Karnataka High Court
Union Of India vs M/S Welcast Steels Limited on 4 February, 2020
Equivalent citations: AIRONLINE 2020 KAR 720
Author: Ravi Malimath
Bench: Ravi Malimath
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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.1352 of 2012 (GM-RES)
Between:
1. Union of India,
Ministry of Commerce & Industry,
Department of Commerce,
Udyog Bhavan, Maulana Azad Road,
New Delhi-110 001
By its Secretary.
2. The Commissioner of Customs,
"Customs House",
Panambur, Mangaluru
3. The Joint Director General of
Foreign Trade,
Ministry of Commerce & Industry,
Kendriya Sadan,
6th Floor, C & E Wing,
17th Main Road,
Koramangala, 2nd Block,
Bengaluru - 560 034.
4. The Director General of
Foreign Trade,
Ministry of Commerce & Industry,
2
Directorate General of Foreign Trade,
Udyog Bhavan, H-Wing,
Gate No.2, Maulana Azad Road,
New Delhi-110 001.
..... Appellants
(By Sri Jeevan J. Neeralgi, Advocate)
And:
M/s. Welcast Steels Ltd.,
Plot No.15, Phase I,
Peenya Industrial Area,
Bengaluru - 560 058,
A company incorporated under the
provisions of Companies Act, 1956,
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.1808/2007 (GM-RES) 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.1808/2007, in 3 allowing the writ petition, the respondents have filed this writ appeal.
2. Brief facts of the case are as follows :
The petitioner is a Public Limited Company engaged in manufacture of export of foundry products including High Chromium Grinding Media Balls (hereinafter referred to as HCGMB). In terms of the Foreign Trade Policy for the period 2004-2009, said HCGMB falls under the Engineering Product Group and is listed at Sl.No.671 of the Standard Input Output Norms (hereinafter referred to as SION). The petitioner challenging the arbitrary and illegal action of respondent No.3 ordering cancellation of the petitioner's licence and ordering cancellation of the petitioner's advance licence and ordering suspension of the IEC of the petitioner till the amount of custom duty plus interest claimed to be due is paid by the petitioner and holding that no further licence will be 4 issued to the petitioner under any duty exception scheme in terms of para 4.24.1 of Handbook Procedures for the period of 2004-2009 until the claimed dues are recovered from the petitioner in terms of the order in original dated 11.01.2007 and received by the petitioner on 16.01.2007. The petitioner has got an alternative remedy to file an appeal against the order dated 11.01.2007.
3. The petitioner is One Start Export House and member of the Engineering Export Promotion Council in Bengaluru and the export turnover of the petitioner during the year 2005-2006 was Rs.7,203.55 lakhs against the total turnover of Rs.11,689.87 lakhs. The State Electricity Authority was unable to cater to the additional power requirements of the petitioner, leaving the petitioner with no alternative but to install a 5.1 MW captive power plant in their factory which uses furnace oil as a fuel for generating power. The 5 petitioner to offset the high power cost obtained an advance licence for import of duty free fuel (furnace oil) on the Actual User Condition as permitted under General Note for Fuel Policy, subject to the terms and conditions set out in Chapter 4 of the Foreign Trade Policy. The petitioner has not availed any advance licence facility for the import of any other raw material listed in SION for manufacturing the HCGMB.
4. Para 4.3 of Chapter 4 of Foreign Trade Policy confers post export Duty Entitlement Pass Book (DEPB for short) benefits with the basic objective of neutralizing the incidence of customs duty on the import content of export product. This neutralization is by way of granting certain percentage of Free On Board (FOB for short) value of the exports as duty credit and the percentage is based on fixed SION the norms for manufacturing of HCGMB is :
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High Chromium Grinding 1. Mild Steel Scap 0.90 MT Media Balls for Cement 2. H.C.Ferro Chome 292 Kg Grinding Bills (Composition 3. Ferro Molly (mo-75%) Cr.16-17%, Mo-0.6.-0.7%, 10 Kg Si-0.6-0.7%, C-1.5-2.5%, Fe 4. Ferro Silicon (Silicon Balance 75%) 10Kg It may be noted that fuel is not appearing in the norms list, listed above.
5. From para 4.1.3 of the Foreign Trade Policy provides "an advance licence is issued to allow duty free import of inputs which are physically incorporated in the export product (making normal allowance for wastage). In addition, fuel, oil, energy, catalysts etc. which are consumed/utilized in the course of their use to obtain the export product may also be allowed under the scheme....."
6. The petitioner obtained an advance licence No.0710034247 for the value of Rs.2.10 crores against the export obligation of Rs.30 crores. The petitioner requested third respondent for closure of 7 their advance licence while submitting that in compliance with the condition in the said licence, they had exported SCGMB to the tune FOB value of Rs.30 crores. The petitioner produced the documents such as original advance licence, copies of the bill of the entry, copies of the shipping bills and copies of the Bank realization certificate.
7. In response to the said letter, the office of the respondent No.3 called upon the petitioner to submit the original copies. The petitioner vide letter dated 28.07.2006 informed the office of the third respondent that they had obtained the advance licence for import of fuel on Actual User Condition under the General Note of fuel at 7% of the FOB value and that the Original Export Promotion copies of shipping bills and original Bank Realization Certificates had already been submitted to the DEPB section for availing DEPB incentive.
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8. The third respondent issued a show cause notice dated 04.09.2006 calling upon the petitioner to show cause as to why action should not be initiated against them to cancel the licence ab initio and to suspend the Import Export Code (IEC for short) apart from refusing further licence to them in terms of para 4.24.1 of Hand Book Procedures 2004-2009.
9. The petitioner vide reply dated 07.09.2006 to the show cause notice, filed a detailed reply to the show cause notice. That on 27.11.2006, the Foreign Trade Development Officer called the petitioner to clarify the words "though other export" and informed the petitioner that policy to fulfill the export obligation in time would attract the penal provisions under the Foreign Trade (Development and Regulation) Act, 1992. The petitioner addressed a letter to the respondent No.3 on 01.12.2006 stating that it had fulfilled its export obligation by exporting HCGMB and 9 also applied for extension of time for fulfilling the said obligation by period of six months. The petitioner clarified that by the term "other exports" it means the export of HCGMB in addition to the turnover that they have submitted earlier for consideration of fulfillment of export obligation. The Foreign Trade Development Officer informed the petitioner through a letter dated 08.12.2006 stating that not a single shipment had been effected against their advance licence and export obligation period had expired on 30.11.2006. the petitioner was called upon to submit the export obligation documents as prescribed under para 4.25 Hand Book of Procedures within two months of expiry of the export obligation period as per the para 4.24. the petitioner vide letter dated 26.12.2006 stated that they were entitled to the benefit under DEPB as well as duty free imports of furnace oil for captive power generation to the extent mentioned in General Note 10 for fuel towards the same export of finished goods. The petitioner further stated that it had approached the Policy Relaxation Committee/Grievance Committee in the Ministry of Commerce and Industry vide letter dated 02.12.2006 seeking clarification in respect of the issue in dispute and requested that no action be initiated against it, pending their representation before the Policy Relaxation Committee/Grievance Committee. The respondent No.3 passed an ex parte order in original dated 11.01.2007 and proceeded to cancel the advance licence, suspend the IEC till the entire amount of custom duties plus 15% interest from the date of export and an amount equivalent to 3% of CIF value of imported material was paid and further ordered that no further licences would be issued to the petitioner under any Duty Exemption Schemes in terms of para 4.24.1 of the Hand Book of Procedures 2004-2009 until the above dues are 11 recovered from the petitioner. The petitioner aggrieved by the order dated 11.07.2007, filed an appeal before the appellate authority. The appellate authority rejected the appeal filed by the petitioner. The petitioner aggrieved by the order passed by the appellate authority filed the writ petition.
10. 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.
11. The respondents aggrieved by the order passed by the learned Single Judge have filed this appeal.
12. 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
13. 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 Schme 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 performs export obligation of Rs.30 crores on the cost of Rs.2.10 crores which he has incurred for importing fuel, there is no obligation on the petitioner to pay any duty on the said fuel. The petitioner would be entitled to payment of duties under DEPB scheme which he has paid on the raw material used in the manufacture of final product. When admittedly, the petitioner has not imported any raw material other than the fuel under the Advance 16 Licence Scheme, which is excluded as per the amended provision, the net result is the petitioner has not availed any benefit under the Advance Licence Scheme. To avail the benefit of both Advance Licence Scheme and DEPB scheme, the petitioner has to perform the export obligation of Rs.30 crores which he has fulfilled. The petitioner has purchased the raw material which has gone into use of manufacturing products and therefore, the petitioner is entitled for refund of the said duty paid. If the petitioner opts for duty Draw Back Scheme the rate at which he is entitled to the duty draw back is 3% and under DEPB Scheme, he is entitled to 4%. The petitioner availed DEPB scheme which is favourable to him.
14. Hence, in view of the above discussion we are of the considered view that the learned Single Judge has rightly held that the petitioner has not imported any raw material other the fuel under the 17 Advance Licence Scheme which is excluded as per the amended provision. The learned Single Judge after considering the material on record held that the original authority as well as the appellate Authority failed to consider the material on record and passed the order which is perverse and arbitrary and quashed the order passed by the original authority as well as the appellate Authority. We do not find any ground to interfere with the impugned order. Hence, we proceed to pass the following:
ORDER Writ appeal is dismissed.
Sd/-
JUDGE Sd/-
JUDGE Naa