Allahabad High Court
Sachin Pandey vs U.O.I.Thru.Secy.Ministry Of Commerce ... on 18 October, 2019
Bench: Pankaj Kumar Jaiswal, Irshad Ali
HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH Court No. - 1 Case :- P.I.L. CIVIL No. - 28695 of 2019 Petitioner :- Sachin Pandey Respondent :- U.O.I.Thru.Secy.Ministry Of Commerce & Industries & Ors. Counsel for Petitioner :- Ritesh Verma Counsel for Respondent :- A.S.G.,Dipak Seth Hon'ble Pankaj Kumar Jaiswal,J.
Hon'ble Irshad Ali,J.
1. Heard Sri Ritesh Verma, learned counsel for the petitioner, Sri S.B. Pandey, Senior Advocate, learned Additional Solicitor General assisted by Sri Varun Pandey for the respondent no. 1 and 2 and Sri Dipak Seth, learned counsel for the respondent no. 3.
2. The Government of India formulated a Foreign Trade Policy (FTP) in terms of Section 5 of The Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act) to increase Indian International Trade Market. The main object of formulating FTP is to accelerate Indian business, generate employment and to earn foreign exchange and to monitor and control the imports into and exports out of India under various promotional schemes.
3. In order to achieve aforesaid object, FTP for the year 2009 - 14 was formulated to regulate foreign trade during the span of said five years. Chapter 4 of FTP 2009-14 published by the Government of India, in exercise of powers conferred by Section 5 of FTDR Act, provides for duty exemption/remission schemes. While Advance Authorization Scheme (AA Scheme) is an Actual User duty free exemption scheme, the Duty Free Import Authorization (DFIA Scheme) permits transferability of authorization and inputs, post endorsement of transferability after discharge of stipulated export obligation in the authorization issued under the provisions of FTP and Hand Book of Procedures.
4. A new Foreign Trade Policy 2015-20 was announced on 01.04.2015 incorporating various changes under DFIA Scheme. The FTP for the year 2015-20 provides a frame work and mechanism for increasing export of Indian goods. In order to increase the foreign trade, certain concessions have been accorded to Indian traders.
5. FTP 2015-20 floated a Duty Free Import Authorization Scheme (DFIA) to regulate export viz-a-viz import of the goods. It is a post export scheme which gave exemption from basic custom duty while importing specified inputs. The design of the scheme is like, the merchant/export trader, has to file on-line application to the concerned regional authority before exporting the goods under DFIA scheme. It is stipulated that export shall be completed within the span of twelve months from the date of generation of particular file number. On completion of export and realization of proceeds, one has to apply for issuance of DFIA with the concerned authority. On each transaction, separate DFIA is issued as per the Standard Input Output Norms (SION). On issuance of authorization the trader will get exemption from paying basic custom duty on the goods allowed to be imported under scheme.
6. In order to give effect to the DFIA Scheme contained in Foreign Trade Policy 2015-20, the Government of India, Ministry of Finance, issued Notification dated 1st April, 2015 in exercise of powers conferred upon it under Sub-section (1) of Section 25 of Customs Act, 1962. The said notification exempts material imported into India against a valid DFIA Scheme in terms of paragraph 4.25 and 4.27 of the Foreign Trade Policy, 2015-20, subject to the conditions contained therein, which are reproduced below:
DUTY FREE IMPORT AUTHORIZATION SCHEME (DFIA) 4.25 DFIA Scheme
(a) Duty Free Import Authorization is issued to allow duty free import of inputs. In addition, import of oil and catalyst which is consumed / utilized in the process of production of export product, may also be allowed.
(b) Provisions of paragraphs 4.12, 4.18, 4.20, 4.21 and 4.24 of FTP shall be applicable to DFIA also.
(c) Export of white sugar under DFIA is allowed under SION Sl.No-E 52 till 30.9.2018 and DFIA in such cases shall be issued only on or after 1.10.2019. Such DFIAs shall be valid for imports till 30.9.2021.
4.27 Eligibility
(i) Duty Free Import Authorization shall be issued on post export basis for products for which Standard Input Output Norms have been notified.
(ii) Merchant Exporter shall be required to mention name and address of supporting manufacturer of the export product on the export document viz. Shipping Bill/ Bill of Export / Tax Invoice for export prescribed under the GST rules.
(iii) Application is to be filed with concerned Regional Authority before effecting export under Duty Free Import Authorization.
(iv) No Duty Free Import Authorization shall be issued for an input which is subjected to pre-import condition or where SION prescribes "Actual User" condition or Appendix-4J prescribes pre import condition for such an input.
7. The writ petitioner is an Advocate by profession, claims to have filed the instant petition in public interest and to prevent huge unwarranted loss of public money. According to him the respondents have failed to discharge their obligations and inaction of the respondents is resulting in loss of public revenue in the form of duty exemption being availed by unscrupulous exporters and importers, wherein the likelihood of connivance of exporters and importers with the officials of the respondents cannot be ruled out. On this premise he has prayed as follows:
a) to forthwith prohibit the duty free import of goods mentioned under the Transferable Authorizations issued by the office of respondent no. 2 under the "Duty Free Import Authorization Scheme ('DFIA Scheme'- notified in Chapter 4 of the respective Foreign Trade Policies for 2009-14 and thereafter for 2015-20), unless the technical specification/quality and characteristics of the imported goods are specifically declared in the shipping bills by the exporter, the imported goods are actually used as inputs in manufacture of export product and the imported goods are not merely alternative inputs or goods capable of using in the export product;
b) directing the respondents to initiate appropriate departmental and/or other proceedings against the officers who are responsible for permitting duty free import of goods without ensuring the aforesaid requirements, by issuing such DFIAs or allowing imports thereunder; and
c) directing the respondents to initiate criminal prosecution under the provision of Section 135 and recovery proceedings under Section 28 of the Customs Act, 1962 against those exporters/importers who are availing undue duty benefits under DFIA Scheme without satisfying the aforesaid requirements.
8. According to the petitioner, duty free import of any goods under Transferable DFIA cannot be permitted unless each of the following 'three essential conditions' are satisfied-
a) the technical specification/quality and characteristics of the imported goods are specifically declared int he shipping bills by the exporter,
b) the imported goods are actually used as inputs in manufacture of export product, and
c) the imported goods are not merely alternative inputs or goods capable of using in the export product.
9. For this purpose, apart from the provisions of Chapter 4 of FTP 2009-14 and 2015-20 concerning DFIA Scheme, the petitioner has also placed on record-
i) Notification Nos. 31 and 90 dated 01.08.2013 and 21.08.2014 respectively inserting Para 4.1.15 (a) and (b) in FTP,
ii) DGFT Public Notice No. 35 dated 30.10.2013
iii) Customs Notifications 98/2009-Cus dated 11.09.2009, 19/2015-Cus. dated 01.04.2015
iv) DGFT Policy Circulars 22 dated 18.07.2008, 72 dated 24.03.2009, 3 dated 02.08.2013, and
v) Policy decision in Case no. 222 of Meeting No. 08/AM19 dated 17.07.2018 of Policy Relaxation Committee (PRC).
10. The petitioner's contention is that duty evasion is punishable under Section 135 of the Customs Act, 1962 and duty foregone is recoverable under Section 28. Therefore, not only prosecution and recovery proceedings shall be initiated against those exporters/importers availing duty exemption for goods which are not actually used in export product under DFIA Scheme, but also departmental action or any other action may be initiated against the erring officials for not strictly complying with these requirements. According to him, once a policy decision is taken, the issue of practically impossible conditions or onerous conditions pale into insignificance. The petitioner has annexed with the petition judgments relating to Transferable Licences in Goodluck Industries Vs. Commissioner, of the Hon'ble Supreme Court, reported in 2000 (120) E.L.T.a. 66 (SC), S.B. International Ltd. Vs. Asstt. DGFT, reported in 1996 (82) E.L.T. 164 (SC), Collector Vs. MRF Ltd., reported in 2000 (110) E.L.T.A. 163 (SC), Commissioner Vs. Jayant R. Patel, reported in 2003 (155) E.L.T.A. 68 (SC), Commissioner Vs. Godavari Drugs, reported in 2011 (274) E.L.T. 508 (Madrass HC) and Commissioner of Customs, Calcutta Vs. G.C. Jain, reported in 2011 (269) E.L.T.A. 307 (SC). He submits that the importers to avail unintended benefits under DFIA and the respondents to justify their inaction cannot be permitted to take shelter of these judgments because none of these judgments are applicable in the current scenario in respect of the DFIA Scheme, as it exist now.
11. Sri S.B. Pandey, learned ASG for the respondent no. 1 (Union of India) and respondent no. 2 (DGFT) and Sri Dipak Seth, learned counsel appearing for the respondent no. 3 (Commissioner of Customs, Lucknow), opposed the admission of the PIL and submitted that the PIL is misconceived and the claims made therein are erroneous.
12. We have heard the parties and have carefully perused the records.
13. We are unable to agree with the petitioner. Directions are being sought by the petitioner against the respondents without any justifiable grounds. The DFIA Scheme as also the earlier Transferable DEEC Schemes are based on the Standard Input Output Norms. In any event, there is no need to go into the issue of applicability or otherwise of the various judgments referred by the petitioner.
14. In Pushpanjali Floriculture Pvt. Ltd. Vs. Union of India, reported in 2016 (340) ELT 32, a Division Bench of the Hon'ble Punjab and Haryana High Court has already considered the DFIA Scheme and has observed as under:-
"25. The DFIAs, in the present case were issued on post-export basis. In other words, the exports in fulfilment of the Export Obligation thereunder were effected by the Exporter / Licence holder prior to issuance of the said DFIAs. It would be impossible, therefore, for any additional indication/endorsement to be entered in the Shipping Bills whereunder the exports had already been effected. Clearly, therefore, requiring the holder or the transferee of the DFIA, which was issued on post-export bases, to comply with para-4.1.15 as inserted by the above-mentioned impugned Notification dated 01/08/2013, would amount to insisting on an impossibility. On the face of it, therefore, insistence on the said requirement would be hit by the well-established principle that no person could be required, by the law, to perform the impossible (lex non cogit ad impossibilia). [Refer State of Rajasthan v Shamsher Singh, SCC 416]
28. How an importer could be required only to import inputs which have actually been used in products which already stand exported. SION norms are notified to prescribe permissible inputs against any export product. The DFIA is issued on such standard basis. It cannot be argued that what is contemplated by these clauses is only replenishment, as replenishment is an entirely independent concept, in respect of which the FTP and the HOP contains separate clauses. We can only understand these clauses, i.e. para-4 of the impugned Notification dated 01/08/2013, and para-2 of the impugned Public Notice dated 30/10/2013, as stipulating that, from the product which already stands exported, the inputs used in the manufacture of thereof should somehow be extracted, and only such inputs be allowed to be subsequently imported into India. To say the least, such requirement is manifestly absurd, and it's very incorporation, in the impugned Notification and Public Notice, reflective, as the learned Senior Counsel has correctly emphasized, of total non-application of mind, on the part of the authorities issuing the said Notification/Public Notice.
29. Indeed, on the face of it, it appears that these covenants, by their very nature were never intended to cover the cases of post-export DFIA or transferees of such DFIAs. Else, the DFIAs would be rendered worthless for all such holders/transferees of the DFIAs. This, in our view, could never have been the intention of a beneficial schemes such as the DFIA Scheme. It is trite that beneficial schemes had to be so interpreted as to extend the availability of the benefit thereof, rather than accorded any restrictive interpretation, which would render the schemes worthless to the persons who seek to avail the promised benefit.
33. DGFT Circular No. 72 dated 24.03.2009 which was also in existence on the date of issuance of the subject DFIAs, further clarified specifically in the context of the DFIA Scheme that since the objective of the SION was to allow duty free import of the inputs which are actually used or were capable of being used in the export product, the exporter had the flexibility to import the alternative inputs / products mentioned in the SION. This guideline, therefore, would govern the availability of import benefits under the subject DFIA during their lifetime.
40. Any other interpretation would also render the statutory SION norms a dead letter. DFIA is issued in terms of the SION norms. Duty free import benefits on all items referred to in the said licences as per the SION as on date of its issuance have, therefore, to be guaranteed to the licence holder as well as to all bonafide transferees thereof..................."
15. In Shah nanji Nagsi Exports Pvt. Ltd. Vs. Union of India reported in 2019 (367) E.L.T. 335 (Bom), a Division Bench of the Bombay High Court has also considered the DFIA Scheme and has observed as under:
25. It is not denied that popcorn maize has also similar starch contents as other varieties of maize, indicating that popcorn maize can be used to manufacture maize starch powder. The scheme never conveys that there is actual user condition attached to the import against the export obligation. It amounts to adding some conditions in the FTP when they never exist. Moreover, when the authorisation is made transferable under the scheme there is no question of actual user condition.
27. As per SION export item at serial No. E-75 is maize starch powder against which exporter is permitted to import "maize" without putting any condition or restriction as regards to variety, quality or characteristic in the said entry. Moreover, there is no such corresponding condition in licence. In its absence, any addition of words cannot be imported to change the equation. Precisely, import of popcorn maize is not excluded from the scope of term "maize".
16. We see no reason to take a different view to take away the benefits otherwise available under the DFIA Scheme under the Foreign Trade Policy, whether of 2009-14 or 2015-20, merely to satisfy the petitioner. According to us the aforesaid judgments of the Punjab and Haryana High Court and Bombay High Court still hold the field, so far as permitting duty-free imports under DFIA are concerned. The contention of the petitioner that duty free import of any goods under DFIA cannot be permitted unless each of the above-mentioned "three essential conditions" are satisfied, clearly runes counter to the above judgments which are binding on the authorities. Neither the officers of the respondents can be proceeded against for following such binding precedents nor can the exporters or importers be subjected to any onerous conditions, declaration, bond or undertaking contrary to these binding precedents, which if taken would be non-est.
17. In that view of the matter there is no merit in any of the prayers of the petitioner. Neither any prima facie case is made out for grant of writ of prohibition as sought nor for any direction to initiate departmental or other proceedings against the officers of the respondents. Similarly, no prima facie case is made out to issue any direction to prosecute the exporters/importers or to take any action of recovery against them.
18. Accordingly, the PIL is dismissed. No order as to costs.
Order Date :- 18.10.2019 Ashish (Irshad Ali, J.) (Pankaj Kumar Jaiswal, J.)