Case Law Details
Commissioner of Customs Vs Joy’s the Beach Resort Pvt Ltd (CESTAT Chennai)
CESTAT Chennai held that once the licencing authority has found that the licencing conditions have been fulfilled, it would not be open to the customs authorities too contend that the imports under the licence are contrary to law.
Facts- The respondent filed bill of entry for import of capital goods namely, ‘Nissan X Trail Car’ under the EPCG scheme availing benefit of exemption under the Notification no.55/2003.
After importing the vehicle, the appellant had registered the vehicle as private vehicle in the first instance and re-registered the same as a tourist vehicle at the instructions of JDGFT. The entire earnings of foreign exchange of USD 116,609.17 was from travel agent / tour operators and USD 142,403.76 was earned from credit card collection which was shown by respondents towards export obligation fulfillment of the imported car.
The department was of the view that the respondent had violated the condition of the notification in as much as the car was not registered as tourist vehicle for a substantial period and also that the foreign exchange was received from various other services and not by use of the car. The respondents did not maintain proper vehicle movement records and the vehicle travel journey documents showed only very less amount collected from using the vehicle for travel purpose.
Show Cause notice was issued to the respondent under section 124 read with section 28 (1) of Customs Act 1962 proposing to deny the benefit of exemption of the notification and for demand of differential duty along with the interest, for confiscation of the vehicle and for imposing penalties.
Commissioner (A) allowed the appeal of the respondent. Being aggrieved, department has preferred the present appeal.
Conclusion- Hon’ble Bombay High Court in the case of Bhilwara Spinners v. Union of India has held that once the licencing authority has found that the licencing conditions have been fulfilled, it would not be open to the customs authorities too contend that the imports under the licence are contrary to law and take action against the licence holder.
Held that we are of the view that the impugned order before does not call for any interference. The same is sustained. Appeals filed by the department are dismissed.
FULL TEXT OF THE CESTAT CHENNAI ORDER
1. The above appeals are filed by the department against the order passed by Commissioner appeals who set aside the order of the original authority confirming the duty demands along with the interest and imposing penalty.
2. Brief facts are that, the respondent, namely, M/s Joys the Beach Resort Pvt. Ltd. filed bill of entry dated 22/01/2005 for import of capital goods namely, ‘Nissan X Trail Car’ under the EPCG scheme availing benefit of exemption under the Notification no.55/2003. After importing the vehicle, the appellant had registered the vehicle as private vehicle in the first instance and re-registered the same as a tourist vehicle at the instructions of JDGFT. The entire earnings of foreign exchange of USD 116,609.17 was from travel agent / tour operators and USD 142,403.76 was earned from credit card collection for the period from 12/4/2005 to 22/12/2005 and for the period from 1/4/2005 to 29/11/2005 respectively, which was shown by respondents towards export obligation fulfillment of the imported car. The department was of the view that the respondent had violated the condition of the notification in as much as the car was not registered as tourist vehicle for a substantial period and also that the foreign exchange was received from various other services and not by use of the car. The respondents did not maintain proper vehicle movement records and the vehicle travel journey documents showed only very less amount collected from using the vehicle for travel purpose. Show Cause notice dated 20/4/2007 was issued to the respondent under section 124 read with section 28 (1) of Customs Act 1962 proposing to deny the benefit of exemption of the notification and for demand of differential duty along with the interest, for confiscation of the vehicle and for imposing penalties. After due process of law, the original authority vide order dated 10/10/2012 denied the benefit of notification to the respondent and confirmed the differential duty of Rs.10,35,461/- along with the interest and also ordered for confiscation of the vehicle imported. Besides this, penalty of Rs.2,00,000/- was imposed on the respondent under section 112 (a) of Customs Act 1962 and a separate penalty of Rs.50,000/- was imposed under section 112 (a) on Shri P. C. Paul, Managing Director of the respondent Company, M/s Joy’s the Beach Resort Pvt. Ltd. Aggrieved by such order, the respondent filed appeal before the Commissioner appeals, who vide order impugned herein, held that the respondents have been issued Export Obligation Discharge Certificate (EODC), and that the Customs department cannot question the same without prior consultation and obtaining report from JDGFT and completely ignore the EODC issued by JDGFT. Aggrieved by such order the department is now before the Tribunal.
3. The Ld. AR Shri Rudra Pratap Singh appeared and argued for the department. It is submitted that in the present case the respondents have violated the conditions of the notification 55/2003 dated 1/4/2003 and the provisions of para 2.2 of FTP 2005-06 by noncompliance of the provisions of the Foreign Trade Development and Regulations Act, 1992, and the Rules and orders made there under. The respondent had not registered the imported car as tourist vehicle. It is only later on the instance of JDGFT that the respondent had registered the vehicle as a tourist vehicle. The respondent did not maintain proper account in respect of services rendered by using the car imported for fulfillment of export obligation under the scheme. It is pointed out by the Ld. AR, that respondent has received very less foreign exchange by use of the imported car and most of the foreign exchange earned is through their hotel and tourism business which was shown towards the fulfillment of export obligation. Though EODC was issued by JDGFT, as the respondents have violated the conditions of the notification, the demand raised by Customs department is legal and proper.
4. The Ld. AR vehemently relied on the decision of the Tribunal in the case of Surya Samudra Holiday Resorts Pvt. Ltd. Vs CC (Export) Mumbai 2010 (256) ELT 432 (Tribunal, Mumbai) to argue that all the very same points were considered by the Tribunal in the said case and it was observed that the proceedings against an assessee for violation of conditions of the exemption notification was not pre-mature at any stage and can continue without DGFT’s concurrence. So also it was held that the export obligation is to be fulfilled only by the earnings through the use of the car and not on the earnings of any other services. The decision in the case of Sheshank Sea Foods Pvt. Ltd. Vs. Union of India 1996 (88) ELT 626 (SC) was also relied by the Ld. AR to argue that customs authorities can conduct investigation for breach of condition of an exemption notification even though EODC is issued by JDFT. The Ld. AR prayed that the appeal may be allowed.
5. The Ld. counsel Shri Gokul Raj appeared and argued for the respondents. It is submitted that the respondent Viz; Joys, the Beach Resorts Ltd. had imported one ‘Nissan X Trail Car’ under the EPCG scheme under concessional duty. The vehicle was initially registered as a private vehicle which was subsequently re-registered as a tourist taxi with effect from 28/3/2006. This was done as per the relevant policy circular issued by the DGFT. The Ld. counsel referred to the circular dated 7/5/2008 issued by DGFT. The relevant para reads as under:
“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 to existing 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.”
6. It is submitted that prior to this circular, there was no requirement that the imported vehicle should be registered as a tourist vehicle. Thereafter the said circular was issued making it clear that the vehicle imported under the scheme should be registered as tourist vehicle. In the above circular itself a relaxation is given by DGFT in cases where the vehicles had not been registered as tourist vehicle till 30/6/2008. The import in the present case is in 2005 and the respondent has re-registered the vehicle as tourist vehicle.
7. Another allegation in the show cause notice is that the entire foreign exchange declared for fulfillment of export obligation was not received by use of the vehicle. The Ld. counsel submitted that the issue stands covered in favour of the respondent in their own case as reported in 2020 (373) ELT 721 (Tribunal-Chennai). It is submitted that under the scheme the respondent herein had imported one Mercedez Benz car and one ‘Nissan X Trailer Car’. The very same allegation was raised in the show cause notice issued in regard to the Mercedez Benz car. The Tribunal after considering the facts and evidence held that the respondent having been issued EODC on 12/6/2018, the department cannot proceed to recover duty alleging non-fulfillment of conditions of EPCG license. The Tribunal in the said case, followed the decision in the case of Narang International Hotel Pvt. Ltd. Vs. CC (Export) JNCH, Nhava Seva 2017 (347) ELT 680 (Tri-Mumbai). The decision in the case of CC (Air cargo) Vs. Hotel Excelsior Ltd. 2016 (336) E.L.T. 595 (Delhi) was also relied by the Ld. counsel to support the contentions.
8. It is submitted that the department has relied on the decision of the Tribunal in the case of Surya Samudra Resort Pvt. Ltd. (supra). An identical matter had come up for consideration before the Hon’ble High Court, Delhi in the case of Commissioner of Customs Vs Air Travel Bureau Ltd. 2010 (260) E.L.T. 78, (Delhi). In the said case, the Hon’ble High court upheld the Tribunal finding that EPCG license does not envisage that only such amount collected by use of the imported car has to be considered towards export obligation under the license. The Hon’ble High court also noted at para 3 of the judgement that if by using the imported cars, the EPCG authorization holder is able to attract Foreign tourist to come to India by providing the incidental services such as arranging air travel ticket, accommodation, site seeing by travel agency, then foreign exchange earned from such services can be treated as earned by using the imported car as well. The said decision of the Hon’ble High court of Delhi has been approved by the Hon’ble Supreme Court as reported in Commissioner Vs Air Travel Bureau Ltd. 2011 (268) E.L.T. A110 SC.
9. The respondent has already obtained the Export Obligation Discharge Certificate from DGFT in respect of the subject EPCG license. The license authority having been satisfied about the fulfillment of export obligation, the Customs authorities are bound to accept it.
10. The Ld. counsel for respondent also argued on the ground of limitation. It is submitted that the issue involves interpretation of exemption notification and there is no mala fide attributed on the respondent. There is nothing to establish that it was not possible for the department to issue show case notice within the normal time period. It is prayed that the appeal may be dismissed.
11. Heard both sides.
12. The issue that arises for consideration is whether the respondent is liable for violation of the condition in the notification. The allegations put forth in the show cause notice is that the respondent had not registered the vehicle as tourist vehicle and also that the foreign exchange earned fully and accounted for the purpose of obtaining EODC was not earned by using the imported car. It is seen that the very same issues had come up for analysis before the Tribunal in the respondent’s own case with regard to the import of Mercedez Benz car under EPCG scheme. The Tribunal after considering various decisions observed as under:
“8. From the above clarification, it can be seen that an importer/assessee could get the vehicles registered as tourist vehicle on or before 31-8-2008 and also if the EODC has not been issued within 30-6-2008. In the present case, the appellants have converted the registration to tourist vehicle much before issuance of EODC.
9. The second allegation is that the appellants have not earned foreign exchange exclusively by the use of the imported vehicle. In the case of Commissioner of Customs Hotel Excelsior Ltd. – 2016 (336) E.L.T. 595 (Del.), the Hon’ble High Court of Delhi held that as long as foreign exchange is earned by the hotel and the imported cars are used for hotel purpose, there would be no violation of any statutory requirement and it is not necessary that the foreign exchange has to be exclusively earned by using the vehicle. The E.P.C.G. license does not envisage that the amount collected by use of the imported car only has to be accounted towards fulfilment of export obligation. Similar view was taken in Air Travel Bureau Ltd. (supra).
10. The Tribunal in the case of Narang International Hotels Pvt. Ltd. (supra) had occasion to analyse a very same issue with regard to import of luxury cars. Relevant paragraphs of the said decision are reproduced are under :-
“11. We are not in doubt that the facts unearthed by the investigators do evidence use of the imported cars for personal use and for purposes other than earning of foreign exchange but that, to the extent that such use is not violation of the conditions of import in the scheme or in the corresponding exemption notification, does not suffice to conclude that the vehicles were not used for the purposes for which import at concessional rate of duty was permitted by the authorization.
12. Appellant-company has applied to the licencing authority for issue of Export Obligation Discharge Certificate (EODC). Such application does not terminate the validity of the authorization or to accrue credit of further earning of foreign exchange in the manner envisaged in the scheme to meet any shortfall in achievement of obligation that may yet be determined by the licensing authority. It is not in doubt that the licensing authority is competent to determine that export obligation has been discharged. That such authority is vested as the final authority to do so is amply clear in the decision of the Hon’ble High Court of Bombay in Bhilwara Spinners v. Union of India [2011 (267) E.L.T. 49 (Bom.)] holding thus :
‘22 Once the licencing authority has found that the licencing conditions have been fulfilled, it would not be open to the customs authorities too contend that the imports under the licence are contrary to law and take action against the licence holder.’
Consequently, while the ‘proper officer’ under the Customs Act, 1962 can initiate action for breach of conditions of notification, a certification of compliance with conditions of licence cannot be ignored or substituted by separate findings to the contrary. The adjudicating authority, in rendering the finding that export obligation has not been fulfilled, has erred in pre-empting a decision by the statutory authority vested with that responsibility. The exemption notification itself in Paragraph 2(2) allows a period of six years from date of licence, i.e. up to August, 2013, as the first reporting block, to fulfill the export obligation; and we notice that seizure was effected and importers directed to justify the imports well before that deadline. For the reason of not having awaited the completion of the deadline prescribed in the exemption notification for compliance with first report of prescribed proportion of achievement of obligation and of deciding on the extent of achievement of export obligation without proper authority, we find that the proceedings are not legally sustainable.”
In the present case, the appellant having been issued EODC on 12-6-2018 by the Jt. D.G.F.T., Trivandrum, the department cannot proceed to recover the duty forgone at the time of import, alleging non-fulfilment of conditions of EPCG license.”
11. From the foregoing discussions and also following the decisions cited supra, we are of the considered opinion that the demand cannot sustain. The impugned order is set aside and the appeals are allowed with consequential relief, if any.”
13. In the case of Hotel Excelsior Ltd. 2016 (336) ELT 595 (Del.) similar issue was considered and the Hon’ble High Court, Delhi observed as under
“2. The short question that arose for consideration in the said appeal from the Order-in-Original dated 27th August, 2010 passed by the Commissioner of Customs was whether the respondent violated the conditions attached to the import of cars for use in the hotel business. According to the Department the respondent failed to demonstrate that the cars were in fact used for transporting the foreign guests of the hotel.
3. As rightly pointed out by the CESTAT, the Department was unable to show any stipulation in any notification issued by the Central Board of Excise and Customs or any other notification specifically requiring the imported cars to be used only for transporting foreign guests of the hotel. Even before this Court, learned counsel for the Department was unable to show any such stipulation. In the circumstances, the Court is unable to disagree with the reasoning of the CESTAT that as long as foreign exchange is earned by the hotel and the imported cars are being used, there cannot said to be a violation of any statutory requirement.
4. No substantial question of law arises for consideration. The appeal and the application are dismissed.”
(emphasis supplied)
14. After appreciating the facts and following the above decisions, we are of the view that the impugned order before does not call for any interference. The same is sustained. Appeals filed by the department are dismissed.
(Pronounced in court on 21.08.2023)
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