SFI Scheme - Exemption under Notifn 92/2004 is not admissible for import of restricted goods - Plea that at time of issuing license, there was no Policy Restriction is not valid - Provisions at time of import are relevant - CESTAT upholds demand against Airports Authority
By TIOL News Service
CHENNAI, SEPT 29, 2015: THE appellant is Airports Authority of India. They had obtained duty free certificates under Served From India Scheme (SFIS) from Joint Director General of Foreign Trade (JDGFT), New Delhi. Based on the intelligence by DRI that appellant had imported various restricted items, demand notices were issued for the imports made at Chennai, Mumbai and New Delhi. The demands were confirmed by the Commissioner of Customs (Exports), Chennai, who is the Common Adjudicating Authority. In addition to confirmation of duty, which was already paid by the appellant at the time of investigation, the goods were confiscated and fine and penalty were also imposed. The appellant are before the Tribunal challenging the Order in Original.
The appellant contended inter alia that:
The object of SFIS scheme is to accelerate growth in export of services so as to create a powerful and unique "served from India" brand instantly recognized and respected world over. As per para 3.6.4.5 of FTP 2004-05 as on 31.8.2004, the duty credit may be used for import of any capital goods including spares, office equipments etc. related to the main line of business of the appellant. The same provisions continued in 2005-06. Only in 2006-07 (as on 1.4.2006), para 3.6.4.5 was amended and the restriction was introduced in the policy that SFIS scrips may be used for import of any capital goods including spares, office equipmentsetc; that are otherwise freely importable under ITC (HS) classification of EXIM items. Therefore the policy provisions prevailed for the financial year of export 2004-05 for which SFIS duty credit scrip was issued specifically permitted import of capital goods and spares etc. The condition that the capital goods must be otherwise freely importable did not exist in 2004-05 and 2005-06 policy.
After hearing both sides, the Tribunal held:
- It is evident from the above ITC (HS) EXIM code, the items imported are restricted and not freely importable. Therefore, there is no dispute on the fact that policy provision in force at the time of importation and EXIM code confirms that SFIS scrip is to be utilized for Customs duty purpose only to the goods which are freely importable and not to the restricted goods.
- Where an exemption of customs duty is to be allowed under the notification 92/2004, the provisions of the notification has to be strictly applied as on the date of import and the SFIS scrip can be used to adjust customs duty only on an item which is freely importable under FTP ITC (HS) EXIM Code. It is not a case here of any contravention of import export regulations but on exemption of customs duty under the notification. The appellants contention that DGFTs clarification on import/export shall prevail over customs and customs authority cannot interpret the policy is not at all relevant to the facts of this case. Rather, the Customs is only implementing the FTP Policy provisions envisaged as per para 3.6.4.5 of FTP 2004-09 (RE-2006) as it stood at the relevant time of import and as specified in the Customs Exemption Notification 92/2004. There is no dispute on the fact that the goods, Radars & VHF & DME are restricted items under ITC (HS) EXIM code and there is no dispute on the fact that para 3.6.4.5 of FTP 2004-09 (RE-2006) stipulated that SFIS can be utilized for customs duty adjustment only on the goods which are freely importable and not to any restricted items.
- The exemption of customs duty under 92/2004-Cus. dt. 10.9.94 is not applicable for Radars, Navigational Equipments& VHF & DME equipments, restricted goods for adjustment of customs duty against SFIS scrips. The customs duty confirmed by the adjudicating authority under Section 28 of Customs Act and appropriation of entire customs duty already paid by the appellants is liable to be upheld with interest.
- With regard to confiscation, the department has not effected any seizure of goods and the goods were already cleared and only based on intelligence and investigation which led to issue of SCN for demand of Customs duty under proviso to Section 28 of Customs Act. When the goods are not available for confiscation, the appellants are not liable for redemption fine. Also since the appellant had paid duty at the time of investigation, penalties are reduced.
(See 2015-TIOL-2059-CESTAT-MAD)
