Whether assessee is eligible for the benefit of EPCG license before the actual date of issuance of license?

PJ/CASE LAW/2016-17/3049

Case: SUPER SPINNING MILLS LTD. Vs COMMR. OF CUS. & C. EX., TIRUCHIRAPALLI
Citation: 2015 (325) E.L.T. 835 (Mad.)
Issue: Whether assessee is eligible for the benefit of EPCG license before the actual date of issuance of license?
Brief Facts:This appeal is by the assessee under Section 130 of the Customs Act, 1962.
On 9-12-1994, the appellant filed an application with the Director General of Foreign Trade, for the grant of licence known as EPCG licence, so as to enable him to avail the concessional rate of 15% on the import of machinery. The application was duly processed and the competent committee approved the grant of licence in a meeting held on 13-2-1995. But, the actual issue of the licence took little more than three months, due to bureaucratic delay. It was issued on 17-5-1995.
In the meantime, the imported machinery arrived at Tuticorin Port and the appellant/assessee was faced with the dilemma as to whether they must have a provisional clearance of the goods or they must await the actual issue of the EPCG licence and incur the demurrage. Choosing the former one, the assessee had provisionally cleared the goods on 15-3-1995.
The Department claimed that the appellant was not entitled to concessional rate of duty in the light of Condition No. 6 contained in annexure A to the licence dated 17-5-1995 which reads as follows : -
“This licence shall be deemed to be valid for the goods already shipped/arrived provided the goods have not already been cleared from the Customs and Customs Duty has not been paid.”
The original authority, the first appellate authority as well as the Tribunal relied on Condition No. 6 and upheld the action of the Department. Therefore, the assessee is before this court.
Reasoning of Judgement: All the three authorities have failed to note is a crucial fact that the licence issued on 17-5-1995 imposed only two limitations or restrictions upon the assessee. One was in respect of time available to the assessee to complete the import and the other was the CIF value of the machinery which the licensee proposed to import. The conditions incorporated in annexure A of the licence did not call upon the assessee to wait until the date of issue of licence even for placing a purchase order upon the foreign exporter. The only restriction as could be seen from Annexure A to the licence was that the assessee should not have cleared the goods, from the Customs and should not have paid customs duty before the actual date of issue of licence.
By stipulating in Condition No. 6, that the validity of the licence commenced even from the date on which the goods had been shipped or goods had arrived, the Director General of Foreign Trade had actually extended the benefit to the assessee. To put it differently, the assessee was entitled, even as per Condition No. 6 of annexure A of the licence, to place an order, to have the goods shipped and also to receive the goods at the port even before the date of actual issue of licence. All that Condition No. 6 requires is that the licensee should not clear the goods and should not pay customs duty.
But, the above two conditions cannot be taken to be absolute. In the case on hand, the appellant was forced to get the goods cleared from the Customs on 15-3-1995, as otherwise, they had to incur demurrage, without knowing the proposed date of issue of licence. The decision to grant licence for the import of the very same machinery at concessional rate had been taken by the Committee atleast one month before the date of clearance of the goods. The meeting in which the Committee decided to issue a licence took place on 13-2-1995 and the assessee cleared the machinery from the Customs on 15-3-1995. But, the DGFT issued the licence on 17-5-1995, despite the fact that nearly three months have passed by that time from the date of the decision. Therefore, the provisional clearance of goods on 15-3-1995 cannot be held against the assessee, especially when the very licence issued to the assessee had only two kinds of limitation, one in the form of a period of validity and another in the form of total CIF value of the import.
Hence, the question of law is answered in favour of the assessee/appellant and the appeal is allowed. The orders of the three authorities are set aside. No costs.
Decision: Appeal Allowed
Comment: The gist of the case is that the assessee has applied for EPCG license and decision to issue has licence took place on 13-2-1995 and the assessee cleared the machinery from the Customs on 15-3-1995. But, the DGFT issued the licence on 17-5-1995.
The High Court held that the Benefits accruing under EPCG licence available notwithstanding release of goods by appellant before the actual date of issue of license.

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PJ/CASE LAW/2016-17/3049

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