2008 (11) TMI 407 - AT - Customs

EPCG scheme - Car imported under EPCG scheme as capital goods - concessional rate of duty of 5% ad valorem and registered as an all India tourist taxi - violation of the EPCG licence conditions obligation could be fulfilled by export of goods capable of being manufactured by the use of capital goods imported under EPCG scheme - fulfil the obligation by export of same goods manufactured in different manufacturing units of the licence holder/specified supporting manufacturer - export obligation may also be fulfilled by export of other goods manufactured or service provided by the same firm/company or group company which has the EPCG Licence - appellant produced an installation certificate issued by a chartered engineer without verification of the capital goods (car in this case) claiming fulfilment of the condition of the Licence and Notification. It was falsely claimed in the certificate that the capital goods was installed - convertible foreign exchange received from foods, beverages, room tariff, Ayurveda Massage were shown to have been received from the use of the capital goods (car in this case) - Income from renting of other vehicles was shown as income from renting of the imported vehicle - misrepresented before the Government that they have a branch - There was no functional office at any of the addresses furnished by them to the DGFT - false information was given to obtain the permission for transfer of the vehicle - shifted the vehicle without the permission of the DGFT - duty forgone was liable to be recovered from them - car was held liable for confiscation under Section 111(o) of the Customs Act - importer held liable for penalty Held that - export obligation in this case could be fulfilled by the appellant only through foreign exchange earnings by actual user of the car for rendering the prescribed service in terms of the Notification - benefit of the amendment brought to this Notification by Notification No. 29/2004-Cus., dated 28-1-2004 would not be available to the appellant being ex porter of service and not exporter of goods - car in this case can be held to have been installed in the appellant s premises and its conversion to a private vehicle is immaterial where it is used for the intended purpose - there being no conflict of views regarding fine, penalty or the quantum of duty, the appeals will have to be dismissed.

Issues Involved:
1. Premature initiation of proceedings.
2. Jurisdiction of Customs authorities.
3. Fulfilment of export obligation.
4. Installation of the imported car.
5. Applicability of Notification 29/2004-Cus.
6. Conversion of the car to a private vehicle.
7. Remand of the case.

Issue-wise Detailed Analysis:

1. Premature Initiation of Proceedings:
The primary issue was whether the action initiated by the Customs authorities against the appellant was premature since the time limit for fulfilment of export obligation was not yet over. The majority held that the proceedings were not premature. The Customs authorities were justified in initiating action before the expiry of the export obligation period to avoid limitation issues under Section 28(1) of the Customs Act. The department had already referred the matter to the DGFT for corrective action, and the DGFT's inaction could not bar the Customs from proceeding.

2. Jurisdiction of Customs Authorities:
The Customs authorities were not prohibited from taking action without the concurrence of the DGFT. The Supreme Court in Sheshank Sea Foods Pvt. Ltd. v. UOI held that the jurisdiction of the licensing authority to investigate does not preclude the Customs authorities from doing so. The majority concluded that the Customs could proceed independently in cases of violation of post-importation conditions of the exemption notification.

3. Fulfilment of Export Obligation:
The export obligation could not be fulfilled by foreign exchange earnings from the entire hotel business. The definition of "export obligation" under Explanation (4) to Notification 44/2002-Cus. required that the obligation be discharged by receiving payments in freely convertible foreign currency for services rendered through the use of the imported capital goods. The majority held that only the foreign exchange earnings from the use of the car for the specified service could be counted towards the export obligation.

4. Installation of the Imported Car:
The car was considered installed in the premises of the importer through its registration with the registering authority at Trivandrum under the Motor Vehicles Act/Rules. The majority agreed that the condition regarding the installation of the car was satisfied by the appellant.

5. Applicability of Notification 29/2004-Cus.:
The amendment brought to Notification 44/2002-Cus. by Notification 29/2004-Cus., dated 28-1-2004, did not benefit the appellant. The majority held that the new parameter of the definition of "export obligation" added by the amendment was irrelevant to the case, as it applied to the export of goods, not services.

6. Conversion of the Car to a Private Vehicle:
The conversion of the car to a private vehicle did not affect its use for the intended purpose. The majority held that the change of status of the car from a tourist vehicle to a private vehicle was immaterial if it was used for the intended purpose.

7. Remand of the Case:
The case did not warrant a remand. The majority concluded that the appeals should be disposed of on merits, and there was no need to remand the case to the adjudicating authority for examining the fulfilment of the conditions of Notification 44/2002-Cus. after the expiry of the period of eight years from the date of import.

Conclusion:
By majority view, the appeals were dismissed, confirming the demand of duty, confiscation of the car, and imposition of penalties. The Customs authorities were justified in their actions, and the appellant failed to fulfil the conditions of the exemption notification.

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