Madras High Court
M/S.Supreme Art Works vs Union Of India on 25 October, 2024
Author: C.Saravanan
Bench: C.Saravanan
W.P.No.4325 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 25.10.2024
CORAM
THE HONOURABLE MR.JUSTICE C.SARAVANAN
W.P.No.4325 of 2021
and
W.M.P.Nos.4907 & 4908 of 2021
M/s.Supreme Art Works
Represented by the Director of
M/s.BNT Connections Impex Ltd.,
Chennai, J.Haresh Bakshani ... Petitioner
vs.
1. Union of India
Represented by the Chairman,
Central Board of Excise & Customs,
North Block, New Delhi 110 001.
2. The Customs & Central Excise,
Settlement Commission, Additional Bench,
II Floor, Narmada Block, Custom House,
Chennai 600 001.
3. The Commissioner of Customs ( Exports),
Custom House, Chennai 600 001.
4. The Assistant Commissioner of Customs,
EPCG Section, Customs House,
Chennai 600 001. .. Respondents
https://www.mhc.tn.gov.in/judis
1/19
W.P.No.4325 of 2021
Prayer : Petition is filed under Article 226 of the Constitution of India to
issue a Writ of Certiorarified Mandamus, to call for the records relating to
the Order No.45-50/2020 dated 30.12.2020 passed by the 2nd respondent,
to quash the same and further direct the 2nd respondent to act in
accordance with the Public Notice No.22/2013-(RE)issued by the DGFT
and the Policy Circular No.8/2013 dated 25.10.2013 and in terms of the
customs Notification No.46/2013 to accept the interest amounts as
Rs.48,58,231/-, which is equal to the duty foregone amount and
consequently directing the refund of excess amount of Rs.22,02,559/-
paid by the petitioner towards interest liability to prove its bonafides.
For Petitioner : Mr.Vasa Lohith Kumar
For Respondents : Mr.Rajinish Pathiyil
ORDER
This is a second round of litigation before this Court. Earlier. the petitioner has challenged the Order No.14/2014-Cus dated 28.01.2014 in W.P.No.11451 of 2017 passed by the Settlement Commission. By an order dated 02.01.2020, directed the Settlement Commission to pass appropriate orders in the application filed by the petitioner on 25.08.2015 thus recalled the impugned order dated 28.01.2014 of the Settlement Commission and had directed the Settlement Commission to pass https://www.mhc.tn.gov.in/judis 2/19 W.P.No.4325 of 2021 appropriate orders on merits with the following directions:-
3. The Settlement Commission appears to have referred Circular No.40/2013-Cus dated 09.10.2013 as per which only in the event of bonafide defaults, the benefit of Notification No.46/2013-Cus dated 26.09.2013 read with P.N.No.22(RE-2013)/2009-2014 can be granted. After the impugned order was passed by the Settlement Commission, the petitioner filed an application to recall the impugned order and sent several representations to the Settlement Commission praying for recalling the order to give the petitioner the benefit of Notification No.46/2013-Cus dated 26.09.2013 read with P.N.No.22 ( RE-2013/2009-2014.
4. Though the petitioner has sent several representations along with a miscellaneous application to recall the impugned final order dated 25.08.2015, the Additional Commissioner attached to the Settlement Commission informed the petitioner that the order passed by the Settlement Commissioner under Section 127(J) of the Customs Act, 1962 is conclusive and cannot be re-opened by the Settlement Commission. Whether such orders are conclusive of inconclusive or final or whether they can be recalled can be decided only by the Settlement Commission.
5. Since no orders have been passed by the Settlement Commission in response to the applications filed by the petitioner to recall the impugned order, I am of the view that the present writ petition can be disposed with a direction to the Settlement Commission to pass appropriate order in the application filed by the https://www.mhc.tn.gov.in/judis 3/19 W.P.No.4325 of 2021 petitioner on 25.08.2015 to recall the impugned order. It is made clear that the Settlement Commission shall pass appropriate orders on merits without getting influenced with the observation contained herein.
6. The present writ petition is disposed with the above observations. No costs.
Consequently, connected miscellaneous petitions are closed.
2. Pursuant to the directions of this Court dated 02.01.2020, the Settlement Commission has passed impugned order in F.No.S.A.Cus-17 & 54-58/2013-SC dated 30.12.2020. Operative portion of the impugned order which is relevant for disposal of the writ petition, reads as under :-
“7.9 The Bench finds force in the argument of the Department during and in their post hearing submission dated 18.12.2020 that this is not a bonafide default case, but diversion of capital goods contravening licensing conditions. It is further observed that all the imports have been made between May 2002 and Sept.,2002 and even in 2011, there were no exports worth the name even after 9 years i.e., after the expiry of 8 years within which he had to fulfill the entire export obligation. The Bench finds that the claim of the applicant of Notifications No.113/2002 Dated 16.10.2002 (15% interest liability) amending Notification No.49/2000 dated 27.04.2000 is obviously not applicable in this case as the imports had taken place prior to the amendment. With regard to the applicability of Public Notice https://www.mhc.tn.gov.in/judis 4/19 W.P.No.4325 of 2021 No. 22 (RE-2013) 2009-14 dated 12.08.2013 of MoC&I, DoC, it is to be noted that the said P.N was issued in terms of Para 4.28 and 5.14 of Hand Book of Procedure only for regularisation of Bonafide Default, Notification No.46/2013 only amended Notification 49/2000 dated 27.02.2000 to give effect to the Public Notice No. 22 (RE-2013) 2009-14 dated 12.08.2013. As discussed in Para 7.6 supra and Para (1) & (4) of the Circular which has been quoted for clarity clearly elucidates that it is applicable for bonafide default only. The fact that no exports has been made even after the expiry of the entire period of 8 years and the diversion of he machinery leads us to believe that the default was not bonafide.
7.10 The applicant from 2008, i.e., 6 years after the imports had been approaching DGFT for permitting M/s BNT and the exports made thereof by them to be considered as third party exports. On 7.10.2011 they had approached EPCG Committee,New Delhi for (i) condonation of export obligation (ii) extension of export obligation period from the date of expiry of original licence by two years (iii) acceptance of third party export towards discharge of export obligation. MOC vide File No.04/21/21/014/AM03 dated 06.02.2012 had clarified that as per Para 9.28 of Foreign Trade Policy is not applicable in this case under the definition of Group Company. All this was previous to the issuance of the PN 22 (RE-
2013)/2009-2014 dated the 12th August, 2013. The applicant firm only after the SIIB investigation vide letter dated 15.03.2012 addressed to the Deputy Commissioner of Customs, SIIB, Custom House, Chennai, https://www.mhc.tn.gov.in/judis 5/19 W.P.No.4325 of 2021 inter-alia, expressed their decision to exit out of the EPCG obligation and to regularise their default of non- fulfillment of export obligations. Thus, to conclude, it is seen that while they had all along approached DGFT/MOC for inclusion of M/s BNT for third party exports and on 7.10.2011 they had approached EPCG Committee,New Delhi for condonation and extension of EPCG they never kept the Customs even informed of the developments before the SIIB Wing of the Custom House visited the premises on 30.11.2011 when diversions/sale of the Capital Goods in contravention of notifications were noticed.
The Bench is of the considered view that the above conduct of the applicant does not establish that their default was bonafide. 7.11Further Notification No.46/2013 at Sl.No.22 inserted the following:-
"In the said notification, after the paragraph 4 and before the Table, the following paragraph shall be inserted, namely:-
"5. In a case of default in export obligation, when the duty on goods is paid to regularise the default, the amount of interest paid by the importer shall not exceed the amount of duty if such regularisation has been dealt in terms of Public Notice of the Government of India in the Ministry of Commerce No. 22 (RE-2013)/2009-2014 dated the 12th August, 2013.".
Particularly significant are the words "if such https://www.mhc.tn.gov.in/judis 6/19 W.P.No.4325 of 2021 regularisation has been dealt in terms of Public Notice of the Government of India in the Ministry of Commerce No. 22 (RE-2013)/2009- 2014 dated the 12th August, 2013". It is not brought to our notice that the MOC has dealt with and regularised the default in terms of Public Notice cited supra. In consequence, they have to pay the original rate of @24% interest in terms of condition No.3 in Para 2 of the notification.
7.12 Para 12.6 of the Final Order No.4/2014 Cus dated 28.01.2014, passed by the earlier Bench, reads as under:
"12.6 After analysing various submissions by the applicant on the issue, Bench is inclined to agree with the contention of the Revenue that the rate of interest to be applied would be as per the conditions of the Bond executed by them. the Board's Circular No.40/2013 dated 09.10.2013 issued with reference to Customs Notification No.46/2013 dated 26.09.2013 and Public Notice No.22 (RE-2013) 2009- 2014 dated 12.08.2013 notified by DGFT states that the benefit of restricting the interest amount to the amount of duty applies only in cases of bonafide defaults in fulfillment of export obligation. In the instant case the imported machines were clandestinely cleared/removed/sold. As such the question of fulfilling export obligation did not arise. The applicant themselves have not claimed that their case is to be treated as bonafide default case. As such the Board's Circular dated 09.10.2013 is not applicable in the instant case... (Emphasis supplied) "
Thus, in view of the preceding discussions https://www.mhc.tn.gov.in/judis 7/19 W.P.No.4325 of 2021 this Bench finds no reason to differ from the Findings of the earlier Bench in the Final Order mentioned supra.
7.13 Thus, the Bench concludes that the Applicant is liable to pay Rs.1,12,98,488/- towards interest liability. As an amount of Rs.70,60,790/- stands paid towards interest, as confirmed by the Revenue, the Applicant is to pay further an interest liability of Rs.42,37,698/-.
7.14 The Bench further notes that the Hon'ble High Court has sought to review the interest liability alone and the Jurisdictional Commissioner has quantified the interest component and the only issue open right now before the Settlement Commission is the quantification of interest. Taking into consideration the Order of the Hon'ble High Court, the Settlement Commission is inclined to quantify the interest payable as Rs.1,12,98,488/-. The Applicant has paid an amount of Rs.70,60,790/- as confirmed by the Revenue. The Applicant is directed to pay the balance amount of Rs.42,37,698/- towards interest liability. In all other aspects, viz., fine and penalty (on the Applicant and Co-
Applicants) the earlier Final Order No. 4/2014-Cus dated 28.01.2014 of the Settlement Commission, Chennai stands. stands.
ORDER 8.1 In the light of the above, the Bench settles the case under the Customs Act, 1962 on the following terms and conditions:
1. INTEREST: The interest liability in this https://www.mhc.tn.gov.in/judis 8/19 W.P.No.4325 of 2021 case is settled at Rs.1,12,98,488/-(Rupees One Crore twelve lakhs ninety eight thousand four hundred and eighty eight only). The Applicant has paid an amount of Rs.70,60,790/-(Rupees seventy lakhs sixty thousand seven hundred and ninety only).
The Applicant is directed to pay the balance amount of Rs.42,37,698/-(Rupees forty two lakhs thirty seven thousand six hundred and ninety eight only) within 30 days from the date of receipt of this Order.
11. FINE AND PENALTY ON THE APPLICANT AND CO-APPLICANTS: It is reiterated that the levy of Redemption Fine and Imposition of Penalty on the Applicant and Co-Applicants vide the earlier Final Order No.4/2014-Cus dated 28.01.2014 of the Settlement Commission, Chennai stands. The applicant is directed to pay the said amounts within 30 days from of the date of receipt of the Order".
3. The specific case of the petitioner is that the petitioner had imported sewing machines numbering 63 in the year 2002 by availing the benefit of Notification No.49/2000-Cus dated 27.04.2000 which implemented the policy decision of the Commerce Ministry, the Foreign Trade Policy in so far as capital goods imported under the Export Promotion Capital Goods Scheme ( EPCG Scheme) under the Foreign Trade Policy for a CIF value of Rs.2,00,69,000/- . The petitioner thus imported capital goods i.e. Textile machinery under the EPCG Scheme https://www.mhc.tn.gov.in/judis 9/19 W.P.No.4325 of 2021 under Chapter-VI of EXIM Policy and Procedures, 1991-2002.
4. It is the specific case of the petitioner that the petitioner was unable to discharge Export Obligation duty adverse marking condition and therefore was unable to discharge Export Obligation for a period of nine years as per the EPCG Licence issued by the Original Authority under the provisions of the Foreign Trade Policy, 1992 r/w Foreign Trade Policy.
5. It appears that the petitioner had also diverted few of the machines to its sister's concern and stated that one of the machines was not known. The petitioner wanted to regularise the default committed under the EPCG Licence issued to the petitioner on 17.02.2021 permitting the petitioner to import the capital goods under the Foreign Trade Policy r/w relevant Notification No.49/2000-Cus dated 27.04.2000 on payment of concessional duty. The petitioner appears to have paid the duty foregone at the time of imported goods for a sum of Rs.48,58,231/- and has further interest of Rs.70,60,790/- on account of defaults committed for discharging the Export Obligation undertaken. https://www.mhc.tn.gov.in/judis 10/19 W.P.No.4325 of 2021
6. The learned counsel for the respondent would however submit that as per records that are available before this Court only a sum of Rs.89,00,000/- has been paid by the petitioner.
7. A reading of the impugned order indicates that the petitioner had indeed paid a sum of Rs.48,58,231/- being the duty foregone at the time of import of the capital goods under EPCG and later a further sum of Rs.70,60,790/- towards interest. The net balance payable was thus reduced Rs.42,37,698/- ( Rs.1,12,98,488/- _ Rs.70,60,790/-) from Rs.1,12,98,488/- vide order dated 03.09.2013.
8. The specific case of the petitioner is that Notification No.49/2000-Cus dated 27.04.2000 under which the Bills of Entries were filed on strength of the EPCG Licence issued by the Regional Authority, namely, the Assistant Director General of Foreign Trade was amended vide Sl.No.22 to Notification No.46-2013-Cus. Dated 26.09.2013. As per the amendment, in case of default in export obligation, when the duty on goods is paid to regularise the default, the amount of interest paid by the importer shall not exceed the amount of duty if such regularisation has https://www.mhc.tn.gov.in/judis 11/19 W.P.No.4325 of 2021 been dealt in terms of Public Notice of the Government of India in the Ministry of Commerce No.22 (RE-2013)/2009-2014 dated the 12th August, 2013". Sl.No.22 , reads as under :-
Sl.No. Notification No.and date Amendments 22 49./2000-Customs, dated In the said notification, after the 27th April, 2000 (Vide the opening paragraph and number G.S.R.365(E), before the Explanation, the th dated the 27 April,2000) following paragraph shall be inserted namey;-
" 2. In a case of default in export obligaion, when the duty on goods is paid to regularise the default, the amount of interest paid by the importer shall not exceed the amount of duty if such regularisation has been dealt in terms of Public Notice of the Government of India in the Ministry of Commerce No.22 ( RE-2013)/2009-2014 dated the 12th August, 2013".
9. The learned counsel for the petitioner would submit that the above Notification was issued pursuant to the Public Notice issued by the Director General of Foreign Trade vide Public Notification No.22 ( RE- 2013)/2009-2014 dated the 12th August, 2013".
10. It is submitted that the Commerce Ministry which is concerned https://www.mhc.tn.gov.in/judis 12/19 W.P.No.4325 of 2021 with the Export Obligation as itself issued the Public Notice and it is the aforesaid Public Notice which has been implemented by Notification No.46/2013– Cus. dated 26.09.2013 and therefore the benefit of the aforesaid amendment to Notification No.49/2000-Cus. dated 27.04.2000 cannot be denied to the petitioner.
11. On the other hand, the learned counsel for the respondents would submit that the impugned order of the Settlement Commission does not warrant any interference of this Court, as the Settlement Commission indeed complied with the directions of this Court dated 02.01.2020 by taking note of the Public Notice No.22(RE)/2013)/2009-14 issued by the Director General of Foreign Trade in the exercise of power conferred under para 2.4 of the Foreign Trade Policy for 2009-2014.
12. The learned counsel for the respondents has also drawn attention to the impugned order of the Settlement Commission drawing a reference under para 4.28 and 5.14 of the Hand Book of Procedure to the relevant Foreign Trade Policy as in force. https://www.mhc.tn.gov.in/judis 13/19 W.P.No.4325 of 2021
13. I have considered the arguments advanced by the learned counsel for the petitioner and the learned counsel for the respondents. I have also perused the Public Notice No.22(RE-2013)/2009-2014 and Notification No.46/2013-Customs dated 26.09.2013 amended Notification No.49/202000-Cus. dated 27.04.2000 in so far as goods imported under the EPCG Scheme under the Foreign Trade Policy and para No.4.28 and 5.14 of the Hand Book of Procedure of Commerce Ministry issued for the relevant Foreign Trade Policy as in force during the dispute.
14. Relevant portion of the Notification No.49-2000–Cus. dated 27.04.2000, reads as under :-
“4. The importer shall, if he fails to discharge a minimum of 25% of the export obligation prescribed for any particular block of two years for two consecutive block, be liable to pay forthwith the whole of the duties of customs leviable on the goods imported but for the exemption contained in this notification together with interest at the rate of 24% per annum from the date of clearance of the goods”.
15. The said Notification was amended along with several other notifications by Notification No.46/2013-Cus dated 26.09.2013. The amendment at Sl.No.22 Notification No.49/2000-Cus. dated 27.04.2000 https://www.mhc.tn.gov.in/judis 14/19 W.P.No.4325 of 2021 deals with only default in Export Obligation, when the duty on the goods is paid, to regularise the default amount of interest paid by the importer and it shall not exceed the amount of duty with such regularisation in terms of Public Notice No.22(RE-2013)/2009-2014 of the Government of India, Foreign Trade Policy in Ministry of Commerce. The said Public Notice No.22 22(RE-2013)/2009-2014 reads as under :-
All pending cases of the default in meeting Export Obligation (EO) cane be regularised by the authorisation holder on payment of applicable customs duty, corresponding to the shortfall in export obligation, along with interest on such customs duty; but the interest component to be so paid shall not exceed the amount of customs duty payable for this default.
[ Here is an example: Suppose the default in EO is 100%, this would mean the complete duty saved amount has to be refunded. The interest on this duty saved amount has to be calculated from the date of import till the date of payment . The interest component under this dispensation would be limited to the duty saved amount. If the duty saved amount were Rs.150/-, then the interest component would be limited to Rs.150 and therefore for regularising this case the maximum amount to be paid by the authorisation holder would be Rs.300. However, for the same duty saved amount of Rs.150, if the default in EO were 30%, then the corresponding duty saved amount becomes Rs.45(30% of Rs.150). Hence, the interest component will be limited to Rs.45. Thus, https://www.mhc.tn.gov.in/judis 15/19 W.P.No.4325 of 2021 duty + interest will not exceed Rs.90 for this regularisation of 30% default in EO for a duty saved amount of Rs.150]”.
16. It is thus clear from a reading of the above Public Notice No.22(RE-2013)/2009-2014, all the pending cases of the default in meeting Export Obligation (EO) can be regularised by an authorisation holder on payment of applicable customs duty, corresponding to the shortfall in export obligation, along with interest on such customs duty.
The interest component to be so paid was not to exceed the amount of customs duty payable for this default. The above Public Notice which is basis for amendment to Notification No.49/2000-Cus.dated 27.04.2000 vide Sl.No.22 and Notification No.46/2013-Cus dated 26.09.2013. Thus, it is clear that Public Notice No.22(RE-213)/2009-2014 was not in the context of bonafide default by the importer. The intention of the Commerce Ministry under Public Notice No.22 (RE-2013)/2009-2014, has been reflected in the form of amendment through several notifications of the customs dealing with various scheme announced under the Foreign Trade Policy which were implemented under Notifications issued under Section 25(1) of the Customs Act, 1962. The amendment to Notification No.49/2000–Cus dated 27.04..2000 vide Sl.No.22 Notification https://www.mhc.tn.gov.in/judis 16/19 W.P.No.4325 of 2021 No.46/2013 – Cus dated 26.09.2013 also does not refer to the case of the bonafide defaulter. It only talks about default simplicitor in Export Obligation. Therefore, the views taken by the Settlement Commission is contrary to the Public Notice No.22 (RE-2013)/2009-2014 and therefore it has to be held as arbitrary. Consequently the determination of defaulted interest component vide communication dated 03.09.2013 of the Deputy Commissioner being report of the Deputy Commissioner bearing FN.S.Misc.188/2011-SIIB was incorrect.
17. Consequently, the impugned order of the Settlement Commission affirming the same is hereby set aside to that extent it asks the petitioner to pay further amounts towards interest.
18. In the result, the application filed by the petitioner before the Settlement Commission deserves to be allowed. This writ petition thus stands allowed. No costs. Consequently, connected miscellaneous petition is closed.
25.10.2024 Index : Yes/No https://www.mhc.tn.gov.in/judis 17/19 W.P.No.4325 of 2021 Internet : Yes/No Speaking : Non-speaking Order Neutral Citation : Yes/No To
1. The Chairman, Central Board of Excise & Customs, North Block, New Delhi 110 001.
2. The Customs & Central Excise, Settlement Commission, Additional Bench, II Floor, Narmada Block, Custom House, Chennai 600 001.
3. The Commissioner of Customs ( Exports), Custom House, Chennai 600 001.
4. The Assistant Commissioner of Customs, EPCG Section, Customs House, Chennai 600 001.
C.SARAVANAN,J.
kkd https://www.mhc.tn.gov.in/judis 18/19 W.P.No.4325 of 2021 W.P.No.4325 of 2021 25.10.2024 https://www.mhc.tn.gov.in/judis 19/19