Gujarat High Court
Messers Lubi Industries Llp vs Union Of India on 22 February, 2019
Author: Harsha Devani
Bench: Harsha Devani, A. P. Thaker
C/SCA/14109/2018 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 14109 of 2018
FOR APPROVAL AND SIGNATURE:
HONOURABLE MS.JUSTICE HARSHA DEVANI
and
HONOURABLE DR.JUSTICE A. P. THAKER
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1 Whether Reporters of Local Papers may be allowed to
see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law
as to the interpretation of the Constitution of India or any
order made thereunder ?
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MESSERS LUBI INDUSTRIES LLP & 1 other(s)
Versus
UNION OF INDIA & 2 other(s)
================================================================
Appearance:
MR PARESH M DAVE, ADVOCATE with MR AMAL DAVE, ADVOCATE with
MR ADITYA TRIPATHI, ADVOCATE for the Petitioners
MR. PARTH H BHATT(6381) for the Respondent(s) No. 2
MS TRUSHA K PATEL(2434) for the Respondent(s) No. 1
NOTICE SERVED BY DS(5) for the Respondent(s) No. 3
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CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI
and
HONOURABLE DR.JUSTICE A. P. THAKER
Date : 22/02/2019
ORAL JUDGMENT
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C/SCA/14109/2018 JUDGMENT (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI)
1. Leave to amend the prayer clause.
2. At the outset, Mr. Paresh Dave, learned advocate for the petitioners states that since no applications have been made by the petitioners for Advance Authorisation No.0810081260 and Advance Authorisation No.0810083301, the prayers made in this petition are not pressed for these two Authorisations. He, however, states that applications under para 2.58 of the Foreign Trade Policy in respect of these two Authorisations shall be made by them before the appropriate authority. It is, therefore, clarified that not pressing the relief in respect of the above two Authorisations shall not come in the way of the petitioners in pursuing any other remedy as may be available in law.
3. By this petition under Article 226 of the Constitution of India, the petitioner seeks the following substantive reliefs:
"11. In the above premises, the petitioners most respectfully pray as under:
[A] That Your Lordships may be pleased to issue a Writ of Certiorari or any other appropriate writ, direction or order, quashing and setting aside appellate order F.No.12013/03/2017-ADJ/AC dated 14.5.2018 (Annexure "K)) made by the Appellate Committee of the Ministry of Commerce and Industry, New Delhi, with all consequential reliefs and benefits;Page 2 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020
C/SCA/14109/2018 JUDGMENT [B] That Your Lordships may be pleased to issue a Writ of Mandamus or any other appropriate writ, direction or order, directing the Joint DGFT, Ahmedabad, the 2 nd Respondent herein, to amend all four Advance Authorisations (as per Annexure "F") by substituting name and IEC number of the Petitioner i.e. M/s Lubi Industries LLP in all these Authorisations with extension of export obligation period by 6 months (or the period that may be deemed fit by this Hon'ble Court;"
4. The facts as averred in the petition are that the petitioner, which at present is a Limited Liability Partnership firm, is engaged in manufacturing goods like PD pumps, electric motors and also parts of PD pumps.
4.1 It is the case of the petitioner that in the year 1985, the petitioner established its manufacturing facilities at its factory located at Near Kalyan Mills, Naroda Road, Ahmedabad. At that time, the petitioner was functioning under the name and style of M/s Lubi Submersibles Ltd. and M/s Lubi Electricals Ltd. The petitioner expanded its business by establishing various other factories and units. With effect from 1.4.2012, the petitioner's firm came to be merged with one M/s Arvind Iron Pvt. Ltd. by virtue of orders passed by the Gujarat High Court and the petitioner continued its business in the name and style of M/s Lubi Industries Pvt. Ltd. Other formalities of filing the orders and permission of the High Court with the office of the Registrar of Companies etc., were also fulfilled. Thereafter, with effect from 14.2.2013, M/s Lubi Industries Pvt. Ltd. came to be converted into a Limited Liability Partnership, and from then onwards, the petitioner has been conducting the same Page 3 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT business in the name and style of M/s Lubi Industries LLP.
4.2 It is the case of the petitioner that it has been regularly exporting the goods, viz., pumps and motors, and even the exports have been increasing year after year. The petitioner has also been availing the benefit of Export Promotion Schemes framed by the Central Government under the Exim Policy and had applied for various Advance Licences/Authorisations, which came to be granted to it on regular basis. It is the case of the petitioner that it has been conducting its business in accordance with law and has been expanding its business activities in view of hard work and industrious approach of the people at the helm of affairs; and the duties and taxes paid by the petitioner year after year also show that the petitioner has been contributing substantial amounts to the Government exchequer.
4.3 The present petition relates to the petitioner's liabilities, if any, in respect of four Advance Authorisations issued during July 2009 to July 2010. In all, seven Authorisations had been issued in favour of the petitioner during this period, out of which three Authorisations were in the nature of EPCG (Export Promotion Capital Goods) Authorisations, and the remaining four were Advance Authorisations for import of raw materials duty free. In this petition, the petitioner has not raised any dispute with regard to EPCG Authorisation and the subject matter of this petition is confined to two out of the four Advance Authorisations.
4.4 It is further the case of the petitioner that after the four Authorisations were issued and the petitioner was in the Page 4 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT process of fulfilling the export obligations, the then existing firms, M/s Lubi Submersibles Ltd. and M/s Lubi Electricals Ltd. were amalgamated with M/s Arvind Iron Pvt. Ltd. The name of M/s Arvind Iron Pvt. Ltd. was later on changed to M/s Lubi Industries Pvt. Ltd., and this entity was converted into a Limited Liability Partnership on 14.2.2013.
4.5 An exporter holding an Advance Authorisation is allowed to import raw materials specified in the Authorisation duty free by virtue of various notifications issued under the Customs Act, 1962. For discharging export obligation flowing from any such Authorisation, the exporter is required to show the Authorisation number in export documents like shipping bill and export invoice, so as to enable the customs officers as well as the Directorate General of Foreign Trade (DGFT) authorities to verify on the basis of such documents whether export obligation in respect of a particular Authorisation stood discharged or not.
4.6 An Import-Export Code (IEC) number is issued by the DGFT under section 7 of the Foreign Trade (Development and Regulation) Act, 1992 (hereinafter referred to as the "Foreign Trade Act") for each of the importers-exporters, and such IEC number is always shown in the Authorisation and also in the export documents like shipping bill. On the basis of IEC number and also the Authorisation number in the export documents, the Export Obligation Discharge Certificate (EODC) is issued by the DGFT authorities; and when such EODC is issued in respect of a particular Authorisation, the custom authorities who allowed duty free imports under such Authorisation discharge the bond furnished by the assessee, thereby discharging such Page 5 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT person from all the obligations. An IEC number is issued for each of the entities, and thus, a particular entity (be it an individual or a firm or a company) is allotted a separate IEC number by the DGFT authorities.
4.7 In the present case also, separate IEC numbers had been allotted by DGFT authorities to each of the above referred entities, viz., M/s Lubi Submersibles Ltd., M/s Lubi Electricals Ltd., M/s Arvind Iron Pvt. Ltd. and also M/s Lubi Industries Pvt. Ltd. In respect of seven Advance Authorisations involved in this case, names and IEC numbers of M/s Lubi Electricals Ltd. and M/s Lubi Submersibles Ltd. were mentioned therein because the Authorisations were issued in favour of these entities at the relevant time. When the above referred changes by virtue of amalgamation and merger of entities took place and a new entity, namely, M/s Lubi Industries Pvt. Ltd. was constituted, which was thereafter converted into an LLP on 14.2.2013, a separate IEC number has been issued in favour of the petitioner, that is, M/s Lubi Industries LLP. It is the case of the petitioner that substantial exports have been made by the petitioner in the name and style of M/s Lubi Industries LLP all throughout the period.
4.8 However, since the above referred Authorisations issued prior to July 2010 had been carrying names and IEC numbers of M/s Lubi Submersibles Ltd. and M/s Lubi Electricals Ltd., the exports made by the petitioner in the new name and under the new IEC number could not be shown as exports in discharge of obligations flowing from such Authorisations. It is the case of the petitioner that when the exports during the period from February 2013 were made on the export invoices and shipping Page 6 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT bills of M/s Lubi Industries LLP, it was not possible for the petitioner to issue such export documents with the name and IEC numbers of the entities whose names and IEC numbers were recorded in the Authorisations. According to the petitioner, the Customs EDI system would not accept such documents, and it was even otherwise not proper to export goods under the documents of Authorisation holders when such entities no longer existed by virtue of amalgamation and merger as referred to hereinabove.
4.9 The petitioner, therefore, lodged an application before the Joint Director General of Foreign Trade, Ahmedabad, for changing the name of the licence holder in respect of the Authorisations in question, and also for extension of time for fulfilling export obligations in respect of such Authorisations. In respect of Advance Authorisation No.0810086954 dated 3.3.2010, such application was made on 12.3.2013, but the same was rejected by order dated 14.3.2013. The petitioner filed a review application on 25.6.2013, which also came to be rejected on 25.11.2013.
4.10 The petitioner thereafter filed an application before the Policy Relaxation Committee, New Delhi (PRC) against such rejection. In the appeal, the petitioner also prayed for extension of time for fulfillment of export obligations. The petitioner also requested the Committee to transfer Authorisations to the new IEC number; however, the Policy Relaxation Committee chaired by the DGFT refused to accept the petitioner's prayer for extension of time beyond forty eight months and recorded the decision in the minutes of the meeting held on 20.9.2016.
Page 7 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020C/SCA/14109/2018 JUDGMENT 4.11 It is further the case of the petitioner that as
allowed under the Foreign Trade Act, it submitted applications before the DGFT to consider their case for grant of automatic extension of time for fulfilling export obligations under paragraph 4.42(e) of the Handbook of Procedures. However, such requests made on 30.11.2016 and 9.1.2017 also came to be rejected by the Policy Relaxation Committee in its Meeting No.31/AM-17 held on 6.2.2017.
4.12 Being aggrieved, the petitioner preferred an appeal before the Central Government under section 16 of the Foreign Trade Act. The Central Government heard the petitioner's appeal on 10.1.2018, on which occasion the petitioner's advocate made oral submissions, and also filed a short note with details of the exports made by the petitioner during last five years in support of the prayers in the appeal. However, by an order dated 14.5.2018, the Central Government dismissed the appeal, which was conveyed to the petitioner under a covering letter by the Director and Member of the Appellate Committee Cell.
4.13 Similar proceedings were also taken out by the petitioner in respect of another Authorisation being No.0810090670 dated 21.7.2010. In respect of this Authorisation, the Policy Relaxation Committee had passed an order in its meeting held on 22.8.2017 refusing to accept the petitioner's request for change in IEC number and name in the Authorisation and for extension of time for fulfilling the export obligations and, therefore, the petitioner had filed an appeal under section 16 of the Foreign Trade Act before the Central Page 8 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT Government on 18.6.2018, which is still pending adjudication. Mr. Paresh Dave, learned advocate for the petitioners, under instructions, has stated that he would withdraw the appeal filed by the petitioner before the Central Government against the order of the Policy Relaxation Committee dated 22.8.2017.
4.14 It appears that during the proceedings before the authorities under the Foreign Trade Act, the Directorate of Revenue Intelligence, Noida Regional Unit, initiated investigation in respect of the above referred Advance Authorisations as the export obligations under such Authorisations had not been fulfilled by the petitioner. After completing the inquiry, a show cause notice came to be issued by the Additional Director General, DRI dated 22.3.2018 calling upon the petitioner to show cause as to why the goods imported under the seven Authorisations referred to therein should not be confiscated; why customs duties aggregating to Rs.4,01,50,127/- should not be demanded and recovered from the petitioner; why interest should not be recovered on the custom duties foregone; and why penalty should not be imposed on the petitioner; and also as to why amounts of Rs.9.46 crores (rounded off) deposited by the petitioner should not be appropriated against the liabilities of duty, interest and penalty.
4.15 It appears that the petitioner has filed a detailed reply in response to the said show cause notice and the proceedings are still pending before the Principal Commissioner of Customs, Ahmedabad.
4.16 It is the case of the petitioner that the orders of the Page 9 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT
authorities functioning under the Foreign Trade Act are wholly unreasonable and arbitrary, and that the export obligations in respect of the seven Authorisations in question could not be set off against such exports of goods made by the petitioner only because the Authorisations carry the names and IEC numbers of the companies which have been merged and amalgamated, whereas the exports made by the petitioner are in the name of the new entity M/s Lubi Industries LLP having a new IEC number. Therefore, the petitioner's prayers for transferring the existing Authorisations in the name and IEC number of the now existing firm could not have been rejected by the Appellate Committee on mere technical reasons. According to the petitioners, as a result of merger, amalgamation and the like, all assets including import licences of the merged/amalgamated entities stand transferred to the new entity and therefore, the DGFT authorities have acted without jurisdiction in not changing the name and IEC number of the petitioner firm by formal substitution in the pending Authorisations. It is the case of the petitioners that there is no bar or prohibition under the Foreign Trade Act and the Exim Policy for such change or substitution, and it would be only reasonable to allow such changes in the Authorisations for enabling a genuine manufacturer-exporter to fulfill export obligations in respect of inputs and materials imported duty free under the Advance Authorisations. That, though the petitioner is a genuine manufacturer-exporter regularly exporting substantial quantities of goods, liabilities of customs duty, interest and penalty are sought to be fastened upon the petitioner only because exports under the name and IEC number of Authorisation holders are not made since such holders have ceased to exist.
Page 10 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020C/SCA/14109/2018 JUDGMENT 4.17 Being aggrieved by the rejection of the petitioner's request for change in name and IEC number in the
Authorisation with a reasonable extension in time to fulfill the export obligation, the petitioner has approached this court seeking the reliefs noted hereinabove.
5. Mr. Paresh Dave, learned advocate for the petitioner submitted that in the present case, the undisputed position is that the change in the name and constitution of the petitioner has taken place and a new IEC number has also been allotted to the petitioner under section 7 of the Foreign Trade Act; and therefore, it was not possible for the petitioner to offer any of the exports made during the intervening period against Authorisations bearing the previous name and the previous IEC number in the export documents like shipping bills. It was submitted that if the petitioner's application and prayer for amendment of the Authorisations by substituting the new name and IEC number had been allowed by the authorities, then export obligations for all pending Authorisations could have been easily fulfilled by the petitioner, inasmuch as substantial exports exceeding what was required under the Authorisations in question have been made by the petitioner during the intervening period, and the exports of similar goods are being made regularly even today. Therefore, the view adopted by the authorities, including the appellate committee, that there was no provision in the policy to transfer the Authorisation to the new IEC is ex facie unreasonable and illegal. It was urged that since the amalgamation and merger have taken place in respect of various entities, and the name and IEC number for which the Authorisations had been Page 11 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT originally issued no longer existed since a new firm, namely, Lubi Industries LLP has been brought into existence with new IEC number, it was only reasonable and proper for the authorities functioning under the Foreign Trade Act to allow transfer of all pending Authorisations with pending obligations arising under such Authorisations to the petitioner herein. It was submitted that such transfer is only an administrative matter, for which the authorities functioning under the Foreign Trade Act have inherent powers; however, the respondents have adopted an approach which is pedantic in nature and is contrary to their own circular. It was submitted that the circular says that there is power to change IEC but the respondents refuse to consider the same, on account of which the petitioner is exposed to penal liability.
5.1 The attention of the court was invited to the statement of export obligations for in all, four advance Authorisations, including the two Authorisations which are subject matter of the present petition, to point out that the quantum of export obligations which were to be fulfilled is not relevant as the petitioner could have easily set off the export obligations made by them. It was pointed out that out of the four advance Authorisations, the petitioner has followed the procedure in respect of two of the advance Authorisations and the appeal in respect of one of the advance Authorisations is still pending before the Central Government.
5.2 Next, it was contended that this court has to examine the validity of the impugned order on the basis of the contents thereof and that it is not permissible for the respondents to supplement the reasons given in the impugned order by way of Page 12 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT affidavit-in-reply in the present proceedings. Reference was made to the decision of the Supreme Court in the case of Mohinder Singh Gill v. Chief Election Commissioner, AIR 1978 SC 851, wherein it has been held thus:
"8. The second equally relevant matter is that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order bad in the beginning may, by the time it comes to court on account of a challenge, get validated by additional grounds later brought out. We may here draw attention to the observations of Bose J. in Gordhandas Bhanji, AIR 1952 SC 16:
"Public orders, publicly made, in exercise of a statutory authority cannot be construed in the light of explanations subsequently given by the officer making the order of what he meant, or of what was in his mind, or what he intended to, do. Public orders made by public authorities are meant to have public effect and are intended to effect the actions and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order itself."
Orders are not like old wine becoming better as they grow older."
It was submitted that in the light of the principles enunciated in the above decision, the impugned orders have to be Page 13 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT considered on the grounds set out therein and new grounds cannot be added by way of affidavit.
5.3 The attention of the court was also invited to the decision of the Policy Review Committee taken in its meeting dated 6.2.2017, to submit that the Committee has adopted a very pedantic view. It was submitted that the petitioner had made the application for two fold purposes: (i) for extension of the export obligation period, and (ii) for change in IEC number. Reference was made to section 5 of the Foreign Trade Act, as it stood at the relevant time when the advance Authorisations were issued, which reads thus:
"5. Export and import policy. - The Central Government may, from time to time, formulate and announce, by notification in the Official Gazette, the export and import policy and may also, in like manner, amend that policy:"
With effect from 27.8.2010, section 5 came to be substituted and now reads thus:
"5. Foreign Trade Policy.- The Central Government may, from time to time, formulate and announce, by notification in the Official Gazette, the foreign trade policy and may also, in like manner, amend that policy:
5.4 Reference was also made to section 7 of the Foreign Trade Act, which provides for "Importer-Exporter Code Number and Licence" and lays down that no person shall make any import or export except under an Importer-Exporter Code Number granted by the Director General or the officer authorized by the Director General in this behalf, in accordance with the procedure specified in this behalf by the Director Page 14 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT General. Referring to the impugned decision dated 6.2.2017 of the Policy Review Committee, it was submitted that the same refers to conduct and knowledge, and absence of any provision for extension of EOP and change in IEC. Reference was made to the written submissions made by the petitioner in the appeal under section 16 of the Foreign Trade Act, to point out that the petitioner had requested that suitable extension be granted in view of the Circular dated 16.11.2011 and as per paragraph 4.42 of the Handbook of Procedure, in which case the petitioner would be in a position to fulfill the export obligation even at this stage within a period of four months from the date of grant of such extension. The attention of the court was invited to the statement of the total exports on yearly basis made by M/s Lubi Industries LLP from 2013-2017 (page 49), to submit that the petitioner could have easily fulfilled the export obligations within the said time.
5.5 Reference was made to the appellate order dated 14.5.2018 passed by the Appellate Committee in respect of Advance Authorisation No.0810086954, to submit that the ground for rejection is that there is no provision for changing the IEC number.
5.6 The attention of the court was invited to the Public Notice dated 24.10.2017 on the subject of one time relaxation of export obligation extension and clubbing of advance Authorisations and more particularly, to paragraph 2 thereof, which provides for "Extension of Export Obligation Period", to submit that the same also covers the exports made under Advance Licences/Authorisations issued under Foreign Trade Policy 2002-07, Foreign Trade Policy 2004-2009 and Advance Page 15 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT Authorisations issued prior to 5.6.2002 under Foreign Trade Policy 2009-14. It was submitted that therefore, the said public notice also covers the period involved in the present case. It was submitted that only on the ground that there is no provision in the Hand Book of Procedure for transferred the Advance Authorisation to the new IEC number, the petitioners' application has been rejected. It was submitted that there are sufficient provisions in the Act as well as the Foreign Trade Policy and public notices and circulars issued from time to time, which permit the extension of export obligation period as well as for transfer of IEC number and therefore, the petitioner's reasonable request for transferring the Authorisations to new IEC number and new name could not have been outright rejected by the authorities functioning under the Foreign Trade Act. It was submitted that rejection of a genuine and bona fide prayer on a specious ground that there is no provision under the Handbook of Procedure for allowing extension of the export obligation period in cases like the present one is wholly illegal, unreasonable and arbitrary. It was urged that despite the fact that all liabilities of the merged companies have to be borne by the petitioner, it is deprived of the advantages available to those companies and that the Circular dated 16.11.2011 has been conveniently bypassed by the authorities.
5.7 Mr. Dave further submitted that because of common sense approach, the IEC number and name was required to be substituted and consequently, some time should have been granted to fulfill the export obligation. Reference was made to the Circular dated 16.11.2011, wherein it has inter alia been provided thus:Page 16 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020
C/SCA/14109/2018 JUDGMENT
"On account of amalgamation/merger/
acquisition/takeover of IEC holding firm/company by another firm/company, the IEC holder firm/company is required to surrender IEC.
In such cases, the assets and liabilities of the IEC holder firm/company is invariably taken over by the newly entity. The pending export obligation in respect of various licences/authorisations issued to the acquired firm/entity constitutes "liability" and unless it is transferred in the name of the new entity and properly accounted for, the export obligation in respect of IEC holder firm/company subsequent to surrender of IEC will go out of the monitoring loop causing loss of revenue to the Government. It is, therefore, desirable that in order to safeguard the revenue interest of the Government, the following drills are required to be meticulously followed at the time of surrender of IEC by a company/firm getting amalgamated/ merged / acquired by a new entity."
Reference was made to clause (c) of paragraph 3 thereof, which provides that licences/Authorisations should be amended using amendment menu by changing the old IEC with the new IEC of the firm/company acquiring the existing IEC holder. Reference was made to clause (f) of paragraph 3 thereof, which provides that in case no monitoring action (viz. demand notice/refusal order/show cause notice) has been initiated in respect of IEC of acquired entity, licence(s)/Authorisation(s) with outstanding export obligation should be directly amended by substituting the existing IEC with the new IEC. It was submitted that therefore, the burden or obligation to make appropriate amendment in case of merger is on the appropriate authority of the Government. It was submitted that when the Government itself has laid down the procedure and when it is the obligation of the authorities to substitute the IEC and name, the stand now taken that under Page 17 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT the Handbook of Procedure, there is no provision to change IEC and name, is wholly irrational and unreasonable.
5.8 The attention of the court was also invited to the Trade Notice No.03/2018-19 dated 25th April, 2018 on the subject of applicability of provisions of Para 2.20 of HBP, 2015-20 on Advance Authorisations issued under 2009-2014, FTP, wherein it has been provided that Regional Authorities may allow revalidation of Advance Authorisation/DFIA, under the provisions of Para 2.20 of HBP, 2015-2020, which has been amended vide Public Notice 38 dated 11.2017, even if authorisation is issued under FTP, 2009-14, provided conditions stipulated in the said public notice are fulfilled.
5.9 Reference was made to the Minutes of the Policy Relaxation Committee Meeting held on 7.7.2015, to point out that the Committee has either granted extension in respect of the licences issued prior to May 2012 or sent the case back. It was submitted that therefore, there was power to extend the export obligation period even in respect of the earlier licences and that the Policy Review Committee has actually exercised such powers. It was submitted that the power to give extension is not only from 5.6.2012 and that the Policy Review Committee has exercised such powers for other periods also. It was submitted that the power has always been there and, therefore, it is now not open for the respondents to say that there is no power. It was submitted that the petitioner has a right to get the IEC and the name changed, and that extension of export obligation period must follow or it becomes academic.
Page 18 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020C/SCA/14109/2018 JUDGMENT 5.10 Reference was made to the deficiency letter dated 14.3.2013 as well as communication dated 25.11.2013
(Annexure "G" to the petition), to submit that the same are not orders but only communications returning the original licences to the petitioner. Similarly, reference was also made to the deficiency letter dated 14.3.2013 and communication dated 25.11.2013, to submit that even if they are orders, they are non est as no hearing was given and no show cause notice was issued. It was submitted that therefore, these orders are not accepted by the petitioner.
5.11 Reference was made to the Foreign Trade Policy, 2015-2020 and more particularly paragraph 2.58 thereof, which provides for "Exemption from Policy/Procedures" and provides that the DGFT may in public interest pass such orders or grant such exemption, relaxation or relief, as he may deem fit and proper, on grounds of genuine hardship and adverse impact on trade to any person or class or category of persons from any provision of FTP or any procedure. While granting such exemption, DGFT may impose such conditions as he may deem fit after consulting the Committees mentioned therein. It was pointed out that in respect of issues otherwise covered under clauses (a) and (b), the concerned Committee is the Policy Relaxation Committee (PRC).
5.12 Referring to the Public Notice dated 24th October, 2017 regarding onetime relaxation for export obligation extension and clubbing of Advance Authorisations, it was submitted that the case of the petitioner falls under clause (b) of paragraph 2 thereof, which provides that for the exports made after 36 months but within 48 months shall be Page 19 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT regularized on payment of composition fees as provided thereunder. It was submitted that the case of the petitioner would fall under the said clause provided the respondents substitutes the IEC number. It was submitted that therefore, the stand of the respondents is wholly arbitrary and unreasonable. It was submitted that the petitioner is not in a position to apply under the said public notice dated 24th October, 2017 because the new entity is not recognized. It was submitted that this is not a case of default and that the petitioner is a going concern and is continuously exporting goods, however, only because the IEC number is not substituted, it cannot get the benefit of any of the schemes. It was submitted that under the Scheme of 2009-2014 also, the benefit of extension of EOP was available. It was submitted that the Onetime Settlement Scheme applies to all whether or not appeal has been filed and that the orders passed by the authorities below have been disputed and have not become final. It was submitted that while considering the validity of the impugned order, the court would consider the relaxation policy dated 24th October, 2017. It was submitted that the petitioner has a right to extension under the policy itself as well as under
the special scheme also wherein a right is given, however, since such right has been denied, the petitioner is entitled to come before this court. It was submitted that the fundamental right of the petitioner under Article 14 of the Constitution of India is violated.
5.13 It was, accordingly, urged that the petition deserves to be allowed by granting the reliefs as prayed for.
6. Vehemently opposing the petition, Ms. Trusha Patel, Page 20 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT learned Senior Standing Counsel for the respondents, invited the attention of the court to the reliefs prayed for in the petition, to submit that the petitioner has prayed for a direction to the respondent authorities to amend all four Advance Authorisations by substituting name and IEC number of the petitioner, that is, M/s Lubi Industries LLP in all these Authorisations with extension of export obligation period by six months, or for the period the court may deem fit. It was pointed out that the petitioner in this case has initiated the proceedings for change of IEC number and for extension of export obligation period only in respect of two Authorisations, viz., Advance Authorisations bearing No.081008694 dated 3.3.2010 and No.0810090670 dated 21.7.2010, and that no applications or proceedings have been initiated in respect of the Advance Authorisations bearing No.0810081260 dated 7.7.2009 and No.0810083301 dated 1.10.2009. It was submitted that the petitioner - M/s Lubi Industries LLP has been constituted out of four companies having different factories and IEC numbers. These companies merged with Arvind Iron Pvt. Ltd. having a different IEC and continued business as M/s Lubi Industries Pvt. Ltd. The attention of the court was invited to the statement of export obligations in the four Advance Authorisations in question (Annexure "F" to the petition), to point out that the four Advance Authorisations have been obtained on 7.7.2009, 1.10.2009, 3.3.2010 and 21.7.2010. The export obligation was to be completed within three years from the date of the Advance Authorisation and therefore, insofar as the first two Advance Authorisations are concerned, the export obligation period came to an end on 7.7.2012 and 1.10.2012 respectively, and in respect of the other two Advance Authorisations, it came to an end on 3.3.2013 and 21.7.2013 Page 21 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT respectively. It was pointed out that by an order dated 6th November, 2012, that is, after the period of export obligation in respect of the first two Advance Authorisations came to an end, the amalgamation came into effect from 1st April, 2012.
6.1 It was pointed out that the applications for change of EOP dated 14.3.2013 and 25.11.2013 made by the petitioner came to be rejected by the regional authority, but were not challenged by the petitioner to submit that therefore, such orders are binding upon the petitioner .
6.2 It was pointed out that the petitioners have initiated proceedings in respect of the two Advance Authorisations dated 3.3.2010 and 21.7.2012, whereas no proceedings have been initiated in respect of the Advance Authorisations dated 7.7.2009 and 1.10.2009 and hence, insofar as the two Advance Authorisations in respect of which no proceedings have been initiated, no relief can be claimed in the present petition. As noted hereinabove, the learned counsel for the petitioner has not pressed reliefs prayed for in the petition insofar as the Advance Authorisations dated 7.7.2009 and 1.10.2009 are concerned, with a view to avail of the alternate remedy that may be available in law.
6.3 The attention of the court was invited to the Advance Authorisation dated 3.3.2010 issued in favour of the petitioner, to point out that it is specifically stated therein that it is not transferable and the expiry period is 36 months. Reference was made to the condition sheet annexed with the said Advance Authorisation No.0810086954, to point out that it was provided therein that failure to fulfill the export obligation in the manner Page 22 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT as prescribed in the Handbook of Procedures VI, 2009-14 shall entail penal proceedings under the provisions of Foreign Trade (Development and Regulation) Act, 1992 and as per the provisions of paragraph 4.28 of the Handbook of Procedures VI, 2009-14 as amended from time to time, and therefore, the petitioner is bound by the Handbook of Procedures VI, 2009-14.
6.4 It was further submitted that in respect of Advance Authorisation dated 3.3.2010, the export obligation period expired on 3.3.2013, whereas the application for extension of EOP and change of IEC number was made on 12.12.2013, after the expiry of the export obligation period was over and that during the subsistence of the export obligation period, no intimation was given to the authorities with regard to the merger or amalgamation of the concerned company. It was further contended that the application made by the petitioner was for automatic extension of the export obligation period as contemplated under clause (e) of paragraph 4.42 of the Foreign Trade Policy, 2015-20, which provided that whenever a ban/restriction is imposed on export of any product, export obligation period in respect of Advance Authorisation already issued prior to imposition of ban, would stand automatically extended for a period equivalent to the duration of ban, without any composition fee. It was submitted that in the facts of the present case, since there was no ban/restriction imposed on the export of any product insofar as the petitioner is concerned, the provisions of automatic extension of EOP would not be applicable whereas the petitioner has not made any application for extension of EOP under any other provisions. According to the learned counsel, the petitioner was clear that it wanted automatic extension under paragraph 4.22 (e).
Page 23 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020C/SCA/14109/2018 JUDGMENT 6.5 The attention of the court was invited to the decision
dated 20.9.2016 of the Policy Review Committee, to point out that the Committee has recorded that the Authorisation in question was obtained in the name of M/s Lubi Submersibles Ltd. having initial export obligation period of 36 months and that during this period, the petitioner could discharge only 7.78% of the export obligation. The merger with new company, that is, M/s Lubi Industries LLP took place after the expiry of the export obligation period and that the IEC code of M/s Lubi Submersible Ltd. has been surrendered on 14.3.2013. It was pointed out that the petitioner was directed to get the case regularized in terms of paragraph 4.49 of the Handbook of Procedures, 2015-2020; however, the petitioner did not do so.
6.6 It was pointed out that the demand notice is in respect of four Advance Authorisations. The attention of the court was invited to paragraph 4.22 of the Handbook of Procedures as existing prior to 5.6.2012, which provided that fulfillment period of export obligation under an Advance Authorisation shall commence from Authorisation issue date, unless otherwise specified. Export obligation shall be fulfilled within thirty six months except in case of supplies to projects/turnkey projects in India/abroad under deemed exports category where export obligation must be fulfilled during contracted duration. It was submitted that therefore, the export obligation period is important and has to be scrupulously followed. It was pointed out that on 5.6.2012, the policy underwent a change and a new policy was introduced with amendments. It was submitted that the export obligation period was reduced to eighteen months and therefore, it was found necessary to introduce a provision Page 24 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT for extension of that period. The attention of the court was invited to paragraph 1.4 thereof, which provides for "transitional arrangement". It was submitted that insofar as paragraph 4.42(c), which is the only provision on which the petitioner has relied upon is concerned, it provides for automatic extension. It was submitted that the export obligation period is mandatory and failure to abide by the same would invite penal action. Reference was made to Circular dated 27th July, 2012 on which reliance has been placed by the learned advocate for the petitioner, to point out that under paragraph 3 thereof, certain areas of change in the Foreign Trade Policy which did not require amendments in customs notifications have been stated thereunder. It was pointed out that under clause (c) thereof, it has been, inter alia, provided that in Para 4.1.2 of the Foreign Trade Policy (applicable to Advance Authorisation and DFIA schemes), in terms of changes made in Para 2.12 of HBP, Volume I, the normal periods of validity for the purpose of making imports under Advance Authorisation, Annual Advance Authorisation and DFIA schemes have been reduced to twelve months. Further, as per Para 4.22 of HBP, Volume I, the period for fulfillment of export obligation has been reduced to eighteen months, with certain exceptions. One extension of six months can be given by the Regional Authority. It was submitted that the notification enlisted the areas which do not require any change. It was submitted that the period of export obligation was reduced to eighteen months and that provision was made for giving one extension of six months. It was submitted that this circular only says what is there in the Foreign Trade Policy. It does not lead anywhere.
6.7 Referring to the Public Notice dated 24th October, 2017, it Page 25 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT was pointed out that only cases falling under category "a" and "b" of paragraph 2 thereof, would be entitled to extension provided the petitioner applies before 31.3.2018. It was submitted that the petitioner's case does not fall either under category "a" or category "b" of paragraph 2 thereof, nor has it applied before 31.3.2018 and hence, the public notice cannot be applied to the facts of the case of the petitioner. Moreover, the circular does not invalidate the orders made by the authority. It was submitted that in this case, the petitioner has not made any application for regularization as contemplated under paragraph 4.49 of the Handbook of Procedures though it was specifically directed to do so while rejecting its application.
6.8 Insofar as the Circular dated 16th November, 2011 on which reliance has been placed by the learned advocate for the petitioner is concerned, it was pointed out that in this case, the IEC number was surrendered on 4.3.2013 and that the exercise as envisaged in the said circular was required to be undertaken before such surrender. It was submitted that the fact regarding merger was not intimated to the authorities at the relevant time. Moreover, the entire exercise was undertaken only on 12.3.2013 when the export obligation period had expired and hence, the circulars and the trade notices would have no applicability to the present case.
6.9 Ms. Patel further submitted that the Policy Relaxation Committee has wide powers and wide discretion which cannot be challenged. There is nothing on record to establish that bona fide attempts were made by the petitioner to discharge the export obligations.
Page 26 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020C/SCA/14109/2018 JUDGMENT 6.10 Reference was made to the questions which were
put to the representatives of the petitioner during the course of inquiry made by the DRI, to submit that in answer to question No.5, the representative had stated that they could not fulfill the export obligation made under the Authorisation No.0810090670 due to lack of export orders and amalgamation with new entity and rejection of request for transfer of Authorisation to new IEC. It was submitted that the petitioner could not fulfill the export orders due to lack of export orders and therefore, it was not possible to fulfill the export obligation. Therefore, the contention that it had exported the goods worth crores of rupees should be rejected.
6.11 Reference was made to rule 6 of the Foreign Trade (Regulation) Rules, 1993, to submit that the same specifically provides that no person shall transfer or acquire by transfer any licence issued by the licensing authority except in accordance with the provisions of the Policy. It was submitted that the merger would not result in the right to transfer the Advance Authorisation in favour of the company. Reference was made to paragraph 2.9 of the Foreign Trade Policy, 2009- 14, which provides that no person may claim an Authorisation as a right to submit that right to transfer due to merger is not a right, much less, a vested right. It was submitted that neither a statutory nor a constitutional right has been infringed and hence, the writ jurisdiction of this court cannot be invoked.
6.12 It was submitted that insofar as revalidation of Authorisation as contemplated under paragraph 4.23 of the Handbook of Procedures is concerned, the Regional Authority may consider a request of the original authorisation holder and Page 27 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT grant revalidation for six months from the expiry date and requests for revalidation of authorisation shall be made in ANF- 2D. Reference was made to the further affidavit of the petitioner and more particularly to the application format for seeking policy/procedure relaxation in terms of paragraph 2.58 of the Foreign Trade Policy in the prescribed ANF-2D. It was pointed out that the petitioner had sought relaxation in terms of paragraph 2.58 of the Foreign Trade Policy and that the petitioner had stated that the period of 48 months is not relevant for allowing automatic extension under Para 4.42(e) of the Handbook of Procedures. Referring to item 14 thereof, it was submitted that there is a basic difference between extension of EOP and revalidation. It was submitted that general meaning of the term "revalidation" cannot be resorted to when there is a specific meaning assigned to it in the scheme itself. It was submitted that the application of the petitioner was for automatic extension and that the earlier orders were not challenged and that the same have merely been produced on record to show the past history. It was submitted that the petitioner had relied upon paragraph 4.42(e) of the Handbook of Procedures and that the initial application was for automatic extension and that even before the reviewing authority, they have made a conscious case only for automatic extension of export obligation period. It was submitted that paragraph 2 of the application speaks of automatic extension as per paragraph 4.42(e) and that merely by annexing letters dated 14.3.2013 and 25.11.2013, it cannot be presumed that the same were challenged before the concerned authorities. It was submitted that the first application made by the petitioner was for extension of export obligation period which has not been placed on record. It was Page 28 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT submitted that in the appeal under section 16 of the Foreign Trade Act, at a belated stage, the petitioner has incorporated prayers which have rightly not been accepted.
6.13 Referring to the clarification regarding extension of Export Obligation Period (EOP) against Advance Authorisation issued vide D.G.F.T. Policy Circular dated 13.4.2009, it was pointed out that after the Advance Authorisation Scheme was increased to thirty six months from the earlier original EOP of twenty four months, representations were received from the Trade and Industry as to whether the facility shall be available only for the Authorisations being issued from 26th February, 2009 onwards or for the Authorisations issued prior to that date also; pursuant to which it was clarified the facility shall be available to all advance authorisations which are within thirty six months from the date of issuance of the authorisation as on 26th February, 2009 or thereafter.
6.14 In conclusion, it was submitted that the applications made by the petitioner have rightly been rejected and that the petition being devoid of merits, therefore, deserves to be dismissed.
7. In rejoinder, Mr. Paresh Dave, learned advocate for the petitioner submitted that despite the petitioner having made applications for substitution of IEC and the name of the new company in the existing Authorisations, no action was taken to substitute the IEC. It was submitted that the circular is only procedural, and that when liabilities get transferred, rights of obligations also get transferred. It was submitted that whether the export obligation period has expired or not is not relevant Page 29 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT and that if there is any liability, the importer-exporter code number has to be changed. It was submitted that the expression "transferable" has not been defined in the policy. Moreover, when merger takes place, there is no transfer. Reference was made to sections 10 to 14 of the Foreign Trade Act which fall under Chapter IV under the heading "search, seizure, penalty and confiscation" to submit that no action has been taken thereunder till date. It was submitted that the right to get the name substituted is a vested right as the right of the merged party gets transferred to the transferee. It was submitted that if the petitioner were to get relief of transfer of IEC number, it should be granted reasonable time for exporting the goods. Reference was made to the contents of the Foreign Trade Policy to point out that paragraph 4.22 thereof provides for export obligations to be fulfilled within thirty six months. Para 4.22.1 thereof provides for automatic extension which does not require an application to be made. Para 4.22.2 relates to exports in anticipation of extension and Para 4.23 pertains to revalidation of authorisation. Reference was made to the definition of "revalidation" in Black's Law Dictionary, Tenth Edition. It was submitted that Para 4.23 does not say that the application has to be made before the expiry of the export obligation period.
7.1 Referring to the Public Notice dated 7th November, 2001, it was pointed out that the same provides that in respect of Advance Licences for physical exports issued on or after 1.4.1997, where the stipulated time period of 30 months for fulfillment of export obligation is over, and where the licence holder has failed to complete his export obligation within the stipulated time period, he can apply for extension of export Page 30 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT obligation period for six months from the date of the public notice. Referring to the Public Notice dated 4th June, 2015, it was submitted that the power was there with the Policy Review Committee and it has exercised such powers. Referring to the Minutes of the Meeting dated 3.9.2014 of the Policy Relaxation Committee, it was submitted that the Committee has granted extension in certain cases and has also remanded the cases. It was submitted that the contention that there is no power for extension of export obligation period prior to June, 2012 is, therefore, misconceived as the Policy Relaxation Committee has been exercising such powers.
8. In the backdrop of the facts and contentions noted hereinabove, the following facts emerge. The order of the Company Court allowing merger/amalgamation of four companies with M/s Arvind Iron Pvt. Ltd. with effect from 1.4.2012 is dated 6.11.2012. At that point of time, based upon the order of merger, no application for change of IEC number was made by the petitioner. It appears that immediately thereafter, the name of M/s Arvind Iron Pvt. Ltd. came to be changed to M/s Lubi Industries Pvt. Ltd. and the business was carried on under that name. Soon thereafter, M/s Lubi Industries Pvt. Ltd. came to be converted into M/s Lubi Industries LLP with effect from 14.2.2013 and the firm was issued a new PAN and a new IEC number, whereupon a request to transfer the Authorisation to IEC No.0812023862 of M/s Lubi Industries LLP came to be made by an application dated 12.3.2002 in respect of Advance Authorisation No.0810086954. Insofar as Advance Authorisation No.0810086954 is concerned, the export obligation period expired on 3.3.2013. Therefore, the application for change of IEC number was made after the Page 31 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT export obligation period had expired, and within the export obligation period, the petitioner had discharged only 7.8% of the export obligation though 100% imports had been made.
9. It appears that the matter rested there. Thereafter, Public Notice No.16/2015-2020 dated 4th June, 2015 came to be issued in exercise of powers conferred under paragraph 1.03 of the Foreign Trade Policy, 2015-2020, notifying amendments in the Handbook of Procedures. One such amendment was in paragraph 4.42 wherein it was provided thus:
"7. Amendment in paragraph 4.42: Amended paragraph 4.42 shall read as under:-
"4.42. Export Obligation (EO) Period and its Extension:
(a) Period of EO fulfillment under an Advance Authorisation shall commence from date of issue of Authorisation, unless otherwise specified. The period of EO fulfillment is given in paragraph 4.22 of FTP.
(b) Regional Authority may consider a request of Advance Authorisation holder for one extension of EO period upto six months from the date of expiry of EO period subject to payment of composition fee of 0.5% of the shortfall in EO. Authorisation holder will have to submit a self declaration to RA stating that unutilised imported/domestically procured inputs are available with the applicant.
(c) Request for further extension of six months after first extension as in (b) above can be considered by Regional Authority, provided Authorisation holder has fulfilled minimum 50% export obligation in quantity as well as in value, on pro-rata basis. This will be subject to payment of composition fee @ 0.5% per month on unfulfilled FOB value of export obligation. No further extension shall be Page 32 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT allowed by Regional Authority. This provision shall also be applicable to Advance Authorisations issued during FTP 2009-2014. However, only two extensions of six months each as given in sub-para (c) and in this sub-
para can be allowed subject to payment of composition fee and under no circumstance Regional Authority shall allow any extension beyond 12 months from date of expiry of EO period. At the time of filing application for second extension, authorisation holder will have to submit a certificate to RA from an independent Chartered Accountant/Chartered Engineer certifying that unutilised imported/domestically procured inputs are available with the applicant.
(d) However, extension in EO period in respect of an Advance Authorisation issued for import of an input listed under Appendix 4J of HBP 2015-2020 or Appendix 30A of Hand Book of Procedures 2009-14 shall not be permitted by RA.
(e) Whenever a ban / restriction is imposed on export of any product, export obligation period in respect of Advance Authorisation already issued prior to imposition of ban, would stand automatically extended for a period equivalent to the duration of ban, without any composition fee."
10. This was followed by another Public Notice No.20/2015- 2020 dated 9th June, 2015, whereby paragraph 4.42 came to be amended once more wherein it was provided thus:
"2. Correction in paragraph 4.42(c):
Corrected paragraph 4.42 (c) shall read as under:-
"4.42. Export Obligation (EO) Period and its Extension:
(c) Request for further extension of six months after first extension as in (b) above can be considered by Page 33 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT Regional Authority, provided Authorisation holder has fulfilled minimum 50% export obligation in quantity as well as in value, on pro-rata basis. This will be subject to payment of composition fee @ 0.5% per month on unfulfilled FOB value of export obligation. No further extension shall be allowed by Regional Authority. This provision shall also be applicable to Advance Authorisations issued during FTP 2009-2014. However, only two extensions of six months each as given in sub-
para (b) and in this sub-para can be allowed subject to payment of composition fee and under no circumstance Regional Authority shall allow any extension beyond 12 months from date of expiry of EO period. At the time of filing application for second extension, authorisation holder will have to submit a certificate to RA from an independent Chartered Accountant/Chartered Engineer certifying that unutilised imported/domestically procured inputs are available with the applicant."
11. Thus, by virtue of the said amendment, paragraph 4.42 of the Foreign Trade Policy, 2015-2020 was made applicable to Advance Authorisations issued during the duration of Foreign Trade Policy, 2009-14. Thereafter, the petitioner made an application dated 27.10.2015 to the Policy Relaxation Committee to order transfer of IEC number and extend the export obligation period for fulfilling the obligation of the Authorisation pending against M/s Lubi Submersibles, which came to be rejected on 9.6.2016 on the basis of a report dated 9.6.2016 submitted by the Regional Authority. On the basis of the report, the Policy Relaxation Committee concluded that the merger with the new company had taken place after the expiry of export obligation period, namely, (i) the IEC number of M/s Lubi Submersible Ltd. had been surrendered on 14.3.2013; (ii) during this period of 36 months, the petitioner could discharge only 7.78% export obligation; (iii) The petitioner would not be able to file shipping bills in the new IEC for old Authorisations Page 34 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT due to limitation of system software at ICEGATE Customs; and
(iv) Extension beyond 48 months is not considered and that period has lapsed in March, 2014. In view of the above, the petitioner was asked to get its case regularised in terms of Para 4.49 of the Handbook of Procedures, 2015-2020.
12. Thereafter, the petitioner made another application dated 30.11.2016 to the Policy Relaxation Committee to re-consider its decision on the following grounds:
− The amalgamation of the company was ordered much prior to the expiry of the obligation period; − The expiry of period of extension was on account of erroneous decision of the concerned officer rejecting the valid request of the petitioner to transfer the Advance Authorisation in the new IEC number of the petitioner company;
- In terms of the Handbook of Procedures, whenever a restriction is imposed on account of which export obligation could not be fulfilled, the said period would automatically stand extended.
In view of the above, it was requested that the transfer of Advance Authorisation may be permitted along with some period of extension to fulfill the pending export obligation. The application came to be rejected by the Policy Relaxation Committee in its meeting held on 6.2.2017, inter alia, holding thus:
"Decision:
The committee discussed the case at length. It was Page 35 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT noted that the Advance Authorisation in question was issued on 03.03.2010 having initial export obligation period of 36 months to export and having 24 months to import duty free goods. The applicant has imported 100% goods permitted in the Authorisation and has effected only 7.78% export obligation within initial obligation period.
It was further noted that M/s Lubi Submersible Limited was amalgamated with M/s Arvind Iron Pvt. Ltd. vide Hon'ble High Court order dated 05.12.2012. Subsequently, M/s Arvind Iron Pvt. Ltd. has changed its name as M/s Lubi Industries LLP. The company was aware of the fact that merging company was under obligation to fulfill balance export obligation by
31.03.2013. There was no provision of export obligation period extension in the prevalent policy and procedure. The applicant should have had got the case regularised on payment on payment of duty and applicable interest to the Customs Authority before acquiring the company by another company.
The applicant has quoted Para 4.42(e) of HBP, 2015- 2020, which states that "Whenever a ban/restriction is imposed on export of any product, export obligation period in respect of Advance Authorisation already issued prior to imposition of ban, would stand automatically extended for a period equivalent to the duration of ban, without any composition fee." Committee noted that the instant matter is not covered by the said para since, in the case under consideration no ban on export product permitted in the Authorisation was imposed by the Government. Therefore, provision quoted by the applicant is not applicable to the present matter.
The committee, therefore, did not accede to the request and reiterate its earlier decision taken in PRC meeting No.18/AM17 dated 20.09.2016.
The applicant is hereby directed to get the case regularised in terms of para 4.49 of HBP, 2015-2020."
13. Being aggrieved, the petitioner filed a review under section 16 of the Foreign Trade (Development and Regulation) Page 36 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT Act, 1992 before the Central Government contending that pursuant to the initial application of the petitioner dated 20.7.2015, a report of the Regional Authority was called by the Committee regarding reasons for not granting transfer of the Advance Authorisation to the new IEC number of the petitioner. Thereafter, the report dated 9.6.2016 was placed before the Committee by the Regional Authority, on the basis of which the Committee erroneously concluded that the merger of the petitioner company had taken place only after the expiry of export obligation period. It was contended that the said report was never tendered to the petitioner and therefore, the petitioner was not in a position to point out the error of fact as enumerated in that report. It was pointed out that the amalgamation was ordered by the Gujarat High Court on 5.12.2012 and thus, it is an undisputed fact that amalgamation of the companies was much prior to the expiry of the export obligation period. It was contended that the subsequent decision dated 6.2.2017 of the Committee was in violation of the principles of natural justice as the Committee had rejected the application of the petitioner for re-consideration on an entirely new ground that was never raised during any of the meetings. It was submitted that the decision of the Policy Relaxation Committee was even otherwise erroneous. Reliance was placed upon the Circular dated 6.11.2011 to submit that transfer of Advance Authorisation to new IEC number is permissible. It was further contended that extension could even otherwise be granted to the petitioner under Para 4.42 of the Handbook of Procedures. The petitioner had also contended that Para 4.42 of the Handbook of Procedures provides that whenever there is a restriction imposed on export of any product, the export obligation period in respect Page 37 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT of Advance Authorisation is already issued prior to imposition of such restriction would stand automatically extended for period equivalent to duration of such restriction. It was contended that the petitioner could not make the exports on account of illegal restriction imposed by virtue of erroneous order passed by the concerned authority rejecting the valid request made by the petitioner for transfer of Advance Authorisation to the new IEC number. The petitioner had also filed written submissions before the Appellate Committee to the effect that as a matter of fact, between the time of amalgamation of the company on 5.12.2012 and the time when petitioner's period to fulfill the export obligation was to end viz. 3.3.2013, there was a period of four months available to the petitioner to fulfill the export obligation. However, since the petitioner's request to transfer the IEC in the name of the amalgamated entity was not approved by the Committee, the petitioner was not able to fulfill the export obligation within such period of four months. In this view of the matter, the petitioner submitted that if a suitable extension is granted in view of the Circular dated 16.11.2011 and as per Para 4.42 of the Handbook of Procedures, then the petitioner would be in a position to fulfill the export obligation even at this stage within a period of four months from the date of grant of such extension.
14. The Appellate Committee, by the impugned order dated 14.5.2018, has dismissed the appeal by holding thus:
"5. After examining the facts of the case and hearing the oral and written submissions of the Appellant, the Appellate Committee in the Department of Commerce comes to the following conclusions:Page 38 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020
C/SCA/14109/2018 JUDGMENT i. Even though the Appellant had applied for transfer of Authorisation from the old unit to the new IEC, the Regional Authority rejected their request as there is no provision in the Handbook of Procedure to transfer the Authorisation to the new IEC.
ii. The Appellant's claim for automatic extension of the export obligation period after amalgamation of the company by quoting para 4.42(e) of the Handbook of Procedure is not maintainable as the present matter is not covered under the said para.
iii. Since the company to which the original Authorisation was issued is not in existence, there is no question of extension of Export Obligation Period (EOP). Moreover, it is not possible to extend the EOP of the new company (the Appellant company) as the transfer of Authorisation to this company was not endorsed by the Authority.
iv. The new company i.e. M/s Lubi Industries LLP was fully aware of the assets and liability of the acquired company. They were also aware that export obligation period was expiring in the month of March, 2013. Accordingly, they would be under obligation to pay duty and interest to the exchequer. There was no provisions of export obligation extension under FTP, 2009-2014 where Authorisation is issued having 36 months export obligation period. Further, export obligation period was reduced to 18 months in the amended FTP released on 05.06.2012.
6. After examining the facts of the case, the oral and written submissions made by the appellant, submissions of officials of DGFT and the records available, it is accordingly ordered that the appeal of M/s Lubi Industries LLP, Ahmedabad is dismissed."
15. A perusal of the order dated 14.5.2018 of the Appellate Committee shows that the Policy Relaxation Committee had Page 39 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT called upon the Regional Authority to explain why the amendment was not allowed when the High Court had allowed amalgamation of the two companies. It was stated that the merger took place after the expiry of the export obligation period and the IEC number of M/s Lubi Submersibles was surrendered on 14.3.2013. In the opinion of this court, the grounds of rejection as stated in the impugned order do not appear to be germane. In this regard, reference may be made to paragraph 4.22 of the Handbook of Procedures, 2009-14, which provides for export obligation (EO) period of its extension and reads thus:
"4.22 Export Obligation (EO) Period and its Extension:
Fulfillment Period of EO under an Advance Authorisation shall commence from Authorisation issue date, unless otherwise specified. EO shall be fulfilled within 36 months except in case of supplies to projects/turnkey projects in India/abroad under deemed exports category where EO must be fulfilled during contracted duration.
EO period for Advance Authorisations issued with input(s) as amended in Appendix 30A shall be as per the period stipulated against each entry therein. Facility of extension of EOP shall not be allowed in case of Advance Authorisation issued for these inputs. RA shall make an endorsement in Advance Authorisation to this effect."
16. Thus, paragraph 4.22 of the Hand Book of Procedures, 2009-14 provides that the fulfillment period of export obligation under an Advance Authorisation shall commence from the authorisation issue date, unless otherwise specified and further provides that the export obligation shall be fulfilled within thirty six months except in the case of the categories specified therein. The paragraph further provides that in case Page 40 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT of inputs mentioned in Appendix 30A, the export obligation period be specified against each entry therein and facility of extension of export obligation period shall not be permitted in case of Advance Authorisation issued for these inputs and that the Regional Authority shall make endorsement in the Advance Authorisation to that effect.
17. From the tenor of the said paragraph, it appears that there is facility of extension of export obligation period except in case of inputs mentioned in Appendix 30A, as otherwise there was no necessity to specify that facility of extension of export obligation period shall not be allowed qua such inputs. The ground put forth by the Policy Relaxation Committee in its meeting held on 6.2.2017 that there was no provision of export obligation period extension in the prevalent policy and procedure, therefore, does not appear to be in consonance with the provisions of paragraph 4.22 of the Handbook of Procedures, which refers to facility of extension of export obligation period. Moreover, this was not the ground for rejection of the application in the decision taken by the Policy Relaxation Committee in its meeting held on 20.9.2016, wherein the ground for rejection was that the merger took place after the export obligation period had expired which was based on the report of the Regional Authority, which in turn, was factually incorrect. The other ground was that extension beyond forty eight months is not considered and that such period has lapsed in March, 2014.
18. It has been contended on behalf of the respondents that in the Advance Authorisation it has been clearly specified that it is not transferable. While it is true that an Advance Page 41 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT Authorisation is non-transferable, it would mean that it cannot be transferred from one entity to another. But in this case, upon M/s Lubi Submersibles having been amalgamated with M/s Arvind Iron Pvt. Ltd., M/s Lubi Submersibles lost its identity and ceased to carry on business, and therefore, the question of fulfillment of the export obligation thereafter by Ms. Lubi Submersibles would not arise. However, under the Scheme of Amalgamation, with effect from the opening of the business as on the appointed date, all the liabilities of all the Transferor Companies (including M/s Lubi Submersibles) stood transferred to the Transferee Company (M/s Arvind Iron Pvt. Ltd.) pursuant to the applicable provisions of the Companies Act so as to become as from the appointed date, the debts, liabilities, duties and obligations of the Transferee Company. Therefore, the obligation to fulfill the export obligation of the Transferor Company viz. M/s Lubi Submersibles was on the transferee Company, namely, M/s Arvind Iron Pvt. Ltd. which was soon thereafter converted to M/s Lubi Industries Pvt. Ltd. and then to M/s Lubi Industries LLP.
19. From the facts as emerging from the record, the respondents seek to take action against the petitioner M/s Lubi Industries LLP in respect of non-fulfillment of the export obligation of M/s Lubi Submersibles but refuse to transfer the Advance Authorisations of the Transferor Company to the IEC of the Transferee Company on the specious plea that there is no provision for transfer of Advance Authorisation. In this case, since by virtue of the order of amalgamation, the Advance Authorisations also stand vested in the petitioner M/s Lubi Industries LLP, it is not as if the Advance Authorisation is being transferred to another person, but it is the person whom the Page 42 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT respondents seek to hold liable to fulfill the export obligation who is seeking transfer of Advance Authorisation to its IEC number so as to enable it to fulfill the export obligation of M/s Lubi Submersibles. It cannot be gainsaid that in view of the fact that M/s Lubi Submersibles ceased to exist upon its amalgamation with M/s Arvind Iron Pvt. Ltd., the question of M/s Lubi Submersibles fulfilling the export obligation would not arise and it is only the Transferee Company which can fulfill the export obligation. It is for taking care of such situations that the Zonal Policy Research Unit of the DGFT has issued the Circular dated 16th November, 2011 which makes provision for transfer of licence/authorisation to new IEC and further provides under clause (c) of paragraph 3 thereof that licences/authorisations should be amended using amendment menu by changing the old IEC with the new IEC of the firm/company acquiring the existing IEC holder. However, ignoring the above circular, the respondents have repelled the request of the petitioner for amendment of the Advance Authorisation by changing the old IEC number of M/s Lubi Submersibles to the new IEC number of the petitioner M/s Lubi Industries LLP.
20. It may be noted that the petitioner, immediately after M/s Lubi Industries LLP came into existence on 12.3.2013, moved applications for amendment of Advance Authorisation in respect of both the above referred Advance Authorisations, viz., Advance Authorisation No.0810086954 and Advance Authorisation No.0810090670, by changing the old IEC to the new IEC. Had the application been considered in terms of the Circular dated 16th November, 2011 and the Advance Authorisation been amended at the relevant time, the Page 43 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT petitioner may have been in a position to complete the export obligation within such extended period as was permissible. It may be reiterated that paragraph 4.22 of the Handbook of Procedures provides for facility of extension of export obligation and in terms of the decision of the Policy Review committee in its meeting held on 20.9.2016, extension beyond 48 months is not considered, which means that extension till 48 months was permissible. The petitioner in case of Advance Authorisation No.0810086954, had applied immediately after the export obligation period was over, and in case of Advance Authorisation No.0810090670, had applied much before the expiry of the export obligation period and hence, had the Advance Authorisation been transferred to the new IEC number, it may have completed the obligation within the period of export obligation. However, on account of the applications being rejected on the ground that there is no provision for transfer, the petitioner could not show any exports against the Advance Authorisations in questions despite having been engaged in the business of export all throughout that period. Thereafter, the petitioner once again applied before the Policy Review Committee, both, for transfer of Advance Authorisation, as well as for extension of export obligation period, which came to be rejected as referred to hereinabove.
21. From the reasons recorded by the Appellate Committee for rejecting the review application, it is apparent that the Appellate Committee has not applied its mind to the controversy in issue and has merely placed reliance upon the orders passed by the subordinate authorities, without taking into consideration the fact that it was these very orders which Page 44 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT had given rise to the review appeal. The Appellate Committee has failed to take into consideration the fact that there is a provision in the Handbook of Procedures for extension of export obligation period. Moreover, there are subsequent Public Notices which extend the time of the export obligation period to include even the Advance Authorisations issued under Foreign Trade Policy, 2009-2014. The Circular dated 16 th November, specifically provides for transfer of Advance Authorisation to new IEC number. However, all these provisions have been ignored and the Appellate Committee has mechanically dismissed the review appeal of the petitioner.
22. In the above view of the matter, this court is of the opinion that the impugned order dated 14.5.2018 passed by the Appellate Committee suffers from the vice of non- application of mind to the relevant issues and is contrary to the provisions of the Handbook of Procedures, 2009-14, the Circular dated 16.11.2011 as well as the Public Notices issued in this regard from time to time, which renders the impugned order unsustainable in law.
23. The petition, therefore, succeeds and is, accordingly, allowed to the following extent:
The impugned order dated 14.5.2018 passed by the Appellate Committee of the Ministry of Commerce and Industry in respect of Advance Authorisation No.0810086954 dated 3.3.2010, is hereby quashed and set aside. The impugned order dated 22.8.2017 passed by the Policy Relaxation Committee refusing to accept the petitioner's request to Page 45 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020 C/SCA/14109/2018 JUDGMENT change IEC and name in the Authorisation and extension of time for fulfilling the export obligation in respect of Advance Authorisation No.0810090670 dated 21.7.2010, is also hereby quashed and set aside. The second respondent - Joint Director General of Foreign Trade is hereby directed to forthwith amend both the Authorisations, viz., Advance Authorisation No.0810086954 dated 3.3.2010 and Advance Authorisation No.0810090670 dated 21.7.2010, by substituting the name and IEC number of the petitioner, that is, M/s Lubi Industries LLP in both the Authorisations with extension of export obligation period by six months from the date of such substitution.
24. Rule is made absolute accordingly with no order as to costs.
(HARSHA DEVANI, J) (A. P. THAKER, J) B.U. PARMAR Page 46 of 46 Downloaded on : Sat Jan 25 23:23:20 IST 2020