Interglobe Enterprises Ltd. vs Union Of India (Uoi) And Ors.
2006 Latest Caselaw 112 Del

JUDGMENT

T.S. Thakur, J.

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1. Issue Rule. Mr. P.P. Malhotra, Additional Solicitor General appears for the respondents. With consent, this petition has been heard for final disposal.

2. Directorate of Revenue Intelligence has, in the course of an investigation initiated by it, seized three out of seven luxury cars imported by the petitioner under what is known as b Export Promotion Capital Goods Schemeb ('EPCG' for short). Aggrieved, the petitioner has rushed to this Court not only for release of the seized cars but also for quashing of the on going investigation. The controversy arises in the following backdrop.

3. The petitioner-company is a service provider engaged in the business of arranging international tours and travels. Apart from being the general sale agent of 14 international airlines, the petitioner claims to be engaged in providing sales, reservation and other allied customer services to its clients.

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4. In terms of section 5 of the Foreign Trade (Development and Regulation) Act, 1992, the Central Government formulates and announces the import export policy every five years. The said policies for the relevant years envisaged an EPCG Scheme, whereunder capital goods could be imported at a concessional customs duty of 5%, subject to an export obligation equivalent to five times of CIF value of such goods to be fulfillled by the importer over a period of 8 years reckoned from the date of the issue of the import license. It is common ground that the said Scheme permitted imports even by service providers like the petitioner company.

5. Taking advantage of the Scheme, the petitioner company appears to have imported seven luxury cars of BMW make. The petitioner's case is that the import of these cars was like other capital goods, subject to the condition that the petitioner fulfillls the export obligation envisaged under the Scheme. Its further case is that the export obligation qua two of the cars imported by it had been fulfillled in recognition whereof the Director General of Foreign Trade (DGFT) had issued two discharge certificates dated 16th September, 2004 and 30th August, 2005, while the request for the issue of such a certificate in regard to the third car was pending consideration.

6. On 24th November, 2005, the officers of the Department of Revenue Intelligence seized the afore-mentioned three cars out of a total of seven imported by the petitioner from the corporate office of the petitioner company situate in DLF City, Phase-III, Gurgaon. The officers making the seizure justified the action on the ground that the export obligation qua the said cars had not been properly fulfillled. An investigation was on that premise initiated by the officers in the course whereof the statements of the Directors of the petitioner company and other employees were recorded. According to the petitioner, the officers seizing the cars had offered to release the same upon payment of differential customs duty and furnishing a bank guarantee and a bond for the requisite amount as though the export obligation under the Scheme had not been fulfillled.

7. The seizure of the cars and the on going investigation have been assailed by the petitioner in the above backdrop primarily on the ground that the DGFT having issued the requisite certificates regarding fulfilllment of the export obligation, the officers of the Directorate of Revenue Intelligence had no legal authority to initiate any investigation or to seize the cars in question and that the officers making the seizures had no reason to believe that the cars in question were liable for confiscation under section 111 of the Customs Act, 1962.

8. Appearing for the petitioner-company Mr.Arun Jaitley strenuously argued that the seizure of the cars and the investigation initiated by the respondents were incompetent and in excess of their jurisdiction. He urged that the DGFT was the final authority to determine whether or not the export obligation qua capital goods imported under the EPCG Scheme had been fulfillled. The issue of a certificate by the Director General was, according to Mr.Jaitley, sufficient to conclusively prove that the goods had been validly imported and the export obligation arising from such import satisfied. The Directorate of Revenue Intelligence, could not Page 0441according to learned counsel, sit in judgment over the correctness of such a certificate or the interpretation of the Scheme by the competent authority. The initiation and continuance of the investigation by the Directorate of Revenue Intelligence was in that view not only incompetent but also extremely harmful for the general reputation of the petitioner, who was planning, according to Mr.Jaitley, to launch its own airlines by making investment of crores of rupees. Mr.Jaitley also attacked the demand for payment for differential duty, execution of bond and bank guarantees as a condition precedent for the release of the seized cars in favor of the petitioner and urged that the investigating officers could not ignore the certificate issued by the DGFT and act on an unfounded assumption that the goods had not been imported under the EPCG Scheme or that the condition subject to which such import was made had been violated.

9. On behalf of the respondents, Mr.P.P. Malhotra, learned Additional Solicitor General, argued that the import of capital goods under the Scheme including those by a service provider was, subject to the conditions stipulated under the Scheme. He urged, by reference to the Scheme as prevalent during the relevant period, that the export obligation equivalent to five times the CIF value of the imported goods had to be fulfillled by the petitioner- importer by use of the capital goods so imported. He contended that the Scheme envisaged the existence of a definite nexus between the import of the goods and their use for the fulfilllment of the export obligation. An importer could not, argued Mr.Malhotra, benefit from the Scheme if the goods imported were not actually used by him for generating the requisite foreign exchange needed for discharge of the export obligation. He also referred to the provisions of the Scheme which enjoined upon the importer the duty to maintain true and proper account of the service rendered by use of the capital goods. He urged that all these conditions had, in the instant case, been violated by the petitioner- importer in as much as the imported cars had not been used for the business of the petitioner nor was any foreign exchange revenue generated out of such user. The cars were not, according to Mr.Malhotra, even registered under the Motor Vehicles Act as tourist vehicles nor were they plied to carry the passengers. The export obligation attached to the import of the said cars could not, therefore, be deemed to have been fulfillled by the importer which was sufficient, according to the learned counsel, to justify confiscation of the cars under >