2006 (1) TMI 145 - HC - Customs

Writ Jurisdiction - Validity of the investigation launched by the DRI - Seizure of cars imported under EPCG Scheme - confiscation - HELD THAT - The scheme does not in our view envisage imports where the goods are not meant for use in the business activity of the importer nor can the goods be diverted for some other use without violating the conditions of actual user which is fundamental to the Scheme. The on-going investigations would, therefore, unravel whether the imported capital goods i.e. the cars in question were ever inducted into the business of the importer. That assumes importance because, according to the respondents, the cars were not even registered for the commercial activity for which the same were imported as was mandatory u/s 39 of the Motor Vehicles Act. There was, according to them an unauthorised diversion of goods contrary to the spirit of the Scheme, which could be investigated and made a basis for further action against the importer. The investigation instituted by the Directorate of Revenue Intelligence officers may in that above backdrop lead to the discovery of the true facts which would eventually lead to the issue of a show cause notice to which the petitioner can respond appropriately. Expression of any opinion by this Court at this stage would in that view be premature and would amount to pre-judging the issue which may arise at the appropriate stage in the context of the facts established in the course of the investigation. The issue of a certificate by the DGFT may also not be conclusive in such circumstances for any such certificate cannot circumscribe the power of the authority to reopen even a concluded matter if it is shown that such conclusion was vitiated by fraud, concealment of facts, misrepresentation or mis-declaration. Even here the respondents are investigating the alleged non fulfilment of the condition subject to which the goods had been imported. The on-going investigation cannot, therefore, be faulted on the ground of jurisdiction. There is no suggestion that the investigation is mala fide or actuated by a collateral purpose. If that be so, there is no reason why such an investigation should be scuttled by interference in exercise of our extraordinary writ jurisdiction. The argument that the petitioner has a lofty plan for starting an airline which may get adversely affected by the pendency of the investigation can hardly be a reason for this Court to quash the proceedings. There is no gain saying that pendency of the investigation can never be seen as a verdict of guilt against the petitioner. It is, after all, an investigation which should be allowed to reach its logical conclusion. We have in that view no hesitation in rejecting the first limb of the petitioner's case. We see no reason why that cannot be done to protect the interests of both the sides especially when the cars would progressively depreciate by continued disuse and want of adequate maintenance, care and protection. Thus, we allow this writ petition but only in part and to the extent that the seized cars shall be released in favour of the petitioner-company upon the petitioner providing a bank guarantee to the extent of the differential duty amount payable on the cars and a bond for the penalty and redemption fine that may be levied by the competent authority. The prayer for quashing of the investigation is, however, rejected and the writ petition to that extent dismissed, leaving the parties to bear their own costs.

Summary

Issues Involved:
1. Validity of the investigation by the Directorate of Revenue Intelligence (DRI).
2. Release of the seized luxury cars to the petitioner.

Detailed Analysis:

1. Validity of the Investigation by the Directorate of Revenue Intelligence (DRI):

The petitioner-company, engaged in international tours and travels, imported seven luxury cars under the Export Promotion Capital Goods Scheme (EPCG), which allows import of capital goods at a concessional customs duty of 5%, subject to an export obligation equivalent to five times the CIF value of such goods. The Directorate of Revenue Intelligence seized three of these cars, alleging non-fulfillment of the export obligation. The petitioner argued that the DGFT had issued discharge certificates for two of the cars, certifying fulfillment of the export obligation, and thus, the DRI had no authority to investigate or seize the cars. The petitioner contended that the DGFT's certificate should be conclusive proof of compliance with the EPCG Scheme.

The respondents argued that the import of capital goods under the EPCG Scheme required the goods to be used to generate foreign exchange, and the petitioner had not used the cars for their intended business purposes. The cars were not registered as tourist vehicles nor used to carry passengers, violating the conditions of the EPCG Scheme. The respondents maintained that the DRI was justified in investigating the alleged non-fulfillment of the export obligation.

The court held that the investigation by the DRI was valid, as there was no statutory bar preventing the investigation. The DGFT's certificate did not preclude the DRI from investigating potential violations of the EPCG Scheme. The court cited the Supreme Court's decision in Sheshank Sea Foods Pvt. Ltd. v. Union of India, which upheld the customs authorities' power to investigate compliance with conditions of import. The court concluded that the ongoing investigation should be allowed to reach its logical conclusion, and the petitioner's argument for quashing the investigation was rejected.

2. Release of the Seized Luxury Cars to the Petitioner:

The petitioner sought the release of the seized cars, arguing that the seizure was unjustified. The respondents did not strongly oppose the release but insisted on protecting the revenue's interest by stipulating appropriate conditions. The court agreed that the cars should be released to prevent their depreciation due to disuse.

The court ordered the release of the cars upon the petitioner providing a bank guarantee for the differential duty amount and a bond for the penalty and redemption fine that might be levied by the competent authority. The petition was allowed in part, granting the release of the cars, but the prayer for quashing the investigation was dismissed. The parties were directed to bear their own costs.

Conclusion:

The court validated the DRI's investigation into the alleged non-fulfillment of the export obligation under the EPCG Scheme, emphasizing that the DGFT's certificate did not limit the DRI's authority to investigate. The court also ordered the release of the seized cars upon the petitioner providing necessary financial securities, thus balancing the interests of both parties.