Punjab-Haryana High Court
M/S Jindal Fine Indus vs Union Of India And Ors on 5 December, 2025
Author: Amarinder Singh Grewal
Bench: Amarinder Singh Grewal
IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH
****
202-1 CWP-11565-2007
Date of Decision: 05.12.2025
M/S JINDAL FINE INDUS. ...Petitioner
Vs.
UNION OF INDIA AND ORS. ...Respondents
AND
Sr. Case No. Petitioner(s) Respondent(s)
No.
2. CWP-11553-2007 M/s Gold Star Union Of India and Ors.
(O&M) Industries
3. CWP-11680-2007 M/s Jagraon Exports Union Of India and Ors.
CORAM:- HON'BLE MR. JUSTICE JAGMOHAN BANSAL
HON'BLE MR. JUSTICE AMARINDER SINGH GREWAL
Present:- Mr. Sarjit Bhadu, Sr. Advocate
Mr. Veer Singh, Advocate and
Ms. Sanya Thakur, Advocate
for the petitioner (s)
Mr. Saurabh Goel, Sr. Standing Counsel (through V.C.) with
Ms. Anju Bansal, Advocate and
Ms. Geetika Jindal, Advocate
for respondents-DRI & UOI
Mr. Ajay Kalra, Sr. Standing Counsel with
Ms. Isha Janjua, Advocate
for respondent-Customs
***
JAGMOHAN BANSAL, J. (ORAL)
1. As common issues are involved in the captioned petitions, with the consent of both sides, the same are hereby disposed of by this common order. For the sake of brevity and convenience, facts are borrowed from CWP- 11565-2007.
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2. The petitioner through instant petition under Articles 226/227 of the Constitution of India is seeking setting aside of show cause notices dated 29.09.2007 (Annexure P-20) and 27.05.2008 (Annexure P-21) issued by Directorate of Revenue Intelligence (for short 'DRI'). They are further seeking direction to respondent to refund a sum of Rs.30,00,000/- which was recovered during the course of investigation. They are also seeking release of documents/files/computers.
3. Learned counsel for the parties are ad idem that prayer qua release of documents/files/computers no more survives.
4. The petitioner is engaged in the business of manufacture and export of bicycle parts. It exported out of country bicycle parts during 2004-05. On 15.09.2005, Officers of DRI conducted search at business and residential premises of the petitioner. During the course of search, certain documents including computers and laptops were resumed. The respondent recorded statements of officials/partners of petitioner on different occasions. On the basis of scrutiny of documents and statement of officials/partners of the petitioner, the respondent-DRI formed an opinion that petitioner in the manufacture & export of bicycle parts utilized Hot Rolled (for short 'HR') Sheet as input whereas Duty Free Replenishment Certificate(s) (for short 'DFRC') were obtained with respect to input namely Cold Rolled Closed Annealed (for short 'CRCA'). During the course of investigation, the DRI received different policy circulars/letters from Directorate General of Foreign Trade (for short 'DGFT') clarifying that there is flexibility in utilization of HR sheets and CRCA. The DRI did not agree with the opinion of DGFT and issued impugned show cause notices dated 29.09.2007 and 27.05.2008 calling upon the petitioner as well as user of DFRC (Importers) to show cause as to why duty foregone at the time of import of CRCA utilization DFRC issued to 2 of 12 ::: Downloaded on - 09-12-2025 23:25:55 ::: CWP-11565-2007 and connected cases -3- petitioner should not be demanded along with interest and penalty. The petitioner preferred petition before this Court assailing show cause notice on different grounds including jurisdiction of DRI to issue show cause notice.
5. The petition was disposed of by this Court vide order dated 04.12.2024. The relevant extracts of order dated 04.12.2024 reads as:-
"13. Keeping in view the order passed by the Supreme Court in M/s Canon India Pvt. Ltd. (supra), the DRI officer would be held to be a 'proper officer' for issuing of notice and conducting of investigation. Accordingly, the contention of the petitioner(s) that the DRI officer would have no jurisdiction, cannot be accepted. We, therefore, reject the same and direct the DRI to proceed ahead and pass appropriate orders.
If the petitioners are still aggrieved keeping in view the orders passed by the Supreme Court, they would be free to file appeal before the appellate authority, in accordance with law
14. Accordingly, all the writ petitions are disposed of in the above terms."
6. The petitioner preferred SLP No.4745 of 2025 before Hon'ble Supreme Court which vide order dated 06.02.2025 held as:-
"3. It is a case of the petitioner that it is into the business of exporting bicycle components availing the benefit of Duty Free Replenishment Certificate (DFRC Scheme) which was announced by the Ministry of Commerce to Merchants as well as manufacturing exporters for imports of inputs required in manufacture and good exported.
4. According to the petitioner, the DFRC issued on Post Export Basis, is freely transferable and as per Standard Input Output Norms (SION) fixed by the Ministry of Commerce.
5. The Principal argument of the petitioner is that the bicycle parts are covered under the serial nos. C-50 to C-122 of SION which provides for the import of Cold Rolled Closed Annealed ("CRCA") and Hot Rolled ("HR") sheets, importable against the export of Chain Wheel and Free Wheel.
6. We have heard Mr. Balbir Singh, the learned senior counsel appearing for the petitioner.
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7. We take notice of the fact that the contention which is sought to be raised before us has not been dealt at all with by the High Court. We do not want to get into the controversy whether such contention was raised before the High Court or not. The High Court seems to have proceeded relying on the recent pronouncement of the Supreme Court in the case of Commissioner of Customs vs. Canon India Pvt. Ltd. reported in 2024 SCC OnLine SC 3188.
8. In such circumstances referred to above, we permit the petitioner to go back to the High Court by filing appropriate application so that the contention which has been raised before us, can be looked into by the High Court.
9. This petition is accordingly disposed of with liberty to go back to the High Court by filing either a review application or any other appropriate application in accordance with law."
7. The petitioner in view of aforesaid order of Supreme Court filed review application which was allowed by this Court vide order dated 28.02.2025. Relevant extracts of the order dated 28.02.2025 read as:-
"5. Review petitions have been filed by the petitioners accordingly, and they submit that the said aspect may be examined afresh.
6. Taking into consideration the observations of the Apex Court, we recall our order dated 04.12.2024; allow these review petitions; and restore the writ petitions i.e. CWP-11553-2007, CWP-11565-2007 and CWP- 11680-2007 to their original number, to be listed as per roster.
7. It is open for the petitioners to argue all the points in the petitions which they have raised before the Supreme Court, as observed supra. Counsel appearing for the respondents would be free to make its submissions accordingly."
8. Learned Senior counsel representing the petitioner submits that petitioner during 2004-2005 exported cycle parts under DFRC Scheme. In the shipping bill, it was never declared that exporter was using CRCA Sheet whereas in the shipping bill, declaration was made as per Standard Input 4 of 12 ::: Downloaded on - 09-12-2025 23:25:55 ::: CWP-11565-2007 and connected cases -5- Output Norms (for short 'SION'). The description as incorporated in Entry No.C74 of SION was reproduced in the shipping bill. The petitioner submitted shipping bill along with other documents to DGFT which issued DFRC. The petitioner did not use DFRC but further sold to importers. The respondent, especially DRI has no jurisdiction to doubt genuineness of DFRC issued by DGFT. The DGFT in its reply as well as various communications has clarified that inputs used in the manufacturing of export product are not required to be examined unless are sensitive items. The DGFT has further clarified that HR Sheet may be used in place of CRCA Sheet. The DGFT has not cancelled DFRC, thus, Customs Authorities including DRI has no right to challenge validity of DFRC and thereafter issued show cause notice. It is DGFT which is competent authority to issue and cancel DFRC like other export incentive scrips. The respondent has raised demand from petitioner who exported the goods and obtained DFRC, however, did not utilize DFRC. It was a freely marketable scrip, thus, petitioner sold DFRC in open market and buyer utilized the same for import of goods without payment of duty. Section 28AAA was inserted in 2012 which empowers Customs to raise demand from exporter with respect to export incentive scrips. Period involved in the instant case is prior to 2012, thus, Section 28AAA is inapplicable. In support of his contentions, he cited upon judgment of Hon'ble Supreme Court in "Titan Medical Systems (P) Ltd. Versus Collector of Customs, New Delhi", (2003) 9 SCC 133, Allahabad High Court in "PTC Industries Ltd. Versus Union of India and Others", 2009 SCC OnLine AII 2138 and Delhi High Court in "DESIGNCO Versus Union of India and Others", 2024 SCC OnLine Del 8163.
9. Per contra, learned counsel for respondents No.2,3 and 6 submits that petitioner utilized HR sheet whereas obtained DFRC to import CRCA sheet. The petitioner could import same product which was utilized to 5 of 12 ::: Downloaded on - 09-12-2025 23:25:55 ::: CWP-11565-2007 and connected cases -6- manufacture export product. SION gave flexibility to use CRCA or HR sheet, however, utilization in the export product and duty-free import of inputs was not interchangeable. The exporter could import only that input which was used to manufacture export product. The circular and letters issued by DGFT are contrary to Export and Import Policy. The Customs is not bound by circulars issued by DGFT which are contrary to Policy.
10. With respect to applicability of Section 28AAA of Customs Act, 1962, Mr. Goel submits that Section 28AAA is inapplicable, however, respondent has raised demand from petitioner as well as importer. They have been jointly and severely called upon to pay customs duty along with interest and penalty.
11. With respect to power of Customs to raise demand in the absence of cancellation of scrip, he submits that Customs can raise demand because there was violation of Policy as well as terms and conditions of exemption notifications on the part of petitioner-exporter.
12. We have heard learned counsel for the parties and perused the record with their able assistance.
13. The petitioner is not disputing that it had used HR sheet and got DFRC with respect to input namely CRCA. The petitioner is claiming that HR sheet and CRCA are two interchangeable inputs. The petitioner is relying upon policy circulars and instructions issued by DGFT. The Revenue is claiming that instructions/policy circulars of DGFT which are contrary to policy itself as well as customs notification cannot be relied upon.
14. The petitioner is further claiming that DRI had no jurisdiction to issue impugned show cause notice in the absence of cancellation of DFRC. It is DGFT which can cancel DFRC as per Section 9 of The Foreign Trade (Development and Regulation) Act, 1992 (for short '1992 Act'). The DGFT is 6 of 12 ::: Downloaded on - 09-12-2025 23:25:55 ::: CWP-11565-2007 and connected cases -7- competent authority to issue show cause notice and thereafter pass order of cancellation of any scrip including DFRC. In the case of petitioner, the DGFT neither issued show cause notice nor cancelled DFRC in question, thus, DRI beyond its jurisdiction issued show cause notice. The petitioner did not utilize DFRC. It sold to various importers who imported goods without payment of duty against DFRC in question. Section 28AAA was introduced in 2012 and period involved herein is 2004-05, thus, duty cannot be demanded from petitioner.
15. We deem it appropriate to firstly adjudicate question of jurisdiction of DRI to issue show cause notice in the light of arguments of the petitioner. Concededly, it was DGFT which issued DFRC in question. DGFT by way of its policy circulars, letters and reply to writ petition has attempted to support stand of the petitioner. The DGFT is of the opinion that as per applicable entry of the SION, HR sheet as well as CRCA can be used as inputs to manufacture and export bicycle parts. Both inputs are notified under same entry of the SION. Both inputs are interchangeable. There is flexibility qua utilization of these inputs. For the ready reference, policy circular dated 10.10.2005 and letter dated 01/03.05.2007 of DGFT are reproduced as below"
Policy Circular No.30(RE-06)/2004-2009 Dated: 10.10.2005 TO All Licensing Authorities, All Commissioners of Customs, Trade and Industry, Subject: Importability of Alternative inputs allowed as per SION under DERC Scheme.
....
Representations have been received from the trade and industry that a doubt has arisen in the field formations 7 of 12 ::: Downloaded on - 09-12-2025 23:25:55 ::: CWP-11565-2007 and connected cases -8- of customs on the issue of allowing alternative inputs as per SION under DIRC Scheme even of exactly the same inputs, in the product value added chain, has not been utilized in the manufacture of the exporter product.
2. The matter was examined in details and it has been decided to inform all concerned that since the objective of SION is to allow duty free import of the inputs which are actually used of are capable of being used in the export product, the exporter has the flexibility to import the alternative input/product mentioned in the SION as long as the same can be used in the manufacture of the exporter product under the DFRC scheme.
3. Any difficulty being faced in the matter should be brought to the notice of DGFT immediately.
4. This issues with the approval of DGFT.
XXXX XXXX XXXX
Letter Dated : 01/3.05.07
TO
The Director of Revenue Intelligence,
Ludhiana Regional Unit,
51-D, Sarabha Nagar,
Ludhiana
Sub : Importability of alternative inputs allowed under DFRC scheme as per Policy Circular No. 30 dated 10.10.2005
--- regarding Sir, This Directorate has received representation from exporters of Ludhiana that DRI Ludhiana have not yet refunded back the amount deposited with them even after issuance of clarification by DGET on the subject mentioned above. It is reiterated that basic purpose of Policy Circular 30 dated 10.10.2005 was to clarify on the flexibility to import alternative inputs (as per SION), which are capable of being used in the manufacture of the export product. Accordingly against export of "Bicycle and Bicycle parts" as long as CR is capable of being used in the manufacture of these products and CR is available 8 of 12 ::: Downloaded on - 09-12-2025 23:25:55 ::: CWP-11565-2007 and connected cases -9- as an alternative inputs in the SION, exporter will have the flexibility to import CR in lieu of HR. a СОРУ of the earlier letter dated 16.10.2006 is enclosed.
In view of above, you are requested to take necessary action for early refund of amount deposited earlier by exporters based on aforesaid clarification.
16. The above quoted policy circular and letter make it clear that DGFT is supporting case of the petitioner, thus, there is no question of cancellation of DFRC at their end. DFRC was indubitably issued in terms of EXIM policy read with 1992 Act. Section 9 of the 1992 Act empowers DGFT to cancel any licence or scrip. Section 9 of 1992 Act for the ready reference is reproduced as below:-
"9. Issue, suspension and cancellation of licence.-- (1) The Central Government may levy fees, subject to such exceptions, in respect of such person or class of persons making an application for licence, certificate, scrip or any instrument bestowing financial or fiscal benefits of in respect of any licence, certificate, scrip or any instrument bestowing financial or fiscal benefits granted or renewed in such manner as may be prescribed. (2) The Director General or an officer authorised by him may, on an application and after making such inquiry as he may think fit, grant or renew or refuse to grant or renew a licence to import or export such class or classes of goods or services or technology as may be prescribed and, grant or renew or refuse to grant or renew a certificate, scrip or any instrument bestowing financial or fiscal benefit, after recording in writing his reasons for such refusal.
(3) A licence, certificate, scrip or any instrument bestowing financial or fiscal benefits granted or renewed under this section shall--
(a) be in such form as may be prescribed;
(b) be valid for such period as may be specified therein; and 9 of 12 ::: Downloaded on - 09-12-2025 23:25:55 ::: CWP-11565-2007 and connected cases -10-
(c) be subject to such terms, conditions and restrictions as may be prescribed or as specified in the licence, certificate, scrip or any instrument bestowing financial or fiscal benefits with reference to the terms, conditions and restrictions so prescribed.
(4) The Director General or the officer authorised under sub-section (2) may, subject to such conditions as may be prescribed, for good and sufficient reasons, to be recorded in writing, suspend or cancel any licence, certificate, scrip or any instrument bestowing financial or fiscal benefits granted under this Act:
Provided that no such suspension or cancellation shall be made except after giving the holder of the licence, certificate, scrip or any instrument bestowing financial or fiscal benefits a reasonable opportunity of being heard.
(5) An appeal against an order refusing to grant, or renew or suspending or cancelling, a licence, certificate, scrip or any instrument bestowing financial or fiscal benefits shall lie in like manner as an appeal against an order would lie under section 15"
[Emphasis Supplied]
17. From the above-quoted Section, it is quite evident that it is DGFT which is competent authority to cancel DFRC. There is no provision in Customs Act which empowers Customs Authorities to cancel DFRC.
18. Hon'ble Supreme Court in Titan Medical Systems (supra) while dealing with misrepresentation by an exporter with intent to obtain advance licence has held that unless licence is questioned by Licensing Authority, the Customs authority cannot refuse exemption on the allegation that there was misrepresentation. If there is misrepresentation, it was for the licensing authority to take steps in that behalf. Relevant extracts of the judgment are reproduced as below:-
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"12. As regards the contention that the appellants were not entitled to the benefit of the exemption notification as they had misrepresented to the licensing authority, it was fairly admitted that there was no requirement for issuance of a licence that an applicant set out the quantity or value of the indigenous components which would be used in the manufacture. Undoubtedly, while applying for a licence, the appellants set out the components they would use and their value. However, the value was only an estimate. It is not the respondents' case that the components were not used. The only case is that the value which had been indicated in the application was very large whereas what was actually spent was a paltry amount. To be noted that the licensing authority has taken no steps to cancel the licence. The licensing authority has not claimed that there was any misrepresentation. Once an advance licence was issued and not questioned by the licensing authority, the Customs Authorities cannot refuse exemption on an allegation that there was misrepresentation. If there was any misrepresentation, it was for the licensing authority to take steps in that behalf."
19. As per above-cited judgment, unless and until licence is cancelled by licensing authority, the customs authority cannot deny benefit of exemption on the ground of misrepresentation. In the case in hand, the respondent-DRI is claiming that there was misrepresentation as well as violation of policy on the part of petitioner while seeking DFRC. The DGFT instead of taking steps to cancel DFRC, on being pointed out by DRI, has supported case of the petitioner. As per DGFT, there is no misrepresentation or misuse of policy on the part of petitioner. DFRC in question has not been cancelled and in view of afore-cited judgment, in the absence of cancellation of scrip, the Customs authorities cannot deny benefit of exemption notification. The respondent has not cited any contrary judgment.
20. In the light of afore-cited judgment of Supreme Court, we are of the considered opinion that in the absence of cancellation of DFRC, the DRI 11 of 12 ::: Downloaded on - 09-12-2025 23:25:55 ::: CWP-11565-2007 and connected cases -12- was not competent to issue show cause notice raising demand of duty which was waived at the time of import of inputs against alleged DFRC.
21. In view of our above findings, with respect to jurisdiction of DRI to issue show cause notice, we do not find it appropriate to dilate on other issues raised by both sides. All those issues are left open.
22. In the backdrop, we hold that impugned show cause notices are liable to be set aside and accordingly set aside qua petitioner. Petitions are allowed with consequential relief.
23. Pending application(s), if any, also stands disposed of.
(JAGMOHAN BANSAL) JUDGE (AMARINDER SINGH GREWAL) JUDGE December 05, 2025 Deepak DPA Whether Speaking/reasoned Yes/No Whether Reportable Yes/No 12 of 12 ::: Downloaded on - 09-12-2025 23:25:55 :::