TaxTMI 
TaxTMI 
2016 (10) TMI 379
X X X X Extracts X X X X
X X X X Extracts X X X X
....st-export or Pre-export. (3) The petitioner company is a 'Merchant Exporter'. Clause 9.39 of the Policy defines merchant exporter as a person engaged in trade activity and exporting or intending to export goods. (4) Since the inception of the 2004-09 Policy, the petitioner company (hereinafter referred to as 'SESA') used to apply for issuance of Post-export DFIAs. After getting DFIAs, SESA used to purchase diverse goods from various manufacturers upon payment of duty and all applicable taxes including excise duty and used to export the goods within the time specified in the DFIAs. After discharging its export obligation, SESA used to apply for transferability of the DFIAs under Clause 4.2.6 of the Policy. Upon being satisfied that SESA had fulfilled its export obligations and export proceeds had been realized, the respondent authorities used to endorse 'transferability' on the DFIAs, whereupon, the same became freely transferable. (5) Since SESA did not avail of 'CENVAT' facility, while endorsing transferability on the DFIAs, the authorities made a note exempting the inputs from additional customs duty/excise duty in terms of Clause 4.2.6 (c) of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al customs duty in respect of 13 DFIAs. Accordingly SESA filed WP 350 of 2015 praying for cancellation and/or recall of DGFT's order dated 12 December, 2014 and for extension of validity period of those licences validity of which had expired during the pendency of the earlier writ petition. On the said second writ petition an interim order of injunction dated 8 April, 2015 was passed restraining the respondent authorities from relying upon or giving effect to the order dated 12 December, 2014. Contention of the petitioner:- (11) The petitioner alleges that the order dated 20 November, 2014 issued by the Addl. Director General of Foreign Trade is arbitrary, illegal, issued in violation of principles of natural justice and without jurisdiction. The order did not give any reason or ground for re- submission of the concerned licences. Neither any show cause notice was issued nor opportunity of hearing was given to SESA before issuance of the said order. The said order was passed obviously with the purpose of deleting/rectifying the endorsement on the DFIAs allowing exemption from payment of additional customs duty. There is no provision of review under the 1992 Act or in the Rule....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mpanies which have been granted authorisation to market fuel by Ministry of Petroleum and Natural Gas. (b) Wherever SIONs prescribe actual user condition and in case of Acetic Anhydride, Ephedrine and Pseudo Ephedrine, DFIA shall be issued with actual user condition for these inputs and no transferability shall be allowed for these inputs even after fulfilment of export obligation. (c) After endorsement of transferability, inputs/domestic procurement against authorisation or transfer of imported inputs/domestically procured inputs shall be subject to payment of applicable additional customs duty/excise duty. While endorsing transferability, authorisation would bear a note as to liability of such additional customs duty/excise duty. However, in case where CENVAT facility has not been availed, exemption from additional customs duty/excise duty would be available even after endorsement of transferability on DFIA." (15) He then referred to Sec. 3(a) of the Central Excise Act, 1944 which states that there shall be levied and collected a duty of excise to be called the Central Value Added Tax (CENVAT) on all excisable goods including goods produced or manufactured in special econ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....so drawn to a circular dated 24 August, 2006 issued by the DGFT instructing its officers that in cases whether the exporter seeks redemption and transferability of DFIA on completion of stipulated export obligation, documentary evidences such as SSI/Central Excise Registration of supporting manufacturer/jobber may not be insisted upon. Learned Counsel submitted that even after receipt of the purported information from the DRI vide letter dated 29 September, 2014, the DGFT authorities endorsed exemption from payment of additional customs duty as well as transferability on eight numbers of licences between 20 October, 2014 and 27 October, 2014. This also goes to show that availing of Cenvat credit by the manufacturer of the export product did not disentitle a merchant exporter like SESA to get the benefit of exemption from payment of additional customs duty. (20) Mr. Deb then submitted that in the current Policy for the period 2015-20, DGFT has changed the definition of the term 'supporting manufacturer' as well as the conditions for validity and transferability of DFIA. However, the new definitions and provisions contained in the current Policy cannot be applied retrospecti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sed in his factory or in the factory of the supporting manufacturer for the manufacture of dutiable goods................" Mr. Deb then submitted that on a reading of the aforesaid Circulars, it is clear that the Department has to ascertain whether the exporter has availed of the Cenvat facility. The said Circular is applicable to DFIA scheme as would appear from the paragraph 6(ii) thereof. (23) Learned Counsel then referred to a letter dated 3 December, 2008 written by the Calcutta Customs in response to a query raised by the Department of Revenue. Learned Counsel relied on a portion of the said letter which reads as follows:- "In terms of DGFT's notification No. 49(RE-1007)/2004-2009 dated 14.11.2007 (copy enclosed for ready reference), this Customs House is following the directions contained in the aforesaid notification i.e. in all the cases of imports, who sought clearance against the transferability DFIA authorization are required to submit certificate from the concerned Central Excise authority to the effect that the license holder have not availed any CENVAT under CENVAT credit rules and on the basis of that certificate goods are assessed without charging additiona....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in violation of this Court's status quo order dated 3 December, 2014 as continued by the order dated 10 December, 2014 and as such is void. (28) Mr. Deb then submitted that DGFT and Customs Authority have made conflicting factual submissions. DGFT contended that SESA did not avail of Cenvat credit facility because it could not do so being an export merchant. However, the Customs Authorities contended that SESA was not entitled to exempt benefit because it had availed of Cenvat facilities on the inputs used for manufacturing the export products. (29) Mr. Deb relied on a decision of the Hon'ble Apex Court in the case of Rao Shiv Bahadur Singh-vs.-The State of Vindhya Pradesh, AIR 1953 SC 394. He relied on the observation of the Hon'ble Supreme Court at paragraph 5 of the judgment to the effect that although it is not permissible to supplant a clear and obvious lacuna in a statute and imply a right of appeal, it is incumbent on the court to avoid a construction, if reasonably permissible on the language, which would render a part of the statue devoid of any meaning or application. He also relied on a decision of the Apex Court in the case of The Commissioner of Income Ta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oms duty. However, vide letter dated 29 September, 2014 information was received from the office of DRI that the supporting manufacturers of SESA had been availing of the Cenvat credit facility on the inputs used for manufacturing the export products. SESA had suppressed this vital fact which led to availment of double benefit by SESA which is not permissible as per the Policy or the related customs notifications. Hence, the respondent authorities came to a conclusion that it was necessary to delete or rectify the endorsements on the DFIAs allowing exemption from payment of additional customs duty and accordingly SESA had been directed to submit the 12 DFIAs. (32) Learned Addl. Solicitor General submitted that one of the main objects of the Foreign Trade Policy formulated by the Central Government in exercise of power under Sec. 5 of the Foreign Trade Act is to boost exports so as to enhance foreign exchange earnings for the country. Chapter 4 of the Policy lays down the Advanced Authorisation Scheme. Clause 4.2.6 of the Policy deals with transferability of licence. (33) SESA being a merchant exporter and not a manufacturer, it is not entitled to avail of Cenvat benefit at all. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ms Circular No. 11/2009 dated 25 February, 2009. (36) Learned Addl. Solicitor General then submitted that it is admitted by SESA that being a merchant exporter, it could not in any case avail of the Cenvat facility. If that be so, there was absolutely no necessity to have that fact certified by the Central Excise Authority. SESA was fully aware of the fact that its supporting manufacturers availed of the benefit of Cenvat credit but it deliberately concealed that fact and intentionally resorted to unnecessary certification of the obvious fact by the Central Excise Authority only to convey a false impression that no Cenvat facility was availed of on the inputs used in the exports consignments so as to avail of the undue benefit of exemption from payment of additional customs duty. This clever ploy worked for quite some time and SESA successfully misappropriated Government Revenue. This wilful deception would have continued for much longer had not the DRI informed the respondents about the fact of Cenvat facility being enjoyed by the supporting manufacturers of SESA. Learned Counsel submitted that the decision to withdraw the benefit of exemption from additional customs duty was rig....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aid clause provides for two important matters. First is transferability of the DFIAs. The second is whether the licence holder would be entitled to have it endorsed on the licence that it is exempted from payment of additional customs duty. Such exemption would be available if Cenvat facility has not been availed of. Learned Counsel for the SESA submitted that admittedly SESA, in whose favour the DFIA licences were issued, did not avail of Cenvat facility. Hence, SESA is entitled to the benefit of exemption from payment of additional customs duty. Learned Counsel for DGFT on the other hand submitted that it was not out of choice that SESA refrained from availing of the Cenvat facility. Being a merchant exporter and not a manufacturer, SESA was not at all entitled to avail of such facility. So, it was not a case where SESA had forgone the benefit of Cenvat facility since such benefit was in the first place not applicable to SESA. Learned Counsel for DGFT imputed dishonesty on the part of SESA in submitting certificates from the jurisdictional Central Excise Authority and contended that the same was done only to give an impression that CENVAT facility had not been availed of in respe....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... taxing statute, there are two interpretations possible, then effect is to be given to the one that favours the citizen and not the one that imposes a burden on him. This principle of law, in my opinion, applies to the facts of this case mutatis mutandis. (42) I am unable to agree with the contention of Learned Additional Solicitor General that granting SESA exemption from payment of additional customs duty would amount to conferring double benefit on SESA. The idea of such exemption is to give an incentive to exporters to boost exports which in turn enhances the foreign exchange reserve of the country. If such exporter has not availed of the Cenvat facility, then it cannot be deprived of the benefit of exemption from payment of additional customs duty just because the manufacturer of the export product has availed of the Cenvat facility. That would, in my opinion, be contrary to the spirit and intent of the Policy. It is not disputed that SESA has purchased the export goods upon full payment of excise duty and in any event, the question of double benefit can arise only if the same entity avails of the same benefit twice. Such is not the case here. The manufacturer of the export p....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and are thus void ab initio. In this connection reference may be had to the decisions in the following two cases:- (a) Ram Swarup-vs.-Shikar Chand, AIR 1966 SC 893. At paragraph 13 of the judgment a Constitution Bench of the Hon'ble Supreme Court held that a quasi-judicial proceeding must be tried in accordance with the principles of natural justice, and if it is shown that in a given case an order has been passed without notice to the party affected by such order, it would be open to the said party to contend that an order in violation of the principles of natural justice is a nullity and its existence should be ignored by the Court. (b) M/s. R. B. Shreeram Durga Prasad And Fatehchand Nursing Das- vs.-Settlement Commission (IT & WT), (1989) 1 SCC 628. At paragraph 7 of the judgment the Hon'ble Apex Court held, inter alia, as follows:- "We are definitely of the opinion that on the relevant date when the order was passed, that is to say, 24th August, 1977 the order was a nullity because it was in violation of principles of natural justice. See in this connection, the principles enunciated by this Court in State of Orissa v. Dr. (Miss) Binapani Dei and Ors., [1967] 2 SCR....