TaxTMI 
TaxTMI 
2026 (9) TMI 1606
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....s" for short) passed by the Additional Director General (Adjudication), Mumbai in respect of imports undertaken by M/s Navayuga Engineering Company Limited, Visakhapatnam ("NECL", for short). The appellant importer M/s NECL has filed an appeal being No. C/85202/2018 assailing impugned order dated 26.05.2017. 2.1 The brief facts of the case leading to these appeals are that the appellant importer company M/s NECL is engaged in Development of mega infrastructure projects such as ports, highways, overbridges across the rivers, tunnels in the Himalayan sector, etc. M/s Krishnapatnam Port Company Limited, Visakhapatnam ("KPCL", for short), is one of the group company of the appellant importer. KPCL is engaged in development of modern, deepwater port having state of art infrastructure, mechanized handling systems, dedicated storage facilities for a modern, clean seaport, on a build, own, share and transfer basis at Krishnapatnam, Andhra Pradesh. The infrastructure project sites of the appellant company M/s NECL are located at hinterland and interior parts of the country, where a number of capital goods are required for setting up of such infrastructure facility. For the purposes of su....
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....d SCN dated 30.09.2016 was adjudicated by the learned Commissioner/ADG (Adjudication) as adjudicating authority after considering the submissions of the appellant importer and other notices, by passing the Order-in-Original No.10 dated 30.05.2017 in dropping the entire proceedings initiated vide SCN dated 30.09.2016 against the appellants companies and other notices. Being aggrieved with the impugned order No.10 dated 30.05.2017, Revenue has filed the appeal bearing No. C/87625/2017 before the Tribunal. 3.1 Similarly, the appellant company had imported capital goods, equipment, machinery like cranes, dumpers, earth movers, excavators, dredgers, Batching plants etc., and also spare parts of helicopter through Mumbai, Chennai, Kolkata, Hyderabad, Delhi and Krishnapatnam ports, by using SFIS/SHIS scrips issued to their group company KPCL, by availing customs duty exemption under Notification No. 91/2009-Customs dated 11.09.2009, as amended. The department objected to such importation of capital goods by using the SFIS or SHIS scrips/licenses of KPCL as being improper, and initiated detailed investigation in respect of such imports, and the capital goods imported through various por....
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....rt of service under the terms of specific license, regardless of the currency in which payments were settled. Therefore, he claimed that adjustment of Rs.109.64 crore generated by KPCL from foreign flagged import vessels to discharge the export obligation in respect of imports made by appellant company is improper and it is in violation of actual user condition as per para 3.12.7 of Foreign Trade Policy (FTP). He further stated that the expression 'group company' has been interpreted by the DGFT in an incorrect manner, and therefore the DGFT's administrative letter 22.02.2007, in allowing the benefits of export obligation to the appellant company cannot override statutory text of para 9.28 of FTP. Further, he stated that such interpretation is also contrary to the law laid down by the Hon'ble Delhi High Court, in the case of Vacmet Packaging India Private Limited Vs. Union of India - 2011 (265) E.L.T. 50 (Del.). He further stated that parts of helicopter, were actually used in helicopter which was used for private purpose and this also violated actual user condition of the license. Therefore, he pleaded that (i) the impugned Order-in-Original No.10 dated 30.05.2017 droppin....
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....Paragraph 9.28 of FTP 2009-2014. Since, such a decision has been taken with the approval of DGFT, he submitted that such interpretation of any provision contained in FTP as given by DGFT shall be final and binding in terms of Paragraph 2.3 of the FTP. Further, he also submitted that the decision of the Hon'ble High Court of Delhi in the case of Vacmet Packagings India Private Limited (supra), the facts of that case was different from the present appeals here, inasmuch as the company-appellant 'Vacmet Packagings' and 'Ploypacks Industries', a partnership firm having three individual partners were compared for being treated as 'group company' by interpreting the word 'enterprise' used in definition clause/Para 9.28. Whereas in the present case, both the appellant company i.e., NECL and KPCL are incorporated companies having separate legal entity and the directors of the company NECL/KPCL represent their voting share as a part of the said company, having direct control over the affairs of the appellant company, and thus qualify for being treated as 'Group company'. Therefore, learned Advocate pleaded that the adjudicating authority had correctly dropped the demands proposed in the SCN....
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....SLP(C) Nos. 23384-23385/2015 filed by the department in delivering the judgement dated 24.11.2025. 6. We have heard both sides, examined the case records and the additional submissions made during the course of hearing, written synopsis along with case law citations in the form of paper books submitted by both sides. 7. The issue involved herein is to decide the following: (i) whether the impugned order No.9 dated 26.05.2017 passed by the learned Commissioner of Customs, confirming the adjudged demands in respect of import of parts of helicopter; and by dropping the duty demand and penalties proposed in SCN dated 20.06.2016 partly, in respect of import of capital goods by allowing the exemption benefit under Notification No.91/2009Customs dated 11.09.2009; is legally sustainable or not, in terms of the Customs Act, 1962? (ii) whether the impugned order No.10 dated 30.05.2017 passed by the learned Commissioner of Customs, in dropping the proceedings initiated vide SCN dated 30.09.2016, is legally sustainable or not, in terms of the Customs Act, 1962? The period of dispute involved in the present case is from 2007-2008 to 2013-2014. 8. In the impugned or....
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....ther enterprise can be said to be its group company. According to DRI, the common shareholding by individual partner or any other company in these enterprises has no relevance for considering them as Group Company under para 9.28 of the FTP (HBP). Based on these documentary evidences and observations of the PIC, DRI concluded that NECL cannot be treated as "group" company of KPCL inasmuch as NECL or KPCL do not have 26% holding, directly or indirectly and that thus no voting rights to the said extent of 26% as an enterprise in each other. DRI thus, concluded that utilization of SFIS scrips earned by KPCL are without any authority of law and are impugned order violations f the provisions of Foreign Trade Policy 2009-2014 read with the provisions of the Customs Act, 1962. xxx xxx xxx xxx 5.1.6 I find that Para 2.3 of the Foreign Trade Policy which details with "Interpretation of Policy" and which are reproduced hereunder: "If any question or doubt arises in respect of interpretation of any provision contained in FP, or classification of any item in ITC (HS) or HBP v2 or Schedule of DEPB Rates (including content, scope or issue of an authorization there under), sa....
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....d of duty raised by the DRI, alleging that the duo are not group companies and the SHIS scrips issued to KPCL cannot be utilized by NECL is unsustainable and untenable. Accordingly | refrain from demanding the Customs Duty from the Noticees M/s. NECL, as raised by the DRI in the impugned Show Cause Notice. 5.2.0 Now, I proceed towards the 2.d issue of determination i.e.. whether the imported parts and spares of Helicopter of Bell Make claiming exemption under 91/2009-Cus. dated 11.09.2009 under SFIS scheme by the Noticees are legal and proper. xxx xxx xxx xxx 5.2.3 I find that in terms of the said Notification read with Para 3.12.6 of Foreign Trade Policy (FTP-2009-2014), the duty credit scrip may be used for import of any capital goods including spares, office equipment and professional equipment, office furniture and consumables; that are otherwise freely importable and / or restricted under ITC (HS); Imports shall relate to any service sector business of applicant; Utilization of Duty Credit scrip earned shall not be permitted for payment of duty in case of import of vehicles, even if such vehicles are freely importable under ITC (HS).I further notice ....
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....mining agent in the business area of the Noticee and hence cannot be related to capital goods for its service sector business, by any stretch of imagination. Similarly, the impugned item cannot also be termed as professional equipment too, for the reason that in normal parlance, a professional equipment is the instrument or tool or goods, which are utilized in the normal course of business activity of any organization. Undoubtedly, the functioning of the Noticee is not for ferrying personnels but rather are reportedly or evidently engaged in various infrastructural portfolios like Roads, Bridges, Marine development and Turnkey projects. Accordingly, it is my considered opinion, that once, it has come on record that the impugned goods are imported for personal purpose and also there are evidences which reveal that the same is utilized for personal use, the claim of the Noticees that they have rightly availed the exemption benefits by declaring it as Capital goods is flawed untenable and bad in law. 5.2.7... Once it is on record that the impugned goods are imported for private purpose, the same automatically gets debarred from the boundary of the Notification, which permits ....
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....ion on this count. 5.4.2 I also notice that the impugned parts of Helicopters were imported against the extant provisions in force and the duty amounting to Rs. 6,01,86,677/- plus interest is recoverable from the Noticees, as the Noticees are ineligible for the exemption benefits. Thus, on account of mis-declaration and ineligibility of exemption, the goods are liable for confiscation under Section 111(d) and Section 111(o) of the Customs Act, 1962. I notice that DRI had seized the impugned goods valued at Rs.26,49,63,787/-, during the investigation. It has also come on record that the seized goods were provisionally released on execution of bond. Hence, I am of the considered opinion that Redemption Fine is imposable on the said goods an d also the differential duty liability is recoverable from the noticees by encashing the Bond. Accordingly, I held that the impugned seized goods valued at Rs.26,49,63,787/-, are liable to confiscation under Section 111(d) and (m) of the Customs Act and can be redeemed on payment of requisite Redemption Fine." 9. Further, in the impugned orders dated 26.05.2017 and 30.05.2017, learned Commissioner of Customs had come to the conclusion ....
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....ion as to whether the two entities are Group Companies. Subsequently, upon consideration of the Representation of M/s. KPCL, the DGFT had issued a Clarification dated 22.02.2017, vide F.No.01/61/180/150/AM 16-PC-3, and clarified that M/s. KPCL and M/s. NECL are Group Companies. The said clarification dated 22.02.2017 was issued by the DGFT in consultation with the Department of Legal Affairs, Ministry of Law, Government of India, New Delhi. The Noticees averred that the Clarification issued by the DGFT finally resolved the issue and confirms the understanding of the Noticee. 5.1.7 I find that Para 2.3 of the Foreign Trade Policy which details with "Interpretation of Policy" and which are reproduced hereunder: "If any question or doubt arises in respect of interpretation of any provision contained in FTP, or classification of any item in ITC (HS) or HBP v2 or Schedule of DEPB Rates (including content, scope or issue of an authorization there under), said question or doubt shall be referred to DFT whose decision thereon shall be final and binding." 5.1.8 I find that it is undoubtedly clear that DGFT is the final authority, in issuance of scrips or other exp....
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....time services for import vessels by M/s. KPCL can be adjusted as "port handling services" for export towards export obligation fulfilment against EPC Licenses by NECL. I find that the specification or rather comments given by DGFT while amending the Licence, thereby permitting to adjust only the "port handling services" for export towards export obligation fulfilment is the sole basis of allegation and the issue of determination, in the instant case. Further, Para 9.53 (iv) of the Foreign Trade Policy which underlines the definition of "Service Provider" specified that Supply of a 'service' in India relating to exports paid in free foreign exchange or in India Rupees which are otherwise considered as having being paid for in free foreign exchange by RBI. I find that the term "exports" are inclusive of exports of goods and exports of services. It is inevitably clear that the "exports" in the instant case is with respect to services to import vessels, and can undoubtedly, be termed as export of services. It is also on record that "Port Handling Services rendered by KPL are inclusive of i) Earnings by marine services rendered to foreign vessels which called KP Port for dischar....
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....nding and parking charges, from foreign airlines are eligible for Export Obligation discharge under EPCG. Thus, it can be construed that rendering services to foreign vessels are recognized as rendering of services to foreigners and payment received in free foreign exchange/Indian Rupees by a service provider for Export Obligation fulfilment under EPCG scheme is permitted. The aspect has further been clarified by RBl as mentioned above, by specifying that for any services rendered, when payments which have been received in foreign exchange would be deemed to be earned in foreign exchange. 5.2.8 Thus, in view of foregoing discussions, I form a considered opinion that the maritime services for import vessels constitute an earning in foreign exchange and thus, are inevitably eligible for the discharge of export obligation liability. Accordingly, since the issue of "Group Company" has already been settled in view of the clarification issued by the DGFT, M/s. Navyuga Engineering Company Ltd, are undoubtedly eligible to discharge their export obligation liability by adjusting the earnings through "port handling services" earned by M/s. KPCL, their group company." 10.1 On peru....
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....ompanies as defined in Para 9.28 of the FTP 2009-14. Since the above facts/documents have been relied upon in the impugned order, in support of the findings for partly confirming the demand in respect of import of parts of helicopter as well as for dropping the duty demands on the basis of coverage under the definition of 'group company' under FTP, it will be important for us to see whether the same can be held as valid evidences for coming to a conclusion on the disputed issues. 10.2 Firstly in order to address the above issue of coverage under 'group company', we would like to refer the relevant legal provisions contained in Foreign Trade Policy (FTP) framed under Foreign Trade (Development and Regulation) Act, 1992 ('FTDR Act' for short) as it is the relevant statute for the purpose of EPCG/SFIS/SHIS scrips; and as no such definition is provided under the Customs Act, 1962. The extract of the same is given below: Foreign Trade (Development and Regulation) Act, 1992. "Section 5. Foreign Trade Policy. The Central Government may, from time to time, formulate and announce, by notification in the Official Gazette, the foreign trade policy and may also, in l....
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....edit scrip may also be used for import of consumables including food items and alcoholic beverages. Non Transferability 3.12.7 Entitlement / goods (imported / procured) shall be non transferable (except within group company and managed hotels) and be subject to Actual User condition. xxx xxx xxx xxx 3.14 Status Holders Incentive Scrip (SHIS) 3.14.1 Objective (a) Objective of SHIS is to promote investment in upgradation of technology. (b) Status Holders of sectors specified in Para 3.16.4 below, shall be entitled to a Duty Credit Scrip @1% of FOB value of exports made during 2009-10,2010-11,2011-12 and 2012-13. (c) Status Holders of additional sectors listed in Para 3.10.8 of HBPv1 2009-14 (RE-2010) shall also be eligible for this Status Holders Incentive Scrip on exports made during 2010-11, 2011-12 and 2012- 13. (d) This shall be over and above any Duty Credit Scrip claimed/availed under this chapter. 3.17.5 Imports Allowed/ Domestic Procurement (a) Duty Credit Scrip may be used for import of inputs or goods including capital goods, provided same is freely importable and / or rest....
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.... imports are allowed under a specific export promotion scheme, in order to allow consequential customs duty exemption benefits under the relevant notification for such scheme, it would depend upon the specific policies framed thereunder. Further, it also transpires that in order to carry out the purpose of FTP and to provide relaxation on the grounds of genuine hardship and adverse impact on trade and in public interest, DGFT is authorised to pass such orders for granting requisite relaxation or relief. Furthermore, in case of any question of doubt in respect of interpretation of any provision of FTP etc., the decision of DGFT thereon shall be final and binding. 10.4 The main ground on which the investigation had interpreted that the appellant company and KPCL do not come under the definition of group company is that NECL had no shareholding in KPCL and vice versa; and the fact that certain individuals/common directors holding shares directly or indirectly through other companies in both NECL and KPCL, was not relevant to decide the status of group company, as defined under Para 9.28 of FTP. In this regard, we find that on plain reading of the definition of 'group company' in Pa....
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.... find that the insistence of the DRI-customs field formation in the Central Board of Indirect Taxes & Customs under the Department of Revenue, Ministry of Finance in not treating the M/s KPCL and M/s NECL as group company through show cause proceedings does not have any legal basis, as the matter has been finally clarified by the administrative department i.e., Department of Commerce, Ministry of Commerce & Industry. 10.5 We find that the Hon'ble High Court of Delhi in the case of Vacmet Packagings (India) Pvt. Ltd. (supra) has held that the meaning of 'enterprise' cannot be stretched to cover individual partners of a firm. Since the facts of the present case does not involve partnership firm, we find that the aforesaid case law is not applicable to the present case. Further, we also find that in the case of Tata Teleservices Limited Vs. Union of India & Ors. and Tata Teleservices (Maharashtra) Limited Vs. Union of India & Ors. in Writ Petitions No.233 and 237 of 2013, respectively, the Hon'ble High Court of Bombay vide its judgement dated 20.12.2014 has held that through indirect control i.e., Tata Sons Ltd. holding 21% equity in Tata Teleservices (Maharashtra) Ltd., and 74% eq....
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....efinition of 'capital goods' provided under paragraph 9.12 of FTP, it transpires that it covers wide variety of plant, machinery, equipment or accessories required for manufacture or production, either directly or indirectly, of goods or for rendering services. In the present case, the impugned goods are used in helicopter, which are thus in the nature of parts or accessories for the functioning of helicopters. In terms of the permission granted by the Director General of Civil Aviation (DGCA) for operating the aircraft for 'private use' is to be understood in the context that it is for compliance with Civil Aviation Requirements (CAR) for ensuring minimum airworthiness, operational and other general requirements for grant of Air Operator Permit for operating air transport services. DGCA has issued certain guidelines for regulating the operation of private chartered jets/planes/air crafts. Civil Aviation Requirements (CAR), Section 3, Series C, Part III covers non-scheduled air transport services and Section 8, Series O, Part II on Commercial Air Transport Operation which includes non-scheduled operation. Further, CAR Section 8, Series O, Part III is on General Aviation which inclu....
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....p company' having been clarified by the Zonal Joint DGFT, Chennai in their letter dated 21.06.2011 being known to the department, more specifically to the jurisdictional Assistant Commissioner of Customs, Nellore Division, Vijayawada Customs Commissionerate, there is no case made out by DRI for suppression of facts or wilful mis-statement with an intention to evade duty for invoking extended period of limitation under Section 28(4) of the Act of 1962. 12.2 In this regard, we find that the Hon'ble Supreme Court in the case of Pushpam Pharmaceuticals Company Vs. Collector of Central Excise, Bombay - 1995 (78) E.L.T. 401 (S.C.), has held that there should be some deliberate act on the part of the assessee to claim the ingredients of fraud, collusion of wilful default. The relevant paragraph is extracted below: "4. Section 11A empowers the Department to re-open proceedings if the levy has been short-levied or not levied within six months from the relevant date. But the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. T....