Allowed

M/S Taurus Pvt. Ltd. v. Additional Director General of Foreign Trade

Karnataka HC7 Sept 2023WP/52908/2015

Case brief

AI extract

What is this about?

The High Court of Karnataka allowed a writ petition quashing an order refusing an Export Obligation Discharge Certificate. The Court held that a Certificate issued after a Grievance Redressal Committee's directive could not be reversed once imported inputs were verified for manufacture of exported goods, directing the DGFT to issue the certificate.

What did the court decide?

Impugned order set aside; Respondent No. 2 directed to issue Export Obligation Discharge Certificate to petitioner for CNC machine exports per Advance Authorization Licenses within four weeks.

M/S Taurus Pvt. Ltd. Vs Additional… — Constitutional and Fundamental Rights | Karnataka HC (2023)

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1 - NC: 2023:KHC:32562 WP No. 52908 of 2015

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 7^TH DAY OF SEPTEMBER, 2023

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BEFORE

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THE HON'BLE MR JUSTICE R. NATARAJ WRIT PETITION NO. 52908 OF 2015 (GM-RES)

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BETWEEN:

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M/S TAURUS PVT. LTD., NO.26C/1, VEERASANDRA INDUSTRIAL AREA, HOSUR ROAD, ELECTONICS CITY POST, BANGALORE-560 100 REPRESENTED BY ITS DIRECTOR, MR. M.S. RAJARAM

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…PETITIONER

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(BY SRI. GURURAJ B.N., ADVOCATE)

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AND:

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ADDITIONAL DIRECTOR GENERAL OF FOREIGN TRADE AND APPELLATE AUTHORITY, OFFICE OF THE DIRECTOR GENERAL OF FOREIGN TRADE, UDYOG BHAVAN, SANSAD MARG, NEW DELHI-110001

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Digitally signed by SUMA Location: HIGH COURT OF KARNATAKA

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THE JOINT DIRECTOR GENERAL OF FOREIGN TRADE, KENDRIYA SADAN, KORAMANGALA, BANGALORE-560 095

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THE ASSISTANT COMMISSIONER OF CUSTOMS INLAND CONTAINER DEPOT, WHITEFIELD ROAD, BANGALORE-560 066

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…RESPONDENTS (BY SRI. B.S.VENKATANARAYANA, CENTRAL GOVERNMENT COUNSEL FOR RESPONDENT NOS.1 AND 2;

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NOTICE IS SERVED ON RESPONDENT NO.3 AND UNREPRESENTED)

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NC: 2023:KHC:32562 WP No. 52908 of 2015

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THIS WP IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER NO.NIL DATED 30.10.2015 IN F NO.1/25/ADDL.DGFT/ECA/CHE/AMM 15 DATED 30.10.2015 VIDE ANNEXURE-P AND ETC.

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THIS PETITION, COMING ON FOR PRELIMINARY HEARING IN 'B' GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:

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ORDER

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The petitioner claims to be a manufacturer of Computerized Numerical Control Machines (‘CNC Machines’ in short). It is also a registered Central Excise assessee and a registered importer / exporter registered with the respondent No.2. The petitioner claims that it imports some of the critical parts and components required for manufacture of CNC Machines and exports the said CNC machines / finished products to the buyers in various countries. In order to be competitive in the overseas market, the petitioner would avail benefit under various export promotion schemes formulated by the Government of India under the Foreign Trade Policy from time to time.

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The Director General of Foreign Trade (“DGFT”) is the highest authority under the Foreign Trade Policy which is

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constituted in exercise of the power conferred under the Foreign Trade (Development and Regulation) Act, 1992. Respondent No.2 being the Regional Authority for the State in Karnataka and subordinate to the DGFT exercises powers under the said Foreign Trade Policy and grants licences under various export promotion schemes. Respondent No.2 is responsible for accepting the discharge of export obligation prescribed under various Export Promotion Policies and issue redemption certificates to the licencees, who have successfully discharged the export obligations.

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The Petitioner claims that it had applied for two advance licences at the hands of the respondent No.1 which were granted to it on 01.08.2006 and 08.03.2007 respectively. The petitioner imported critical parts of CNC Machines under the said licences through Air Cargo Complex Division, Bengaluru. Subsequently, it manufactured the CNC machines and also exported the finished products in two consignments on 20.02.2007 and

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29.01.2008. Since the unit was custom bound the consignments were examined and sealed by the jurisdictional Central Excise Authorities before the same were removed from the factory of the petitioner and the petitioner realized the proceeds of the export. It is further stated that after obtaining the certificate of consumption of imported inputs for manufacture of exported goods from the jurisdictional Central Excise authorities, the petitioner applied to the respondent No.2 for issuance of Export Obligation Discharge Certificate in respect of two advance authorization licences. Respondent No.2 replied and informed the petitioner that the number of advance licences was not mentioned on the face of the shipping bills under which exports were made by the petitioner. Therefore, the petitioner was directed to obtain suitable endorsement or amendment to the shipping bills from the customs authorities at the port of export and produce the same for obtaining the redemption certificate. Accordingly, the petitioner approached the customs authorities of Inland Container Depot, Bengaluru and requested them for

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amendment of shipping bill so as to incorporate the advance authorization numbers on the face of shipping bills. The petitioner accordingly applied to the respondent No.3 for amendment of the shipping bills.

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The Superintendent of Customs (Admin), Inland Container Depot, Bengaluru by the letter dated 17.12.2009, directed the petitioner to file an application for amendment of the shipping bills and contemporaneously directed the petitioner to file a licencewise statement of exports made by it through the Inland Customs Depot, Bengaluru. The petitioner submitted the said statement to the customs authorities on 18.12.2009. Though the petitioner had applied for the amendment of the shipping bills to incorporate the advance authorization numbers, the respondent No.3 did not respond. After continued follow up with the authorities at various levels, the Grievance Redressal Committee of the Ministry of Commerce and Industry, decided in its meeting held on 14.03.2013 to accede to the request of the petitioner and

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consequently, issued an office memorandum dated 28.05.2013 and directed the DGFT to implement its decision without placing it before the Policy Relaxation Committee (PRC)/ PIC as the case may be.

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Based on this, the petitioner again approached the respondent No.2 for issuance of the redemption certificate. The respondent No.2 after perusing the order passed by the Grievance Redressal Committee, issued redemption before discharging the petitioner from any further obligation under the advance authorization licences. Consequent thereto, the petitioner armed with the redemption certificate approached the Customs Authority, Air Cargo Complex Division, at Bengaluru International Airport, Bengaluru seeking cancellation of the bond and return of the bank guarantee, it had submitted at the time of import under the Advance Authorization Scheme. The petitioner was purportedly informed at the Air Cargo Complex Division, Bengaluru that the respondent No.2 had informed it that the redemption

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certificate issued to the petitioner was under review and therefore, not to cancel the bond executed by the petitioner.

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The petitioner contends that for reasons unknown, the respondent No.2 issued a letter dated 11.12.2013, whereby, it once again directed the petitioner

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to pay customs duty with interest and also to pay penalty equivalent to 3% of the Cost Insurance and Freight and value of the imports (henceforth referred to as 'CIF' for short) to the Customs Authority.

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The petitioner aggrieved over the way in which the decision of the Grievance Redressal Committee, was reversed, approached the respondents seeking clarification. However, the respondents did not disclose the reason for reversing the discharge certificates. Following this, the respondents caused a notice of demand (Annexure-J) dated 11.12.2013 calling upon the petitioner to pay customs duty and interest and also a sum equivalent to 3% of the CIF value which was challenged by

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the petitioner before this Court in W.P.No.18685687/2014. This Court noticed that the demand was without issuing a corresponding show-cause notice to the petitioner, the said demand notice was ordered to be treated as a show-cause notice and the respondents were directed to consider the case of the petitioner. Accordingly, a fresh show-cause notice was issued on 27.06.2014 which was suitably replied by the petitioner on 05.07.2014 stating that the goods that were exported were manufactured from the goods imported under the advance authorization and that there was a mistake in not mentioning the advance authorisation license numbers on the shipping bills and such mistakes were permitted to be corrected by Grievance Redressal Committee. Notwithstanding the reply submitted by the petitioner, respondent No.2 passed an order dated 22.08.2014 rejecting the reply furnished by the petitioner and refusing to condone the mistake committed by the petitioner in not mentioning the advance authroisation number and date or file number on the shipping bills and

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reiterated the demand for payment of customs duty and interest apart from penalty in the form of 3% of CIF value of the imports. Aggrieved by the aforesaid order, the petitioner preferred an appeal and the same was also rejected by respondent No.1 in terms of its order dated 30.10.2015. Feeling aggrieved by the orders passed by respondent Nos.1 and 2 referred above, the petitioner is before this Court.

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The learned counsel for the petitioner submitted that the goods that were imported under the advance authorization license were CNC systems, servo motor and drive packages and sauter make 06 position type tool turrets and the final product was a CNC turning machine and similarly, in the license No.2 the inputs that were imported were two CNC systems which were used for the manufacture of the final product namely, CNC controlled swivel forming machine. Similarly, for the manufacture of a single station 3 roll stamping machine, the inputs that

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were imported were a Sumitomo make gear box and mitsubhishi make PLC and servo packages.

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He further submitted that the fact that the input machines were imported and used for manufacturing the final products were accepted by the Superintendent of Central Excise, Bengaluru by their declaration dated 26.03.2008 and 24.03.2008 respectively. He therefore, submitted that there is no dispute that the inputs that were imported were used in the manufacture of final product and the mistake committed by the petitioner was not declaring the advance authorization license numbers on the face of shipping bills, which was purely a clerical error and the respondents ought to have allowed the same to be rectified. He submits that when once the Grievance Redressal Committee had accepted the mistake of the petitioner, and had directed the DGFT to make appropriate corrections and to issue the export obligation discharge certificate, the respondent No.2 having already issued such certificate could not have reversed it. He submitted

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that the respondent Nos.1 and 2 have refused to undo the mistake, citing that this would become a precedent. He submits that when the petitioner has used the imported inputs for the manufacture of final products, the respondent Nos.1 and 2 could not have laid stumbling blocks in the petitioner claiming the benefit under the advance authorization scheme.

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In support of his contentions, the learned counsel for the petitioner relied upon a judgment of a Coordinate bench of this Court in the case of Biocon Ltd.,

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Vs. Director General of Foreign Trade, New Delhi -

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2022 (380) E.L.T. 252 (Karnataka.) and the judgment of Hon'ble Supreme Court in the case of Commissioner of Sales Tax, U.P. Vs. Auriaya Chamber of Commerce, Allahabad - 1986 (25) E.L.T. 867 (S.C.).

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Per contra, the learned counsel for the respondents submitted that unless the petitioner disclosed the Advance Authorisation License numbers on the shipping bills, the respondents cannot correlate the

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exported product with the components imported under the scheme and therefore, the petitioner cannot claim advantage of the scheme and therefore, the products that were exported by the petitioner were treated as free shipping bills. He contended that as several parcels move across the country, it will be difficult for the respondents to identify whether the final products that were exported were manufactured by using the imported products. He relied upon a judgment of a Delhi High Court in the case of Wadpack Private Limited Vs. Director General of Foreign Trade and another - 2020 SCC Online Del 2303 and contended that in similar circumstances the Delhi High Court had refused to interfere with the exercise of discretion by respondent Nos.1 and 2.

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I have considered the submissions made by learned counsel for the petitioner and learned counsel for respondent Nos.1 and 2.

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A perusal of the certificates issued by the Superintendent of Central Excise as per Annexures - C and

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C1 indicated that the products that were imported by the petitioner under the advance authorization license were infact used to manufacture the final product and therefore, there is no dispute that whatever that was imported by the petitioner was finally incorporated in the final product exported by the petitioner.

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It is not even the case of any of the respondents that the products that were imported by the petitioner were not used in the manufacturing of the final product. On the contrary, the respondents seem to have claimed that since the petitioner failed to mention the advance authorization license number on the shipping bills, the petitioner was not entitled to the benefit of the export obligation discharge certificate. The letter dated 20.02.2008 issued by the respondent No.2 clearly indicates that the deficiency was only in not mentioning the license number or the file number on the shipping bill duly attested by the customs authority.

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The grievance of the petitioner was rightly considered by the Grievance Redressal Committee which issued an office memorandum dated 28.05.2013 accepting the explanation offered by the petitioner and which directed the DGFT to implement the order of the Grievance Redressal Committee and grant the benefit to the petitioner. The respondent No.2 having once accepted and having once issued the export obligation discharge certificate, could not have reneged or reversed it on any grounds, whatsoever, more particularly, when there is no dispute that the imported goods were used for manufacturing of the final product.

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In that view of the matter, the impugned order passed by the respondent Nos.1 and 2 warrants interference.

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Consequently this petition is allowed and impugned order passed by respondent Nos.1 and 2 is set aside and the respondent No.2 is directed to issue Export Obligation Discharge Certificate to the petitioner in respect

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of the exports of CNC machines by the petitioner as per the Advance Authorization License Number - 0710046466 dated 01.08.2006 and 0710050495 - 08.03.2007 and the same shall be complied within a period of four weeks from the date of receipt of certified copy of this order.

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Sd/JUDGE

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SMA-para Nos.1 to 3 HJ-para No.4 till the end List No.: 1 Sl No.: 32

M/S Taurus Pvt. Ltd. v. Additional Director General of Foreign Trade

Case brief

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What did the court decide?

M/S Taurus Pvt. Ltd. v. Additional Director General of Foreign Trade

Case brief

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