2002 (9) TMI 711 - Commission - Customs

Customs Act Settlement: Duty Payment & Bond Required for Seized Goods

The Settlement Commission allowed the case to proceed under Section 127C of the Customs Act. The applicants were directed to pay the admitted duty ... Settlement Commission jurisdiction over EPCG cases - Classification of imported goods as capital goods for rendering services - Settlement under Section 127C of the Customs Act, 1962 - Release of seized goods on payment, execution of bond and bank guaranteeSettlement Commission jurisdiction over EPCG cases - Whether the Settlement Commission can entertain applications relating to imports under the EPCG scheme - HELD THAT: - The Commission noted that the question of jurisdiction raised by the Revenue had been considered by various Benches which had taken the view that EPCG cases fall within the purview of the Settlement Commission under Section 127B, and referred to earlier decisions including Bell Granito Ceramica Ltd. The Revenue sought constitution of a larger Bench and drew attention to a reference made by CBEC to the Law Ministry; however, the Commission observed that a challenge to the Commission's jurisdiction in a writ petition before the Madras High Court had not secured a stay of the Settlement Commission's order in Ganapathy Smelters Ltd., and that, in view of the pending High Court proceedings, it would not be appropriate to constitute a larger Bench. Having considered the submissions, the Commission proceeded to admit and deal with the instant applications under the statutory scheme. The Commission therefore treated EPCG matters as amenable to settlement and admitted the applications for disposal under the Settlement provisions. [Paras 13, 14, 15, 20]Applications under the EPCG scheme are within the Settlement Commission's purview and the Commission admitted the applications for settlement.Classification of imported goods as capital goods for rendering services - Whether the imported cars qualified as 'capital goods' within the notification relied upon by the importers - HELD THAT: - The advocates for the applicants relied on the definition of 'capital goods' in Notification No. 49/2000 which includes items required for 'rendering services'. The Commission observed that the goods had been assessed by Customs allowing exemption under the Notification and that the definition's sub-clause referring to 'rendering services' lent considerable force to the applicants' contention that the imports were rightly treated as capital goods at the initial stage. The Commission recorded that seizure occurred within the initial two-year slab during which the export obligation was not yet required to be fulfilled. [Paras 4, 16, 17, 18]The Commission accepted that the contention regarding classification under the 'rendering services' limb of the definition had considerable force and noted that Customs had initially allowed the exemption.Settlement under Section 127C of the Customs Act, 1962 - Release of seized goods on payment, execution of bond and bank guarantee - Terms on which the admitted duty liability could be settled and the seized cars released - HELD THAT: - The applicants admitted the duty liability as demanded in the Show Cause Notice and sought settlement and release of the seized vehicles. The Commission allowed the applications to proceed under sub-section (1) of Section 127C and directed payment of the admitted duty within 30 days as required under sub-section (3). The Commission further required execution of a bond equal to the full value of the seized goods as recorded in the panchnama and a bank guarantee of Rs. 16 lakhs; on payment of the admitted duty and furnishing of the bond and bank guarantee the seized goods were ordered released for proper upkeep. The Commission declined the applicants' prayer to allow sale of the goods. [Paras 19, 20, 21, 22]Admitted duty to be paid and, upon payment and execution of the prescribed bond and bank guarantee, the seized cars to be released for upkeep; prayer to allow sale rejected.Final Conclusion: The Settlement Commission admitted and proceeded with the EPCG-related settlement applications, accepted the applicants' position on classification as capital goods as having substantial force, and directed settlement under Section 127C on payment of the admitted duty with execution of bond and bank guarantee for release of the seized cars; sale of the vehicles was refused. Issues:1. Interpretation of capital goods under Notification No. 49/2000.2. Jurisdiction of Settlement Commission in EPCG cases.3. Liability of importers under EPCG scheme.4. Settlement of duty liability and release of seized goods.Detailed Analysis:1. The case involved a dispute regarding the classification of imported cars as capital goods under Notification No. 49/2000. The applicants imported cars under the EPCG scheme for conversion into tourist taxies. The Show Cause Notice alleged that the imported cars did not qualify as capital goods. The applicants, represented by their advocates, acknowledged the duty liability and expressed willingness to pay the demanded amount to settle the case.2. The issue of the Settlement Commission's jurisdiction in EPCG cases was raised by the Revenue. They argued that the Commission cannot entertain cases where importers fail to fulfill export obligations under the EPCG scheme. The Revenue emphasized that such cases involve non-fulfillment of obligations rather than mis-declaration, making them beyond the Settlement Commission's jurisdiction. A larger bench was requested to decide whether EPCG cases fall under the Commission's purview.3. The applicants contended that the imported goods were authorized under the EPCG scheme by the DGFT. They highlighted that the Customs had initially allowed exemption under Notification No. 49/2000, which specified export obligation requirements. The advocates argued that the seized goods were within the initial two-year period, where export obligations were not due. The definition of capital goods and the import authorization provided further support for the applicants' position.4. Considering the facts and circumstances, the Commission allowed the case to proceed under Section 127C of the Customs Act. The applicants were directed to pay the admitted duty liability within 30 days and provide a bond with a bank guarantee for the seized goods' value. The release of the seized goods was permitted for proper upkeep, but the request to sell the goods was denied. The order specifically applied to the five seized cars imported through Nhava Sheva Port, emphasizing compliance with statutory provisions.This detailed analysis covers the legal issues, arguments presented by both parties, and the final decision of the Settlement Commission in the case.