TaxTMI 
TaxTMI 
2011 (3) TMI 113
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....T on the date of exports and not as per the SION notified subsequent to the exports. Based on the above communication, the Jt. DGFT, Mumbai by 11 orders in original all dated 26/11/2010 has demanded duty with penalty from the petitioner in respect of the 'Formers' imported duty free by the holder of the DFRC's issued to the petitioner on the ground that the 'Formers' were not covered under the SION notified by the DGFT on the date of exports effected by the petitioner. 4) Ordinarily, we would have relegated the petitioner to avail the alternate remedy of appeal against the orders in original dated 26/11/2010 which are impugned in this Writ Petition. However, since the said orders in original are based on the communication issued by the DGFT on 3/5/2010 and the validity of the said communication is challenged, we have deemed it proper to entertain the Writ Petition and decide the issue on merits. 5) The petitioner is engaged in the business of manufacture and export of glass bottles, perfumary bottles, vials, etc. During the period 2004-05 the petitioner had exported several consignments of glass bottles and opted for DFRC licences. 6) Under the EXIM Po....
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....oresaid policy provisions it is clear that after export, the exporters are issued DFRC's for import of inputs used in the export product, which are covered under the SION notified by the DGFT and also indicated in the shipping bills. 8) As per the SION notified by the DGFT, originally six inputs eligible for duty free import under heading 'Chemical & Allied Product SI No. A3016' in respect of the products exported by the petitioner. By a Public Notice dated 12/04/2004 the DGFT amended the SION so as to include two more inputs viz. "Formers' & 'Packing material' under SI No. A3016. Thus, as per the amended SION, an exporter of glass bottles became entitled to import eight inputs enumerated in entry A3016 of SION without payment of duty. 9) In the present case, the petitioner had applied for DFRC's from time to time after the SION was amended on 12/4/2004. In the said applications, the petitioner claimed DFRC's for duty free import of all the eight inputs used in the products exported prior to 12/4/2004 as also exported subsequent to 12/4/2004. The licensing authority under the DGFT accordingly issued several DFRC's during the period 2004-05. The said DFRC's speci....
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....pugned orders in original were passed on 26/11/2010 confirming duty, interest and imposed penalty upon the petitioner and its Directors. Challenging the communication dated 3/5/2010 and also 11 orders in original dated 26/11/2010 the present petition is filed. 14) Mr. Sridharan, learned counsel appearing on behalf of the petitioner submitted that the communicated dated 3/5/2010 is contrary to the Exim policy, because the policy provides for duty free importation of inputs used in the export product and it is not in dispute that formers & packing materials are inputs used in the product exported by the petitioner. He submitted that para 4.2.3 of the policy ensures that the DGFT verifies the inputs used in the export product and notifies the same in the SION so that the DFRC is issued only for import of inputs used in the export product and not any other inputs. Similarly, para 4.2.4 of the policy requires that the DFRC's are issued for duty free import of inputs used in the export product which are notified in the SION and indicated in the shipping bills. The object is to ensure that the exporter in the shipping bills submitted to the customs authorities declares....
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....two items, the importers to whom DFRC's were sold would have imported items other than Formers / Packing materials. Therefore, it is contended that the communication dated 3/5/2010 being contrary to the policy be quashed and set aside. Consequently, the orders in original dated 26/11/2010 passed on the basis of the communication dated 3/5/2010 seeking to recover duty, interest and penalty from the petitioner who is not even the importer deserve to be quashed and set aside. 17) Mr.Khambata, learned Additional Solicitor General ('ASG' for short) appearing on behalf of the respondents, on the other hand submitted that the communication dated 3/5/2010 merely clarifies the policy provisions as they stood at the relevant time and, therefore, no fault can be found with the communication dated 3/5/2010. As regards the validity of the orders in original all dated 26/11/2010, he submitted that the petitioner must be directed to avail the statutory remedy of appeal provided under the Act. 18) On the merits of the case relating to the issuance of DFRC's permitting the duty free import of 'Formers / Packing materials', the learned ASG submitted that admittedly on the dates o....
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....ere not covered under SION on the date of export. The DFRC's were granted on the basis of the application made by the petitioner. The error committed in issuing DFRC's for duty free import of Formers / Packing materials came to light when the Audit Authority raised the objection. The said objection was confirmed by the DGFT vide communication dated 3/5/2010. The petitioner while making the applications for DFRC's had executed an undertaking to the effect that the contents of the application if proved to be incorrect or false, then the petitioner would be liable for penal action or other consequences. Since the claim of the petitioner for duty free import of 'Formers / Packing materials' which were not included in the SION on the date of export is found to be incorrect, the petitioner in terms of the undertaking given, is liable to pay duty, interest and also liable for penalty. The fact that the duty demand on packing materials has been dropped as the same are allowable as per General Policy for 'packing material' under the Hand Book of Procedures, Vol II for SION, the petitioner cannot escape liability to pay duty with interest and penalty on the 'formers' which were erroneously a....
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....t, even if the product was exported prior to the issuance of the public notice by the DGFT. In other words, for issuing DFRC what is relevant is that the inputs must be notified under the SION and not the date on which it is notified. Thus, reading the policy provisions as a whole, it is evident that DFRC has to be issued for duty free import of inputs used in the export product which are notified under the SION and the fact that an input was not notified on the date of export cannot be a ground to deny duty free import of that input under the DFRC, because the object of the policy was to allow duty free import of the inputs used in the export product and not restricted to the inputs notified on the date of export. 26) The fact that the 'Formers / packing materials' are inputs used in the product exported by the petitioner is confirmed by the Central Excise authorities. Even the DGFT has confirmed, though belatedly, that 'Formers / packing materials' are inputs used in the product exported by the petitioner. There is nothing in the policy to suggest that DFRC has to be issued in respect of the inputs notified under the SION on the date of export. Even the public notice da....
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....d not have issued clarification on 3/5/2010 so as to prejudicially affect the interests of the exporters / third parties, who had imported 'Formers / packing materials' on the basis of the DFRC's issued by the office of the Jt. DGFT several years ago. In other words, even if it is held that the Licensing authorities were in error in interpreting the provisions of the policy, in the facts of the present case, since the DFRC's have been fully utilized much prior to the realisation of the mistake committed by the licensing authority, the petitioner cannot be saddled with any liability in respect of imports already made. 29) It is not the case of the revenue that the DFRC's have been issued on account of fraud or misrepresentation on the part of the petitioner. The only grievance of the revenue is that the petitioner ought not to have included 'Formers / packing materials' in the applications seeking DFRC's because on the date of export, neither the said items were included in the SION nor the said items were indicated by the petitioner in the shipping bills and, therefore, in terms of the undertaking given at the time of export, the petitioner is liable to pay duty with inte....
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....edits have to be calculated only on the basis of the norms as they were existing on the date of exports. In that case, Adani Exports had availed the pass book scheme under the 1992-1997 policy and had exported goods covered under Entry 7 of SION, under which they were entitled to the credit of the customs duty payable on 227 kilos of vitamin mixes for export of every metric ton of vitamin mixes. With effect from 1/4/1997 new EXIM police for 1997-2002 came into force under which pass book scheme was discontinued by the Central Government. Similarly, with effect from 1/4/1997 new SION came into force wherein the entry regarding vitamin mixes was bifurcated into vitamin mixes and mineral mixes and the permissible quantity under the new SION for vitamin mixes was 27 kg. for export of every metric ton of vitamin export. The question was, whether Adani Exports who had exported goods under the 1992-97 policy and eligible to the credit of customs duty payable on 227 kgs. of vitamin mixes on export of every metric ton of vitamin mixes could be denied that credit on the ground that under the new SION which came into force with effect from 1/4/1997 the permissible quantity was only 27 kg. per....