9911796707
TMI Blog2008 (11) TMI 407X X X X Extracts X X X X X X X X Extracts X X X X ..... talled - convertible foreign exchange received from foods, beverages, room tariff, Ayurveda Massage were shown to have been received from the use of the capital goods (car in this case) - Income from renting of other vehicles was shown as income from renting of the imported vehicle - misrepresented before the Government that they have a branch - There was no functional office at any of the addresses furnished by them to the DGFT - false information was given to obtain the permission for transfer of the vehicle - shifted the vehicle without the permission of the DGFT - duty forgone was liable to be recovered from them - car was held liable for confiscation under Section 111(o) of the Customs Act - importer held liable for penalty – Held that: - export obligation in this case could be fulfilled by the appellant only through foreign exchange earnings by actual user of the car for rendering the prescribed service in terms of the Notification - benefit of the amendment brought to this Notification by Notification No. 29/2004-Cus., dated 28-1-2004 would not be available to the appellant being ex porter of service and not exporter of goods - car in this case can be held to have been insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -2006 to the customs authorities that he had leased out Shivir to BPL Telecom from November, 1998 to March, 2004 and to Indigo Mass Communications from 1-4-2004 until they vacated the premises on 30-9-2005; that the lease agreement with BPL Telecom and the later tenant provided that the premises was to be used solely for residential purposes and should not be sub-let without obtaining the lessor's (Dhirendra) consent and that he had not consented to any sub-letting. The EPCG licence issued to the importers stipulated that the importer was under an obligation to export goods/provide service to foreign tourists and earn foreign exchange worth five times the CIF value of the capital goods imported on FOB basis within a period of eight years from the date of issue of the licence which was subject to actual user condition and subject to the condition that it was to be installed at the importers' premises at Trivandrum. The importers had applied for import of the car declared for exclusive use of providing premium service to VIP and VVIP guests visiting their hotel. In the application for transfer of the registration from Kerala to Karnataka, the importers stated that they had their off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out on 15-2-2004, and that Mr. Jan Wornicki had checked in on 27-12-2003 and checked out on 30-12-2003. 4. Mr. Kersi Mistry's statement was recorded on the same day. He stated that Mr. M.S. Ram whom he knew personally, contacted him for repairs and maintenance of the Ferrari car in question; that he collected the car from customs at Mr. Ram's request; loaded the car on a truck to Trivandrum and after registration in Kerala, the car was brought to Bangalore by the same truck; that the car was stationed at 419, 13th Main, 2nd Cross, 3rd Block, Koramangala, Bangalore, till date; that the car was used very occasionally to drop VIPs from airport to hotel vice versa. In the light of the above, it appeared that the importers had neither earned any freely convertible foreign currency for services rendered through the use of the car, nor could they prove that the car was put to use for the purpose for which it was imported under the EPCG licence and, therefore, the car was liable to confiscation and the importers liable to duty of Rs. 1,01,85,961/- foregone, together with interest, and that penal action against the importers was also called for. On the above basis, show cause notice dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same can be taken at this point of time. As such, the present proceedings which proceed on the premise that export obligation had not been fulfilled, as claimed by the appellant-company, are premature and consequently the demand for duty as well as confiscation of car and imposition of penalties cannot be sustained at this point of time. In coming to this conclusion, we consider it necessary to deal with certain aspects of the matter, particularly those relating to the jurisdiction of the Customs authorities as well as the methodology that is required to be followed while dealing with such matters. 6. The learned counsel for the appellant-company has contended that the Customs had no jurisdiction to question the correctness of the EODC issued by the licensing authorities and relied upon several decisions and judgments in support of these propositions. The learned Joint CDR on the other hand drawn our attention to the judgment in the case of Sheshank Sea Foods Pvt. Ltd. v. CC - 1996 (88) E.L.T. 626 (S.C.) = 1996 (11) SCC 755 to contend that it was open to the Customs authorities to independently verify the correctness of the EODC, as fulfilment of export obligation was a condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . which are consumed during the manufacturing process. Duty Free Import of mandatory spares upto 10% of the CIF Value of licence is also permitted as earlier. Advance licence can be issued for physical export, intermediate sup plies and deemed exports. Annual Advance Licence Scheme has however, been discontinued. Both Advance License and the materials imported against it are subject to actual user condition even after fulfilment of export obligation. One departure made in the new Advance License Scheme is to abolish DEEC Book. Advance license issued under the new Scheme on pre-export basis (i.e. to say where import takes place before fulfilment of export obligaion) would inter alia contain description, value and quantity of materials permitted against it and value and quantity of export obligation to be fulfilled; advance licence issued on post-export basis (i.e. to say after fulfilment of export obligation) would in addition also contain details of exports made against the licence. In respect of Advance Licences issued on post- export basis, in doubtful cases, or where investigations have been launched by customs or other Agencies, Customs may require DGFT authorities to cause ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permitted in the DFRC license in terms of SION for the relevant export product as earlier. License issued under DFRC scheme are freely transfer able as earlier. Other procedural requirements of DFRC Scheme as specified in DOR's ear her Circular Nos. 33/2000-Cus., dated 2-5-2000 [2000 (118) E.L.T. T27], 42/2000-Cus., dated 2-5-2000 [2000 (118) E.L.T. T20] and 59/2000-Cus., dated 11-5-2000 [2000 (119) E.L.T. T74] shall continue to be followed with the aforesaid modifications. Customs Notification No. 46/2002-Cus., dated 22-4-2002 has been issued to operationalise this Scheme. 2.3 DEPB Scheme DEPB Scheme has been continued in the Exim Policy 2002-07 for some more time. Under the new DEPB Scheme, DEPB scrips would be issued only on post-export basis (i.e. to say on completion of exports) as pre/export DEPB Scheme has already been discontinued. The provisions of DEPB Scheme are contained in Paras 4.3 and 4.3.1 to 4.3.5 of the Exim Policy. One significant change in the new DEPB Scheme is that in terms of Para 4.3.5 of the Exim Policy even excise duty paid in cash on inputs used in the manufacture of export product shall be eligible for brand rate of drawback as per rules framed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EO period for 2 consecutive block has also been done away with. Para 5.5 of the Exim Policy also permits fulfilment of export obligation under EPCG Scheme by Export of goods capable of being manufactured from the capital goods imported under EPCG Scheme. Similarly, export obligation under the Scheme is also allowed to be fulfilled by export of same goods (for which EPCG license is obtained), manufactured of produced in different manufacturing units of the license holder. It is reiterated that redemption of Bond/BG against license (with Customs) issued under EPCG Scheme should normally be allowed on the basis of EQ Discharge Certificate issued by DGFT authorities. However in doubtful cases or where investigations have been launched by Customs or other Agencies, Customs may require DGFT to take suitable corrective action. Other procedural requirements of EPCG Schemes as outlined in DOR Circular Nos. 39/2000-Cus., dated 11-5-2002 [2000(118) E.L.T. 113], 80/2000- Cus., dated 22-9-2000 [2000(121) E.L.T. T34] and earlier DOR Circulars shall continue to be followed with the aforesaid modifications. Customs Notification Nos. 44/2002-Cus., dated 19-4-2002 has been issued to operationali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIF value of the EPCG Licence and also the quantum of export obligation specified therein. Unilateral action by Customs in such cases may ultimately help the EPCG licence holder to escape the clutches of law because under EPCG Scheme both Customs arid DGFT authorities have important roles to play. 4. It is, therefore, reiterated that in all cases pertaining to EPCG Scheme where Customs have doubts about valuation, quantum of EO etc., the jurisdictional Commissioners of Customs scrupulously follow the instructions contained in DOR Circular No. 24/2002. 5. Suitable Public Notice for Trade and Standing Order for the guidance of customs field formations may be issued. 6. Receipt of this Circular may please be acknowledged." 7. There is already a Committee set up for this purpose, in which CBEC is also represented. The CBEC circular clearly prohibits unilateral action by Customs in such cases and recommends that under the EPCG scheme, both the Customs and the DGFT authorities have important roles to play. Applying the circulars to the present situation, we find that though the Customs were entitled to investigate the matter, they ought to have followed the Board's instructions b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d capital goods are used for the purpose of the hotel business, the requirement of the notification would be met. Whether in the facts of the present case these requirements are met or not is a matter which we do not wish to comment at this point of time as, in our view, this exercise would be premature. 9. On the question whether the appellant was entitled to the benefit of relaxation offered by Notification 29/2004 dated 28-1-2004, the learned Joint CDR had contended that the said notification was inapplicable to the appellant for two reasons, namely that such a claim should have been only made before the licensing authorities and secondly that the said relaxation did not apply to a ser vice provider. We, however, find that the Commissioner, in his impugned order, has not disputed the applicability of Notification 29/2004 dated 28-1-2004 but has denied the benefit of the said amendment on altogether different grounds, namely that (a) such claim should have been made only before the licensing authority and (b) that even by application of relaxations, export made prior to 28-1- 2004, cannot be considered while calculating the export obligation. Since applicability of Notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appropriate authorities to decide at a future date whether or not this requirement has been met by the appellant. 11. The learned Jt. CDR had also contended that since the appellant has already converted the car from All-India Tourist Taxi to a private vehicle, the car had been rendered incapable of use for the hotel's business. We have examined the relevant provisions of the Motor Vehicles Act, 1988 and find that the consequence of registering a vehicle as a private vehicle is that the owner is then prohibited from letting out the car for hire or reward. Such registration however does not prevent the owner from using the car for his own business. We take note of the fact that there are innumerable cars registered in the names of companies who are using the cars for their own business purpose. As long as such companies do not charge for the hire of their cars, they are not infringing the provisions of the Motor Vehicles Act, 1988. We, therefore, do not agree with the contention of the learned Jt. CDR that by the mere conversion of registration to a private vehicle, the appellants are now prohibited from using the car for their business purpose. We would also like to clarify here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allegations are contained in Para 52 of the impugned SCN. Briefly, these are- (a) As per the condition of the Notification 44/2002-Cus., the capital goods imported under the Notification had to be installed at the address given in the Licence that is in Trivandrum. This condition is also incorporated in Para 2.2 of the EXIM Policy for 2002-07 as well as in condition no. 9 of the Licence. The evidences suggest that the imported car was never installed or kept at the address given in the Licence but was transported to Bangalore. (sub-paras 1, 2 and 3 of Para 52 of the SCN). The importer applied for transfer of car to Bangalore at a non-existent address on some flimsy ground, which was rejected by the DGFT (sub-para 6 of Para 52 of the SCN). (b) Another requirement of the Notification was to produce a certificate of installation at the specified premises given by the jurisdictional Assistant/Deputy Commissioner of Central Excise within 6 months of import. No such certificate was given by the importer. The certificate of the Chartered Engineer submitted on 25-1-2006 was only on the basis of the documents and not based on the actual verification of installation. (sub-para 4 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the SCN). (g) The appellant have violated the conditions of the Notification 44/2002-Cus. as well as the provisions of the EXIM Policy and, therefore, the demand was issued under Section 28(1) of the Cus toms Act. The car is also liable to confiscation under Section 111(o) of the Customs Act, 1962. The importer was liable to penalty under Section 1 14A ibid and others were also liable to penalty under Section 114/112(a) ibid. 16. Perusal of the allegations clearly indicates that the actions for the realization of the differential duty and for the imposition of the penalties are not based only on the non-fulfilment of export obligation but for the violation of other conditions of the Notification also. It is to be noted that the fulfilment of the export obligation may be one of the conditions of the Notification but not the only condition. There are several other conditions of the Notification, which have to be fulfilled. If such violation of any of the conditions is proved, then the action of the Customs cannot be held to be premature. In fact, the Customs and the DGFT act in different fields. While the DGFT is supreme authority in respect of the Licences for import, the Custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Exemption Notification; upon which the appellants obtained exemption from payment of Customs Duty and therefore the terms of the Section 111(o) enable the Customs authorities investigate. Here it was also argued that the bond furnished by the appellants pursuant to the licences also provided for action by the licencing authority which was not accepted by the Apex Court. We, therefore, hold that the Customs and Central Excise Authorities have not exceeded their Jurisdiction and have correctly acted to safeguard the revenue interests in time. 18(a). As the Customs has the authority to examine the fulfilment of the conditions of Notification, it is necessary to ascertain whether the importer had violated the condition of the Notification. 18(b). The relevant notification 44/2002-Cus. had undergone various amendments from the date of its issuance. As on date of import of the said car under the EPCG scheme, the said Notification reads as under: 18(c). Amended Notification No. 44/2002-Cus., dated 19-4-2002 Relevant for this case is as under: In exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being sat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... namely S. No. Period from the date of issue of licence Proportion of total export obligation (1) (2) (3) 1. Block of 1st, 2nd, 3rd, 4th and 5th year Nil 2. Block of 6th, 7th and 8th year 15% 3. Block of 9th and 10th year 35% 4. Block of 11th and 12th year 50%: Provided further that where a sick unit notified by the Board for Industrial and Financial Reconstruction (BIFR) is subsequently taken over by another unit for revival, the export obligation may be fulfilled within a period of 12 years from the date of issue of license: Provided also that the export obligation of particular block may be set off against the excess exports made in the said preceding block(s); (3) the importer produces within 30 days from the expiry of each block from the date of issue of licence or within such extended period as the Assistant Commissioner of Customs or Deputy Commissioner of Customs may allow, evidence to the satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner of Customs showing the extent of export obligation fulfilled, and where the ex port obligation of any particular block is not fulfilled in terms of the preceding condition, the importer sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the month of January 2001, the Licensing Authority may grant extension in the overall period of export ob ligation up to one more year: Provided further that in case of a licence holder unit referred to in the first proviso, having overall export obligation period of 13 years and in case of other licence having export obligation period of 12 years, extension of overall period of export obligation shall not be allowed."; 3. where the goods are found defective or unfit for 'use, the said goods may be re-exported back to the foreign supplier within 3 years from the date of payment of duty on the importation thereof: Provided that at the time of re-export the goods are identified to the satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner of Customs as the goods which were imported. TABLE S.No. Description of goods (1) (2) 1. Capital goods. 2. Capital goods in SKD/CKD condition to be assembled into capital goods by the importer 3. Components of capital goods required for assembly or manufacture of capital goods by the importer 4. Spare parts not exceeding twenty percent of the value of goods specified at special Nos. 1, 2 and 3 as actually imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 (RE-2003)/2002-2007, dated 28th January, 2004." 19. Let us examine the conditions of the Notification, which are required to be fulfilled and are to be supervised by the Customs. 20. As per condition 2 of Para 2 of the Notification, the importer has to execute a Bond undertaking to fulfil the 'export obligation' within a period of 8 years as per the norms given in the table. The term export obligation has been emphasized as the same has a definite connotation as per the definition of this term in the Notification itself. This aspect will be dealt with in detail in the latter part of this order. 21. As per condition 3 of Para 2 of the Notification, within a month of the completion of a Block in terms of condition 2, the importer has to satisfy the AC/DC concerned that he has fulfilled the export obligation as per the norms mentioned in condition 2 of the Notification. 22. As per condition 4 of the Notification, the importer had to produce to the AC/DC concerned a certificate of the jurisdictional C. Ex. officer or an in- dependent Chartered Engineer within six months from the date of importation that the imported goods had been installed at the premises mentioned in the Licenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -Cus. It is clear from the above sub-clause that the export obligation in relation to importers rendering services, means, receiving payments in freely convertible foreign currency for services rendered through the use of such capital goods. (Emphasis supplied) 27. This aspect of the dispute has been dealt with in Paras 8 & 9 of the Order proposed by the Hon'ble Vice-President. In Para 8, the Hon'ble Vice-President has referred to the decision of the Hon'ble High Court of Delhi in the case of Intergiobe Enterprises Ltd. reported in 2006 (203) E.L.T. 202 (Del.) and concluded that as long as export obligation is met through foreign exchange earned by the hotel business, and the imported capital goods are used for the purpose of the hotel business, the requirement of the notification would be met. I would like to extract the relevant paragraph of the decision of the Hon'ble High Court in the case of Interglobe Enterprises Ltd. cited supra. 12. Two interpretations are thus being offered by the parties to the terms of the policy. The one offered by the petitioner if accepted would mean that once the capital goods are harnessed into the establishment, it is not necessary that the expo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for which the same were imported. In this case, the business activity, for which the car was imported was to provide transport to the hotel guests for money. As the evidences suggest, the car was not kept at the hotel resort and the appellant has not produced any evidence that after import, the car was ever used for the transport of the guests of the hotel. The appellant has, therefore, not fulfilled the condition of the notification as per the diktat of the Hon'ble High Court in the case of Intergiobe cited supra. 28. The Hon'ble Vice-President in Para 9 of the order has observed that the Commissioner in the impugned order has not disputed the applicability of the Notification 29/2004-Cus., dated 28-1-2004 but has denied the benefit of the said amendment on altogether different grounds, namely that (i) such claim should have been made only before the licensing authority and (ii) that even by application of relaxations, export made prior to 28-1-2004 cannot be considered while calculating the export obligation. The Hon'ble Vice-President has concluded that the appellant would be entitled to plead for the benefit of the said notification and it will be for the concerned authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince the applicability of Notification 29/2004-Cus., was not disputed by the Commissioner, we do not agree with the contention of the learned Jt. CDR that the said amendment is inapplicable to the appellant.' With due respect, the argument of the Jt. CDR was that the said Notification 29/2004-Cus., had amended the basic Notification 44/02-Cus. which was relevant for import of duty free goods by an EPCG. The issue before us is whether the importer had fulfilled the condition of Notification 44/02-Cus. as amended from time to time. Notification 29/2004-Cus. Had amended the Notification and added sub-clause (iii) in the explanation 4 of the same. The Commissioner had held violation of the conditions of the notification on various grounds. One of the grounds was that the importer did not satisfy the requirement of fulfilling the export obligation even after the amendment brought out by Notification 29/2004-Cus. There may be a particular reason considered by the Commissioner but whether imported goods are eligible for benefit of a Notification is a question of law and any argument in support of the contention or against it addresses a question of law, which can be raised at any stage of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mporter is legally sustainable. 32. After holding so, I propose to consider the effect of the amendment brought out by the Notification 29/2004-Cus. in the Notification 44/2002-Cus. As already stated the amending Notification 29/2004-Cus. enlarged the definition of 'export obligation' to also mean export of goods in terms of the notification of the Government of India in the Ministry of Commerce and Industry (Department of Commerce) No. 28 (RE-2003)/2002-2007, dated 28th January, 2004. The said Notification 28 (RE-2003)/2002-2007 dated 28-1-2004 brought out changes in Para 5.4(i) of the EXIM Policy. The same is extracted below: Para 5.4(i) pertaining to "Export Obligation" is amended as under: (i)The export obligation shall be fulfilled by the export of goods capable of being manufactured or produced by the use of the capital goods imported under the scheme. The export obligation may also be fulfilled by the export of same goods, for which EPCG licence has been obtained, manufactured or produced in different manufacturing units of the licence holder/specified supporting manufacturer (s) /vendor (s). The export obligation under the scheme shall be, over and above, the average lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PCG scheme for being eligible to the benefit of the Notification 44/2002-Cus. 35. In Para 10 of the Order, the Hon'ble Vice-President has addressed the issue of fulfilment of condition No. 4 of the Notification. The said condition reads as: (4) the capital goods imported, assembled or manufactured are installed in the importer 's factory or premises and a certificate from the jurisdictional Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise or an independent Chartered Engineer, as the case may be, is produced confirming installation and use of capital goods in the importer's factory or premises, within six months from the date of completion of imports or within such extended period as the said Assistant Commissioner of Customs or Deputy Commissioner of Customs may allow: 36. The Hon'ble Vice-President has referred to the arguments of both the Jt. CDR and the Counsel for the appellant. She has noted that the car being mobile could not be installed. She has, therefore, concluded that as long as the car is put to use for the business of the appellant, the requirement of installation would be satisfied. She has further qualified her conclusion with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a certain location, namely, Trivandrum in this case as that was the premises declared in the application for the licence and in the bill of Entry filed by the appellant. The car must be put to use for earning foreign exchange at Trivandrum. As stated by the appellant in their application to the DGFT, the car was being imported for providing facilities to the touristscoming to the resort in Trivandrum as they would like to see scenic places in Kerala. There was no bar for taking the car to other places for the guest of the resort but they have to satisfy the condition of locating the same at Trivandrum. There are ample evidence produced by the department to show that the car, on arrival from Mumbai after clearance by the Customs authority, was immediately taken to Bangalore in the same truck, in which it was brought to Trivandrum from Mumbai. The only purpose for which the car was taken to Trivandrum was to get it registered with the Transport Authority. The Hon'ble Vice-President has observed that the car should be used for the business of the Resort and that will fulfil the condition of installation. I do not agree with the said proposition for the reasons stated above. Also, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raph in that circular is and I quote "It is re-iterated that redemption of Bond/BG against License (with customs) issued under EPCG scheme should normally be allowed on the basis of EQ Discharge Certificate issued by DGFT authorities. However in doubtful cases or where investigation have been launched by Customs or other Agencies, Customs may require DGFT to take suitable corrective action." 43. In the instant case, it is not disputed that investigations were going on and the only requirement of the Circular is that the issue should be brought to the notice of the DGFT, who will take suitable corrective action. The Customs have informed the DGFT about their investigations. It is for the DGFT to take action. There is no provision in the circular to prohibit the Customs from taking actions in furtherance of their investigations. It is the wisdom of the DGFT to take or avoid taking action on the recommendations of the Customs, but their action or inaction is not a condition for continuation of action by the Customs. 44. The second Circular No. 46/2004-Cus. referred to by the Hon'ble Vice-President is the one dated 26-7-2004. Para 2 of this Circular makes it very clear that the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court in the case of Commissioner of Customs, Kandla v. Essar Oil Ltd. reported in 2004 (172) E.L.T. 433 (S.C.). 30. A "fraud" 'is an act of deliberate deception with the design of securing something by taking unfair advantage of another. It is a deception in order to gain by another's loss: It is a cheating intended to get an advantage. (See S.P. Changalvaraya Naidu v. Jagannath [1994 (1) SCC 1]. 31. "Fraud" as is well known vitiates every solemn act. Fraud and justice never dwell together. Fraud is a conduct either by letter or words, which includes the other person or authority to take a definite determinative stand as a response to the conduct of the former either by words or letter. It is also well settled that misrepresentation itself amounts to fraud. Indeed, innocent misrepresentation may also give reason to claim relief against fraud. A fraudulent misrepresentation is called deceit and consists in leading a man into damage by wilfully or recklessly causing him to believe and act on falsehood. It is a fraud in law if a party makes representations, which he knows to be false, and injury enures therefrom although the motive from which the representations proceeded may n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esentation to become fraudulent must be of fact with knowledge that it was false. In a leading English case i.e. Derry and Ors. v. Peek (1886-90) All ER 1 what constitutes "fraud" was described thus: (All ER p. 22 B-C) "fraud" is proved when it is shown that a false representation has been made (i) knowingly, or (ii) without belief in its truth, or (iii) recklessly, careless whether it be true or false". But "fraud" in public law is not the same as "fraud" in private law. Nor can the ingredients, which establish "fraud" in commercial transaction, be of assistance in determining fraud in Administrative Law. It has been aptly observed by Lord Bridge in Khawaja v. Secretary of State for Home Deptt. (1983) 1 All ER 765, that it is dangerous to introduce maxims of common law as to effect of fraud while determining fraud in relation of statutory law. "Fraud" in relation to statute must be a colorable transaction to evade the provisions of a statute. "If a statute has been passed for some one particular purpose, a court of law will not countenance any attempt which may be made to extend the operation of the Act to something else which is quite foreign to its object and beyond its scope. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Concise Ox ford Dictionary, it has been defined as criminal deception, use of false representation to gain unjust advantage; dishonest artifice or trick. According to Halsbury's Laws of England, a representation is deemed to have been false, and therefore a misrepresentation, if it was at the material date false in substance and in fact. Section 17 of the Contract Act defines fraud as act committed by a party to a contract with intent to deceive another. From dictionary meaning or even otherwise fraud, arises out of deliberate active role of representator about a fact which he knows to be untrue yet he succeeds in misleading the representee by making him believe it to be true. The rep resentation to become fraudulent must be of the fact with knowledge that it was false. In a leading English case Derry v. Peek [(1886-90) ALL ER Rep 1: (1889) 14 AC 337 (HL)] what constitutes fraud was described thus; (All ER p. 22 B-C). 'Fraud is proved when it is shown that a false representation has been made (i) knowingly, or (ii) without belief in its truth, or (iii) recklessly, careless whether it be true or false'." 34. This aspect of the matter has been considered recently by this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hicles. They also misrepresented that the fuel required for the vehicle was not available in Trivandrum. (vi) They had shifted the vehicle to Bangalore without the permission of the DGFT or intimation to the Customs immediately after registration of the vehicle in Trivandrum and they were representing before the officers of the Government as if the vehicle was still in Trivandrum. 48 The aforesaid misrepresentations were knowingly made; hence as per the definition of the word 'Fraud', the appellant had committed the fraud. Their acts will vitiate all solenm acts. They do not deserve any leniency. I, there fore, uphold the demand of duty, confiscation of the car and the imposition of redemption fine in lieu thereof. I also confirm the penalty imposed on them Under the Customs Act, 1962. 49. The roles of the Director Shri M.S. Ram and the CFO Shri Rajeesh Kumar have clearly been brought out in the Show Cause Notice as well as in the impugned Order-in-Original. Not much was argued by the counsel for those appellants against their liability to penalty under the Customs Act, 1962. I, there fore, uphold the penalties imposed on them by the adjudicating authority. Sd/- (A.K. Srivasta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded after expiry of the period of 8 years from the date of import as held by the Hon'ble Vice-President or the appeals of the appellants are to be rejected outright as held by the Member (Technical)? (Pronounced on 4-11-2008) Sd/- (Jyoti Balasundaram) Vice-President (24-10-2008) Sd/- (A.K. Srivastava) Member (Technical) (24-10-2008) 50. [Order per: P.G. Chacko, Member (J)]. - This matter has arisen be fore me as third Member consequent upon differences of opinion between the learned Vice-President and the learned Member (Technical) of the regular Bench which considered the appeals in the first instance. The essential facts of the case have been given in sufficient detail in the orders passed by the learned Vice President and the learned Member (Technical). The Revenue s case is decipher able from para 15 wherein the allegations raised in the relevant show-cause notice have been outlined. According to the Revenue, many of the conditions attached to Notification No. 44/2002-Cus., dated 19-4-2002, whereunder the assessee cleared the imported car on payment of duty at concessional rate under EPCG Scheme, were not fulfilled by them and, therefore, the duty forgone was liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) E.L.T. 94 (Tribunal) = 2009 (92) RLT 161], Commissioner v. Som Dutt Builders Ltd. [2009 (236) E.L.T. 478] and Air Travel Bureau Ltd. v. Commissioner [2009 (237) E.L.T. 2831. On the other hand, it has been argued by the learned JCDR that, as per the relevant condition of the notification, the importer had to satisfy the proper officer of Customs that they had duly discharged the 'export obligation'. The officer was not so satisfied. The EODC produced by the party was not accepted for valid reasons. According to the learned JCDR, the foreign exchange earnings of the assessee out of any activities/services other than the specific service mentioned in the EPCG licence were not liable to be counted towards discharge of 'export obligation' by the assessee under the notification. The EODC was issued on the basis of the information furnished by the assessee regarding foreign exchange earnings out of their entire business activity. It has been argued that only the earnings out of the specific service mentioned in the licence should have been taken into account by the DGFT in determining whether the 'export obligation' had been discharged by them. The learned JCDR has also endeavoured to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing goods capable of being manufactured by the use of the imported capital goods. He had also the option of discharging export obligation by way of export of identical goods manufactured in different units owned by him. In case he has no manufacturing unit, this option could be exercised by way of export of goods manufactured by his supporting manufacturer having one or more manufacturing units. The amended para 5.4(i) of the EXIM Policy allowed an alternative, viz, the ex port obligation could be fulfilled by export of other goods manufactured or ser vice provided by the licence holding company or group company. It is this part of the amended para 5.4(i) of the EXIM Policy, which has been specifically re ferred to by both sides. The learned counsel has argued that the assessee had the alternative option of discharging export obligation by way of export of the ser vices provided by them. The learned counsel has endeavoured to import this provision of the EXIM Policy into the relevant condition of Notification 44/2002- Gus. At this juncture, one should fall back on the relevant of the notification. The notification as amended by Notification 29/2004 dated 28-1-2004, provides that e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation was considered by the Bench, it is not reasonable to say that certain provision thereof was not taken note of. On a perusal of the Tribunal's judgment in M. Far Hotels case, I find that there is no specific reference to Notification 44/2002-Cus. therein. However, it appears, the appellant in that case had also imported a car under the EPCG Scheme for use by their hotel. It appears that the import was made during the EXIM Policy period 2002-07. The learned counsel claimed that, in M. Far Hotels case, the Tribunal did consider the definition of "export obligation" given under Notification 44/2002-Cus. But I have not found even a single reference to Notification 44/2002-Cus., let alone to the definition of export obligation. The submission made by the learned JCDR that the question whether M. Far Hotels Ltd. had discharged export obligation in terms of the relevant provisions of the said notification, particularly the definition of "export obligation" given under Explanation (4) thereto, was not addressed by the Bench in the manner similar issue was considered in the instant case by the learned Member (Technical) of the regular Bench. Therefore, in my view, the decision in M. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n issued to them but the benefit of concessional rate of duty under Notification 44/2002 had been availed by them. Referring to the provisions of the EXIM Policy 2002-07, the report maintained that the export obligation was required to be fulfilled by the assessee by using the imported goods and that there should be a nexus between the imported goods and the services rendered. I am told that the DGFT is yet to act upon the request of the department. In any case, it appears, the department has taken up the case with the DGFT for corrective action as envisaged in the Board's Circular dated 26-7-2004. The question which now arises is whether the department should wait for the DGFT's decision. Considering the period of limitation provided under Section 28(1) of the Customs Act, it was necessary for the department to initiate action against the party by issuing the show-cause notice without delay. Had the department not done so, any belated action against the assessee would probably have been defeated on the ground of limitation. Any inaction or delayed action of the DGFT upon the matter referred to it by the Customs authorities cannot be allowed to defeat the Revenue. The jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion" given under clause (ii) of Explanation (4) to the notification. If that be so, the requirement of having to discharge export obligation by way of earning foreign exchange by making use of the imported capital goods is something imperative, which cannot be dispensed with. If there is any clarification of the Board to the contra, it is open to review. The Supreme Court's observation (vide Commissioner v. Ratan Melting & Wire Inds. [2008 (231) E.L.T. 22 (S.C.) = 2008 (12) S.T.R. 416 (S.C.)] that a circular which is contrary to statutory provisions has really no existence in law is relevant to this context. If there is any decision of this Tribunal without regard to the aforesaid definition connected with a substantive condition of Notification 44/2002-Cus., the same may not be a valid precedent. In the result, I hold that only such foreign exchange earnings, if any, earned by the assessee out of actual use of the car for rendering the specific service mentioned in the EPCG licence could be reckoned hi determining the extent of discharge of export obligation by the assessee. The learned Member (Technical) of the regular Bench has, in his dissenting order, lucidly brought out the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the assessee to use the car in the same premises for rendering service to foreign tourists and earning foreign exchange out of such use. This condition, it is clear, was not complied with by the assessee. In the result, on strict interpretation of the relevant conditions of the notification, I hold that the 'export obligation' in respect of the imported car in this case was liable to be fulfilled only by the earnings through the use of the car in or around the place in which it was installed. As observed by the Apex Court in Sarabhai M. Chemicals v. Commissioner [2005 (179) E.L.T. 3 (S.C.)], it is well-settled that an exemption notification has to be strictly interpreted and that the conditions for taking the benefit of exemption have to be strictly interpreted. (d) Point No. 4 This point is already covered by point No. 3. The relevant query stands answered in the affirmative, i.e., the imported car was installed in the premises of the importer through its registration with the registering authority at Trivandrum under the Motor Vehicles Act/Rules. (e) PointNo.5 Here the query is whether the amendment brought to Notification 44/2002-Cus. by Notification 29/2004-Cus., dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
