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2016 (5) TMI 1237
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....y. It is contended that inasmuch as the impugned notification stipulates an absolute bar on transferability of goods imported under the SFIS, it is violative of Articles 14, 19 (1) (g) and 300A of the Constitution of India, Section 25 of the CA, the Foreign Trade (Development and Regulation) Act, 1992 ('FTDR Act'), the Foreign Trade (Regulation) Rules 1993 ('FTR Rules') and the Foreign Trade Policy ('FTP') 2009-14 as amended on 1st August 2013. 2. The challenge in this petition is also to a letter dated 12th June 2013 sent by the Commissioner of Customs (Exports) (Respondent No.5 herein) informing the Petitioner that the decision of the Policy Relaxation Committee ('PRC') constituted by the Director General of Foreign Trade ('DGFT') (Respondent No. 3 herein) conveying approval to the transfer of one of the imported vessels of the Petitioner utilising the SFIS scrips was contrary to para 3.12.7 of the FTP 2009-14 and para 3.11.6 of the Hand Book of Procedure ('HBP') and therefore the DGFT had been requested to keep the said decision in abeyance till the matter was resolved through mutual discussion. Background facts 3. The Pet....
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.... move. 8. On 1st August 2013, the DGFT in exercise of the powers under Section 5 of the FTDR Act read with para 2.1 of the FTP 2009-14 amended para 3.12.7 of the FTP 2009-14 to read as under: "3.12.7 Entitlement/goods (imported/procured) shall be non transferable (except within group company and managed hotels) and be subjected to Actual User condition. However, these goods can be alienated on completion of 3 years from the date of import/procurement." 9. By a letter dated 6th September 2013, the Petitioner informed the Joint DGFT that in view of the recent amendment to para 3.12.7 of FTP 2009-14, it would be going ahead with the sale of Greatship Amrita since the said vessel was imported more than three years earlier. 10. On the same day i.e. 6th September 2013 the Commerce Secretary wrote to the Secretary (Revenue) on this issue as under: "We are dismayed to receive your D.O. letter No. 605/17/2013-DBK dated 8th August, 2013 in which you have conveyed your reservations about alienation of goods imported by utilisation of SFIS scrip. SFIS scrip is a duty credit scrip. Accordingly, an import consignment for which duty is paid by using SFIS scrip, involves technically....
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.... on 17th/18th February 2014, by the Additional DGFT to the Joint Secretary (Drawback) requesting that the DoR should agree with the DGFT. It was pointed out that where any violation of the terms regarding alienation took place within three years and any such violation was pointed out, the DGFT would have no hesitation in taking action as per the FTDR Act. 12. The above correspondence reveals that the differences between the DGFT and the DoR on the issue persisted. On 18th March 2014, the Petitioner again wrote to the Joint Secretary (Drawback) in the DoR reiterating its intention to sell the vessels imported under the SFIS which had been imported more than three years earlier and seeking confirmation. The Petitioner received no response. Orders in W.P. (C) 616 of 2015 13. On 8th January, 2015, the Petitioner wrote to the DoR for permission to sell Greatship Akhila which had been imported on 6th April 2009. However, with there being no response to this request, the Petitioner filed WP (C) No. 616/2015, in which an interim order was passed by this Court on 22nd January 2015, the relevant portion of which reads thus: "In the meanwhile, Greatship Akhila (Anchor Handling Tug....
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....ached between the Department of Revenue and the DGFT that "specific individual cases of export sale of goods (other than goods defective or unfit for use), can be dealt by DGFT on merits in terms of Para 2.5 of FTP subject to the condition that export would be without claim for any export incentive, rebate, refund, drawback and/or re-credit of incentive and the condition that bringing back into India shall be treated as fresh import". 3. As far as the present petition is concerned, the Petitioner had sought permission to re-export Supply Vessel Greatship Akhila having identified a Vietnamese buyer. This Court by its order dated 22nd January 2015 permitted the Petitioner to go ahead with the sale subject to the Petitioner furnishing a bank guarantee for a sum of Rs. 12 crores in favour of Respondent No. 5. Pursuant thereto the Petitioner has re-exported the said ship. 4. In view of the agreement reached between the Department of Revenue and the DGFT as spelt out in the letter dated 29th April 2016 addressed to Mr. Nijhawan there is no surviving issue as far as the present petition is concerned since the Department of Revenue and the DGFT have agreed to permit re-export of capi....
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....in, the learned ASG, stated that he was appearing before the Court on behalf of both the DoR and the DGFT. He had at the hearing on 2nd March, 2016, stated that both the "Directorate General of Foreign Trade and the Commissioner of Customs (Export) will work out the modalities and their stand will be disclosed on the next date of hearing." However, as already noticed, on 5th May 2016, the DoR reiterated its objections to alienation of the vessels imported under the SFIS in the domestic market even if they had been imported more than three years earlier. 18. There were two principal submissions made by Mr. Jain. He first clarified that the Respondents had no objection to the Petitioner seeking to avail of the facility of payment of customs duty or excise duty as the case may be by utilising SFIS scrips issued in terms of FTP 2004-2009 even under the FTP of 2009-2014. However, according to him, the payment of customs duty or excise duty by using SFIS scrips whether under the FTP 2004-2009 or FTP 2009-2014 could not be treated as actual payment of duty in cash but only as 'duty foregone'. According to Mr. Jain payment of duty by using SFIS scrips under FTP 2004-2009 is subj....
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.... FTP. The slight change in FTP 2009-2014 is that under para 2.3(b) a Policy Interpretation Committee could be constituted to aid and advise the DGFT. Under Section 5 of the FTDR Act read with para 2.1 of the FTP 2009-2014, the DGFT has the power to make amendments to the FTP 2009-2014. 22. Para 3.6.4 of the FTP 2004-2009 as well as para 3.12 of the FTP 2009-2014 sets out the entire SFIS. The clauses sub-titled Objective, Eligibility, Entitlement, Remittances, Imports Allowed, Non-Transferability are identical under both FTPs. Relevant to the present case is para 3.6.4.5 of the FTP 2004-2009 (corresponding to para 3.12.6 of FTP 2009-2014) dealing with imports that are allowed. It states that the duty credit scrip may be used for import of any capital goods including spares, office equipment and professional equipment, etc. that are otherwise freely importable under ITC (HS). It states that the "imports shall relate to any service sector business of the applicant." 23. As regards non-transferability both para 3.6.4.6 of FTP 2004-2009 and para 3.12.7 of FTP 2009-2014 provide as under: "Entitlement/goods (imported/procured) shall be non-transferable (except within group compan....
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...., the DGFT is the final authority as far as the interpretation of the FTP is concerned. It is, therefore, not possible to agree with the contention of Mr. Jain that the HBP should give way to the FTP. It is only where the HBP is contrary to or inconsistent with the FTP that the latter will prevail. However, since it is the DGFT who has the final word as regards the FTP, and not the Customs Department or any other authority, and it is the DGFT who issues the HBP as well, the question of the HBP not binding the DoR or the DGFT does not arise. The Court has not been shown any para in either FTPs that prohibits goods imported by paying duty using SFIS scrips from alienation for all times to come. No doubt there is an 'actual user' condition attached to goods imported under the SFIS but as can be seen from para 2.43 of the HBP that spells out the procedure under both FTP 2004-2009 and FTP 2009-2014, alienation with prior permission of the RA is envisaged. Para 2.43.1 of the HBP clarifies that the prior permission of the RA is not necessary for the transfer or disposal of goods, imported with Actual User condition provided such goods are freely importable without Actual User c....
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.... FTP 2009-2014. 30. The SFIS scheme is implemented by the DGFT working under the Ministry of Commerce. In terms of the FTDR Act, it is the DGFT who has the final word on interpretation of the FTP. Whether it is para 3.6.4.6 of FTP 2004-09 or para 3.12.7 of FTP 2009-14, both of which stipulate 'non-transferability' of goods imported under SFIS, the interpretation of the DGFT is final. The FTDR Act, FTR Rules, the FTP and the HBP are a complete code governing the SFIS. Para 3.12.7 of the FTP 2009-14 has been amended by the DGFT in exercise of his statutory powers under Section 5 of the FTDR Act with effect from 1st August 2013 to permit alienation of goods that have been imported on completion of three years from the date of import. The said notification being statutory in character should equally bind the DoR. 31. The present case reveals the impasse brought about on account of the inability of two ministries of the central government viz., the Commerce Ministry and the Finance Ministry, to reconcile their differences about permitting alienation of goods imported under the SFIS. Just as it is important to protect the revenues of the central government it is esse....
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....ip itself is a benefit that has been 'earned'". This also answers the misconception of the DOR that customs duty can only be paid in cash, and that use of duty credit scrips is only 'revenue foregone'. The position has been explained by the Madras High Court in Tanfac Industries Ltd. (supra) where it was held that the goods cleared by using DEPB scrips for payment of duty should be treated as duty payable goods and not as duty exempted goods. 34. The Court posed a query to the learned ASG whether denying permission to alienate goods imported under the SFIS when the FTP 2004-09 was operational while permitting such alienation if goods were imported under the SFIS under FTP 2009-14 was based on any rational criteria or was designed to achieve any legitimate objective. The learned ASG was unable point out any. Indeed denial of permission to transfer vessels imported more than three years ago only because they were imported under FTP 2004-09 serves no useful or rational purpose. 35. On the other hand the Petitioner had been impressing on the DoR the need for a much needed clarification as regards its notification dated 19th September 2009 which was impairin....