2008 (9) TMI 356 - AT - Customs

Tribunal rules in favor of appellants, finding no EPCG license violation. Compliance emphasized, demands deemed unjustified.

M FAR HOTELS LTD. Versus COMMISSIONER OF CUSTOMS, COCHIN

The Tribunal ruled in favor of the appellants, finding that they did not violate the EPCG license conditions and that the demand for fulfilling the export ... EPCG scheme – export obligation –import of car for use in hotel – violation of conditions – held that - In the overall package of the hotel, the use of the vehicle also would be included. In other words, the package includes very many things including the use of the vehicle. From the clarification, it is clear that it is not very necessary that the appellants have to show the amount of foreign exchange earned because of the exclusive use of the car, due to practical difficulties - . The Director is an official of the hotel and when it is registered in the name of the Director, we do not find anything is wrong. In any case, the vehicle had been registered as a Contract Carriage even on 30-01-2006. The installation certificate had been delayed. On account of that, it is not fair to deny the benefit of the exemption notification – benefit of exemption can not be denied. Issues Involved:1. Violation of EPCG licence conditions.2. Premature demand for fulfillment of export obligation.3. Registration and use of the imported vehicle.4. Maintenance of records and evidence of foreign exchange earnings.5. Clarifications and circulars issued by DGFT.Detailed Analysis:1. Violation of EPCG Licence Conditions:The Revenue argued that the appellants violated the EPCG licence conditions by not using the imported Land Cruiser car for the intended purpose of earning foreign exchange. The Commissioner concluded that the vehicle was not used as per the conditions stipulated under the EPCG scheme and the Customs notification, leading to the car being liable for confiscation under Section 111(o) of the Customs Act. The appellants contended that they had complied with the conditions and that the vehicle was registered as a tourist vehicle before the policy clarification.2. Premature Demand for Fulfillment of Export Obligation:The appellants argued that the demand for fulfilling the export obligation was premature as they had time until 2011 to meet the requirements. They highlighted that the Customs Department should not determine eligibility for benefits under the EXIM Policy, which is framed by the Ministry of Commerce. The DGFT circular dated 7-5-2008 was cited, which allowed registration of vehicles as tourist vehicles by 31-8-2008. The Tribunal agreed with the appellants, noting that the demand was premature and that the appellants had applied for the Export Obligation Discharge Certificate (EODC).3. Registration and Use of the Imported Vehicle:The Revenue contended that the vehicle was not registered as a tourist vehicle immediately after import and was instead registered in the name of the Director, which was not permissible. The appellants countered that the vehicle was registered as a contract carriage on 30-1-2006, before the DGFT policy clarification. The Tribunal found that registering the vehicle in the name of the Director was not a violation, as he was an official of the hotel, and the vehicle was used for the hotel industry.4. Maintenance of Records and Evidence of Foreign Exchange Earnings:The Revenue's main contention was the lack of evidence showing that foreign exchange was earned through the use of the car. The appellants argued that it was impractical to show separate earnings from the vehicle due to the nature of the hotel industry, where the vehicle's use is part of an overall package. The DGFT clarification dated 27-12-2006 supported this view, stating that it was not necessary to show separate foreign exchange earnings from the vehicle. The Tribunal agreed with the appellants, noting the practical difficulties in maintaining such records.5. Clarifications and Circulars Issued by DGFT:The appellants relied on the DGFT circular dated 7-5-2008 and the clarification dated 27-12-2006, which provided that vehicles imported under the EPCG scheme should be registered as tourist vehicles and that foreign exchange earnings from overall hotel packages could be considered for fulfilling export obligations. The Tribunal emphasized that a broader view should be adopted in such matters, considering the DGFT's directions and the time available for fulfilling the export obligation.Conclusion:The Tribunal found no merit in the Revenue's contentions and set aside the impugned order. It held that the demand for duty and imposition of penalties were unjustified, given the appellants' compliance with the DGFT's clarifications and the premature nature of the demand. The appeals were allowed with consequential relief.