EPCG Scheme import of car alleged personal use but lack of evidence leads to licence validity restored and order set aside

EPCG scheme import of a motor vehicle treated as imported capital goods; allegation of personal use by a director was unsupported by evidence, and no breach of EPCG licence conditions was established, so concessional import remained valid. Export obligation performance documents were accepted by the competent authority, and the import declaration disclosed relevant facts; therefore the impugned adverse administrative action was set aside and relief granted to the importer. The analysis focuses on admissibility of evidence to prove misuse, applicability of EPCG conditions to movable capital equipment, and the effect of accepted export obligation documentation.

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Issues Involved:
1. Validity of the import of Mercedes SL 500 car under the EPCG scheme.
2. Alleged violations of the conditions of the EPCG license.
3. Confiscation of the imported car and imposition of fines and penalties.
4. Fulfillment of export obligations under the EPCG scheme.

Issue-wise Detailed Analysis:

1. Validity of the import of Mercedes SL 500 car under the EPCG scheme:
The appellants imported a Mercedes SL 500 car under the EPCG scheme, claiming a concessional rate of customs duty of 5% as per Notification No. 97/2004CUS dated 17 September 2004. The import was supported by an EPCG license issued on 10 December 2004. The appellants argued that the import was valid as they were in the tour and travel service business, earning substantial foreign exchange, which justified the issuance of the EPCG license for importing capital goods, including the car.

2. Alleged violations of the conditions of the EPCG license:
The department alleged several violations, including the car not being installed at the specified address, not being used for earning foreign currency, being insured as a personal vehicle, and being used by the Director for personal purposes. The show cause notice dated 2 February 2009 listed these allegations, suggesting that the car was imported and cleared by fraudulently availing duty exemption.

3. Confiscation of the imported car and imposition of fines and penalties:
The adjudicating authority confirmed the recovery of Rs. 51,86,378/- as differential customs duty along with interest, imposed a mandatory penalty equivalent to the duty evaded, confiscated the car with an option to redeem it on payment of a fine of Rs. 10,00,000/-, and imposed a penalty of Rs. 5,00,000/- on the Managing Director under Section 112 (b) of the Customs Act, 1962.

4. Fulfillment of export obligations under the EPCG scheme:
The appellants contended that the car was used for receiving VIP clients exclusively for business purposes and that the requirement to register the car as a tourist vehicle was not mandatory at the time of import. They argued that the car's usage did not violate EPCG conditions as the primary requirement was the earning of foreign exchange, which was fulfilled. The Additional Director General Foreign Trade had issued an Export Obligation Discharge Certificate (EODC) on 30 January 2017, certifying the fulfillment of export obligations.

Judgment:
The Tribunal found that the appellants had validly imported the car under the EPCG scheme and that there was no violation of the EPCG license conditions. The Tribunal noted that the car being parked at the Director's residence did not constitute a violation as it was still in the possession of the importing firm. The Tribunal emphasized that the primary condition of earning foreign exchange was met, as evidenced by the EODC issued by the Additional Director General Foreign Trade. Consequently, the Tribunal set aside the order-in-original, ruling that the confiscation, fines, and penalties were unwarranted. The appeals were allowed, and the order was pronounced in open court on 10/06/2020.

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