2018 (9) TMI 674 - HC - Customs

Court upholds denial of extension for Duty Credit Scrip, stresses timely incentive utilization

The Court dismissed the petition challenging the decision to deny an extension of validity period for a Duty Credit Scrip (DCS) issued to a manufacturing ... Duty Credit Scrip (DCS) - period of validity - loss of the scrip - extension of time for such clearance - Did the facts justify such extension and whether the Committee committed a serious error in refusing to exercise such powers? Held that:- DCS and similar scheme are in the nature of exporter incentives in order to encourage export, providing the exporters with certain additional benefits in terms of credit which could be utilised for making imports in future. Such scrips are often times freely transferable. In order to manage the fund flow, scrips would necessarily have validity period. Such incentive cannot be made available with no reference to the period before which the utilisation must be made - While reconsidering the petitioner’s request and after granting personal hearing, the Committee in its later decision dated 3-1-2017 cited additional reasons namely, the duty credit scrip is a transferable instrument having specific validity. The petitioner had the option to sale or transfer it within its validity period. The petitioner did not do so initially for a period of over 12 months. The petitioner did not apply for issuance of duplicate scrip with all necessary documents. No genuine hardship is noticed. No justification for not utilising the scrip for 12 months is given. While recognising the powers of the Committee to revalidate the period of scrip, we must recognise its discretionary nature. As noted, when the scrip gives certain financial benefits to an exporter as an incentive, simultaneously, the policy makers having provided a specific period of validity of utilisation thereof, the extent of discretion of the concerned authority to extend the period of validity or not gets considerably enlarged. Unless it is shown that the exercise of such power borders to the level of perversity, the Court would show a healthy restraint in such matters. In the present case, it may be that some time was consumed by the Government bodies in responding and granting duplicate DCS, nevertheless, we cannot lose sight of the fact that after its first issuance, the petitioner did not utilise or transfer it for over one year out of total period of six months. Once again it was the petitioner or its CHA who was responsible for loss of the scrip. Finally even after expiry of period of validity of 31-1-2015, the petitioner applied for extension of the validity period only on 17-4-2015. At all stages the petitioner had thus shown a degree of slowness. Petition dismissed. Issues Involved:Challenge to decisions dated 27-9-2016 and 3-1-2017 regarding extension of validity period for Duty Credit Scrip (DCS) by respondent authorities.Analysis:1. Extension of Validity Period for DCS:The petitioner, a company engaged in manufacturing and export, was issued a DCS by respondent authorities. The original DCS was lost, and a duplicate was issued, but its validity was co-terminus with the original, expiring on 31-1-2015. The petitioner requested an extension of validity due to inability to utilize or transfer the scrip within the short timeframe. The Policy Relaxation Committee denied the request citing lack of delay in issuance of duplicate scrip and the petitioner's failure to utilize the scrip within the initial 12 months. The Committee reiterated its decision after a detailed representation and personal hearing with the petitioner.2. Legal Arguments and Decision:The petitioner argued that the Committee had powers to extend the validity period based on the Foreign Trade Policy 2015 to 2020. The Committee's decision was challenged on grounds of procedural delays in issuance of duplicate scrip and the short timeframe for utilization. However, the respondent's counsel contended that the Committee's decision was proper and reasoned, considering all aspects. The Court examined the provisions of the Foreign Trade Policy and circulars, acknowledging the Committee's power to extend validity but emphasizing the discretionary nature of such decisions.3. Judicial Review and Discretionary Powers:The Court recognized the Committee's discretion in extending the validity period of the DCS, linked to exporter incentives and fund flow management. While acknowledging procedural delays in duplicate scrip issuance, the Court noted the petitioner's failure to utilize or transfer the scrip within the initial 12 months. The Court upheld the Committee's decision, emphasizing healthy restraint in interfering with discretionary powers unless they border on perversity.4. Conclusion:The Court dismissed the petition, noting that while some observations by the Committee may not be entirely accurate, there was no infirmity in the exercise of discretionary powers. The judgment underscores the importance of timely utilization of export incentives and the discretionary authority vested in committees to extend validity periods.