Court interprets trade rules, limits petitioner's value. Bank guarantee requirement overturned.

The court upheld the communication limiting the petitioner's Advance Authorization value based on the correct interpretation of the relevant provisions. It found the petitioner entitled to a lower value than claimed due to the preceding year's exports. Additionally, the court ruled in favor of the petitioner regarding the requirement for furnishing bank guarantees, holding that the Handbook of Procedures cannot impose conditions contrary to the privileges granted under the Foreign Trade Policy. The impugned communication was set aside in part, allowing the petition to that extent, with no order as to costs.

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Issues Involved:
1. Entitlement to Advance Authorization value.
2. Requirement for furnishing Bank Guarantees by a Two Star Export House.

Detailed Analysis:

1. Entitlement to Advance Authorization Value:

The petitioner, a two-star export house, challenged the communication dated 31.05.2013 from the Additional DGFT, which limited its Advance Authorization entitlement to Rs. 38,83,52,050/- instead of Rs. 77,03,73,810/- (USD 1,54,07,476.20). The petitioner argued that it was entitled to a higher value based on the exports of the preceding year (2011-12), and the reduction was unjustified. The court examined the relevant provisions of the Foreign Trade Policy and the Handbook of Procedures. According to paragraph 4.7.1 of the Handbook of Procedures, a status holder is entitled to Advance Authorization of 500% of the FOB value of the preceding year's exports. The petitioner applied for Advance Authorization on 14.03.2012, making 2010-11 the relevant preceding year. The exports for 2010-11 were Rs. 7,76,70,410/-, making the correct value of Advance Authorization Rs. 38,83,52,050/-. The court found the impugned communication reflecting this entitlement to be correct and not faulty.

2. Requirement for Furnishing Bank Guarantees by a Two Star Export House:

The petitioner contended that as a two-star export house, it was exempt from furnishing bank guarantees under any scheme of the Foreign Trade Policy. The respondents argued that under paragraph 4.7.3 of the Handbook of Procedures, an authorization exceeding the entitlement required a 100% bank guarantee to Customs Authorities. The court examined the Foreign Trade Policy, which provides privileges to status holders, including exemption from furnishing bank guarantees (paragraph 3.10.4(v)). The court noted that the Handbook of Procedures, which specifies the procedure for implementing the Foreign Trade Policy, cannot impose conditions contrary to the policy. The requirement for a bank guarantee under paragraph 4.7.3 of the Handbook of Procedures was found repugnant to the privilege granted under the Foreign Trade Policy. The court resolved this repugnancy in favor of the Foreign Trade Policy, disregarding the condition imposed by the Handbook of Procedures.

Conclusion:

The court set aside the impugned communication to the extent it required the petitioner to submit the Advance Authorization for endorsement of the Bank Guarantee condition, allowing the petition to this extent. The petition and application were disposed of without any order as to costs.

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