Karnataka High Court
Union Of India vs M/S Welcast Steels Ltd on 4 February, 2020
Author: Ravi Malimath
Bench: Ravi Malimath
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
ON THE 4TH DAY OF FEBRUARY 2020
BEFORE
THE HON'BLE MR. JUSTICE RAVI MALIMATH
AND
THE HON'BLE MR. JUSTICE ASHOK S. KINAGI
WRIT APPEAL NO.1353 of 2012 (GM-RES)
Between:
1. Union of India,
Rep. by its Secretary
Ministry of Commerce & Industry,
Dept. of Commerce,
Udyog Bhavan, Maulana Road,
New Delhi - 110011
2. The Regional Joint Director
General of Foreign Trade,
6th Floor, C & E Wing,
Kendriya Sadan, Koramangala,
Bengaluru - 560 034.
3. The Assistant Commissioner of Customs,
Inland Containers Depot,
Whitefield,
Bengaluru - 560 066.
.....Appellants
(By Sri Jeevan J. Neeralgi, Advocate)
And:
M/s. Welcast Steels Ltd.,
A Company incorporated under the
provisions of the Companies Act, 1956,
2
Having its Registered office at
Plot No.15, Phase I, Peenya Industrial Area
Bengaluru - 560056
Represented by its Executive Director
Mr. Yash Raj.
..... RESPONDENT
(BY Sri Vikram Nankani, Sr. Counsel for
Sri N.C. Mohan, Advocate)
This Writ Appeal is filed under Section 4 of the
Karnataka High Court Act praying to set aside the order
passed in the Writ Petition No.16716/2007 (GM-RES) c/w
Writ Petition No.9551/2008 (T-TAR) dated 26.08.2011
This Writ Appeal having been heard and reserved for
judgment on 30.10.2019, coming on for pronouncement of
judgment, this day, Ashok S. Kinagi, J., delivered the
following:
ORDER
Aggrieved by the order dated 26.08.2011 passed by the learned Single Judge in W.P.No.16716/2007 c/w W.P.No.9551/2008, in allowing the writ petition, the respondents have filed this writ appeal.
2. Brief facts of the case:
The present petition is being filed by the petitioner, challenging the arbitrary and illegal actions of respondent No.2 ordering imposing a penalty of 3 Rs.280 lakhs and suspension of the IEC of the petitioner with immediate effect till the amounts of penalty is paid by the petitioner and cancellation of the petitioner's Advance Licence. The respondent No.2 also ordered that no further licences or procurement of goods from canalizing agency, or any other permission under the said Act as defined under the Section 2(g) of chapter I shall be issued to the petitioner firm until the petitioner complied with respondents Order-in-Original dated 26.09.2007 (received by the petitioner on 29th September, 2007).
The cancellation of their Licence and the suspension of their IEC has brought the petitioner's business to a complete standstill inasmuch as the petitioner are prevented from making any imports whatsoever, severely hampering the manufacturing operations of the petitioner; their business is suffering huge losses;
the petitioner are at a risk of delay in supplying all 4 their export orders which will expose them to penalties, losses and a loss of both reputation and customers; lead to idling of approximately 500 permanent and temporary workers. The petitioner say and submit that to offset the high power cost, they obtained an Advance Licence for import of duty free fuel (Furnace Oil) on Actual User Condition, as permitted under the General Note for Fuel Policy, subject to the terms and conditions set out in Chapter 4 of the Foreign Trade Policy. It is to be noted that the petitioner have not availed any Advance Licence facility for import of any other raw material listed in the SION for manufacturing the HCGMB.
That Chapter 4 of FTP contains the provisions relating to Duty Exemption Scheme, which in turn, contains, different schemes formulated by the Government of India for extending incentive to exporter. One such scheme is the Advance License 5 Scheme, whereby Licenses are issued for import of raw material duty free for use in the manufacture of export products, with an obligation to export the goods as per the quantity and value mentioned on the license within the stipulated time period. Such licenses are issued based on the fixed standard which are called Standard Input Output Norms (hereinafter referred to as the "said norms"). The petitioner applied for and was granted four Advance Licenses, details whereof are given in a Statement. That under all the said four Advance Licenses, the petitioner had applied for and were therefore permitted to import, duty free only Furnace Oil which is one of the inputs permissible under the said norms. The petitioner did not opt for duty free import of other input/raw material, although permissible under the said norms. In the manufacture of the said goods, the petitioner also uses various other inputs/raw materials. As duty 6 paid material/inputs were used by the petitioner in the manufacture of the said goods exported by them, including under the said four Advance Licenses, the petitioner applied for issue of Duty Exemption Pass Book(DEPB)licenses which are issued post export under Chapter 4 of FTP. That there is no prohibition or error in either the said Act or the FTP in availing the benefit under DEPB and Advance Licenses in respect of the same export goods. This is more so, when as stated hereinabove, duty paid materials/inputs were used in the manufacture of goods for export and as per well recognized and time tested policy of the Government of India with taxes are not exported, upon export of the said goods, the petitioner applied for DEPB since the said goods exported by the petitioner carried duty paid raw materials/inputs on which duty was paid and barring Furnace Oil, duty free benefit was not availed in respect of the other 7 raw materials/inputs permissible under the said norms.
Despite the fact that the petitioner fulfilled the export obligation in time and as per the quantity and value endorsed on the said licenses by an order dated 11th January 2007 in respect of the first Advance License bearing No.710034247 dated 23rd January, 2004, the second respondent passed an order dated 11th July, 2007 directing the petitioner to pay customs duty along with interest and penalty @ 1% of the unfulfilled export. By the same, the second respondent also cancelled the IEC Code.
The petitioner filed Writ Petition No.1808/2007 before this Court challenging the order dated 11th January, 2007 and by an order dated 20th January, 2007, this Court admitted the petition with regard to cancellation of IEC Code, but directed the petitioner to avail alternative remedy against the said order dated 8 20th February, 2007 on deposit of Rs.35 lakhs against Rs.68.32 lakhs towards customs duty and interest leviable on the Furnace Oil imported by them as ordered by the second respondent.
The petitioner has since filed an appeal against the order dated 11th January, 2007 with regard to the demand for customs duty, interest and penalty and the same is pending before the Additional Director General of Foreign Trade, New Delhi. The petitioner has also since deposited Rs.35 lakhs in compliance wit the orders of this Court. The petitioner crave leave to refer to and rely upon the memorandum of appeal filed before the Additional Director General of Foreign Trade.
The export obligation period in respect of the second license bearing number is 710039056 dated 11th July, 2005. Accordingly, by letter dated 10th July, 2007, the petitioner informed the respondents that 9 they had exported the goods to the tune of Rs.43.25 crores as against the obligations to export goods worth Rs.40 crores.
While the appeal before the Additional Director General is pending, the second respondent issued a Demand Notice dated 25th July, 2007 in respect of the second license bearing No.710039056 dated 11th July, 2005 on the ground that although the export obligation period expired on 11th July, 2007 no export documents to show fulfillment of the export obligation had been submitted in terms of paragraph 4.25 of the Handbook of Procedures (hereinafter referred to as 'the Handbook').
The petitioner also has two other Advance Licenses bearing Nos.710043028 dated 13th February, 2006 and 710045727 dated 27th June, 2006. against these two Advance Licenses also while the petitioner have completed the export obligation, the petitioner 10 have also availed the benefit of DEPB since the petitioner had imported only Furnace Oil duty free and used other inputs/raw materials which are duty paid. The petitioner apprehend that like in the case of first and second licenses, the respondent shall take the same action once the export obligation period in respect of these two licenses expires on 13th February, 2008 and 27th June, 2008. All the exports and imports are in accordance with law. The DEPB benefit availed by the petitioner is 3% of the FOB value and with effect from 1st April, 2006 the petitioner have undertaken third party exports as is permissible under the provisions of the FTP and the Handbook. The petitioner craves leave to refer to and rely upon the said provisions as and when required. Accordingly, with effect from 1st April, 2006 the DEPB benefit has been availed by the third party (merchant exporter) and not the petitioner but the petitioner apprehend 11 that in view of the stand taken by the respondent, the goods manufactured by them and exported in terms of the provisions of FTP and the Handbook shall be de- recognized by the respondents towards the discharge of the export obligations under the remaining two licenses also.
3. Learned Single Judge after considering the material on record, allowed the writ petition and quashed the order passed by the appellate authority and set aside the order of the appellate authority and issued a mandamus directing the respondent to accept exports affected by the petitioner directly or indirectly towards fulfillment of the obligation under the impugned advance licence as well as the benefit of DEPB which he has already claimed against the exports and further directed the respondents to restore the Import and Export Code of the petitioner 12 and withdraw the cancellation of advance licence and also further directed to refund the amount forthwith.
4. The respondents aggrieved by the order passed by the learned Single Judge have filed this appeal.
5. We have perused the records and order passed by the learned Single Judge. Hand Book of procedures in respect of para 2.4 of the Export and Import Policy 2002-2007 Clause 4 reads as under :
(4) A decision was taken to permit the duty free import of fuel for all Advance Licence applications either under SION or under self declaration as per para 4.7. Hence para 4.9 pertaining to Standardisation of Adhoc norms is amended as under:
For Standardisation of norms, an
application may be made by the
manufacturer exporter or merchant-
exporter, tied to supporting manufacturer, duly filled in with complete data. Such 13 applications shall be made to the Advance Licensing Committee (ALC) in the form given in Apendix-10.
Import of fuel may also be allowed by ALC subject to the following:
(a) The facility of import of fuel shall be allowed only to the manufacturer having captive power plant.
(b) Fuel should be allowed either under specific SION or as per the general fuel policy for productions for which SION exists or as per general fuel policy under paragraph 4.7 or under ad-hoc norms.
(c) Fuel should be allowed only against an actual user licence and therefore, fuel shall not be allowed for imports against DFRC, which is transferable in nature.
(d) Even where fuel is included as an input under SION, it shall not be taken into account while fixing the DEPB rate for such products against which fuel has been allowed as an input.
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(e) The applications of fixation of fuel
entitlement for new sectors and
modification of the existing entitlement as per the General Note for Fuel in the Handbook of Procedures (Vol.2) would be made to the Advance Licensing Committee along with the requisite date in Appendix 10 H pertaining to the "Data Sheet for Fuel Rate". The Advance Licence holders wishing to procure the fuel indigenously m ay apply for an Advance Release Order of Back to Back Inland Letter of Credit. The indigenous supplier supplying fuel shall be entitled for deemed export benefits given in para 8.3(a), (b) & (c) of the Policy. In case the indigenous suppliers is now willing to avail of DE benefits under such supplies of fuel to the Advance Licence holder, he may issue a disclaimer on the basis of which the Advance Licence holder can avail of the deemed export benefits as per procedure given in Chapter 8 of the Handbook of Procedures (Vo.I).15
6. Clause (d) provides that even the fuel is included as an import under SION, it should not be taken into account while fixing the DEPB rate for such products against which fuel has been allowed as an input. The petitioner has imported fuel under the Advance Licence Scheme and even admittedly he has not imported any other raw material under that scheme. The petitioner has not availed any benefit under the Advance Licence Scheme. Once the petitioner fulfills the export obligations of Rs.30 crorers on the cost of Rs.2.10 crores, he has incurred for importing fuel. Though the petitioner availed the benefit under the Advance Licence Scheme to import fuel as is clear in the aforesaid amended provision that has to be excluded from the said scheme.
7. Learned Single Judge considering the submissions and entire material on record has rightly allowed the writ petition. We do not find any grounds 16 to interfere with the impugned order. Accordingly, the writ appeal is dismissed.
Sd/-
JUDGE Sd/-
JUDGE Naa