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 ... Cancellation of Advance licence - Duty Exemption Scheme - During the pendency of the writ petition, the petitioner was heard by the Advance Licensing Committee on 21.09.1999 which decided that because of quantitative factors relating to non-fulfilment of export obligation under the Advance Licence and absence of evidence about use of packing material, the exports made by the petitioner was not eligible for grant of the relief of conversion of the exports into the duty drawback system - Held that: - the EXIM Policy itself makes ample provision for discharge of export obligation in non-convertible India Rupees apropos exports ‘from India against liquidation of Rupee balance to the credit of erstwhile RPA countries’. The RBI had permitted release of advance payment in the petitioner’s account for the agreed exports - The petitioner has affected exports of the relevant amount. It neither mis-represented nor mis-declared any information for the grant of the Advance Licence. The RBI has clarified that the ‘transaction in question pertains to exports from India against liquidation of rupee balance of the erstwhile USSR.’ Therefore the respondents’ contention that the EXIM Policy did not permit the discharge of export obligation in Indian Rupees, is untenable - petition allowed - decided in favor of petitioner. 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.