2024 (8) TMI 965 - HC - Customs

Policy Relaxation Committee must accept SEZ supply proof for Export Obligation discharge without Bill of Export requirement

The Bombay HC ruled on a Policy Relaxation Committee decision regarding Export Obligation discharge under Advance Authorisation. The petitioner's request ... Bill of Export as mandatory document - deemed export to SEZ - proof of discharge of export obligation - Policy relaxations under FTP - corroborative evidence in lieu of Bill of Export - judicial precedent on non-submission of Bill of ExportBill of Export as mandatory document - proof of discharge of export obligation - judicial precedent on non-submission of Bill of Export - Policy relaxations under FTP - Validity of Policy Relaxation Committee minutes rejecting redemption of Advance Authorisation for supplies to SEZ solely for non-submission of Bills of Export - HELD THAT: - The Court held that the Policy Relaxation Committee's refusal to accept supplies to SEZ as discharge of export obligation merely because assessed copies of Bills of Export were not produced was not sustainable. Having regard to established precedent of this Court that supplies to SEZ constituted deemed export and that copies of ARE-1 and other corroborative documentation could establish discharge of export obligation, the Committee's insistence on absolute procedural compliance with Bills of Export was arbitrary. Further, DGFT Policy Circular No. 04/2024 relaxed the requirement of submission of Bill of Export for supplies made to SEZ units under Advance Authorisation/DFIA prior to 01.07.2017 and listed specified corroborative evidence to be accepted in lieu thereof. Applying the circular and precedent, the Court directed issuance of Export Obligation Discharge Certificates in respect of those supplies covered by the circular and quashed the impugned minutes insofar as they denied redemption on the ground of non-submission of Bills of Export. [Paras 8, 9, 13, 16]Both impugned minutes of meetings quashed; Respondent authorities must issue EODC in respect of supplies covered by the DGFT circular and judicial precedent accepting ARE-1 and corroborative documents as proof of discharge.Corroborative evidence in lieu of Bill of Export - deemed export to SEZ - Policy relaxations under FTP - Procedure for consideration of remaining supplies not covered by the circular - HELD THAT: - For the supplies not falling within the circular's cut-off (eight supplies in this case), the Court directed that the petitioner be permitted to submit specified corroborative evidence listed in the Policy Circular dated 3 June 2024 - namely, ARE-1 showing the Advance Authorisation/DFIA details duly attested by the jurisdictional Central Excise/GST authorities, evidence of receipt by the SEZ recipient, and evidence of payment by the SEZ unit. The respondents are to examine the submissions and, if in order, issue the EODC within four weeks; if any query arises, a personal hearing shall be given with at least three working days' notice. This constitutes judicially supervised remand for verification and compliance with the circular's requirements. [Paras 14, 15]Petitioner to submit the specified corroborative documents within two weeks; respondents to examine and issue EODC within four weeks or call for hearing if queries arise.Final Conclusion: Writ petition allowed; the Policy Relaxation Committee minutes dated 21.06.2022 and 26.06.2023 are quashed insofar as they rejected redemption of the Advance Authorisation for non-submission of Bills of Export; EODCs to be issued for supplies covered by the DGFT circular dated 03.06.2024 and the remaining supplies to be considered upon the petitioner's submission of the prescribed corroborative documents, with respondents to act within the timelines directed by the Court. Issues Involved:1. Legality and validity of PRC decisions rejecting the petitioner's request.2. Requirement of 'Bill of Export' for discharge of Export Obligation (EO) under Advance Authorisation (AA).3. Relaxation of the 'Bill of Export' requirement by DGFT for supplies made to SEZ units prior to 01.07.2017.4. Applicability of previous court judgments on similar issues.Detailed Analysis:P Legality and Validity of PRC Decisions:The petitioner challenged the decisions taken by the Policy Relaxation Committee (PRC) in meetings held on 21st June 2022 and 26th June 2023. The PRC rejected the petitioner's request for considering supplies to SEZ units as valid discharge of EO under AA due to the non-submission of 'Bills of Export.' The petitioner argued that the rejection was unjustified as other substantial evidence of export was provided.P Requirement of 'Bill of Export':The petitioner, engaged in manufacturing and exporting Non-Ferrous Metal Alloys, supplied goods to SEZ units but failed to submit 'Bills of Export' due to an inadvertent error. Despite submitting all other relevant documents, including ARE-1 forms, the PRC maintained that the 'Bill of Export' was mandatory under the Foreign Trade Policy (FTP) for discharging EO. The respondents argued that the submission of 'Bill of Export' is a mandatory requirement for exports to SEZ units.P Relaxation by DGFT:A Policy Circular No. 4 of 2024 dated 3rd June 2024 issued by the Directorate General of Foreign Trade (DGFT) relaxed the requirement of 'Bill of Export' for supplies made to SEZ units prior to 01.07.2017. The circular allowed the submission of ARE-1 forms, evidence of receipt of supplies by the SEZ unit, and evidence of payment made by the SEZ unit as corroborative evidence in lieu of 'Bill of Export.' This relaxation covered 29 out of 37 supplies made by the petitioner, necessitating the issuance of Export Obligation Discharge Certificate (EODC) for these supplies.P Applicability of Previous Judgments:The petitioner relied on the judgment in Larsen & Toubro Limited vs. Union of India, where the court held that the refusal to relax export obligations due to the absence of 'Bill of Export' was unjustified if other substantial evidence of export was provided. The court emphasized that procedural lapses should be condoned if the petitioner could prove the fulfillment of EO through other documents. This judgment was followed in Electromech Material Handling System (India) Pvt. Ltd. vs. The Union of India & Ors., reinforcing that failure to produce a 'Bill of Export' should not result in non-discharge of EO if other evidence is available.P Final Judgment:The court directed Respondents Nos. 1 to 3 to issue EODC for the 29 supplies covered by the DGFT circular. For the remaining 8 supplies, the petitioner was instructed to submit ARE-1 forms, evidence of receipt by the SEZ unit, and evidence of payment within two weeks. The respondents were to examine these documents and issue the EODC within four weeks if the documents were in order. Any queries by the respondents would necessitate a personal hearing with at least three working days' notice.Consequently, the rule was made absolute in terms of prayer clause (a), quashing and setting aside both impugned minutes of meetings. The petition was disposed of accordingly.