2018 (12) TMI 671 - AT - Customs

Penalty u/s 112 of CA on Managing Director - Import of car under EPCG Scheme - benefit of N/N. 55/2003-Cus dated 1st April 2003 - Held that - The proceedings were initiated by customs authorities who had, under a notification issued under section 25 of Customs Act, 1962, permitted duty-free import. It is also apparent that the said notification governing the administration of imports under the Export Promotion Capital Goods scheme was primarily drafted for realisation of foreign exchange proceeds from export of goods; however, recognising the importance of service industry, the scheme has been utilised to grant licenses to service providers. In the present instance, the discharge certificate itself is questioned only against the background of eligibility of a service provider based in India to apply for, and to obtain, a licence under a scheme that was originally formulated for export of goods. The evolution of the scheme beyond physical exports is within the purview, and only, of the Director General of Foreign Trade. It is not open to customs authorities to contend that, sans the empowerment, powers not existing, the license itself was issued on the basis of fraudulent submissions. Appeal allowed - decided in favor of appellant.

Issues:
1. Eligibility for benefits under the Export Promotion Capital Goods scheme.
2. Validity of 'export obligation discharge certificate' and compliance with customs regulations.
3. Authority of customs officials to question the discharge certificate.
4. Interpretation of the EPCG policy regarding the use of imported goods for business activities.
5. Comparison with previous judgments and application of legal principles.

Issue 1: Eligibility for benefits under the Export Promotion Capital Goods scheme
The case involved the import of a car under the Export Promotion Capital Goods scheme. The appellant, a travel agent, imported a Toyota Camry against a license issued by the Director General of Foreign Trade. The customs authorities ruled the imported car ineligible for scheme benefits, leading to the recovery of foregone duties, confiscation of the car, and imposition of penalties. The appellant argued that they fulfilled the export obligation within four years instead of the stipulated eight years, relying on circulars precluding customs action post-issuance of the 'export obligation discharge certificate.'

Issue 2: Validity of 'export obligation discharge certificate' and compliance with customs regulations
The appellant contended that the 'export obligation discharge certificate' issued by the licensing authority absolved them of further claims from customs authorities. They highlighted circulars instructing customs not to act unilaterally post-certificate issuance. The appellant emphasized compliance with the conditions of the scheme and the timely fulfillment of export obligations, challenging the penalties and duty recovery imposed by customs.

Issue 3: Authority of customs officials to question the discharge certificate
The case questioned the authority of customs officials to challenge the 'export obligation discharge certificate' issued by the licensing authority. The appellant argued that customs lacked the competence to question the validity of the certificate, especially in cases involving service providers importing goods under the scheme. The appellant cited circulars and previous judgments to support their contention that customs should not proceed unilaterally post-certificate issuance.

Issue 4: Interpretation of the EPCG policy regarding the use of imported goods for business activities
The judgment delved into the interpretation of the EPCG policy concerning the use of imported goods for business activities. It discussed the necessity for imported goods to be utilized in the importer's business activities to fulfill the export obligations under the scheme. The judgment emphasized the importance of actual use and compliance with scheme conditions, highlighting the need for goods to align with the importer's business operations.

Issue 5: Comparison with previous judgments and application of legal principles
The judgment referenced previous decisions, including one by the Hon'ble High Court of Delhi, to support the appellant's arguments regarding compliance with scheme conditions and the validity of the discharge certificate. It compared the present case with past rulings where similar penalties and duty recovery were set aside by the Tribunal. The judgment applied legal principles from prior cases to conclude that the impugned order should be set aside, allowing the appeals in favor of the appellant.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the legal reasoning applied by the Tribunal in reaching its decision.

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