2019 (4) TMI 1963 - AT - Customs

EPCG Scheme - concessional rate of duty - denial of the benefit provided under Notification No. 55/2003 dated 01.04.2003 on the ground that the services provided was ocean freight service to liners and such transport service did not fall under cargo handling service - HELD THAT - The disputed capital goods were installed/commissioned in the premises of the appellant on 29.04.2004, which is evident from the certificate issued by the Chartered Engineers M/s. Joshi Associates, placed at page 36 in the appeal records. Such installation certificate of Chartered Engineers has not been disproved by the department. Further, we also find that the appellant had filed the statement in form Appendix-9B before the Office of the DGFT regarding the foreign exchange earned by it as per the EPCG Scheme. In the said form, the appellant had stated the category of service provided as cargo handling service . On the basis of the documents submitted by the appellant, the Office of DGFT vide redemption letter dated 20.11.2009 had confirmed that the export obligation against the EPCG authorization dated 01.03.2004 has been discharged. Considering the overall facts and circumstances of the case, since the licensing authority had confirmed the fact regarding achievement of the export obligation by the appellant, the benefit of concessional duty in terms of Notification No. 55/2003-Cus., dated 01.04.2003 cannot be denied by the customs department. The law is well settled in the case of TITAN MEDICAL SYSTEMS PVT. LTD. VERSUS COLLECTOR OF CUSTOMS, NEW DELHI 2002 (11) TMI 108 - SUPREME COURT that once an advance licence was issued and not questioned by the licensing authority, the Customs authorities cannot refuse exemption on an allegation that there was misrepresentation and that if there was any misrepresentation, it was for the licensing authority to take steps in that behalf. In this case, it is an admitted fact on record that on the basis of documents submitted by the appellant towards discharge of export obligation, the licensing authority has issued the redemption letter, confirming achievement of export obligation. The certificate issued by the DGFT cannot be questioned at this juncture for non-fulfillment of the export obligation and contravention of the provisions under the Notification dated 01.04.2003. Appeal allowed - decided in favor of appellant

Summary

Issues:
1. Denial of benefit under Notification No. 55/2003 dated 01.04.2003 due to alleged violation of conditions.
2. Interpretation of export obligation fulfillment under EPCG Scheme.
3. Validity of redemption letter issued by DGFT.
4. Distinction between importation of goods and export of services under Customs Act, 1962.

Issue 1: Denial of benefit under Notification No. 55/2003:
The appellant imported capital goods under EPCG Scheme but faced denial of benefits under Notification No. 55/2003 due to alleged diversion of goods and violation of conditions. The department initiated proceedings seeking duty demand, redemption fine, and penalty based on discrepancies in the utilization of capital goods for cargo handling services.

Issue 2: Interpretation of export obligation fulfillment:
The appellant argued that the export obligation was fulfilled by utilizing the imported capital goods for cargo handling services. They referred to the redemption letter issued by DGFT confirming the discharge of export obligation. The appellant relied on the judgment of Titan Medical System Pvt. Ltd. to assert that once a license is issued and not questioned by the licensing authority, customs cannot deny exemption.

Issue 3: Validity of redemption letter by DGFT:
The redemption letter issued by DGFT confirmed the fulfillment of export obligation by the appellant. The letter stated that the export obligation stipulated in the license had been met in full, supporting the appellant's claim that they had fulfilled the conditions of the EPCG authorization.

Issue 4: Distinction between importation of goods and export of services:
The Tribunal differentiated between importation of goods and export of services under the Customs Act, 1962. It highlighted that in cases of goods import/export, customs authorities can verify fulfillment of conditions, but in service exportation, they rely on statements and certificates from licensing authorities. The Tribunal emphasized that the customs cannot question the certificate issued by DGFT regarding export obligation fulfillment.

In conclusion, the Tribunal found no merit in the impugned order and allowed the appeal in favor of the appellant, emphasizing the importance of the redemption letter issued by DGFT and the distinction between importation of goods and export of services under the EPCG Scheme.