Customs Notifications Cannot Override FTP & HBP Benefits Once DGFT Grants Approval: CESTAT Chennai Grants Relief To Hyundai Motor

Ajayan T.V (Judicial Member) and Ajit Kumar (Technical Member) stated that if the Central Government in its wisdom introduces a beneficial scheme or provision under the FTDR Act, the benefit of such legislation are to be made available by another Department of Central Government, namely the Customs Department, for which purpose Notifications and Circulars are issued under the Customs Act, 1962.

The Tribunal further opined that Neither such Notifications and Circulars can be interpreted to take away the benefit which is otherwise available under the FTP and HBP, nor any further clarification or instructions may be insisted by the Customs Department, when the provisions of the FTP and HBP mandate the grant of such benefit.

In this case, the assessee/appellant was engaged in the manufacture of motor vehicles, in the course of its business, has imported various capital goods under the Export Promotion Capital Goods (EPCG) Scheme during the period 07.02.2007 to 28.05.2013.

The department found that the assessee had imported capital goods by availing the benefit of the concessional rate of duty under the EPCG Scheme, in terms of the Customs Notifications mentioned above.

The benefits were available subject to the fulfilment of certain conditions (pre-import and post-import) as laid down in the respective notifications.

It was alleged that the imported capital goods had been diverted to the vendor's premises that are not authorised for installation in the condition list attached to the EPCG authorisation on the strength of which the imports were made.

A show-cause notice was issued to the assessee. Upon adjudication of the Show Cause Notice, the Chief Commissioner of Customs dropped the proceedings and found that when the shifting of the imported goods is approved by the competent authority viz. Committee of Secretaries, the decision shall be deemed to be a policy decision of the Government.

The issue before the bench was whether the non-inclusion of vendors/non-endorsement of vendors in the EPCG licences are violations of conditions of the notification substantive enough to merit a demand of duties foregone on the assessee and to attract consequential penal and confiscatory liabilities.

The Tribunal opined that there cannot be any dispute that DGFT is responsible for carrying out the policy. Thus, when DGFT has accorded such post facto approval, it evidently cements the Respondent's contention that the substantial conditions of the EPCG Scheme are that the export obligation is completed and the capital goods satisfy the actual user condition till such time of completion of export obligation. The remaining conditions of the notifications are only guardrails to ensure the compliance of the main condition of fulfilment of the export obligation.

The bench stated that an exporter or importer or any licensing or any other competent authority would be bound by the procedure specified by DGFT for implementing the provisions of FT (D&R) Act, the Rules, the Orders made thereunder, and FTP, published by means of a Public Notice. Thus, all procedural aspects, whether or not notified by the Ministry of Finance, if contrary to what is specified in Public Notice/Handbook of Procedure, would give way to those specified in the Public Notice.

The Tribunal held that by granting expost facto approval, the DGFT Authorities have shown that they are not influenced or bound by the requests/instructions of DRI.

The bench opined that the adjudicating authority has passed a well-reasoned order that warrants no interference.

In view of the above, the Tribunal dismissed the revenue's appeal.

Case Title: Commissioner of Customs v. M/s. Hyundai Motor India Limited

Case Number: Customs Appeal No. 40648 of 2017

Counsel for Appellant/ Department: Anandalakshmi Ganeshram

Counsel for Respondent/ Department: T. Viswanathan, D. Santhana Gopalan and S Ganesh Arvindh

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