AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (9) TMI 219
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.... 2. It is the petitioner's case that it was exempt from the condition of furnishing bank guarantees in respect of any scheme framed under the Foreign Trade Policy. Further, according to the petitioner, it was entitled to Advance Authorization of a higher value and, therefore, the reduction in the value of Advance Authorization as indicated in the impugned communication was not justified. 3. The learned counsel for the petitioner submitted that under the Foreign Trade Policy, the petitioner, holding there status of a two star export house, was exempt from furnishing Bank Guarantees in respect of any scheme under the Foreign Trade Policy. It was further submitted that the petitioner was entitled to an Advance Authorization equivalent to 500% of the FOB and/or FOR value of the preceding year's export. It was contended that the Advance Authorization in question was issued to the petitioner on 09.05.2012 and, therefore, the exports during the year 2011-12 were to be considered for calculating the value of the Advance Authorization. It was pointed out that the Advance Authorization was computed on the basis of goods exported by the petitioner in the year 2010- 11, which could not be co....
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....fied that the impugned communication only required that the petitioner submit the Advance Authorization for endorsement of the Bank Guarantee condition and the petitioner would be required to submit a bank guarantee directly to the Customs Authorities in the event the imports exceeded the amount of Advance Authorization. 7. The impugned communication does not demand that the Bank Guarantee(s) be submitted to the Office of the Director General of Foreign Trade (hereinafter referred to as 'DGFT') and it has been clarified that the Bank Guarantee(s) would be required to be furnished directly in favour of the customs authorities. Thus, the petitioner's grievance in that regard is illusory. The essential controversies that need to be addressed are, whether the petitioner was entitled to an Advance Authorization for a value exceeding Rs. 38,83,52,050/-, and whether an exporter holding the status of a Two Start Export House is required to submit Bank Guarantees while claiming Advance Authorization in excess of its entitlement. 8. Before proceeding further, it is necessary to examine the relevant provisions of the Foreign Trade Policy, the Handbook of Procedures and the legal framework u....
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....h reads as under:- "4.7.1 Entitlement CIF value of one or more such authorisations shall be maximum 500% of FOB and/or FOR value of preceding year's exports and/or supplies in case of status holders and Rs. 5 crore or 500% of the FOB and/or FOR value of preceding year exports and/or supply, whichever is more, for others." 13. It is seen from paragraph 4.7.1 of the Handbook of Procedures that a status holder - which the petitioner, concededly, is - is entitled to an Advance Authorization of 500% of the value of exports in the preceding year. Thus, the petitioner was entitled to Advance Authorization for a value equivalent to five times its export in the preceding year. However, since the petitioner had applied for the Advance Authorization on 14.03.2012, the relevant preceding year would, obviously, be 2010-11. The fact that the Advance Authorization in question was issued on 09.05.2012 is not germane since the same only communicated the acceptance of the application made by the petitioner. It is also relevant to note that the petitioner's application was also made on the basis of the FOB value of its exports during the year 2010-11, which were declared to be Rs. 7,76,70,410/....
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....view of Advance Authorisation. Duty free import of mandatory spares upto10% of CIF value of Authorisation which are required to be exported/supplied with resultant product are allowed under Advance Authorisation. Advance Authorisations are issued for inputs and export items given under SION. These can also be issued on the basis of Ad hoc norms or self declared norms as per pars 4.7 of HBP v1. xxxx xxxx xxxx xxxx 4.1.4 Advance Authorisations are exempted from payment of basic customs duty, additional customs duty, education cess, anti-dumping duty and safeguard duty, if any. However, imports for supplies covered under paragraph 8.2 (h) & (i) will not be exempted from payment of applicable anti-dumping and safeguard duty, if any. xxxx xxxx xxxx xxxx 4.1.6 Advance Authorisation necessitates exports with a minimum value addition of 15%, except for items specified in Appendix 11B of HBP v1 and for items in Gems & Jewellery sector, for which value addition would be as per paragraph 4A.2.1 of HBP v.1. Exports to SEZ Units/supplies to Developers/Co-developers, irrespective of currency of realization, would also be covered. xxxx xxxx xxxx xxxx 4.1.7 Advance Authorisation shall be is....
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....TP. (x) Status Holders of Agri. Sector (Chapters 1 to 24) shall be eligible for Agri. Infrastructure Incentive Scrip under VKGUY - Para 3.13.4 of FTP." 17. Undeniably, one of the privileges extended to Export and Trading House status holder is that they are exempt from furnishing bank guarantee in schemes by virtue of clause (v) of paragraph 3.10.4 of the Foreign Trade Policy. A bank guarantee is an instrument to provide security in respect of the amount covered. It is, thus, not far to see why status holders have been granted the privilege in respect of exemption from furnishing bank guarantees. It is apparent that the Central Government in its wisdom thought it fit that exporters who had been recognised on account of their established track record should be considered creditworthy enough to be allowed the benefit of schemes under their policy without providing any security in the form of a bank guarantee. The requirement for furnishing bank guarantee in respect of Advance Authorization scheme as contained in the Handbook of Procedures must be viewed in this perspective. 18. The procedure and mechanism for availing of the benefit of the Advance Authorisation scheme as contempla....