2016 (10) TMI 441 - AT - Customs

Non-fulfillment of export obligation - denial of exemption from duty under section 25 of Customs Act, 1962 - import of second hand rotary sizer - Export Promotion Capital Goods (EPCG) licence with eligibility for concessional rate of duty of 10% - conditions to be fulfilled under notification no. 28/1997 dated 1st April 1997 - failure to comply with installation of machinery so as to fulfill export obligation - whether is is justified to hold that usage to which the imported goods were to be subjected, remained unfulfilled and appellant liable to action under the Customs Act, 1962? Held that - the Directorate General of Foreign Trade has, in exercise of its original and exclusive statutory jurisdiction, amended the terms of the licence to waive the condition of installation. With waiver of that condition, the requirement of installation had been done away with and, hence, the scope of contravening that condition was eliminated. - the impugned order based on a non-existent condition set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Failure to comply with condition no. 5 of notification requiring installation certification.
2. Failure to furnish evidence of prescribed export obligation fulfillment.
3. Demand of duty and confirmation of adjudication order.

Issue 1: Failure to comply with installation certification condition
The appellant imported a used rotary sizer under an EPCG license with a concessional duty rate of 10%. The appellant failed to comply with condition no. 5 of the notification, which mandated certification of installation by the jurisdictional Assistant Commissioner of Central Excise within six months of import completion. The non-installation led to a demand for the entire duty foregone, confirmed by the original authority and upheld by the Commissioner of Central Excise and Customs (Appeals), Goa.

Issue 2: Failure to furnish evidence of export obligation fulfillment
The appellant was also charged for not providing evidence of meeting the prescribed export obligation within the specified timeframe. An amount towards duty liability was remitted, and the appellant sought waiver of the installation condition due to operational issues. The Policy Relaxation Committee granted the waiver, and the export obligation was fulfilled, leading to the issuance of a redemption letter by the licensing authority.

Issue 3: Demand of duty and confirmation of adjudication order
The authorized representative argued for strict implementation of exemption notifications, citing a Supreme Court decision. However, the Tribunal emphasized that exemption notifications are tied to the Foreign Trade Policy scheme, and the Policy Relaxation Committee's decisions are crucial. The Tribunal distinguished the present case from the cited Supreme Court judgment, highlighting the waiver of the installation condition and the fulfillment of export obligations as reasons to set aside the impugned order. As no breach remained after the installation condition waiver, the appeal was allowed, and the duty demand was deemed non-applicable.

In conclusion, the Tribunal set aside the impugned order based on the non-existent installation condition breach, highlighting the fulfillment of export obligations and the waiver granted by the Policy Relaxation Committee. The judgment emphasized the importance of considering the specific circumstances of each case concerning duty demands and compliance with notification conditions under the Foreign Trade Policy scheme.