2025 (2) TMI 813 - HC - Customs

Settlement Commission must verify actual export obligation achievement through NRE account remittances under EPCG Scheme

The HC remanded the matter to the Settlement Commission after finding that both the Commission and writ court incorrectly determined the export obligation ... Non-fulfilment of export obligation under the EPCG Scheme as per the EXIM policy 1992-97 - entitlement to concessional duty based on the export obligation achieved - HELD THAT:- When the DGFT had particularly sought for the details of export earnings upto the period 22.12.1999 along with the bank certificates and Appendix 10C attested by the Chartered Accountant and the same has also been furnished by the appellant with all particulars, there had been no further development and when these details were also filed before the Commission, the same had not been considered by the Commission only on the ground that the request for extension made by the appellant had been rejected. Before this Court, the appellant had filed a consolidated statement of exports and the receipts in foreign currency for the period from 01.04.1993 to 20.12.1999. On perusal it could be seen that it is only a self serving document prepared by the appellant and we are not inclined to rely on this self serving document to appreciate the contentions made by the appellant. However, copies of 3 Bank certificates all dated 25.09.2000 issued by Federal Bank Limited, Indian Overseas Bank and State Bank of Travancore, pertaining to the remittances received for the period upto 22.12.1999 has been filed. The certificate issued by the State Bank of Travancore precisely states that the remittances had been received from various NRE accounts into the account of the appellant. But the certificate of Indian Overseas Bank states that they have collected and credited Rs. 1,63,84,165/- from various NRE customers for the period from 03.06.1999 to 20.12.1999 which is equivalent to US$ 3,56,170. The certificate issued by Federal Bank also certifies that for the period upto 20.12.1999 they have credited an amount of Rs. 4,21,550/- which is approximately equivalent to US$ 10,036.90. When admittedly the EPCG licence has been extended for the period upto 20.12.1999 and also the appellant had received remittances from the NRE customers for cable subscriptions and when the export achieved upto 1998 had alone been taken into account, necessarily the remittances received by the appellant towards export obligation which according to the appellant has been achieved 30% has to be considered, as their obligation towards the payment of duty will proportionately reduce. As both the Commission as well as the writ court had not considered this aspect and had simply concluded the issue holding that there has not been any extension after 1998 which is factually incorrect, the portion of the order insofar as fixing the export obligation to have been achieved at 14% alone is set aside and the matter is remanded back to the file of the first respondent Settlement Commission only for the limited purpose of ascertaining the actual export obligation achieved by the appellant by the remittances received by them from the NRE accounts towards cable subscription charges in the 3 banks. Based on the ultimate decision to be arrived at by the Commission, fixing the export obligation achieved, the proportionate duty for the unfulfilled export obligation shall be paid by the appellant as directed by the Commission, failing which the DGFT will be entitled to realise the bank guarantee. The bank guarantee shall be kept alive till the proceedings are concluded before the first respondent Settlement Commission and ultimately acted upon. In view of the pendency of the issues for a considerable length of time, the entire exercise shall be completed within a period of 3 months from the date of receipt of copy of this order. Conclusion - The court remanded the matter to the Settlement Commission to verify the actual export obligation achieved through NRE account remittances. The Writ Appeal stands partly allowed. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment include:Whether the appellant fulfilled the export obligation under the EPCG Scheme as per the EXIM policy 1992-97.Whether the Settlement Commission and the writ court erred in concluding that the export obligation was achieved only up to 14% and not considering the extended period till 22.12.1999.Whether the appellant is entitled to concessional duty based on the export obligation achieved.Whether the remittances received from NRE accounts can be considered as export revenue for fulfilling the export obligation.Whether the writ court's decision to dismiss the petitions based on the Settlement Commission's findings was justified.ISSUE-WISE DETAILED ANALYSISExport Obligation FulfillmentRelevant legal framework and precedents: The Export Promotion Capital Goods (EPCG) Scheme under the EXIM policy 1992-97 allows service providers to import capital goods at concessional duty rates, subject to fulfilling specified export obligations.Court's interpretation and reasoning: The court noted the appellant's failure to meet the export obligation within the original and extended periods as per the EPCG licence. The Settlement Commission had concluded that only 14% of the obligation was achieved based on the DGFT's communication.Key evidence and findings: The DGFT had reduced the export obligation and extended the period by one year. The appellant claimed to have achieved up to 30% of the obligation by the extended deadline, supported by bank certificates and Appendix 10C.Application of law to facts: The court found that the Settlement Commission had not considered remittances received from NRE accounts during the extended period, which could impact the fulfillment percentage.Treatment of competing arguments: The appellant argued for consideration of exports realized till 22.12.1999, while the respondents contended that the obligation was not met, and the appellant was liable for full duty.Conclusions: The court remanded the matter to the Settlement Commission to verify the actual remittances from NRE accounts, which could affect the export obligation fulfillment.Entitlement to Concessional DutyRelevant legal framework and precedents: Under the EPCG Scheme, concessional duty is contingent upon fulfilling export obligations.Court's interpretation and reasoning: The court noted that the appellant's entitlement to concessional duty depends on the actual export obligation achieved, which was in dispute.Key evidence and findings: The appellant provided bank certificates indicating remittances from NRE accounts, but the Settlement Commission had not fully considered these.Application of law to facts: The court emphasized the need to ascertain the actual export obligation fulfillment to determine the duty payable.Treatment of competing arguments: The appellant sought recognition of exports up to 30%, while the respondents maintained that only 14% was achieved.Conclusions: The court directed the Settlement Commission to reassess the export obligation based on additional evidence, affecting the duty liability.Consideration of NRE Account RemittancesRelevant legal framework and precedents: The EXIM policy allows for export obligations to be fulfilled through foreign currency earnings, including from NRE accounts.Court's interpretation and reasoning: The court found that remittances from NRE accounts could potentially qualify as export revenue, impacting the obligation fulfillment.Key evidence and findings: Bank certificates indicated remittances from NRE accounts, but the Settlement Commission had not fully considered these.Application of law to facts: The court directed the Settlement Commission to verify bank statements to determine the extent of export obligation fulfillment through NRE account remittances.Treatment of competing arguments: The appellant argued for the inclusion of NRE remittances, while the respondents questioned the validity of these as export revenue.Conclusions: The court remanded the matter to the Settlement Commission for further verification of NRE account remittances.Justification of Writ Court's DismissalRelevant legal framework and precedents: The writ court's role is to review administrative decisions for legality and reasonableness.Court's interpretation and reasoning: The court found that the writ court had not fully considered the potential impact of NRE remittances on the export obligation fulfillment.Key evidence and findings: The writ court had dismissed the petitions based on the Settlement Commission's findings, which were now under reconsideration.Application of law to facts: The court emphasized the need for a thorough assessment of the export obligation fulfillment before determining the writ court's decision's validity.Treatment of competing arguments: The appellant challenged the writ court's dismissal, while the respondents supported it based on the Settlement Commission's conclusions.Conclusions: The court partially allowed the writ appeal, remanding the matter for further assessment by the Settlement Commission.SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning: 'The applicant has stated that the DGFT was still considering their request. However, the matter cannot be kept pending for an unduly long time defeating the very objective of the Settlement mechanism.'Core principles established: The fulfillment of export obligations under the EPCG Scheme must consider all relevant evidence, including remittances from NRE accounts, to determine duty liability accurately.Final determinations on each issue: The court remanded the matter to the Settlement Commission to verify the actual export obligation achieved through NRE account remittances. The writ appeal was partly allowed, directing further proceedings to ascertain the duty liability based on verified export fulfillment.