2016 (12) TMI 764 - AT - Customs

EPCG scheme - restrain from taking any action till the completion of prescribed export obligation period - import of cranes - concessional rate of import duty at 3% permitted by notification no. 103/09-Cus dated 11 September 2009 - principle condition of furnishing certificate of installation was contravened and for diversion of the imported goods to an unauthorized site - appellant s capability to fulfill export obligation in doubt - Held that - The authorization to the importer having been issued by the competent authority and amended by a Committee empowered to do so, it is not open for any other agency to question the bona fides of the license. A Larger Bench of this Tribunal has held, in Rainbow Silks Vs Commissioner of Customs (Exports), ACC, Mumbai 2015 (11) TMI 503 - CESTAT MUMBAI , held that Customs authorities are competent to initiate action against offending goods even in matters of violation of the Foreign Trade Policy. However, such an empowerment does not extend to questioning the scope of a validly issued license but is to be invoked for contraventions arising from the failure to discharge obligation or the conditions of import. Therefore, and in consequence, it is not open to the Customs authorities to withdraw the benefit of exemption or to curtail the period within which export obligation is to be fulfilled. It would appear that, in the present case, the adjudicating authority has done so. The impugned order has held that the appellant is incapable of meeting the export obligation and, thereby, Pre-empted that possibility well before the period of export obligation. This is patently improper. The learned Authorized Representative made an earnest plea that the matter to be remanded back to the original authority to enable the adjudicating authority to consider the various developments relating the amendment of the license and arrive at a proper conclusion on the notice issued by him. We have rendered a finding on the flexibility of movable capital goods as well as on the error in alleging diversion of the goods. We have also noted that it is not open to the Customs authorities to initiate action for non-fulfillment of export obligation until the period of export obligation is complete. There is, therefore, no aspect that requires a further scrutiny by the lower authority. We, therefore, do not agree that a remand is necessary - appeal allowed by way of remand.

Issues Involved:
1. Compliance with conditions of the exemption notification under the EPCG scheme.
2. Submission of installation certificate for imported goods.
3. Alleged diversion of imported goods to an unauthorized site.
4. Capability of the importer to fulfill the prescribed export obligation.
5. Jurisdiction and authority of customs officials versus the licensing authority.

Issue-wise Detailed Analysis:

1. Compliance with Conditions of the Exemption Notification under the EPCG Scheme:
The appellant imported crawler cranes under the Export Promotion Capital Goods (EPCG) scheme, availing a concessional import duty rate of 3%. The scheme required the importer to fulfill an export obligation as a quid pro quo for the concessional rate. The customs authorities initiated proceedings alleging non-compliance with the conditions of the exemption notification, specifically the failure to submit an installation certificate and the diversion of imported goods.

2. Submission of Installation Certificate for Imported Goods:
The customs authorities contended that the appellant failed to submit the installation certificate from the jurisdictional Central Excise officer or an independent Chartered Engineer within the stipulated six-month period. The appellant argued that the requirement for an installation certificate was redundant for mobile equipment like crawler cranes, which are not meant to be installed at a fixed location. The Tribunal noted that the Director-General of Foreign Trade (DGFT) had issued a circular exempting movable capital goods from the installation certificate requirement, thus rendering the customs authorities' insistence on such a certificate inapplicable in this case.

3. Alleged Diversion of Imported Goods to an Unauthorized Site:
The customs authorities alleged that one of the imported crawler cranes was found at a site in Nagpur, which was not the location specified in the import authorization, thus violating the condition prohibiting the transfer of capital goods before fulfilling the export obligation. The Tribunal found that the movement of mobile equipment like crawler cranes to different sites for operational purposes did not constitute a "transfer" as contemplated by the notification. The Tribunal emphasized that the cranes remained under the physical possession and control of the importer, and their deployment to different locations did not breach the conditions of the exemption notification.

4. Capability of the Importer to Fulfill the Prescribed Export Obligation:
The customs authorities argued that the appellant, not being a producer of goods, could not fulfill the export obligation. The appellant countered that the scheme allowed for the fulfillment of the export obligation through services, including those rendered to special economic zones, which was approved by an inter-ministerial authority. The Tribunal noted that the customs authorities could not unilaterally disregard amendments to the authorization approved by the competent authority. The Tribunal held that the customs authorities' presumption that the appellant would fail to fulfill the export obligation was premature and unwarranted, especially since the export obligation period had not yet expired.

5. Jurisdiction and Authority of Customs Officials versus the Licensing Authority:
The Tribunal highlighted that the customs authorities' role was to implement the EPCG scheme as per the Foreign Trade Policy, and they could not question the validity of licenses issued or amended by the DGFT. The Tribunal referenced the decision of the Hon'ble High Court of Bombay in Bhilwara Spinners v. Union of India, which affirmed the DGFT's authority to amend licenses retrospectively. The Tribunal concluded that the customs authorities overstepped their jurisdiction by preemptively determining the appellant's inability to fulfill the export obligation and initiating recovery proceedings before the obligation period had expired.

Conclusion:
The Tribunal set aside the impugned order, holding that the customs authorities had acted prematurely and without proper jurisdiction. The Tribunal emphasized the importance of adhering to the principles of natural justice and ensuring fair prosecution of disputes. The appeal was allowed, and the order imposing penalties and confiscation was annulled.

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