2017 (11) TMI 1496 - AT - Customs

Tribunal overturns order, grants relief to appellant for procedural lapses under EPCG scheme

M/s. Regency Ceramics Ltd., M/s. Regency Glazes Ltd. Versus Commissioner of Customs (Export), Chennai

M/s. Regency Ceramics Ltd., M/s. Regency Glazes Ltd. Versus Commissioner of Customs (Export), Chennai - 2018 (363) E.L.T. 293 (Tri. - Chennai) Issues Involved:1. Alleged installation of imported capital goods at unapproved premises.2. Requirement and validity of installation certificate.3. Compliance with Export Promotion Capital Goods (EPCG) scheme conditions.4. Demand of duty, confiscation, and penalties for alleged violations.Issue-Wise Detailed Analysis:1. Alleged Installation of Imported Capital Goods at Unapproved Premises:The department alleged that M/s. Regency Ceramics Ltd. (RCL) installed imported capital goods at the premises of M/s. Regency Glazes Ltd. (RGL) instead of RCL's factory, thus violating Notification No. 55/2003-Cus. The appellant contended that the goods were initially installed at RCL and later moved to RGL due to environmental concerns, with management's consent. The Tribunal found that the goods were indeed initially installed at RCL, supported by an installation certificate from the Assistant Commissioner of Central Excise dated 24.08.2007. The subsequent relocation to RGL was acknowledged and regularized by the Joint Director General of Foreign Trade (Jt. DGFT), who imposed only a nominal penalty for the procedural lapse.2. Requirement and Validity of Installation Certificate:The department argued that the installation certificate should have been issued by the jurisdictional Deputy/Assistant Commissioner of Central Excise within six months of import, as per Notification No. 55/2003-Cus. The appellant initially provided a Chartered Engineer's certificate, which is permitted under the Handbook of Procedures for the EPCG scheme. The Tribunal noted that while the notification requires a certificate from the AC/DC, the appellant later produced such a certificate dated 24.08.2007, confirming the installation at RCL. The Tribunal concluded that the appellant complied with the substantive requirement of installation, and the procedural lapse was later rectified.3. Compliance with EPCG Scheme Conditions:The appellant fulfilled the export obligation under the EPCG scheme, as evidenced by a certificate from the DGFT dated 18.10.2007. The Jt. DGFT's order dated 09.04.2008 confirmed that the appellant met the export obligation and used the imported goods for the intended purpose. The Tribunal emphasized that the goods were not sold or disposed of improperly but were used as intended, fulfilling the scheme's objectives. The Jt. DGFT regularized the procedural lapse of not informing about the relocation to RGL, imposing a nominal penalty.4. Demand of Duty, Confiscation, and Penalties for Alleged Violations:The department's demand for duty, confiscation of goods, and imposition of penalties were based on the alleged violation of installation requirements and the non-production of the AC/DC certificate within the prescribed period. The Tribunal found that the appellant's actions constituted a procedural lapse rather than a substantive violation. The Jt. DGFT's regularization of the lapse and the fulfillment of the export obligation negated the need for such severe penalties. Citing the Supreme Court's judgment in Mangalore Chemicals, the Tribunal held that non-observance of a procedural condition does not justify the denial of duty exemption or imposition of penalties.Conclusion:The Tribunal set aside the impugned order, allowing the appeals with consequential relief, emphasizing that the procedural lapse was rectified, the export obligation was fulfilled, and the substantive conditions of the EPCG scheme were met. The decision underscored the importance of distinguishing between procedural and substantive compliance in regulatory frameworks.