2015 (11) TMI 1026 - HC - Customs

Denial of concessional rate of duty - violation of condition 6 - appellant/assessee was faced with the dilemma as to whether they must have a provisional clearance of the goods or they must await the actual issue of the EPCG licence and incur the demurrage. - Held that - licence issued on 17.5.1995 imposed only two limitations or restrictions upon the assessee. One was in respect of time available to the assessee to complete the import and the other was the CIF value of the machinery which the licensee proposed to import. The conditions incorporated in annexure A of the licence did not call upon the assessee to wait until the date of issue of licence even for placing a purchase order upon the foreign exporter. The only restriction as could be seen from Annexure A to the licence was that the assessee should not have cleared the goods, from the Customs and should not have paid customs duty before the actual date of issue of licence. Appellant was forced to get the goods cleared from the Customs on 15.3.1995, as otherwise, they had to incur demurrage, without knowing the proposed date of issue of licence. The decision to grant licence for the import of the very same machinery at concessional rate had been taken by the Committee atleast one month before the date of clearance of the goods. The meeting in which the Committee decided to issue a licence took place on 13.2.1995 and the assessee cleared the machinery from the Customs on 15.3.1995. But, the DGFT issued the licence on 17.5.1995, despite the fact that nearly three months have passed by that time from the date of the decision. Therefore, the provisional clearance of goods on 15.3.1995 cannot be held against the assessee, especially when the very licence issued to the assessee had only two kinds of limitation, one in the form of a period of validity and another in the form of total CIF value of the import - Decided in favour of assessee.

Summary

Issues:
- Interpretation of condition No.6 in the EPCG licence
- Entitlement to concessional rate of duty
- Validity of provisional clearance of goods

Interpretation of condition No.6 in the EPCG licence:
The appellant filed for an EPCG licence to avail a concessional rate on machinery import. The licence was delayed, leading to a dilemma for the appellant regarding provisional clearance. Condition No.6 stated the licence is valid for goods not cleared from Customs. The authorities upheld the Department's claim based on this condition. However, the Court noted that the licence imposed limitations on time and CIF value, not on placing orders or receiving goods. The Court found that the appellant was entitled to place orders and receive goods before the licence issue date as long as Customs clearance and duty payment were not done.

Entitlement to concessional rate of duty:
The Department argued the appellant was not entitled to the concessional rate due to condition No.6. The Court disagreed, emphasizing that the appellant's provisional clearance was necessitated by bureaucratic delays in licence issuance. The Court highlighted that the licence only had limitations on time and value, not on the appellant's actions before the licence issue date. The Court ruled in favor of the appellant, stating that the provisional clearance should not be held against the appellant.

Validity of provisional clearance of goods:
The appellant provisionally cleared goods due to uncertainty about the licence issue date to avoid demurrage costs. The Court noted that the licence decision was made a month before the clearance, yet the licence was issued much later. The Court found that the provisional clearance on 15.3.1995 should not be held against the appellant, as the licence had limited restrictions on validity period and CIF value only. The Court allowed the appeal, setting aside the orders of the authorities.