1998 (4) TMI 149 - HC - Customs

Court directs customs to issue demand notice for duty recovery, allows regularisation for failed export obligations, stays prosecution pending representations.

The court directed customs authorities to issue a demand notice for customs duty recovery and permitted the petitioners to seek regularisation for failing ... Import - Advance licence - DEEC scheme Issues Involved:1. Non-passing of orders permitting surrender of imported raw material.2. Coercive steps initiated under the Foreign Trade (Development and Regulation) Act, 1992 and the Customs Act.3. Violation of export obligations under the Duty Exemption Scheme.4. Jurisdiction and actions of Customs Authorities and Directorate of Revenue Intelligence.5. Regularisation of non-fulfilment of export obligations.6. Coordination between different government departments.Detailed Analysis:1. Non-passing of Orders Permitting Surrender of Imported Raw MaterialThe petitioners sought a declaration that the respondents' inaction in permitting the surrender of imported raw material to a transferable licence holder was arbitrary, illegal, and violative of the Foreign Trade (Development and Regulation) Act, 1992, and the Export and Import Policy. The petitioners had applied for permission to sell the imported raw material to an import licence holder due to the inability to fulfill export obligations caused by unforeseen market conditions. Despite applications and follow-ups, no response was received from the authorities, leading the petitioners to surrender the material to a party holding a transferable licence.2. Coercive Steps Initiated Under the Foreign Trade (Development and Regulation) Act, 1992 and the Customs ActThe respondents initiated coercive steps against the petitioners, including raids and potential prosecution under the Customs Act and the Foreign Trade Act. The petitioners contended that such actions were arbitrary and discriminatory, especially since they had not received any response to their applications for regularisation.3. Violation of Export Obligations Under the Duty Exemption SchemeThe petitioners were granted advance licences under the Duty Exemption Scheme to import raw materials duty-free on the condition that they would manufacture and export finished goods. Due to market conditions, the petitioners failed to fulfill these export obligations, leading to allegations of customs duty evasion and the initiation of proceedings under the Customs Act.4. Jurisdiction and Actions of Customs Authorities and Directorate of Revenue IntelligenceThe Customs Authorities and Directorate of Revenue Intelligence (DRI) initiated investigations and took actions against the petitioners for allegedly diverting imported raw materials to the domestic market, thereby evading customs duty. The DRI's actions included raids and detentions, which the court found to be high-handed and harassing. The court clarified that both the Customs Act and the Foreign Trade Act operate in different fields, and actions under one act do not preclude actions under the other.5. Regularisation of Non-fulfilment of Export ObligationsThe court noted that the Duty Exemption Scheme allows for the regularisation of bona fide defaults in fulfilling export obligations. The petitioners argued that their failure to meet export obligations was due to genuine market conditions and sought regularisation. The court directed the petitioners to file representations before the licensing authority and the customs authorities for regularisation, and ordered these authorities to consider the applications in accordance with the law.6. Coordination Between Different Government DepartmentsThe court highlighted the lack of coordination between the Foreign Trade Department and the Customs Department, which allowed the petitioners to deal with the goods without fulfilling their export obligations. The court emphasized the need for better coordination to prevent harassment and ensure efficient regulation. The court also criticized the Directorate of Revenue Intelligence for overstepping its role and acting independently of the parent departments.Conclusion:The court directed the customs authorities to issue a demand notice for the recovery of customs duty and allowed the petitioners to seek regularisation of their default in fulfilling export obligations. The court stayed the prosecution until a decision on the representations was made and criticized the high-handed actions of the Directorate of Revenue Intelligence. The court also called for better coordination between government departments to avoid similar issues in the future.