2017 (3) TMI 217 - HC - Customs

Court orders amendment of Advance License to reflect export obligation in Indian Rupees. Show cause notice found unsustainable.

The court allowed the writ petition, directing the respondents to amend the Advance License to reflect the export obligation in Indian Rupees instead of ... Advance License - Export Obligation - Rupee Payment Area vs General Currency Area - Value Addition Norms - Interpretation of EXIM Policy (Appendix XIII) - Suppression/misrepresentation - Amendment of licence - RBI permission for rupee advance paymentsSuppression/misrepresentation - Advance License - Whether the petitioner suppressed or misrepresented material facts in the application for grant of the value based advance licence such as to justify cancellation of the licence. - HELD THAT: - The adjudicating officer (Deputy Director General) examined the application and found that the petitioner had clearly indicated the FOB value of exports both in Indian currency and in US dollars and had also disclosed the mode of payment as advance payment. The Court recorded and upheld that all relevant information was disclosed before the grant of the Advance Licence and therefore the allegations in the show cause notice were not sustainable. The earlier departmental finding absolving the petitioner of the allegations of suppression/misrepresentation was noted and accepted by the Court, which held that the issue of cancellation did not arise. [Paras 9, 16]No suppression or misrepresentation; show cause notice not sustainable and cancellation not justified.Rupee Payment Area vs General Currency Area - Value Addition Norms - Interpretation of EXIM Policy (Appendix XIII) - RBI permission for rupee advance payments - Amendment of licence - Whether the petitioner was entitled to amendment of the Advance Licence to record the export obligation in Indian Rupees in view of (i) the contract and exports being in Indian Rupees, (ii) RBI's authorization regarding rupee advance payment, and (iii) the EXIM Policy provisions for liquidation of rupee balances. - HELD THAT: - The Court noted the agreement fixed the contract price in Indian Rupees and that the petitioner effected exports for the rupee amount. The RBI had earlier permitted release of rupee advance payment and later confirmed that the transaction pertained to exports against liquidation of rupee balances of the erstwhile USSR. Appendix XIII of the Handbook expressly provides that for exports against liquidation of rupee balances to erstwhile RPA countries (and for exports to Russian Federation against repayment of state credits) value addition norms and certain relaxations apply and that contracts and invoices may be determined in non convertible Indian Rupees, with export obligation capable of being indicated and discharged in Indian Rupees. The Court held that where the parties had agreed on INR and RBI had authorised rupee advance receipts, DGFT could not re write the contractual currency or deny amendment of the licence to record the export obligation in Indian Rupees; accordingly the petitioner was entitled to amendment of Advance Licence No. P/W/1526408 dated 14.02.1994 to show the export obligation in Indian Rupees. [Paras 17, 20, 21, 22]Licence to be amended to show export obligation in Indian Rupees; respondents to issue appropriate orders within three weeks.Final Conclusion: Writ petition allowed: departmental cancellation claim rejected and petitioner entitled to amendment of the Advance Licence to record the export obligation in Indian Rupees; respondents directed to issue appropriate amended licence within three weeks. Issues Involved:1. Quashing of the show cause notice dated 07.07.1995.2. Amendment of the Advance License to reflect export obligations in Indian Rupees instead of USD.3. Compliance with the terms of the Advance License and the export obligation.4. Validity and amendments of the Advance License under the Duty Exemption Scheme.5. Compliance with the EXIM Policy and RBI guidelines regarding export obligations and payments.Detailed Analysis:1. Quashing of the Show Cause Notice:The petitioner sought the quashing of a show cause notice dated 07.07.1995, which alleged suppression of information and misrepresentation regarding the advance payment received from Russia. The petitioner argued that all relevant information, including the FOB value of exports in both Indian Rupees and USD, and the mode of payment as advance payment, was clearly indicated in their application. The respondent's show cause notice was found unsustainable as the petitioner had not suppressed any information. Consequently, the prayer for quashing the show cause notice became infructuous.2. Amendment of the Advance License:The petitioner requested an amendment to the Advance License to reflect the export obligation in Indian Rupees (Rs. 14,69,26,650) instead of USD (USD 45,91,457). The respondents opposed this, arguing that the license was issued for the General Currency Area, requiring proceeds in freely convertible foreign exchange. However, the court noted that the agreement between the petitioner and the Russian buyer specified only the Indian Rupee value, and the RBI had permitted the release of advance payment in Indian Rupees. The EXIM Policy allowed for discharge of export obligations in non-convertible Indian Rupees for exports against liquidation of rupee balances to the credit of erstwhile RPA countries. Therefore, the court directed the respondents to amend the Advance License accordingly.3. Compliance with the Terms of the Advance License:The petitioner had exported 21.25 lakh pieces of LDPE liner bags as per the agreement, with the total value specified in Indian Rupees. The respondents issued a show cause notice alleging non-fulfillment of export obligations, but the petitioner provided evidence of exports worth Rs. 14,78,33,760.60. The court found that the petitioner had complied with the terms of the Advance License and that the respondents had not raised any doubts about the LDPE content in the bags over the past 23 years. The petitioner's declaration regarding the LDPE content in the shipping bills was accepted in the absence of contrary evidence from the respondents.4. Validity and Amendments of the Advance License:The petitioner applied for an Advance License under the Duty Exemption Scheme, specifying the FOB value of exports and the CIF value of imports in both Indian Rupees and USD. The license was initially rejected due to the lack of norms for LDPE liner bags but was later granted. The petitioner sought amendments to reflect the export obligation in Indian Rupees and to allow exports to RPA countries. The court noted that the petitioner had disclosed all relevant information, and the respondents' contention that the license could only be issued for the General Currency Area was untenable. The court directed the respondents to amend the license to reflect the export obligation in Indian Rupees.5. Compliance with EXIM Policy and RBI Guidelines:The EXIM Policy provided for discharge of export obligations in non-convertible Indian Rupees for exports against liquidation of rupee balances to the credit of erstwhile RPA countries. The RBI had permitted the release of advance payment in Indian Rupees for the petitioner's exports. The court found that the petitioner had complied with the EXIM Policy and RBI guidelines and that the respondents' contention that the policy did not permit discharge of export obligations in Indian Rupees was untenable. The court directed the respondents to issue appropriate orders to amend the Advance License accordingly.Conclusion:The court allowed the writ petition, directing the respondents to amend the Advance License to reflect the export obligation in Indian Rupees (Rs. 14,49,26,650) instead of USD (USD 45,91,457) within three weeks. No order as to costs was made.