2015 (6) TMI 185 - AT - Customs

Violation of Export Promotion Capital Goods (EPCG) Scheme in import of vehicle - benefits of exemption from payment of Customs Duty under the EPCG Scheme - Exemption Notification No.103/2009-Cus dated 11.09.2009 - Held that - The DGFT Policy Circular No. 26/2009-14 dispenses with the production of installation certificate for moveable capital goods such as vehicles imported under EPCG scheme by Service Providers, as they are movable capital assets and cannot be installed at one particular location. All Customs Authorities have been instructed by this Policy Circular no. 26/2009-14, not to insist on the installation certificate for such movable capital assets / goods, if imported under EPCG scheme. Therefore, non-production of installation certificate of the vehicle is not in contravention of the EPCG scheme. There is no condition stipulating to park the vehicle imported under EPCG scheme at a particular place, or to seek its registration only from any particular RTO office. Mere parking of the vehicle at a particular place cannot be considered as violation of actual user condition or proof of the usage of vehicle in a particular manner or of transfer of ownership. - Neither there is any documentary evidence of sale of the vehicle to any other person / entity with any evidence of corresponding payment, nor has the Appellant claimed having sold the vehicle in question. It is not in dispute that the vehicle is still shown as fixed asset in the Balance Sheet of the Appellant Company. Most importantly, no evidence of any change of ownership of the vehicle in the name of any other person / entity is forthcoming from the records of RTO. The record of registration with the RTO conclusively shows that the ownership of the vehicle remains with the Appellant Company and continues to be for Tourist Purpose . These are not even disputed by the adjudicating authority. It cannot therefore be said that the vehicle has already been sold and transferred in violation of the actual user condition. Export Item Name for the Appellant Company as seen from the Condition Sheet attached to their EPCG license is Hotel and Tourism related services . The vehicle is accordingly registered for Tourist purpose in the name of the Appellant Company owning a Hotel in State of Karnataka at Bangalore. In view of the above binding precedents in Interglobe Enterprises Ltd (2006 (1) TMI 145 - HIGH COURT OF DELHI), Air Travel Bureau Ltd (2010 (8) TMI 434 - DELHI HIGH COURT ) and the clarification from the office of DGFT, it is not mandatory that the Hotel of the Appellant Company should have charged separately for the use of the vehicle to collect money in foreign exchange specifically under the head of transportation charges with separate accounting of the same. Even if the words All India Permit are not mentioned on the vehicle registered as a Tourist Vehicle with a Tourist Permit, neither it is in violation of any mandatory condition of the EPCG License nor of the Exemption Notification. Neither the person in whose name the visitor pass was issued has been questioned, nor can such a Pass be a conclusive evidence to prove that the vehicle was not being used by the Hotel for providing services - Driver whose statement was recorded has been driving four different vehicles and was not kept to exclusively drive the subject vehicle. He admits having attended to in-house guests, and that since there is no safe and sufficient parking at Hotel, the Rolls Royce car is parked at the residence of the CMD and sometimes at the premises of Hotel. This driver cannot be presumed to be competent to identify the nationality of the guests. Guests of Indian origin from Asian countries do not look different from resident Indians. Further, the non-resident Indians are also bound to spend in foreign exchange during the short periods of stay in India. Hence no conclusive inference can be derived from the version of the driver. None of the statements contain any positive admission that the Appellant Company actually intended to import the car only for personal use of Shri Prakash Shetty. These statements and the records do not dispute the fact that after importation, the vehicle is actually registered in the name of Goldfinch Hotels Pvt Ltd and for Tourist purpose only. None of these statements even remotely allege any sale or transfer of the vehicle to any other person or entity, and moreover the registration with RTO stands in the name of the Appellant Company. It is also not in dispute that the balance sheet of the appellant company filed with the Registrar of Company also shows the vehicle in the fixed assets of the company. Some statements also positively assert that the vehicle was actually being used by the WIP guests and thus were used for providing Hotel and Tourism related services. Therefore, there is no tangible evidence to support the basic charge in the Show Cause Notice for demanding duty. Some of these statements at the most give room for suspicion, but cannot replace the tangible proof required in such cases. The benefits conferred under the FTP therefore cannot be denied to the Appellant. We find that neither the Foreign Trade Policy nor the Exemption Notification lay down the nature of day to day record to be maintained by the licensee in respect of foreign exchange earned from the imported capital goods. It is nowhere provided that details of each journey undertaken or name of foreign guest who used the car or the amount and mode of payment should be recorded. The service provider has been given the freedom to use the imported capita goods in whatever way he considers best to earn the incremental foreign exchange. - In any case foreign guests staying in hotels do not pay separately for their travel and the Appellant Company claims to provide complementary facility to their VVIP guests, which is not disproved, by the department. The vehicle has not been sold or transferred to any other person by the importer It is not proved even on preponderance of probability that the vehicle was imported solely for personal use of the CMD of the Hotel. In these circumstances, we find that even if the mandatory conditions of Exemption Notification are construed strictly, there is no violation of any condition of the EPCG license, FTP or the Customs Notification. The appellant has also raised the issue of erroneous rejection of the request for mandatory examination of witnesses as prescribed under section 138B of the Customs Act, 1962 on the issue of the relevancy of statements in the adjudication proceedings. However in view of the above findings we find no need to consider the said issue. - No violation of any condition of the EPCG license, FTP and the Exemption Notification is thus proved. Neither any demand of duty can therefore sustain, nor is any case for confiscation or imposition of penalty thus made out. The impugned Order-in-Original is therefore erroneous and is set aside. - Decided in favour of assessee.

Summary

Issues Involved:
1. Alleged violation of Export Promotion Capital Goods (EPCG) Scheme in the import of a vehicle.
2. Compliance with conditions of EPCG license, Foreign Trade Policy (FTP), and Exemption Notification.
3. Allegation of misuse of the imported vehicle for personal use.
4. Procedural aspects and evidence evaluation by the adjudicating authority.
5. Legitimacy of the demand for duty, confiscation, and penalties.

Issue-wise Detailed Analysis:

1. Alleged Violation of EPCG Scheme:
The case revolves around the alleged violation of the EPCG Scheme by the Appellant Company in importing a "Rolls Royce Ghost" model car. The EPCG Scheme, under Chapter 5 of the FTP, allows import of capital goods at concessional duty rates with an obligation to export services. The Appellant was accused of importing the vehicle for personal use rather than for the intended "Hotel & Tourism related services."

2. Compliance with Conditions of EPCG License, FTP, and Exemption Notification:
The Appellant Company had an EPCG License mandating the vehicle's registration for "tourist purpose only." It was argued that the vehicle was registered accordingly and used in compliance with the conditions. The DGFT Policy Circular No. 26/2009-14 dispenses with the need for an installation certificate for movable capital goods like vehicles, thus non-production of such a certificate was not a violation. The Tribunal found no evidence that the vehicle was disposed of or transferred in violation of the actual user condition.

3. Allegation of Misuse for Personal Use:
The Department alleged that the vehicle was used personally by the CMD of the Appellant Company rather than for the intended business purposes. However, the Tribunal noted that the vehicle was registered for tourist purposes and used for business promotion, which is permissible under the EPCG Scheme. The Tribunal referenced precedents like Interglobe Enterprises Ltd vs. Union of India and Commissioner of Customs vs. Air Travel Bureau Ltd, which support the use of imported vehicles for business activities without separate accounting for each service provided.

4. Procedural Aspects and Evidence Evaluation:
The Tribunal examined the statements of various employees and the CMD, which did not conclusively prove misuse. The Tribunal emphasized that presumptions and assumptions cannot replace tangible proof. The procedural fairness in rejecting the request for witness examination under section 138B of the Customs Act was also noted, but the Tribunal found no need to delve into this due to the findings on merits.

5. Legitimacy of Demand for Duty, Confiscation, and Penalties:
The Tribunal concluded that no violation of the EPCG license, FTP, or Exemption Notification was proven. The demand for duty, confiscation, and penalties was found unsustainable. The Tribunal set aside the impugned Order-in-Original and dismissed the Department's appeal for enhancement of penalty.

Conclusion:
The Tribunal allowed the appeals of the Appellant Company, providing consequential reliefs, and dismissed the Department's appeal. The operative part of the judgment was pronounced in court.