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TMI Blog2015 (12) TMI 1045X X X X Extracts X X X X X X X X Extracts X X X X ..... peals are disposed of by a common order. 3. The facts in brief are that HEL is providing "Hotel Services under the category of Tourism and Travel related services" mentioned in Appendix 10 of the Handbook of Procedures relating to Foreign Trade Policy 2004-2009. M/s HEL obtained EPCG authorisation dated 20.08.2007 in respect three Mercedes Benz cars and another such authorisation dated 1.11.2007 in respect of one Rolls Royce car. The export obligation against this EPCG authorisation was to be fulfilled within eight years reckoned from the date of authorisation. HEL imported three Mercedes cars on 1.1.2008 and one Rolls Royce car on 7.2.2008 by claiming concessional rate of duty/exemption under Notification No. 97/2004-Cus dated 17.6.2004. An investigation was conducted on 16.1.2009 and consequent thereof, the Show Cause Notices were issued to deny the benefit of EPCG license and to demand the duty forgone by giving the benefit of Notification No. 97/2004-Cus dated 17.6.2004 on the following grounds: (a) The cars were not put to proper use inasmuch as they were not used for providing transport facilities to the guests of the hotel to earn foreign exchange. (b) As the cars were pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dernisation, technological upgradation or expansion of services, which for the present proceedings means hotel services. He further submits that proviso to para 5.1 of the policy allows import of motor cars, sports utility vehicles or all purpose vehicles inter alia to hotels. Condition for import of capital goods in para 5.3 of the Policy is that import of cars shall be the subject to actual user condition till export obligation is completed. As per para 9.4 of the Policy actual user means, who may be either industrial or non-industrial and para 9.6 of the Policy, "actual user" means a person who utilise the imported goods for his own use in any service industry. Therefore, it means that cars imported by HEL were to be used by HEL in their service industry. He further submits that para 5.4(i) of the policy envisages fulfilment of export obligation by export of services rendered by HEL. It is further provided that export obligations can also be fulfilled by exports of group company/managed hotels which has EPCG authorisation. Therefore, the export obligation in respect of hotel 'A' which has imported cars under EPCG can also be fulfilled by the hotel 'B' of the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the notification. Therefore, there is no divergence between the provisions of the Foreign Trade Policy and the exemption notification. To support this contention he relied following decisions: (a) CC, New Delhi Vs. Som Dut Builders Ltd. - 2009 (236) ELT 478 (Tri.-Del.) (b) M Far Hotels Ltd. Vs. CC, Cochin - 2009 (241) ELT 94 (Tri.-Bang.) (c) Air Travel Bureau Ltd. Vs. CC, New Delhi - 2009 (237) ELT 283 (Tri.-Del.) (d) CC Vs. Air Travel Bureau Ltd. - 2010 (26) ELT 78 (Del.). (e) Air Travel Bureau Ltd. Vs. CC- 2012 (277) ELT 250 (Tri.-Del.) (f) Goldfinch Hotels Pvt Ltd. Vs. CC (ACC and Exports), Mumbai - 2015-TIOL-976-CESTAT-MUM Apart from this, he submits that the action of the department is premature as HEL has time till August 2015 and November 2015 for fulfilment of export obligation. He further, submits that allegation of Revenue is that logbooks of the cars in question were maintained differently from the logbooks of other cars or the control of these cars was with Directors while the control of other cars was with the staff or the cars were being used by the family members of the Directors. With regard to this, he submits that it is not the case of the dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is to be operationalised the benefit of custom duty accorded in the Foreign Trade Policy. Therefore, the Foreign Trade Policy of custom notification issued thereof cannot be viewed as being mutually contradictory. It is also submitted that the definition of capital goods, neither the definition of the export obligation by itself nor when read in conjunction with the proviso relating to managed hotels suggested that the Government of India intended any divergence in Foreign Trade Policy and the customs notification in regard to the matter in issue. Therefore, the Policy and the customs notification, allow import of cars by hotels for use in providing service. In fact, custom notification does not provide how to use capital goods imported under EPCG scheme and it is not the case of Revenue that provisions of Foreign Trade Policy do not permit such use. In fact, the understanding of the department for actual user is that the custom notification provides use of cars by foreign tourist. The definition does not suggest the nature of service to be provided by the importer is to be governed by the type of the capital goods imported. He further submits that the case law relied upon by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cars, sports utility vehicles/all purpose vehicles shall not exceed 50% of average foreign exchange earnings from hotel, travel and tourism and golf tourism sectors in preceding three licensing years. (iii) Vehicles imported shall be so registered that the vehicle is used for tourist purpose only. A copy of the Registration certificate should be submitted in concerned RA as confirmation of import of vehicle. However, parts of motor cars, sports utility vehicles/all purpose vehicles such as chassis etc. cannot be imported under EPCG Scheme. 5.4 Export Obligation Following conditions shall apply to the fulfilment of the export obligation- (i) Export obligation shall be fulfilled by export of goods, manufactured/services rendered by the applicant. Export obligation shall be, over and above, the average level of exports achieved by applicant in preceding three licensing years. Such average would be the arithmetic mean of export performance in last 3 years. Export obligation may also be fulfilled by exports of group company/managed hotel which has EPCG Authorisation. However, in such cases, additional export obligation imposed shall be over and above average exports achieve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utility vehicles or all purpose vehicles inter alia to the hotels. Condition for import of such capital goods in para 5.3 of the Policy is that import of cars shall be subject to actual user condition till export obligation is completed and para 9.4/9.6 means actual user a person who utilises imported goods for his own use in any service industry. Therefore, the said conditions clearly stipulates that the car imported by HEL were to be used by HEL in their service industry. We further find that para 5.15 of Handbook of Procedure mandates that every EPCG authorisation holder has to maintain for a period of three years from date of redemption, a true and proper account of exports/supplies made and services rendered towards fulfilment of export obligation. This Policy does not envisage that a service provider importing the goods under EPCG authorisation will have to change the character of service depending upon the goods imported which means that a hotel importing laundry equipment will have to render service of washing clothes of foreign tourists and earn foreign exchange in the process. Therefore, it cannot be construed that hotel importing cars will have to provide transportation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t three years between operating management contract operating hotel/hotel chain and hotel being managed. Management contract, as per the definition, must necessarily cover the entire gamut of operations/management of "Managed Hotel". This proviso clarifies that view of the Revenue that the cars are only to be used by foreign tourists staying as guests in the hotel is not in line with even the language of the notification. It further says there is no divergence between the provisions of Foreign Trade Policy and exemption notification. 10. We also note that the appellants do not suggest that the department has to follow only the provisions of Foreign Trade Policy but the department on the same time has no jurisdiction to administer the provisions of customs notification. Therefore, the provisions of Policy and the notification are to be viewed harmoniously and in a case where harmonious interpretation is available in that case department cannot take contrary view and can interpret the notification in its own way. Neither the definition of capital goods nor the definition of export obligation by itself or when read in conjunction with the proviso relating to "Managed Hotels" suggests ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conditions no where suggest that the nature of service to be provided by the importer or to be governed by the type of capital goods provided. As in the case of other goods like lift and chair do not envisage the use by foreign tourist, the car are to be used by foreign tourist, implying thereby that while other capital goods could be used indirectly or laterally, the cars could not be so used and were to be used by foreign tourists. This logic is not tenable for it is not the goods which will expand or contract the concept of use underlying the EPCG scheme. The rule of law emphasizes the regulation of activities according to law and is antithetical to arbitrariness; the logic that the nature of goods will determine a to how the law would be interpreted emphasizes that it is the understanding of the department about the use of the goods that will decide the interpretation of law and thus introduces an element of arbitrariness. 12. The argument advanced by the ld. Special Counsel for the Revenue that the case laws relied upon by the ld. Counsel for HEL and its Directors have not examined the provisions of exemption notifications, therefore, the same cannot be relied. We do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that in that case the imported car was transferred in a private name in stead of being registered at tourist vehicle in the name of importer, on these facts, the foreign exchange earned by the said appellant has not been earned by the use of imported car. In those set of facts, this Tribunal arrived at a decision that the foreign exchange earning out of the service rendered without the use of capital goods would not found part of discharge of export obligation. Definitely this is not the case in hand. In the case of Surya Samudra Holiday Resorts Pvt. Ltd. (supra) also the Tribunal had not analysed how and in which manner car is required to be used by importers, the car was already transferred in private name. As car was not available with the appellant in that case, in those facts, this Tribunal also arrived at the decision that the proceeding are not pre-mature. In this case, HEL has not part with the cars and the cars are registered as tourist vehicle. In fact, the manner, how to use has not been defined either in the customs notification or in the Foreign policy, in the absence of that the capital goods can be used directly or indirectly in providing hotel services by the hote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... car or the amount and mode of payment should be recorded. The only requirements are that the required incremental foreign exchange be earned in a specified period and that the imported goods should not be sold or in any way parted with. In any case the Department has not produced any proof that the cars have been used for any other purpose or have been sold. There is no bar to a car meant for private use being used to transport commercially important guests. In any case foreign guests staying in hotels do not pay separately for travel from Airport to hotel. This is a complementary facility provided by hotel to their guests. In the nature of the hotel industry a major part of their marketing strategy is to interact with major tour group operators who provide bulk business and such interaction is at the convenience of the tour operator and not the hotel which is the buyer. 27. The importers are required to use imported cars for earning incremental foreign exchange as required under EPCG scheme. The Customs Notfn. or the Export Import Policy do not prescribe the nature of record to be maintained by the importer. The service provided has been given the freedom to use the imported ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a vehicle "for tourist purpose only". This would make purpose of import of vehicles absolutely clear and would also facilitate registration. b. in all past cases where Export Obligation Discharge Certificate (EODC) has not been obtained by 30.06.2008 and where vehicles were not registered as Tourist Vehicles, EPCG authorization holders will get them registered as Tourist Vehicles, by 31-08-2008. Regional Authorities of DGFT will monitor and ensure compliance. 3. This issues with the approval of DGFT. [D.G.F.T. Policy Circular No, 7(RE-2008)/2004-09, dated 7-5-2008] 9. Further, our attention was also invited to the DGFT clarification. 10. The clarification of the DGFT in respect of the use of the imported car is reproduced in the letter given below: No. 01/94/180/518/AM07/PC-1/770 Government of India Ministry of Commerce & Industry Department of Commerce Directorate General of Foreign Trade Udyog Bhawan, New Delhi Dt: 27-12-2006 To The Joint Director General of Foreign Trade Bangalore [Kind Attn. Shri M. Balagangadharan, Joint DGFT] Subject: Import of Cars under EPCG Scheme - reg. Sir, Please refer to your letter No. 7/21/EPCG.MISC.Statement/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd beverages apart from transportation of the tourist, should be considered towards discharge of export obligation against vehicles imported under EPCG scheme. This is however subject to the condition that no part of the sale proceeds have been paid in free foreign exchange to any other service provider for providing add on services for hotel accommodation etc. 5. These instructions may be followed scrupulously and wherever the EODC etc. has been cancelled based upon the recommendations of DRI or any other authority, the same may be reviewed and dealt with in line with the instructions contained in this letter. However, wherever there is a specific order from any court of law in this regard, the same may be brought to the notice of the Headquarters. 6. This issues with the approval of Competent Authority. 11. On going through that letter it is seen that the DRI requested the DGFT to issue clarification saying that export earnings through alternate products and services like room rent, income from sale of food beverage should not be considered towards the discharge of Export obligation. This point has not been accepted by the DGFT as it would be very difficult to show export e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, the facts of the cases before us are similar to the case of M Far Hotels Ltd. (supra). 16. We further observed that in the case of Air Travel Bureau Ltd. (supra) the cars were confiscated for violation of notification as well as conditions of EPCG license. As the cars importer were required to be used for intended purpose wherein this Tribunal has observed as under: "6.3 We find that the Customs authorities have taken up the matter with the DGFT expressing their views that there is violation of EXIM Policy provisions and it appears that the said view has not been accepted by them. According to the appellant, not only the DGFT had not accepted the view of the Customs Department but they have also redeemed the EPCG licence after certifying that they have fulfilled the export obligation as prescribed. 6.4 We agree with the contention of the learned DR that the Customs authorities are empowered to look into the compliance of the conditions of the notification independently. However we, in the present case, find that the notification has a link to provisions of the EXIM policy and the understanding of the DGFT authorities on the said provisions cannot be brushed aside w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions of actual user which is fundamental to the Scheme." 6. Once we apply this yardstick to the facts of the present case, the conclusion would be that the respondents have been able to fulfill the obligation under EPCG license as pointed above, which was the very condition imposed in the said license by the DGFT. DGFT has redeemed the license and has taken the view that the respondents have fulfilled their export obligation. No doubt, the opinion of the DGFT would not be conclusive and any such certificate cannot press the power of the authority to reopen even a concluded matter if it is shown that the such conclusion was vitiated by fraud concealment of facts or misrepresentation or misdeclaration as held by the Apex Court in Sheshank Sea Foods Pvt Ltd. v. Union of India & Ors. - (1996) 11 SCC 755 = 1996 (88) E.LT. 626 (S.C.). However, in the present case, the appellants have not been shown that there is any fraud, concealment of facts or misrepresentation or mis-declaration on the part of the respondents. 7. We, thus, are of the opinion that no substantial question of law arises. These appeals are accordingly dismissed." And appeal filed against the order of the High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d judgement was rendered in a totally different context, inasmuch as there was violation of the actual user condition and the main issue was whether the Customs Authorities were empowered to take action for violation of conditions of the Exemption notification before the completion of the export obligation period without concurrence of DGFT. In that case, unlike the instant case, the vehicle (Farrari car) imported for resort in Kerala was always at Bangalore, and was never used in Kerala for rendering services to tourists visiting Kerala. Moreover the vehicle was transferred by registering as a private vehicle in the name of the-Managing Director of the appellant therein from earlier registration in Trivandrum as a tourist vehicle. In view of the above findings, this judgement is not applicable in the facts of the instant case. 28. 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. 29. No violation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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