EPCG compliance for hotel imports upheld where export obligation was met and no misuse of imported cars was proved.

Import of cars under the EPCG scheme for the hotel service sector was not shown to breach any condition of the EXIM Policy, EPCG licence, or Notification No. 49/2000-Cus. The scheme required achievement of the stipulated incremental foreign exchange within the prescribed period and prohibited sale or other disposal of the imported goods; those conditions were not proved to have been violated. The absence of separate journey-wise or guest-wise foreign exchange records was not, by itself, evidence of misuse, and the Department did not rebut the finding that the hotel had met the export obligation. The duty demand was therefore not sustainable.

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Issues: Whether the import of cars under the EPCG scheme for hotel service sector violated the conditions of the licence or the customs notification so as to justify duty demand.

Analysis: The record did not show breach of any specific condition of the EXIM Policy, EPCG licence, or Notification No. 49/2000-Cus. dated 27-4-2000. The requirements under the scheme were earning the stipulated incremental foreign exchange within the prescribed period and not selling or otherwise parting with the imported goods. There was no prescribed mode of maintaining records of foreign exchange earnings, and the absence of separate journey-wise or guest-wise records was not, by itself, proof of misuse. The cars were not shown to have been sold or used for any prohibited purpose, and the Department did not rebut the factual finding that the hotel had met the export obligation.

Conclusion: There was no violation of the EPCG scheme or the customs notification, and the duty demand was not sustainable.

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