2008 (10) TMI 153 - HC - Customs

Court sets aside challenge to VKGUY Scheme eligibility for ground-nut kernels export, directs adherence to procedural requirements

The Court set aside the impugned proceedings challenging the VKGUY Scheme eligibility for export of ground-nut kernels, directing the third respondent to ... Violation of principle of Natural justice by not granting opportunity of being heard – revenue’s contention is that Chapter 20 of ITC (HS) covers only value added products and the Ground-nuts will not qualify for the benefit under the VKGUY Scheme – dept. contend that VKGUT scrips were sold by petitioner to various importers - Department directed petitioner to surrender the licence issued, to pay customs duty together with interest – Section 9(4) of the FTDR Act specifically provides that such suspension or cancellation can be made only after giving the holder of the licence a reasonable opportunity of being heard - the impugned proceedings cannot be sustained Issues:Challenge to impugned proceedings dated 25-7-2008 and 21-7-2008 regarding VKGUY Scheme eligibility for export of ground-nut kernels.Analysis:The petitioner firm, engaged in exporting commodities, sought to avail export incentives under the Vishesh Krishi and Gram Udyog Yojana Scheme (VKGUY Scheme) for the export of agricultural produce, including ground nuts. The firm inadvertently indicated an incorrect HS classification for the exported ground-nuts, which were processed and fell under Chapter 20 of the HS Code, making them eligible for benefits under the Scheme. The petitioner sought amendments to the shipping documents, which were permitted by the first respondent. Subsequently, duty credit scrips were issued and utilized for imports. However, the third respondent later issued communications alleging that the ground-nut kernels were not eligible for VKGUY Scheme benefits, directing the surrender of licenses and payment of customs duty.The petitioner contended that they had utilized the credit scrip as per the Scheme without any violations and challenged the impugned communication for not following the prescribed procedures under the Foreign Trade (Development & Regulation) Act and Rules. On the other hand, the respondents argued that the ground-nut kernels did not qualify as value-added products under Chapter 20, thus not eligible for VKGUY Scheme benefits. They cited provisions allowing for suspension or cancellation of licenses under the Act.The Court observed that the petitioner had followed the VKGUY Scheme and utilized the credit scrips for imports. However, the impugned communications were issued without following the mandatory provisions of the Act and Rules, which required giving the license holder a reasonable opportunity of being heard before any suspension or cancellation. The Court noted the failure to adhere to procedural requirements and principles of natural justice in issuing the communications.Consequently, the Court set aside the impugned proceedings dated 25-7-2008 and 21-7-2008, remitting the matter back to the third respondent to follow the provisions under the Foreign Trade (Development and Regulation) Act and Rules, ensuring due process and opportunity for the petitioners to be heard. The writ petitions were allowed with this direction, and no costs were awarded.