 Crore Involving a duty foregone amount of Rs. 18.65 Crore for the manufacture of LCVs, namely, ‘Dost’, ‘Partner’ and ‘Mitr’ at M/s. ALL; and
b) 51 EPCG Licences valued at around Rs. 334 Crore involving a duty foregone amount of Rs. 89.07 Crore for the manufacture of ‘Evalia’ and ‘Stile’, at M/s RNAIPL and their supporting manufacturers/vendors.
5. On verification of the 51 EPCG licenses issued to M/s ALNVL by DGFT, it revealed that:
I) The Licences have been issued for Import of dies, Jigs and checking fixtures etc for manufacture of “Passenger Motor Vehicles (Chassis/fully built – goods/passenger)” falling under ITC HS Code 87033110, 87033119 and also under 87033199 (In some of the licenses);
II) M/s Renault Nissan Automotive India Pvt Ltd, Oragadam (M/s RNAIPL) and M/s Nissan Motor India Private Limited, Oragadam along with some other companies have been endorsed as supporting manufacturer in respect of all the 51 licenses (The details of the license-wise supporting manufacturers are as per Annexure-B to the SCN).
III) M/s ALNVL had executed bank guarantees amounting to Rs. 14,35,55,000/- at the time of registration of the 51 EPCG licences with Custom House, Chennai,
6. The analysis of the import and export data, revealed that for the manufacture and export of ‘Evalia’ and ‘Stile’ model vehicles, M/s ALNVL had imported capital goods in the form of dies, jigs, checking fixtures etc., under EPCG Scheme vide 108 bills of entry (105 bills of entry through Chennai Seaport (INMAA1) and 3 bills of entry through Chennai Air cargo (INMAA4)) totally valued at Rs 334.18 Crore during the period 2011-13. The said capital goods were imported under 51 EPCG licenses 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 the SCN.
8. The summary of the violations alleged by department are as under:-
“(i) M/s. ALNVL have failed to achieve the minimum of 50% export obligation in respect of 23 EPCG authorisations, issued in terms of customs notification no. 102/2009 dated 11/09/2009, within the block period of 1st to 4th year. M/s ALNVI, is therefore, liable to pay the proportionate duties of customs along with applicable interest, within 3 months from the expiry of the block of years to the extent of non-fulfilment of export obligation in respect of the said 23 EPCG authorizations.
(ii) Besides, M/s. ALNVL had also indulged in diversion of capital goods to unauthorized premises, imported under nine EPCG authorizations, including the capital goods imported under six out of the 23 EPCG authorizations, for which, the minimum 50% export obligation has not been fulfilled. Therefore, the benefit of Customs Notification No. 102/2009 cus and 103/2009-Cus both dated 11/09/2009 (as the case may be), is liable to be denied in respect of the goods imported under the nine EPCG authorizations.
(iii) Apart from the above, some of the capital goods imported under 5 of the 23 EPCG authorisations and installed at the premises of M/s RNAIPL, appeared to have been destroyed/consumed by wear and tear and hence were not available in the installed premises. It has also come to light that these capital goods were used in the manufacture of other models of the supporting manufacturer M/s RNAIPL. The non-availability of these impugned capital goods for further production of the goods intended for export contributed to the default of prescribed Export obligation. Hence, the benefit of Customs notification no. 102/2009 dated 11/09/2009, is liable to be denied in respect of the non-available capital goods imported under 5 EPCG authorizations.
9. Thus Show Cause Notice dated 15.09.2016 was issued to the appellants proposing to demand differential duty denying the exemption under notification no. 102/2009 dated 11/09/2009 along with interest, for imposing penalties, for confiscation of goods under Section 111 (d) & 111 (o) of Customs Act 1962 etc. The Show Cause Notices were issued in respect of 51 EPCG licenses. After due process of law the original authority found lapses in regard to 26 EPCG licenses and passed the following :
ORDER
“1) In respect of M/s. Ashok Leyland Nissan Vehicles Ltd., Kochar Towers, # 19, Venkatanarayana Road, T. Nagar, Chennai – 600017 for imports in Sea Customs, Chennai, I order as below :
(i) I demand customs duty of ₹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 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 ₹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 section 143(3) of the Customs Act, 1962 read with notification no. 103/2009- Customs dated 11/09/2009, and the bonds furnished thereof;
(iv) I demand Interest at the rate of 15% from Ashok Leyland Nissan/Ashok Leyland as per 103/2009-Cus both dated 11/09/2009 on the duty demanded at (iii) above from the date of import of the goods;
(v) 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 six licenses mentioned at Table-4 at para no.37.4 of this order. I demand customs duty of ₹10,77,24,468/- (Rupees Ten Crore, Seventy Seven Lakh, Twenty Four Thousand, Four Hundred and Sixty-Eight only) from 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;
(vi) 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 (v) above from the date of Import of the goods:
(vii) 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 EPCG Licenses mentioned In Table-6 at para no. 39.1 of this order. I demand customs duty of ₹ 71,47,851/- (Rupees Seventy One Lakh, Forty Seven Thousand, Eight Hundred and Fifty One, only) 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;
(viii) 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 (vii) above from the date of Import of the goods.
(ix) I order confiscation of the seized capital goods valued at ₹187,98,13,669/- (Rupees One Hundred and Eighty-seven crore, Ninety Eight Lakh, Thirteen Thousand, Six Hundred and Sixty Nine, only) (A.V.) which were Imported by claiming benefit under notification no. 102/2009 Customs dated 11/09/2009, 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 ₹ 15,00,00,000/- (Rupees Fifteen Crores Only);
(x) I order confiscation of the goods other than the seized goods mentioned at (b) above, valued at ₹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 ₹ 3,00,00,000/- (Rupees Three Crores Only);
(xi) I Impose a penalty of ₹ 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 ₹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 Customs Act, 1962.
(i) I impose penalty of ₹10,00,000/-(Rupees Ten Lakhs Only) on M/s Renault Nissan Automotive India Private Limited, Plot No. 1, SIPCOT Industrial Park, Oragadam, Mattur (Post), Sriperumbudur Taluk, Kanchipuram District, Tamilnadu – 602105, for diverting/ non availability of imported capital goods under EPCG Scheme in the capacity of Supporting Manufacturer for full life period of machines, even before fulfilling the Export Obligation;
(ii) I impose penalty of ₹10,00,000/-(Rupees Ten Lakhs Only) on M/s Gestamp Automotive Chennai Private Limited, Plot No. B12, SIPCOT Industrial Park, Phase IL Vengadu Village, Pillaipakkam Post, Sriperumbudur Taluk, Kanchipuram District, Tamil Nadu-602105, for having installed the diverted premises;
(iii) I impose penalty of ₹10,00,000/-(Rupees Ten Lakhs Only] on M/s Myoung Shin India Automotive Pvt Ltd. No. 496/2, Mannur Village, Valarpuram, Sriperumbudur, Kanchepuram, Tamil Nadu 602 105, for having diverted the Impugned capital goods Imported under the EPCG Scheme, to an unauthorised premises;
(iv) I Impose penalty of ₹10,00,000/-(Rupees Ten Lakhs Only) on M/s Daejoo Automotive India Pvt Ltd. No. 134, Kllacherry Pachayettu, Govinda Medu Village, Thiruvallur, for having installed the diverted impugned capital goods Imported under the EPCG Scheme, in an unauthorised premises and subsequently diverting them to another unauthorised premises;
(v) I impose penalty of ₹10,00,000/-(Rupees Ten Lakhs Only) on M/s MS Global India Automotive Pvt Ltd, Survey No. 133 (Part), 134 (Part) & 135 (Part), SIPCOT Industrial Estate, Oragadam Village, Singaperumal Koll Road, Mattur (PO), Sriperumbudur Taluk, Kanchipuram District, Tamil Nadu-602105, for having Installed the diverted impugned capital goods imported under the EPCG Scheme in an unauthorised premises;
(vi) I impose penalty of ₹10,00,000/-(Rupees Ten Lakhs Only) on M/s Cosma International India Pvt Ltd, RNS-11, SIPCOT Industrial Growth Centre, Orgadam, Vadakupattu, Sriperumbudur, Kanchepuram, Tamil Nadu 603204, for having diverted the impugned capital goods Imported under the EPCG Scheme to an unauthorised premises; and
(vii) I impose penalty of ₹10,00,000/-(Rupees Ten Lakhs Only) on M/s Caparo Engineering India Limited, T-1, T-2, SIPCOT Industrial Estate, Sunguvarchatram, Sriperumbudur Taluk, Kanchipuram District, Tamilnadu 602106 for having 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 ₹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 of ₹12,26,700/- (Rupees Twelve Lakh, Twenty-Six Thousand and Seven Hundred, only) 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,
(iv) I demand interest at the rate of 1596 from M/s Ashok Leyland Limited as per notification no. 102/2009 Customs dated 11/09/2009 on the duty demanded at (ii) above from the date of import of the goods;
(v) I order confiscation of the seized goods valued at ₹3,11,59,224/- (Rupees Three Crore, Eleven Lakh, Fifty-Nine Thousand, Two Hundred and Twenty-Four, 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 ₹30,00,000/-(Rupees Thirty Lakhs Only)
(vi) I order confiscation of the goods other than the seized goods mentioned above, valued at ₹62,82,547/- (Rupees Sixty-Two Lakh, Eighty-Two Thousand, Five Hundred and Forty-Seven, 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 ₹6,00,000/-(Rupees Six Lakhs Only);
(vii) I impose penalty of ₹6,00,000/-(Rupees Six Lakhs Only) on M/s Ashok Leyland Limited under section 112 (a) of the Customs Act, 1962; and
(viii) I order enforcement and adjustment of the bank guarantees executed by them with Customs at the time of registration of the EPCG licenses, towards the duty and interest, demanded above;
(ix) Nissan Automotive India Private Limited, Plot No. 1, SIPCOT Industrial Park, Oragadam, Mattur (Post), Sriperumbudur Taluk, Kanchipuram District, Tamilnadu – 602105 penalty under section 112 (a) of the Customs Act, 1962, for utilising/non availability of the capital goods Imported under EPCG Scheme in the capacity of Supporting Manufacturer for full life period of machines, even before fulfilling the Export Obligation.
Summary of Duties & Interest (as applicable) Fines & Penalties ordered:
