TaxTMI 
TaxTMI 
2015 (12) TMI 1045
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....al in all the appeals, therefore, all the appeals are disposed of by a common order. 3. The facts in brief are that HEL is providing "Hotel Services under the category of Tourism and Travel related services" mentioned in Appendix 10 of the Handbook of Procedures relating to Foreign Trade Policy 2004-2009. M/s HEL obtained EPCG authorisation dated 20.08.2007 in respect three Mercedes Benz cars and another such authorisation dated 1.11.2007 in respect of one Rolls Royce car. The export obligation against this EPCG authorisation was to be fulfilled within eight years reckoned from the date of authorisation. HEL imported three Mercedes cars on 1.1.2008 and one Rolls Royce car on 7.2.2008 by claiming concessional rate of duty/exemption under Notification No. 97/2004-Cus dated 17.6.2004. An investigation was conducted on 16.1.2009 and consequent thereof, the Show Cause Notices were issued to deny the benefit of EPCG license and to demand the duty forgone by giving the benefit of Notification No. 97/2004-Cus dated 17.6.2004 on the following grounds: (a) The cars were not put to proper use inasmuch as they were not used for providing transport facilities to the guests of the hotel to....
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....ries required for providing hotel services, as also for modernisation, technological upgradation or expansion of services, which for the present proceedings means hotel services. He further submits that proviso to para 5.1 of the policy allows import of motor cars, sports utility vehicles or all purpose vehicles inter alia to hotels. Condition for import of capital goods in para 5.3 of the Policy is that import of cars shall be the subject to actual user condition till export obligation is completed. As per para 9.4 of the Policy actual user means, who may be either industrial or non-industrial and para 9.6 of the Policy, "actual user" means a person who utilise the imported goods for his own use in any service industry. Therefore, it means that cars imported by HEL were to be used by HEL in their service industry. He further submits that para 5.4(i) of the policy envisages fulfilment of export obligation by export of services rendered by HEL. It is further provided that export obligations can also be fulfilled by exports of group company/managed hotels which has EPCG authorisation. Therefore, the export obligation in respect of hotel 'A' which has imported cars under EPCG ....
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.... guests in the hotel is not in line with even the language of the notification. Therefore, there is no divergence between the provisions of the Foreign Trade Policy and the exemption notification. To support this contention he relied following decisions: (a) CC, New Delhi Vs. Som Dut Builders Ltd. - 2009 (236) ELT 478 (Tri.-Del.) (b) M Far Hotels Ltd. Vs. CC, Cochin - 2009 (241) ELT 94 (Tri.-Bang.) (c) Air Travel Bureau Ltd. Vs. CC, New Delhi - 2009 (237) ELT 283 (Tri.-Del.) (d) CC Vs. Air Travel Bureau Ltd. - 2010 (26) ELT 78 (Del.). (e) Air Travel Bureau Ltd. Vs. CC- 2012 (277) ELT 250 (Tri.-Del.) (f) Goldfinch Hotels Pvt Ltd. Vs. CC (ACC and Exports), Mumbai - 2015-TIOL-976-CESTAT-MUM Apart from this, he submits that the action of the department is premature as HEL has time till August 2015 and November 2015 for fulfilment of export obligation. He further, submits that allegation of Revenue is that logbooks of the cars in question were maintained differently from the logbooks of other cars or the control of these cars was with Directors while the control of other cars was with the staff or the cars were being used by th....
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....stom notification. In fact, it is the case where both the Foreign Trade Policy and the customs notification is to be operationalised the benefit of custom duty accorded in the Foreign Trade Policy. Therefore, the Foreign Trade Policy of custom notification issued thereof cannot be viewed as being mutually contradictory. It is also submitted that the definition of capital goods, neither the definition of the export obligation by itself nor when read in conjunction with the proviso relating to managed hotels suggested that the Government of India intended any divergence in Foreign Trade Policy and the customs notification in regard to the matter in issue. Therefore, the Policy and the customs notification, allow import of cars by hotels for use in providing service. In fact, custom notification does not provide how to use capital goods imported under EPCG scheme and it is not the case of Revenue that provisions of Foreign Trade Policy do not permit such use. In fact, the understanding of the department for actual user is that the custom notification provides use of cars by foreign tourist. The definition does not suggest the nature of service to be provided by the importer is to be g....
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....years is Rs. 1.5 crores or more. (ii) "duty saved" amount on all EPCG Authorisations issued in a licensing year for import of motor cars, sports utility vehicles/all purpose vehicles shall not exceed 50% of average foreign exchange earnings from hotel, travel and tourism and golf tourism sectors in preceding three licensing years. (iii) Vehicles imported shall be so registered that the vehicle is used for tourist purpose only. A copy of the Registration certificate should be submitted in concerned RA as confirmation of import of vehicle. However, parts of motor cars, sports utility vehicles/all purpose vehicles such as chassis etc. cannot be imported under EPCG Scheme. 5.4 Export Obligation Following conditions shall apply to the fulfilment of the export obligation- (i) Export obligation shall be fulfilled by export of goods, manufactured/services rendered by the applicant. Export obligation shall be, over and above, the average level of exports achieved by applicant in preceding three licensing years. Such average would be the arithmetic mean of export performance in last 3 years. Export obligation may also be fulfille....
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....l A" which has imported cars under EPCG scheme can also be fulfilled by "hotel B" of the same company or under the same management which has imported any other item like lift under EPCG scheme. The proviso to para 5.1 of the policy allows import of motor cars, sports utility vehicles or all purpose vehicles inter alia to the hotels. Condition for import of such capital goods in para 5.3 of the Policy is that import of cars shall be subject to actual user condition till export obligation is completed and para 9.4/9.6 means actual user a person who utilises imported goods for his own use in any service industry. Therefore, the said conditions clearly stipulates that the car imported by HEL were to be used by HEL in their service industry. We further find that para 5.15 of Handbook of Procedure mandates that every EPCG authorisation holder has to maintain for a period of three years from date of redemption, a true and proper account of exports/supplies made and services rendered towards fulfilment of export obligation. This Policy does not envisage that a service provider importing the goods under EPCG authorisation will have to change the character of service depending upon the goods....
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.... hotel, export obligation can be fulfilled by "Managed Hotel" as defined in paragraph 9.36 of the Foreign Trade Policy. The "Managed Hotel" means hotel provided by a three star or above hotel/hotel chain under an operating management contract for a duration of at least three years between operating management contract operating hotel/hotel chain and hotel being managed. Management contract, as per the definition, must necessarily cover the entire gamut of operations/management of "Managed Hotel". This proviso clarifies that view of the Revenue that the cars are only to be used by foreign tourists staying as guests in the hotel is not in line with even the language of the notification. It further says there is no divergence between the provisions of Foreign Trade Policy and exemption notification. 10. We also note that the appellants do not suggest that the department has to follow only the provisions of Foreign Trade Policy but the department on the same time has no jurisdiction to administer the provisions of customs notification. Therefore, the provisions of Policy and the notification are to be viewed harmoniously and in a case where harmonious interpretation is available in ....
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....ation for the importer rendering service means receiving payment in convertible foreign exchange for service rendered through the use of capital goods. Therefore, if the cars were used directly or indirectly for providing the hotel services from which the foreign exchange is earned, the conditions no where suggest that the nature of service to be provided by the importer or to be governed by the type of capital goods provided. As in the case of other goods like lift and chair do not envisage the use by foreign tourist, the car are to be used by foreign tourist, implying thereby that while other capital goods could be used indirectly or laterally, the cars could not be so used and were to be used by foreign tourists. This logic is not tenable for it is not the goods which will expand or contract the concept of use underlying the EPCG scheme. The rule of law emphasizes the regulation of activities according to law and is antithetical to arbitrariness; the logic that the nature of goods will determine a to how the law would be interpreted emphasizes that it is the understanding of the department about the use of the goods that will decide the interpretation of law and thus introduces ....
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....for services rendered through the use of imported capital goods (car), it would appear without any foreign exchange earning out of service rendered without the use of capital goods would not form part of discharge of export obligation envisaged under Notification No. 44/2002. We have seen that in that case the imported car was transferred in a private name in stead of being registered at tourist vehicle in the name of importer, on these facts, the foreign exchange earned by the said appellant has not been earned by the use of imported car. In those set of facts, this Tribunal arrived at a decision that the foreign exchange earning out of the service rendered without the use of capital goods would not found part of discharge of export obligation. Definitely this is not the case in hand. In the case of Surya Samudra Holiday Resorts Pvt. Ltd. (supra) also the Tribunal had not analysed how and in which manner car is required to be used by importers, the car was already transferred in private name. As car was not available with the appellant in that case, in those facts, this Tribunal also arrived at the decision that the proceeding are not pre-mature. In this case, HEL has not part wit....
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.... 26. Neither the Import Policy nor the Customs Notfn. 49/2000-Cus. dated 27-4-2000 lay down the nature of record to be maintained by the licensee in respect of foreign exchange earned from the imported capital goods. It is nowhere provided that details of each journey undertaken or name of foreign guest who used the car or the amount and mode of payment should be recorded. The only requirements are that the required incremental foreign exchange be earned in a specified period and that the imported goods should not be sold or in any way parted with. In any case the Department has not produced any proof that the cars have been used for any other purpose or have been sold. There is no bar to a car meant for private use being used to transport commercially important guests. In any case foreign guests staying in hotels do not pay separately for travel from Airport to hotel. This is a complementary facility provided by hotel to their guests. In the nature of the hotel industry a major part of their marketing strategy is to interact with major tour group operators who provide bulk business and such interaction is at the convenience of the tour operator and not the hotel which is the buye....
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.... 2. In order to ensure proper and intended use of above vehicles under EPCG Scheme, following course of action would be taken by EPCG authorization holder, Regional Authorities of DGFT and Customs Authorities in addition to existing conditions: a. Customs authorities will endorse in "Bill of Entry" while clearing such vehicles that such vehicles have to be registered as a vehicle "for tourist purpose only". This would make purpose of import of vehicles absolutely clear and would also facilitate registration. b. in all past cases where Export Obligation Discharge Certificate (EODC) has not been obtained by 30.06.2008 and where vehicles were not registered as Tourist Vehicles, EPCG authorization holders will get them registered as Tourist Vehicles, by 31-08-2008. Regional Authorities of DGFT will monitor and ensure compliance. 3. This issues with the approval of DGFT. [D.G.F.T. Policy Circular No, 7(RE-2008)/2004-09, dated 7-5-2008] 9. Further, our attention was also invited to the DGFT clarification. 10. The clarification of the DGFT in respect of the use of the imported car is reproduced in the letter given below: N....
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....ervice industry the vehicles are part of an overall package drawn by these service providers for the tourists. This package may include hotel accommodation, food, beverages and travel cost and charges for utilizing imported vehicles would not be billed separately to the tourist. It is therefore not practically possible for these sectors to show export earnings separately from use of these vehicles. Therefore, the views expressed by the DRI on this score can not be accepted and all benefits including all earnings for providing hotel accommodation, sale of food and beverages apart from transportation of the tourist, should be considered towards discharge of export obligation against vehicles imported under EPCG scheme. This is however subject to the condition that no part of the sale proceeds have been paid in free foreign exchange to any other service provider for providing add on services for hotel accommodation etc. 5. These instructions may be followed scrupulously and wherever the EODC etc. has been cancelled based upon the recommendations of DRI or any other authority, the same may be reviewed and dealt with in line with the instructions contained in this letter. Howev....
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....ertificate to the appellants then it is not for the Customs authorities to question the same. In view of all these points we do not find any merit in the impugned order. There is no justification for imposition of any penalties. It is stated that the said vehicle has been attached to the corporate office. These things are all not grounds for demand of duty and imposition of heavy penalties. Hence, we set aside the impugned order and allow the appeals with consequential relief." Admittedly, the case of the Revenue is similar that the foreign exchange should be earned by use of car. Therefore, the facts of the cases before us are similar to the case of M Far Hotels Ltd. (supra). 16. We further observed that in the case of Air Travel Bureau Ltd. (supra) the cars were confiscated for violation of notification as well as conditions of EPCG license. As the cars importer were required to be used for intended purpose wherein this Tribunal has observed as under: "6.3 We find that the Customs authorities have taken up the matter with the DGFT expressing their views that there is violation of EXIM Policy provisions and it appears that the said view has not been accepted by them....
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.... in the following manner:- 'The true position appears to us to be that while capital goods may or may not be capable of generating convertible foreign exchange by their independent 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 is 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." 6. Once we apply this yardstick to the facts of the present case, the conclusion would be that the respondents have been able to fulfill the obligation under EPCG license as pointed above, which was the very condition imposed in the said license by the DGFT. DGFT has redeemed the license and has taken the view that the respondents have fulfilled their export obligation. No doubt, the opinion of the DGFT would not be conclusive and any such certificate cannot press the power of the authority ....
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....rovide complementary facility to their VVIP guests, which is not disproved by the department The vehicle has not been sold or transferred to any other person by the importer. It is not proved even on preponderance of probability that the vehicle was imported solely for personal use of the CMD of the Hotel. In these circumstances, we find that even if the mandatory conditions of Exemption Notification are construed strictly, there is no violation of any condition of the EPCG license, FTP or the Customs Notification. 27. We have also perused the judgement of this Tribunal in Surya Samudra Holiday Resorts (P) Ltd. - 2010 (256) ELT 433 (Tri.-Mum). The said judgement was rendered in a totally different context, inasmuch as there was violation of the actual user condition and the main issue was whether the Customs Authorities were empowered to take action for violation of conditions of the Exemption notification before the completion of the export obligation period without concurrence of DGFT. In that case, unlike the instant case, the vehicle (Farrari car) imported for resort in Kerala was always at Bangalore, and was never used in Kerala for rendering services to tourists visi....