W.P. Nos. 1118 of 2014 and 350 of 2015. Case: Sesa International Ltd. Vs Director General of Foreign Trade. Calcutta High Court CEGAT & CESTAT Cases
| Case Number | W.P. Nos. 1118 of 2014 and 350 of 2015 |
| Counsel | For Appellant: Shri Ranjan Deb, Bar-at-Law, V.N. Dwivedi and Ms. Jayanti Char, Advocates and For Respondents: Shri Kausik Chandra, Sr. Advocate, R. Bharadwaj, K.K. Maiti and Ujjal Kr. Ray, Advocates |
| Judges | Arijit Banerjee, J. |
| Issue | Customs Act, 1962 - Section 129A |
| Citation | 2016 (342) ELT 481 (Cal) |
| Judgement Date | October 05, 2016 |
| Court | Calcutta High Court CEGAT & CESTAT Cases |
Judgment:
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The disputes in the two writ petitions under consideration arise in relation to the Foreign Trade Policy (in short the ''Policy'') for the period 2009-14 framed in terms of Sec. 5 of the Foreign Trade (Development and Regulation) Act, 1992 (in short ''the Act'') and the procedure framed for the purpose of implementing the Policy and contained in the ''Handbook of Procedures'' (in short the ''Procedures'').
Brief background of the case:
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Duty Free Import Authorization (DFIA) is one of the duty exemption schemes under Chapter 4 of the Policy. DFIA is issued to allow duty free import of inputs. DFIA may be either post-export or pre-export.
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The petitioner company is a ''Merchant Exporter''. Clause 9.39 of the Policy defines merchant exporter as a person engaged in trade activity and exporting or intending to export goods.
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Since the inception of the 2004-09 Policy, the petitioner company (hereinafter referred to as ''SESA'') used to apply for issuance of post-export DFIAs. After getting DFIAs, SESA used to purchase diverse goods from various manufacturers upon payment of duty and all applicable taxes including excise duty and used to export the goods within the time specified in the DFIAs. After discharging its export obligation, SESA used to apply for transferability of the DFIAs under Clause 4.2.6 of the Policy. Upon being satisfied that SESA had fulfilled its export obligations and export proceeds had been realized, the respondent authorities used to endorse ''transferability'' on the DFIAs, whereupon, the same became freely transferable.
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Since SESA did not avail of ''CENVAT'' facility, while endorsing transferability on the DFIAs, the authorities made a note exempting the inputs from additional customs duty/excise duty in terms of Clause 4.2.6(c) of the Policy. On the strength of such endorsement, SESA either imported inputs by itself or transferred the DFIAs to various importers. The goods imported on the basis of such DFIAs were exempted from payment of customs duty/additional customs duty, additional cess, anti-dumping duty and safeguard duty.
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In January, 2014, the respondent authorities issued two DFIAs dated 17 January, 2014 and 20 January, 2014 in favour of the SESA. Such licences were issued against export of non-alloy steel billet and permitted duty free import of non-alloy steel melting scrap. The expiry date for both the licences was 31 July, 2015.
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On 17 October, 2014 and 10 November, 2014, SESA applied for endorsement of transferability of the said two DFIAs and exemption from payment of additional customs duty. On 14 November, 2014 a meeting was held in the chamber of the Dy. Director General of Foreign Trade (Respondent No. 4). SESA made a grievance that there was being inordinate delay in endorsing transferability on the said licences and the Respondent No. 4 assured that the matter was under consideration, and SESA would receive confirmation soon.
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On 20 November, 2014 the Addl. Director General of Foreign Trade (Respondent No. 2) by e-mail requested SESA to submit 12 DFIA licences which had been issued earlier and on which endorsement of transferability had been made. However, SESA had already transferred such licences to third parties. Accordingly, SESA wrote a letter dated 24 November, 2014 for recalling the order dated 20 November, 2014. Subsequently SESA filed W.P. 1118 of 2014 challenging the said order dated 20 November, 2014 and also praying for a direction on the respondent authorities to make endorsement of transferability on the two licences dated 17 January, 2014 and 20 January, 2014.
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On 3 December, 2014 I.P. Mukerji, J., passed an order of status quo as regards the concerned licences. On 10 December, 2014 the interim order was extended till disposal of the writ application.
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When one of the transferees of the said DFIA licences, in connection with permitted imports presented the licence for debiting of dues in lieu of cash payment of additional customs duty, the customs authorities refused to honour the same. Upon enquiry, it was found that the DGFT authorities vide letter dated 12 December, 2014 withdrew the benefit of exemption from payment of additional customs duty in respect of 13 DFIAs. Accordingly SESA filed W.P. 350 of 2015 praying for cancellation and/or recall of DGFT''s order dated 12 December, 2014 and for extension of validity period of those licences validity of which had expired during the pendency of the earlier writ petition. On the said second writ petition an interim order of injunction dated 8 April, 2015 was passed restraining the respondent authorities from relying upon or giving effect to the order dated 12 December, 2014.
Contention of the petitioner:
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The petitioner alleges that the order dated 20 November, 2014 issued by the Addl. Director General of Foreign Trade is arbitrary, illegal, issued in violation of principles of natural justice and without jurisdiction. The order did not give any reason or ground for re-submission of the concerned licences. Neither any show cause notice was issued nor opportunity of hearing was given to SESA before issuance of the said order. The said order was passed obviously with the purpose of deleting/rectifying the endorsement on the DFIAs allowing exemption from payment of additional customs duty. There is no provision of review under the 1992 Act or in the Rules and Regulations framed thereunder or in the Policy. Hence, the order is not sustainable.
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Learned Counsel for SESA then submitted that the moot issue is whether SESA, a merchant exporter, is entitled to exemption from payment of additional customs duty consequent to exports made under post-export DFIA scheme, which the respondents have granted for the last several years. In recognition of its performance, DGFT has granted a certificate recognizing SESA as a ''Star Export House''. The only contention of the respondent authorities is that since the purported supporting manufacturers of SESA were availing of Cenvat facility, SESA is, therefore, not entitled to exemption from payment of additional customs duty.
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Referring to Clause 4.2.2(c) of the Policy, learned Counsel submitted that in case of post-export DFIAs, a merchant exporter is required to mention only name(s) and address(es) of manufacturer(s) of the export product(s). The applicant is required to file application to the concerned RA before effecting exports under DFIA. At the time of making application for licence, SESA was required to mention only the name of the manufacturer who manufactured the export goods as it was a post-export authorization. Since on the e-platform of DGFT website, there was no column for mentioning the name of the manufacturer, SESA put the name of the manufacturer under the column ''supporting manufacturer''. However, while submitting hard copy of the application together with requisite documents, SESA clearly stated that its application was for post-export DFIAs and this fact is not in dispute. It was submitted that the manufacturers of the products which SESA exported were not co-authorization holder. They never undertook any obligation in respect of the DFIAs. SESA fulfilled the export to the satisfaction of all concerned and there is no complaint in this regard from any of the authorities.
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Mr. Deb then referred to Clause 4.2.6 of the Policy which reads as follows:
Clause 4.2.6: - (a) Once export obligation has been fulfilled, request for transferability of authorisation or inputs imported against it may be made before concerned RA. Once transferability is endorsed, authorisation holder may transfer DFIA or duty fee inputs, except fuel and any other item(s) notified by DGFT. However, for fuel, import entitlement may be transferred only to companies which have been granted authorisation to market fuel by Ministry of Petroleum and Natural Gas.
(b) Wherever SIONs prescribe actual user condition and in case of Acetic Anhydride, Ephedrine and Pseudo Ephedrine, DFIA shall be issued with actual user condition for these inputs and no transferability shall be allowed for these inputs even after fulfilment of export obligation.
(c) After endorsement of transferability, inputs/domestic procurement against authorisation or transfer of imported inputs/domestically procured inputs shall be subject to payment of applicable additional customs duty/excise duty. While endorsing transferability, authorisation would bear a note as to liability of such additional customs duty/excise duty. However, in case where CENVAT facility has not been availed, exemption from additional customs duty/excise duty would be available even after...
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