2011 (10) TMI 271 - AT - Customs

Notification 44/2002 - EPCG Scheme - Foreign exchange realization equal to 5 times the value of the imported capital goods within eight years from import - Held that - Notification do not put any restriction that foreign exchange earning should be generated by the exclusive use of the cars. - The facts that the cars were not registered as a tourist vehicle and the Appellants did not bill for the use of car separately cannot be fatal for claiming the customs duty exemption, though there may be a slight irregularity in the matter which can be decided only if the matter is examined with reference to the terms of contracts and the laws applicable to use of Motor Vehicles, which matter is not before this Tribunal. - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of conditions for availing exemption under Notification 44/2002-Cus for importing cars under EPCG Licenses.
2. Allegations of misuse of the EPCG Scheme by the Appellants.
3. Requirement of demonstrating correlation between service rendered using imported cars and foreign exchange realization.
4. Comparison of facts and decisions in similar cases like Kumarakam Lake Resorts.

Analysis:
1. The Appellants, a travel agency, imported BMW cars under EPCG Licenses with exemption under Notification 44/2002-Cus. Customs authorities alleged improper discharge of export obligation, initiating a Show Cause Notice (SCN) for duty demand, confiscation of cars, and penalties. The Appellants argued they met obligations and produced Export Obligation Discharge Certificates.
2. Customs found the cars mainly used for free services, questioning the source of foreign exchange used for export obligation discharge. The SCN confirmed duty demand, penalties, and confiscation. The Appellants contested, citing precedents and arguing no need for direct correlation between car use and foreign exchange realization.
3. The Appellants referenced a Kerala High Court case to distinguish their situation from Kumarakam Lake Resorts, emphasizing the cars were registered in the company's name and used for intended purposes. They contended that, like laundry machines in hotels, direct correlation of foreign exchange to car use was not feasible.
4. The Tribunal noted differences in services provided by the Appellants and Kumarakam Lake Resorts, stating that the Customs notification and Import Export Policy did not require 'exclusive' foreign exchange generation from car use. The absence of separate billing for car use and non-registration as tourist vehicles were not fatal to claiming duty exemption. The Tribunal allowed the appeals, finding no scope to differ from the High Court's decision in the Appellants' case.

This detailed analysis covers the interpretation of exemption conditions, allegations of misuse, correlation between services and foreign exchange, and comparisons with similar cases, providing a comprehensive overview of the judgment.