Cus - Notfn. 28/97 - DGFT amended terms of licence to waive condition of installation - since requirement done away with, scope of contravening that condition was eliminated -duty liability ceases to exist: CESTAT
By TIOL News Service
MUMBAI, OCT 06, 2016: THE appellant had imported a 'used rotary sizer' valued at Rs.4,23,65,814/- against Export Promotion Capital Goods (EPCG) licence with eligibility for concessional rate of duty of 10%, subject to certain conditions, including that of export obligation, under notification no. 28/1997 dated 1 st April 1997.
The CCE Goa initiated proceedings against the appellant on two grounds - the first for failure to comply with condition no. 5 of notification supra which requires the installation of capital goods at the factory to be certified by the jurisdictional Assistant Commissioner of Central Excise within six months of completion of import and the second for failure to furnish evidence of fulfillment of prescribed export obligation within 30 days of expiry of each year commencing from the second year after import - with duty of Rs.13,51,469/- demanded for the year ended August 2000.
The original authority concluded that the failure to evidence installation was sufficient to confirm demand of entire duty foregone along with interest; consequently, the other notice, though taken note of in adjudication order, was rendered irrelevant.
As this order was upheld by the Commissioner (Appeals), the appellant is before the CESTAT.
The appellant submitted that an amount of Rs.12,83,424/- was remitted towards duty liability. Appellant, while admitting to non-installation of machinery owing to necessity of shutting down operations and, discovering the lack of certain critical parts, applied to the Policy Relaxation Committee of Directorate General of Foreign Trade for waiver of condition of installation on 15 th December 2004 which was granted on 22 nd March 2005. In the meanwhile, the export obligation was also fulfilled and the licensing authority issued 'redemption letter' dated 14th June 2005. The appellant, therefore, contended that the liability to duty has ceased to exist.
The AR invited the attention of the Bench to the conditions of the referred notification and pointed out that it is now well-settled in law that exemption notifications are to be implemented strictly. Pennar Industries Ltd & Anr - 2015-TIOL-162-SC-CUS was cited in support.
The Bench inter alia distinguished the decision cited by the AR and observed -
"9. In the present dispute, no action has been initiated under section 111 of the Customs Act, 1962. There is also no record of any adjudication proceedings having been initiated by the Directorate General of Foreign Trade. We note that the Directorate General of Foreign Trade has, in exercise of its original and exclusive statutory jurisdiction, amended the terms of the licence to waive the condition of installation. With waiver of that condition, the requirement of installation had been done away with and, hence, the scope of contravening that condition was eliminated. Unlike in re Pennar Industries Ltd , there is no other breach reflected or recorded in the impugned order that can be fastened on the appellant. The original authority, having confirmed the recovery of entire duty foregone on grounds of non-installation and the other ground, viz. a partial non-fulfillment, having been deemed to be redundant, there is no breach that remains. The issue of redemption letter by the licensing authority is, per contra, sufficient to establish that the critical condition of export had been fulfilled. No evidence to the contrary is adverted in the impugned order…"
Holding that the impugned order is based on a non-existent condition, the same was set aside and the appeal was allowed.
(See 2016-TIOL-2632-CESTAT-MUM)
