TaxTMI 
TaxTMI 
2008 (11) TMI 407
X X X X Extracts X X X X
X X X X Extracts X X X X
....conditions and the provisions of exemption Notification 44/2002-Cus., dated 19-4-2002. Enquiry conducted with the Sub-Regional Transport Office, Neyyanttinkara, Trivandrum, revealed that the car was registered in February, 2003 in the name of the managing director of the importers. An NOC had been issued for transferring the car to Bangalore on 26-4-2005. The address shown for registering the vehicle at Bangalore as a private vehicle was "Shivir", No. 1667, 9th Main, HAL III Stage, Bangalore; the rent/lease agreement dated 5-1-2004 between M/s. Indigo Mass Communications Pvt. Ltd., having its address at the above address, and the importers for leasing a room/cabin at the above address had been submitted to the RTO at Bangalore for registration of the car at Bangalore. Enquiries made at the above address revealed that the place was locked for some time; that the property was in the name of one Mr. Dbirendra Singh who had sold the same to Mr. H.S. Prakash who lived next door to Shivir; Prakash deposed that when he had purchased the property, there were no tenants occupying the place and that he had not seen any Ferrari car parked at the address from the time he purchased the property....
X X X X Extracts X X X X
X X X X Extracts X X X X
....VVIP guests, that they had raised one or two bills for the use of the car by tourists, that one Mr. Kersi Mistry drives the car as and when required in Bangalore. In his statement recorded on 17-8-2006, Mr. M.S. Ram inter alia stated that the importers do not have a Branch at the premises at Shivir, HAL, III Stage, Bangalore. 3. Statement of Mr. Rejeesh Kumar, chief financial officer of the importers, was recorded on 19-7-2006 wherein he deposed inter alia that foreign exchange earned for the fulfilment of export obligation was through services such as room rent, food and beverages income, and laundry facilities, income from ayurveda rendered to foreign tourists. He also stated that the importers had a Branch Office in Bangalore at 642, III Stage, 4th Main, Bangalore. On being asked about invoice dated 29-12-2003 issued to one Mr. Jan Wornicki of London for Rs. 5,400/- and invoice dated 15-2-2004 issued to Ms. Fiona Astor of London for Rs. 3,600/-, for letting out motor vehicle, he stated that the importers had two more Qualis vehicles during the period mentioned in the invoices and the invoices could have been raised for use of the Qualis vehicle. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....edings initiated against the appellant are premature. The primary obligation of the appellant, under Notification 44/2002-Cus., was fulfilment of export obligation to the prescribed extent as indicated in the licence. Such obligation was required to be fulfilled within a period of 8 years from the date of the grant of EPCG licence. In the present case, the licence was granted on 13-9-2002 and the 8-years period expires only on 12-9-2010. Though the appellant-company has claimed that it had fulfilled its export obligation by the year 2006 and also produced an Export Obligation Discharge Certificate from the licensing authorities to substantiate this contention, the Revenue contends that the EODC was wrongly issued as the foreign exchange earnings of the appellant-company were not 'through the use of the car', as required in the notification. Assuming for a moment that the EODC was wrongly issued by the DGFT and it was rightly questioned by the Customs authorities, it cannot be disputed that under the notification the appellant-company still has time till 12-9-2010 to fulfil the export obligation. Whether the appellant-company would be able to fulfil the export obligation in the mann....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r with the concerned DGFT authorities so that necessary corrective action, if any, is taken simultaneously by Customs and DGFT authorities. The circulars are reproduced herein below:- "Advance Licence, DFRC, DEPB and EPCG Schemes - Changes made in, vide EXIM Policy 2002-2007 - Clarifications. M.F. (D.R.) Circular No. 24/2002-Cus., dated 6-5-2002. F. No. 605/201/2001-DBK Government of India Ministry of Finance (Department of Revenue) Central Board of Excise & Customs, New Delhi Subject: Changes made in Advance License, DFRC, DEPB and EPCG Schemes vide Exim Policy 2002-07 - Reg. Exim Policy for the year 2002-2007 has been announced on 31-3-2002 by Hon'ble Commerce and Industry Minister. Changes have been carried out in the subject schemes on the demand of trade and in order to remove certain procedural bottlenecks being faced by the trade. Details of change effected in each scheme are as follows. 2.1 Advance License Scheme Advance License scheme is contained in Chapter 4 and Paras 4.1 & 4.1.1 to 4.1.14 of the Exim Policy. In terms of Para 4.1.1 of the exim policy advanced licence can be issued for permitting duty free import of inputs to be utilize....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 2002-07 with some minor changes. The earlier DFRC Scheme announced in 2000-01 Exim Policy required that for the purpose of allowing DFRC benefit to imported inputs used in the resultant export product, the quality, technical characteristics and specifications of the inputs under import should be the same as those used in the resultant export product. For this purpose the quality, technical characteristics and specifications of each input used in the resultant export product were required to be specified on the shipping bill and at the time of import Customs was required to co-relate it with the in put under import so as to allow DFRC benefit to those inputs which were of the same quality, technical characteristic and specification. Under the new DFRC scheme such co-relation of quality, technical characteristic and specifications has been done away except in the case of items were which are listed in para 4.31 of the Handbook of Procedures Volume 1 as amended by DGFT/Notice No. 4/2002-07, dated 1-4-2002. In respect of such items customs shall continue to ascertain the quality, technical characteristics and specifications of the inputs under import with reference to the quality, tec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d with the above modifications. Verification of DEPB Scrips shall continue to be done by Customs. However, in doubtful cases, or where investigations have been launched by Customs or other Agencies, Customs may require DGFT to take suitable corrective action. Customs Notification No. 45/2002-Cus., dated 22-4-2002 has been issued to operationalise this Scheme. 2.4 EPCG Scheme EPCG Scheme is contained in Chapter 5 of the Exim Policy 2002-07. 5% Duty EPCG Scheme, which was hitherto in operation, has been continued with some changes. Whereas the normal EO period for EPCG License of value not exceeding Rs. 100 crores has been maintained at 8 years, in respect of licenses of value Rs. 100 crores or more, a longer EO period of 12 years has been prescribed. The four blocks in respect of such EPCG Licence would comprise of 1st Block 0-5 Years 2nd Block 6-8 Years 3rd Block 9-10 Years 4th Block 11-12 Years The new EPCG Scheme also permits granting extension of block-wise EO period more than once during the total EO period by competent authority. In addition, in respect of EPCG License having total EO period of 8 years, the Scheme also permits extension o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al custom houses when it was brought to the notice of the Board that Customs is not accepting such EQ Discharge Certificates. 2. It has come to the notice of Board that in some cases, despite issue of EQ Discharge Certificate by the DGFT authorities, Customs has issued show cause notices to the licence holder questioning the value of imported capital goods/quantum of export obligation. Later, when the Commissioner increased the CIF value of imported capital goods by issue of an adjudication order, CESTAT struck down Commissioner's order on the ground that such unilateral action by customs was bad in law. 3. In respect of import of capital goods under EPCG Scheme, there is link age between the CIF value of imported capital goods and the quantum of export obligation fixed against the EPCG Licence by DGFT authorities. Hence, if Customs have any doubts about valuation of imported capital goods in relation to addition of the element of any other charges in value, then before initiating any precipitative action, the jurisdictional Commissioner of Customs should bring this to the notice of Board which will take up the matter with concerned DGFT authorities so that necessary correcti....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... export obligation by the appellant. 8. The learned Joint CDR had contended before us that export obligation under the EPCG Scheme can be fulfilled only by considering export realization made through the use of the capital goods imported under the said scheme. The learned counsel for the appellant on the other hand submitted that it is the business for which the capital goods have been imported, which should earn foreign exchange. It was further submitted that the EXIM Policy and the customs notification had been amended to provide that the export obligation could also be fulfilled through export of other services and goods either by the appellant itself or its group companies. Reference in this regard was invited to Notification 29/2004, dated 28-1-2004. Both sides also referred to and relied upon the judgment of the Delhi High Court in the case of Interglobe Enterprises Ltd. v. UOI -2006 (203) E.L.T. 202 (Del.), which has laid down that it is not necessary that imported capital goods should themselves earn foreign exchange. What is important, according to the Delhi High Court, is that the imported capital goods should be &nb....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... therefore read down this condition to mean that the car should have been stationed at the Resort at Trivandrum. This approach of the Commissioner was assailed by the learned counsel for the appellant on the ground that the condition of the installation was incapable of being fulfilled in relation to a car and that the said condition ought to have been considered as never been applicable. The legal maxim 'lex non cogit ad impossibilia' was cited in support of this proposition. The learned Jt. CDR on the other hand supported the reasoning given by the Commissioner and argued that the condition of installation when used in relation to a car means its use at the location mentioned in the licence. We have given due consideration to this argument and are of the view that the condition of installation of a car is incapable of being satisfied in its literal sense. The object behind this condition in the notification appears to be, that the capital goods should be put to use, which can only happen if such capital goods are installed. In the present case, the capital goods happens to be a vehicle which by its very nature needs to be mobile. We, therefore, read the condition of installation ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he extent and manner of discharge of export obligation by the appellant. We also make it clear that before initiating such proceedings, the Customs will follow the procedure prescribed by the Board in its Circular No. 46/2004-Cus., dated 26-7-2004. Sd/- (Ms. Jyoti Balasundaram) Vice-President (10-9-2008) 13. [Order per: A.K. Srivastava, Member (T)]. - I have gone through the order proposed by the Hon'ble Vice-President, but I regret that I do not agree with her conclusions. In Para 5 of the order, the Hon'ble Vice-President has pro posed to dispose of the appeal on the ground that the proceedings initiated against the appellant are premature. According to her, the appellant had time to fulfil the export obligation under Notification 44/2002-Cus., till 12-10-2010 and, therefore, no decision on the same can be taken at this point Of time. She had proposed .that demand of duty as well as confiscation of car and imposition of penalties could not be sustained at this point of time. 14. A plain reading of this part of the order indicates as if the fulfilment of export obligation within the time prescribed by the Notification is the only ground for confiscation of the ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Licence without verifying the same by the DGFT and the car was converted into a Private Vehicle in the year 2005 in violation of Para 2.2 of the EXIM Policy 2002-07 (sub-paras 7 & 8 of Para 52 of the SCN). (e) Evidences suggest that the said car was never transported from Bangalore to Trivandrum. However, the importer submitted documents suggesting use of the car in Trivandrum by the guests of the Hotel at Trivandrum. This is evident from the reading of the Odometer of the car, which was certified to be true by the person driving the car. Thus, the allegation is that the car was never used for the purpose for which the same was imported in violation of the condition of the Notification. (sub-para 9 of Para 52 of the SCN). (f) The documents submitted by the importer before the DGFT showing fulfilment of export obligation included the export earnings of the importer from the services other than by the utilizing the imported car. Thus the foreign exchange earned by the importer during the relevant period was not by the use of the imported car but from other services. Notification 44/2002-Cus., as well as Notification 28 (RE-2003)/2002-07 issued by Ministry of Commerce stipulat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of by the appellants. The Customs authorities, therefore, clearly had the power to take action under the provisions of Section 111(o). 10. We do not find in the provisions of the Import and Export Policy or the Handbook of Procedures issued by the Ministry of Commerce, Government of India, anything that even remotely suggests that the aforesaid power of the Customs authorities had been taken away or abridged or that an investigation into such alleged breach could be conducted only by the Ii censing authority. That the licensing authority is empowered [to] conduct such an investigation does not by itself preclude the Customs authorities from doing so." 17. This view was further explained by the Hon'ble Tribunal in the case of Moser Baer India Ltd. v. CC reported in 2006 (204) E.L.T. 590 (Tri. - Del.). Para 17(b) of the Order is reproduced. "(b) Whether the permission granted by the Development Commissioner in r/o categorized goods can be reviewed by the Customs and Central Excise Department, subsequently w/o taking up the matter with the Development Commissioner's Office? To answer this question, we place our reliance on the Apex Court s decision in the case of Sheshank ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Policy permitting import of goods at the rate of five percent duty and the said licence is produced for debit by the proper officer of the customs at the time of clearance:- Provided that for the import of spare parts, the validity period of the licence shall be deemed to be the period permitted for fulfilment of the export obligation in full; (2) the importer executes a bond in such form and for such sum and with such surety or security as may be specified by the Assistant Commissioner of Customs or Deputy Commissioner of Customs binding himself to fulfil export obligation equivalent to five times the CIF value of the goods imported on FOB basis, as specified in the licence, or for such higher amount as may be fixed by the Licensing Authority or for such amount as may be fixed by the Licensing Authority in terms of clause (i) of Paragraph 5.4 of the Export and Import Policy, 2002-2007 within a period of eight years from the date of issue of licence, in the following proportions, namely:- S. No. Period from the date of issue of licence Proportion of total export obligation (1) (2) (3) 1. Block of 1st and 2nd year Nil 2. Block of 3rd and 4th ye....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s the case may be, is produced confirming installation and use of capital goods in the importer's factory or premises, within six months from the date of completion of imports or within such ex tended period as the said Assistant Commissioner of Customs or Deputy Commissioner of Customs may allow: Provided that in the case of, - (i) manufacturer exporter and merchant exporter having supporting manufacturer(s) or vendor(s), (ii) import of irrigation equipment for use in contract farming for export of agricultural products, and (iii) importer rendering services. the capital goods may be installed at the factory or premises of such other person whose name and address are endorsed on the licence referred to in condition (i) and where the bond for full difference of duty, if necessary, in terms of condition (2), with a bank guarantee is executed by the importer and such other person binding themselves jointly and severally to fulfil the export obligation and all other conditions of this notification and to pay duty with interest in case of default; (5) notwithstanding anything contained in condition (3), where the Licensing Authority grants an extension of block-wise p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iculture, pesciculture, poultry, viticulture and sericulture; (c) rendering services; (2) "Export and Import Policy " means the Export and Import Policy 2002- 2007 published vide notification of the Government of India in the Ministry of Commerce, No. 1/2002-2007, dated the 31st March, 2002; (3) "Licensing Authority" means the Director General, Foreign Trade appointed under Section 6 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992) or an officer authorised by him to grant a licence under the said Act. (4) "export obligation ", - (i) in relation to importers other than those rendering services, means export, to a place outside India, of products manufactured with the use of capital goods imported, assembled or manufactured in terms of this notification: Provided that export obligation may also be fulfilled by export of same product capable of being manufactured with the (a) use of said capital goods; or (b) export of same product manufactured in different units of the licence holder; or (c) through third party exports made by an exporter or manufacturer on behalf of the licence holder by exporting the same product and in such cases,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) rendering services; In the instant case, it is the car, which is being imported for rendering services and, therefore, the same has to be considered as capital goods. The conditions relevant for capital goods have to be fulfilled by the car imported. 25. The last part of the Explanation to the Notification is most important for our purpose; and it will be worthwhile to examine effect of the same in respect of identifying the definition and scope of the words "export obligation". Prior to the amendment of the said clause by Notification No. 29/2004-Cus., dated 28-1-2004, the said Notification 44/2002-Cus., had two sub-clauses to Clause 4 of the Explanation to the Notification. Sub-clause (i) dealt with the scope and meaning of the phrase export obligation for 'goods' whereas sub- clause (ii) dealt with the meaning of the phrase for 'services'. The first sub-clause specifically excludes exporters rendering 'services' and the second sub-clause is only for exporters rendering services. The sub-clause (iii), added in 2004 reads "export obligation means, export of goods in terms of the notification of the Government of India in the Ministry of Commerce and Industry (Department of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ital goods may or may not be capable of generating convertible foreign exchange by their in dependent use as is the position in the case of the lift in a hotel or the cars imported by the travel agent, the least that the importer must demonstrate s that the goods were put to use for the business activity for which the same were imported. The scheme does not in our view envisage imports where the goods are not meant for use in the business activity of the importer nor can the goods be diverted for some other use without violating the conditions of actual user which is fundamental to the Scheme. The on-going investigations would, therefore, unravel whether the imported capital goods i.e. the cars in question were ever in ducted into the business of the importer. That assumes importance because, according to the respondents, the cars were not even registered for the commercial activity for which the same were imported as was mandatory under Section 39 of the Motor Vehicles Act. There was, according to them an unauthorised diversion of goods contrary to the spirit of the Scheme, which could be investigated and made a basis for further action against the importer. The investigation inst....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion. Fulfilment of export obligation is not only the requirement of the DGFT but also of the Notification. If the Customs has evidence to show that the importer has violated the post-import condition even before the expiry of the period of fulfilment of export obligation, it will be well within its power and authority to initiate action for violation of the condition of the Notification. I rely on the following observation of the Tribunal in Para 17(d) in the case of Moser Baer (Supra) (d) Whether the Show Cause Notice issued on 23-7-2002 demanding duty and contemplating interest/penalty is invalid particularly since the appellants are regd. as 100 % EOU: While we are of the view that in the case of non-fulfilment of export obligations, goods are liable to confiscation, penalty imposable and interest chargeable, any such action once the offence is established during the currency of export obligation cannot be questioned on the plea that the appellants are regd. as 100% EOU. We would rather go by the maxim "strike while the iron is hot" which should be the maxim of any responsive administration. The ratio adopted by the Tribunal in Bhazvana Export's case (supra) which held tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at item Dual Action Nozzle Brush falls under Tariff Heading 96.03 and the appellants have shown us from the Tariff heading that so far as the item Dual Action Nozzle Brushes are concerned these will be prima Jack covered under this Tariff heading and notifications cited prima facie cover this heading. In regard to Notification 280/88 is concerned, by this notification goods falling under Tariff Heading 4819.90 are exempted from payment of duty. The appellants' other item is paper bags which are used in the vacuum cleaner and this also prima facie appear to be covered under Tariff Heading 4919.90. Inasmuch as the plea is regarding the application of a notification and there is no dispute as regard to the facts, nature of the goods involved, it is settled law that the legal plea can be made at any stage. We, therefore, permit the appellants to raise these grounds. 30. It is the duty of the CESTAT to decide issues brought before it according to law. If a law point was not addressed by the adjudicating authority, then the Tribunal cannot abdicate its responsibility on the ground that the said issue was not addressed by the adjudicating authority. The main issue to be decided i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e years for the substitute products/services. 33. The entire paragraph refers to obligation in respect of export of goods. The first option is that the obligation could be fulfilled by export of goods capable of being manufactured by the use of capital goods imported under EPCG scheme. The second option was to fulfil the obligation by export of same goods manufactured in different manufacturing units of the licence holder/specified supporting manufacturer. As an alternative to this, export obligation may also be fulfilled by export of other goods manufactured or service provided by the same firm/company or group company which has the EPCG Licence. The alternative given in the last leg of the Para is an alternative for first and second options. Both first and second option talk of obligation in respect of export of goods. Therefore, the alternative is also only for fulfilling obligation in respect of export of goods and not in respect of export of services. If we consider the alternative to cover an option to fulfil the export obligation for both goods and services required to be fulfilled by the capital goods imported under EPCG Scheme, then that interpretation will amount to ad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....produced before the assessing officer within 6 months from the date of completion of import. The said six months have passed long before. For whatever reasons, the adjudicating authority has come to the conclusion that the said vehicle was not installed at the premises of the importer and no certificate was produced within the stipulated period. The certificate produced before the DGFT was of a Chartered Engineer, who had not even seen the car and gave the certificate based on the records. In such a situation, I do not think that this issue could be left open for a decision at a future date by the Adjudicating Authority. I, therefore, propose to decide this issue also. 38. The premises declared by the appellant before the Customs and the DGFT was the resort in Kerala. It has to be examined whether the said car after import was installed in Kerala. The word 'install' has been defined in the Dictionary as 1. To connect or set in position and prepare for use: installed the new fit mace; installed software on my computer. 2. To induct into an office, rank, or position : a ceremony to install the new governor, 3. To settle in an indicated place or condition; establish: insta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ess given by them to the Customs. They have, therefore, violated the condition 4 of the exemption Notification 44/2002-Cus. 40. In Para 11 of the proposed order, the Hon'ble Vice-President has addressed the issue of converting the car from a tourist vehicle to a private one. She has observed that the effect of such conversion is that the owner is prohibited from letting out the car for hire or reward; that such registration, however, does not prevent the owner from using the car for his own business. She has further observed that 'there are innumerable cars registered in the names of companies who are using the cars for their own business purpose.' 41. I regret that I do not agree with Hon'ble Vice-President on this count also. The car was not imported for the business purposes of the company, which may include providing a car to the official of the company also. The car was imported for earning foreign exchange by its use. After, the conversion of the car in a private vehicle, the said car cannot be used for hire or reward. How the said car then can earn foreign exchange. I, therefore, hold that after conversion, the car cannot be used for the purpose, for which it was impor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s Circular also is limited to informing the DGFT to take corrective step. This Circular also has no provision for not pursuing the cases of violation of conditions of the notification without concurrence of the DGFT. I am fortified in holding the above view by placing reliance on the judgment of the Hon'ble Supreme Court in the case of Sheshank Sea Foods Pvt. Ltd. v. Union of India reported in 1996 (88) E.L.T. 626 (S.C.). For ready reference, I again extract below paras 9 and 10 of the said judgment. "9. Section 111(o) states that when goods are exempted from Customs duty subject to a condition and the condition is not observed, the goods are liable to confiscation. The case of the respondents is that the goods imported by the appellants, which availed of the said exemption subject to the condition that they would not be sold, loaned, transferred or disposed of in any other manner, had been disposed of by the appellants. The Customs authorities, therefore, clearly had the power to take action under the provisions of Section 111(o). 10. We do not find in the provisions of the Import and Export Policy or the Handbook of Procedures issued by the Ministry of Commerce, Government ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ne including resjudicata. (See Ram Chandra Singh v. Savitri Devi and Ors. [2003 (8) SCC 319]. 32. "Fraud' and collusion vitiate even the most solemn proceedings in any civilized system of jurisprudence. It is a concept descriptive of human conduct. Michael Levi likens a fraudster to Milton's sorcerer, Comus, who exulted in his ability to, 'wing me into the easy hearted man and trap him into snares'. It has been defined as an act of trickery or deceit. In Webster's Third New International Dictionary "fraud" in equity has been defined as an act or omission to act or concealment by which one person obtains an advantage against conscience over another or which equity or public policy forbids as being prejudicial to another. In Black's Legal Dictionary, "fraud" is defined as an intentional perversion of truth for the purpose of inducing another in reliance upon it to part with some valuable thing belonging to him or surrender a legal right; a false representation of a matter of fact whether by words or by conduct, by false or misleading allegations, or by concealment of that which should have been disclosed, which deceives and is intended to deceive another so that he shall act upon ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owingly and deliberately to invoke exercise of power and procure an order from an authority or tribunal. It must result in exercise of jurisdiction, which otherwise would not have been exercised. The misrepresentation must be in relation to the conditions provided in a section on existence or non-existence of which the power can be exercised. But non-disclosure of a fact not required by a statute to be disclosed may not amount to fraud. Even in commercial transactions non-disclosure of every fact does not vitiate the agreement. "In a contract every person must look for himself and ensures that he acquires the information necessary to avoid bad bargain. In public law the duty is not to deceive. (See Shrisht Dhawan (Smt.) v. M Shaw Brothers, [1992 (1) SCC 534]. 33. In that case it was observed as follows: "Fraud and collusion vitiate even the most solenm proceedings in any civilized system of jurisprudence. It is a concept descriptive of human conduct. Michael levi likens a fraudster to Milton's sorcerer, Comus, who exulted in his ability to, 'wing me into the easy-hearted man and trap him into snares'. It has been defined as an act of trickery or deceit. In Webster's Third New....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Fraud" is a conduct either by letter or words, which induces the other person or authority to take a definite determinative stand as a response to the conduct of the former either by words or letter. Although negligence is not fraud but it can be evidence on fraud; as observed in Ram Preeti Yadav's case (supra). 37. In Lazarus Estate Ltd. v. Beasley - (1956) 1 QB 702, Lord Denning observed at pages 712 & 713, "No judgi of a Court, no order of a Minister can be allowed to stand if it has been obtained by fraud. Fraud unravels everything." In the same judgment Lord Parker U observed that fraud vitiates all transactions known to the law of however high a degree of solemnity. (page 722). 47. It will be relevant to examine whether in the instant case, the appellant had committed fraud at any point of time. Some undisputed facts are: (i) The appellant produced an installation certificate issued by a chartered engineer without verification of the capital goods (car in this case) claiming fulfilment of the condition of the Licence and Notification. It was falsely claimed in the certificate that the capital goods was installed in Trivandrum. (ii) The convertible foreign exchange....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... obligation was not yet over as held by the Hon'ble Vice-President or the Customs could initiate action at any stage, after the import if the post-import condition of the Notification 44/2002-Cus. was violated as held by the Member (Technical)? (ii) Whether Customs is prohibited from taking any action in respect of capital goods imported under EPCG Scheme without concurrence of the DGFT in view of the two Circulars referred to by the Hon'ble Vice-President or it can initiate action irrespective of the Circular, if the issue is not the valuation of the capital goods imported or the quantum of export obligation to be fulfilled - particularly in view of the Hon'ble Supreme Court Judgment in the case of Sheshank Sea Foods Pvt. Ltd. v. Union of India - 1996 (88) E.L.T. 626 (S.C.)? (iii) Whether in view of the wordings of the exemption Notification 44/2002-Cus. as amended from time to time, the export obligation in respect of the imported car as capital goods could be fulfilled by foreign exchange earnings from the entire earning of the Hotel business as observed by Hon'ble Vice-President or the export obligation is to be fulfilled only by the earnings through the use of the car as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r in relation to the car imported by them under the EPCG licence issued by the DGFT had not been fulfilled by way of earning freely convertible foreign currency through the use of the vehicle. In other words, the actual user condition of the notification was allegedly violated by the importer. The show-cause notice further noted that the capital goods (car) had not been "installed" in the manner contemplated under the notification inasmuch as the car was kept out of the State of Kerala except for a few days on which it was at Trivandrum for purposes of registration. It was alleged that the car was used at Bangalore for purposes unconnected with the business activity of the importer. The show-cause notice did not accept the Export Obligation Discharge Certificate (EODC) issued by the DGFT, as proof of discharge of "export obligation" in terms of the notification, and thereby the most important condition of Notification 44/2002 was alleged to have been violated. The learned Member (Technical) of the regular Bench sustained these allegations of the department and upheld the Commissioner's order. On the other hand, the learned Vice-President, after noting that the 'export obligation....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... definition, in relation to importers rendering services, "export obligation" means receiving payments in freely convertible foreign currency for services rendered through the use of capital goods imported under EPCG Scheme. One of the conditions attached to the EPCG licence obligated the licensee to "provide service to foreign tourists and earn foreign exchange" to the extent of five times the CIF value of the capital goods (car) within a period of eight years from the date of issue of the licence (13-9-2002). This condition further stipulated that the 'export obligation' should be fulfilled by the use of the imported capital goods. An allied condition attached to the EPCG licence was that the import of capital goods should be subject to actual user condition. Coupled with these conditions of the licence is the definition of "export obligation" given under Explanation (4) to Notification 44/2002. Accordingly the assessee was liable, under the EPCG to discharge their export obligation in relation to the imported car by way of receiving payments in freely convertible foreign currency for services rendered through the use of the car. The learned counsel has made an endeavour to claim....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion "export obligation" as "export of services". In other words, the new parameter of the definition of "export obligation", added to Notification 44/2002-Gus. by the Central Government by Notification 29/2004-Gus., dated 28-1-2004 has to be held to be irrelevant to the present case. Only the pre-existing parameter is applicable to this case and the same is under clause (ii) of the definition of "export obligation" given under Explanation (4) to Notification 44/2002- Gus. Accordingly, for the present case, "export obligation" means receiving payments in freely convertible foreign currency for services rendered through the use of the imported capital goods (car). Thus, it would appear that any foreign exchange earnings out of services rendered without the use of the capital goods would not form part of the discharge of export obligation envisaged under Notification 44/2002-Cus. The learned counsel has relied on the Tribunal's decision in the case of M. Far Hotels Ltd. in support of his contention that the foreign exchange earnings through alternate services/products like room rent, income from sale of food and beverages etc. are also liable to be taken into account to wards disch....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2002, it was clarified that redemption of bond/bank guarantee against licence issued under EPCG Scheme should normally be allowed on the basis of EODC issued by the DGFT. However, in doubtful cases or where investigations have been launched by Customs or other agencies, the Customs authorities could require DGFT to take suitable corrective action. Learned counsel has argued that, where in the present case the department doubted the reliability of the EODC produced by the assessee, they should have referred the matter to the DGFT for suitable corrective action and also should have waited for the decision of the DGFT. The present proceedings taken by the department without waiting for feedback from the DGFT are premature according to the learned counsel. The learned counsel has also relied on Circular No. 46/2004-Cus., dated 26-7-2004 wherein it was reiterated that, in all cases pertaining to EPCG Scheme where customs had doubts about the valuation, quantum of export obligation etc., the jurisdictional Commissioners of Customs should scrupulously follow the instructions contained in Circular No. 24/2002-Cus. The learned JCDR has submitted that the above clarifications of the Board re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tment should not have initiated action against the assessee till the date of expiry of the period of eight years (export obligation discharge period). Once the show-cause notice is issued, it has got to be adjudicated upon, for which there is a mechanism under the Customs Act. Even the CBEC cannot, in any manner, hinder this process of law. I believe, no such hindrance was intended in the aforesaid circulars. I, therefore, on first principles, hold that the circulars referred to by both sides cannot be considered to have created a bar against departmental action against the assessee in the facts and circumstances of this case. In other words, as rightly held by the learned Member (Technical) of the regular Bench, the proceedings against the assessee for violation of post-importation conditions of the Exemption Notification were not premature at any stage and can continue against them to its logical conclusion without DGFT's concurrence. The point is answered accordingly. (b) Point No. 2 Here it has to be decided as to whether the customs authorities were prohibited from taking any action in respect of the car imported by the assessee under EPCG Scheme, without concurrence of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lore ever since then, and was never shown to have been used for rendering service to foreign tourists visiting Kerala. Originally the car was registered as a tourist vehicle. Later it was converted into a private car. Such conversion of the nature of use of the car did not, in any manner, subserve the purpose for which it was imported. The learned counsel has referred to certain facts in his bid to show that the car was used at Bangalore for business purposes of the assessee. These submissions remain to be just ipse dixit. It may be true that the DGFT agreed to amend the licence by incorporating therein a Bangalore address which the assessee claimed to be its own. Even this amendment would not improve the case of the assessee vis-a-vis the conditions of Notification 44/2002-Cus. One of the conditions of the notification is that the car should be installed in the premises of the importer. Contextually, I have to consider the rival submissions with reference to "installation" of car. One must have regard to what the apex court observed in the case of TISCO v. Collector [2005 (181) E.L.T. 311 (S.C.)] - "As the words "instal" or "installed" go to show, much would depend upon the contex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bsequently converted into a private vehicle. Nowhere in the EPCG Scheme of the EXIM Policy or in Notification 44/2002 is there any specific reference to, or discussion on, this aspect. I am of the view that the change of status of the car cannot affect its use. If the car, whether tourist ye hide or private vehicle, is used for the intended purpose, that is enough for purposes of Notification 44/2002. The point is answered accordingly. (g) Point No. 7 Here it has to be determined as to whether this case requires to be remanded to the adjudicating authority for examining the scope of fulfilment of the conditions of Notification 44/2002-Cus. (as amended) after expiry of the period of eight years from the date of import. I have already held that; on the facts of this case, there was no bar for continuation of the departmental proceedings vide point No. 1. The point is decided accordingly, with the result that no remand of this case is warranted and the appeals will be disposed of on merits. 52. There being no conflict of views on whether the appeals can be disposed of on merits in the manner the learned Member (Technical) has done where remand of the case is ruled out, I have....