2003 (11) TMI 429 - AT - Customs

Interpretation of statute - Notification - EXIM - Service provider - Definition - Demand - Limitation - Demand - Show Cause Notice

Issues Involved:
1. Compliance with Concessional Notification No. 28/97-Cus.
2. Fulfillment of Export Obligation.
3. Interpretation of "Freely Convertible Foreign Currency".
4. Role of Tariff Authority for Major Ports (TAMP).
5. Applicability of RBI Clarifications.
6. Timing and Validity of Show Cause Notice.

Issue-Wise Detailed Analysis:

1. Compliance with Concessional Notification No. 28/97-Cus.:
The appellants were aggrieved by the Order-in-Original confirming demands of over Rs. 21,60,84,019/- for non-compliance with Notification No. 28/97-Cus. This included interest and an order of confiscation of capital goods, with a fine of Rs. 4.50 crores and a penalty equal to the duty demanded.

2. Fulfillment of Export Obligation:
The appellants, a private container terminal operator, had to fulfill an export obligation equivalent to 46 million US dollars under EPCG Licence No. 0430000001. They claimed to have achieved cumulative exports of 6,598,842.76 US dollars. However, the Customs authority alleged that the export obligation was not met because payments were received in Indian rupees, not in US dollars, as required by the notification.

3. Interpretation of "Freely Convertible Foreign Currency":
The appellants argued that the term "freely convertible foreign currency" should be interpreted in light of the EXIM Policy and RBI clarifications. The EXIM Policy 2002-2007 defined a service provider as one supplying services paid in free foreign exchange or in Indian rupees considered as foreign exchange by RBI. The RBI clarified that payments in Indian rupees, reducing outgo of foreign exchange, could be deemed as received in foreign exchange.

4. Role of Tariff Authority for Major Ports (TAMP):
The appellants contended that TAMP, a statutory authority, fixed tariffs denominated in US dollars but collected in Indian rupees. This was in line with a policy direction from the Ministry of Surface Transport. The Customs authority, however, did not recognize TAMP's role and rejected the dollar-denominated tariffs fixed by TAMP.

5. Applicability of RBI Clarifications:
The Commissioner did not accept the RBI's clarification, stating it pertained to the EXIM Policy 2002-2007 and not the earlier policy (1997-2002) under which the capital goods were imported. The appellants argued that the RBI's clarification should apply retrospectively, as the term "service provider" had the same wording in both policies.

6. Timing and Validity of Show Cause Notice:
The appellants argued that the show cause notice was premature as they were still under the licensing authority and had not yet completed their export obligation. They cited the Tribunal's judgment in Mechano Paper Machines Ltd. v. CC, Calcutta, which held that action should not be taken while the license still subsists.

Judgment:
The Tribunal found that the RBI's clarification on the term "freely convertible foreign currency" was binding on the Customs authority. The clarification applied to both the EXIM Policy 1997-2002 and 2002-2007. The Tribunal noted that the Customs authority should have considered the integrated activity of the appellants and the statutory provisions fixed by TAMP. The Tribunal also held that the show cause notice was premature and the demands were time-barred due to no suppression of facts by the appellants. Consequently, the appeal was allowed with consequential relief.

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