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2024 (12) TMI 966 - AT - CustomsRecovery of customs duty with interest and penalty - mis-declaration of the year of manufacture of capital goods - denial of benefit of EPCG authorisation issued by the Director General of Foreign Trade - case of the department is built on the premise that the appellant had mis-declared the year of manufacture of the capital goods so as to avail undue benefit under the TUF Scheme of the Ministry of Textiles. Whether the appellant had mis-declared the year of manufacture of the capital goods? - HELD THAT - It is found that the Bill of Entry (which is the declaration of the appellant made under the Customs Act) nowhere indicates any year of manufacture. Thus, there was no mis-declaration before the Customs. Benefit of the EPCG licence issued by the DGFT which also does not specify any year of manufacture - HELD THAT - The appellant had not imported the goods under TUF but imported only under EPCG. Even though the proforma invoice submitted by the appellant does indicate the year of manufacture of the goods as 2000, the EPCG authorisation did not place any restriction on the year of manufacture. The TUF scheme under which the alleged undue benefits were to be availed do not apply to the appellant because it had specifically not imported the goods under TUF. Whether the appellant had obtained any undue benefit under the TUF scheme of the Ministry of Textiles? - HELD THAT - The answer is in the negative - Import of capital goods under EPCG with TUF is covered separately under paragraph 5.8 of the HBP. Whether there were any violation of the customs exemption notification no.103/2009-Cus which exempted the goods imported under an EPCG licence issued by the DGFT? - HELD THAT - It needs to be pointed out that while DGFT formulated several schemes under which exemptions and concessions are given, the schemes of DGFT, by themselves cannot prevail over the charge of duty of customs under section 12 of the Customs Act, 1962. Therefore, for every scheme of DGFT, a corresponding exemption notification is issued under the Customs Act exempting goods imported under that scheme. Notification no. 103/2009-Cus issued under section 25(1) of the Customs Act provides for exemption from duty in excess of 3% on capital goods imported under the EPCG licence issued by the DGFT. Even this notification does not place any restriction on the year of manufacture of the goods which can be imported under EPCG. Whether the Commissioner of Customs is competent to read into the EPCG licence issued by DGFT some additional conditions such as the year of manufacture? - HELD THAT - The Commissioner can exercise only such powers as are conferred on him under the Customs Act. While import of goods and duties and restrictions on them are under the Customs Act, the EPCG licences are issued by the DGFT under FTDR Act and the Foreign Trade Policy FTP framed under it by the Government. Neither the FTDR Act not the FTP confers any persons as the Commissioner of Customs. On the other hand, para 2.3 of the FTP (2009-2014) specifically states that the decision of the DGFT shall be final and binding on all matters relating to its interpretation - Neither the Customs Act nor the FTDR Act nor any other law gives the Commissioner of Customs any powers to either modify the licence issued by the DGFT or read something more into it. If investigations in any case indicate that a licence or authorisation has been obtained from DGFT by an importer or exporter wrongly by fraud, mis-declaration, etc., the Commissioner or other customs officer can pass such information and evidence to the DGFT who issued the licence so that he can take a decision. Customs officers, including the Commissioner, have no powers under the FTDR Act. Whether any alleged attempt to avail undue benefits under TUF scheme from the Ministry of Textiles would fall within the scope of the Customs Act? - HELD THAT - If it emerges in any investigation, that anyone had availed or was attempting to avail undue benefits under a scheme of the Ministry of Textiles or some other ministries, the customs officers can convey the details to such ministry to consider and take appropriate decision. Even if one tried to avail ineligible benefit from Ministry of Textiles under TUF, that cannot be a ground, by any stretch of imagination, to demand duty, confiscate goods and impose penalties under the Customs Act. Whether the capital goods were liable for confiscation under sections 111(m) and 111(o) of the Customs Act? - HELD THAT - Section 111(m) applies if the goods do not correspond to the entry made under the Act, i.e., the Bill of Entry. As we found that the Bill of Entry does not mention any year of manufacture at all, the imported goods do not have to be of any year of manufacture. Clearly, 111(m) does not apply to this case - Section 111(o) applies if the goods are exempted subject to some conditions and such conditions were not fulfilled and the non-fulfilment of such conditions was not sanctioned by the proper officer. In this case, the capital goods imported under EPCG were exempted subject to the condition that the goods manufactured using them will be exported and the export obligation was met and the DGFT issued an EODC to the appellant. Therefore, section 111(o) also does not apply to this case. Whether the penalty imposed under section 114A can be sustained? - HELD THAT - This section applies to some cases where duty was not paid or short paid for certain reasons. Since it is found that there is no short payment of duty at all and the demand of duty cannot be sustained, penalty under section 114A also cannot be sustained. The impugned order, which has been issued ignoring both the facts of this case and the legal provisions cannot be sustained and is set aside insofar as it pertains to the appellant - Appeal allowed.
Issues Involved:
1. Mis-declaration of the year of manufacture of capital goods. 2. Undue benefit under the Technology Upgradation Fund (TUF) scheme. 3. Violation of the customs exemption notification. 4. Competence of the Commissioner of Customs to impose additional conditions. 5. Applicability of the Customs Act to alleged benefits under the TUF scheme. 6. Liability for confiscation under sections 111(m) and 111(o) of the Customs Act. 7. Imposition of penalty under section 114A of the Customs Act. Detailed Analysis: 1. Mis-declaration of the Year of Manufacture: The Tribunal examined whether the appellant mis-declared the year of manufacture of the capital goods. It was found that the Bill of Entry did not indicate any year of manufacture, thus there was no mis-declaration before Customs. The EPCG licence issued by the DGFT also did not specify any year of manufacture, allowing the appellant to import goods of any year using the licence. Consequently, the Tribunal concluded that there was no mis-declaration by the appellant. 2. Undue Benefit under the TUF Scheme: The Tribunal addressed whether the appellant obtained undue benefits under the TUF scheme. The appellant had not imported goods under TUF but solely under the EPCG scheme. The proforma invoice indicated the year of manufacture as 2000, but the EPCG authorisation did not restrict the year of manufacture. The Tribunal determined that the appellant did not receive any undue benefit under the TUF scheme. 3. Violation of Customs Exemption Notification: The Tribunal considered if there was any violation of customs exemption notification no. 103/2009-Cus, which exempted goods imported under an EPCG licence. The notification did not impose any restriction on the year of manufacture. The Tribunal found no violation of the exemption notification by the appellant. 4. Competence of the Commissioner of Customs: The Tribunal evaluated whether the Commissioner of Customs was competent to impose additional conditions such as the year of manufacture. It was established that the Commissioner could only exercise powers conferred under the Customs Act. The DGFT's decision on matters relating to the interpretation of the Foreign Trade Policy is final and binding. Thus, the Commissioner lacked the authority to modify or add conditions to the EPCG licence issued by the DGFT. 5. Applicability of the Customs Act to TUF Scheme Benefits: The Tribunal assessed whether any attempt to avail benefits under the TUF scheme fell within the scope of the Customs Act. It found no legal basis for customs officers to demand duty, confiscate goods, or impose penalties under the Customs Act for alleged benefits under the TUF scheme. 6. Liability for Confiscation under Sections 111(m) and 111(o): The Tribunal examined if the capital goods were liable for confiscation under sections 111(m) and 111(o) of the Customs Act. Section 111(m) did not apply as there was no mis-declaration in the Bill of Entry. Section 111(o) was inapplicable because the appellant fulfilled the export obligation, and the DGFT issued an EODC. Therefore, confiscation under these sections could not be sustained. 7. Imposition of Penalty under Section 114A: The Tribunal reviewed the imposition of a penalty under section 114A, which applies when duty is not paid or short paid due to collusion or mis-statement. Since there was no short payment of duty, the demand for duty and the penalty under section 114A could not be sustained. Conclusion: The Tribunal concluded that the impugned order ignored both the facts and legal provisions, and thus, could not be sustained. The appeal was allowed with consequential reliefs, setting aside the impugned order as it pertained to the appellant.
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