AI OCR 
TaxTMI 
TaxTMI 
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2019 (2) TMI 1445
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....ided by this common judgment. 3. For the sake of convenience, reference is made to the facts as appearing in Special Civil Application No.14558 of 2018 filed by Messrs Maxim Tubes Company Pvt. Ltd. 4. The petitioner is a manufacturing unit for manufacture of goods like Stainless Steel Seamless & Welded Pipes, Tubes, UTubes and such products. The petitioner manufactures such goods and sells them in the country and also by way of exports to foreign countries and is a Government recognized export house by virtue of substantial exports made continuously for last several years. 4.1 It is the case of the petitioner that it has been exporting substantial quantities of goods and is a reputed concern and has been conducting manufacturing, selling and exporting activities in accordance with applicable laws and various awards have been given to it, thereby recognizing the petitioner's growth and contribution to exports. 4.2 Under the Foreign Trade Act, the Central Government has been framing Export-Import Policy (also known as FTP, i.e. Foreign Trade Policy) for development, regulation and control of imports and exports in the country and has announced various duty exemption schemes, one ....
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.... to four weeks; and therefore, a manufacturer-exporter like the petitioner would get an Advance Authorisation about three to four weeks after receiving the export order. Thereupon, order for required raw materials could be placed to a suitable overseas supplier; and locating such suitable supplier, negotiating the price and other issues with such supplier and actual supply of the materials would take minimum three months. If the raw materials required were of extraordinary parameters and specifications, then production of such materials at the overseas supplier's end would take five to six months also. Ordinarily, the transit time for procuring the raw materials, which is normally by sea, is three weeks or a little more; and customs clearance and actual transportation of the materials from the port to the factory would also take minimum one week. Production of the export goods upon utilizing such materials would require ten to fifteen days, and delivery time for such shipments from the factory to the overseas buyer would also be a few weeks depending upon the location of the buyer and availability of sea going vessel. According to the petitioner, if any genuine manufacturer-exporte....
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.... collecting these new levies even for the goods imported into India against an Advance Authorisation. It appears that some of the aggrieved persons approached the Delhi High Court, challenging such recoveries of integrated tax and GST compensation cess on goods imported against Advance Authorisation, whereupon an interim order came to be made by the said court. 4.7 It is the case of the petitioner that realising the error of not amending the existing notification or in not issuing a new notification for exemption from Integrated Tax and the Cess to goods imported against an Advance Authorisation, the Central Government has issued an amending Notification No.79/2017- Customs dated 13.10.2017, whereby six existing notifications have been amended, including Notification No.18/2015- Customs for imports made against Advance Authorisation. Upon incorporated of the amendments/substitutions made vide the above Notification No.79/2017-Customs in Notification No.18/2015-Cus., exemption is also granted from levies imposed under sub-sections (7) and (9) of section 3 of the Customs Tariff Act. 4.8 The grievance and the subject matter of the petitions is the insertion of "Pre-import Condition"....
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.... to the goods imported against such Authorisation. In view of this belief or impression about the "pre-import condition", it would mean that the exemption of Notification No.18/2015-Customs would not be admissible in case of manufacturer-exporters like the petitioner, who undertake manufacturing and export of goods in a continuous cycle, and it would also mean that the exemption of the above notification would not be admissible when goods manufactured were exported in anticipation of Licence/Authorisation, because such would be a case of export having been made first and duty free import against the Authorisation having been made subsequently. 4.11 In the above view of the matter, a letter dated 3.4.2018 came to be issued by the Deputy Director, DRI, Kolkata to the petitioners informing them about the amendments in the foreign trade policy and customs notification, and also calling upon the petitioners to submit information and details in a prescribed format for ascertaining whether import of goods were made first and exports against the Authorisation under which such imports were made were effected after import of the goods, or otherwise. 4.12 The petitioners' representatives ap....
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....xporter is allowed to export in anticipation of Advance Authorisation in terms of paragraph 4.12 of the Hand Book of Procedures, Volume-I, only when either the norms are not fixed in the SION, or they are willing to fulfill their export obligation first. As the process of fixing norms takes considerable time, said provision leaves a window of opportunity for the importer to export in advance at their own risk of not being considered towards discharge of export obligation. 5.1 It is further averred that the amendment in paragraph 4.14 of the Foreign Trade Policy (2015-20) brought in terms of the DGFT Notification No.33/2015-20 and corresponding Customs Notification No.79/2017 dated 13.10.2017 to avail benefit of the exemption of IGST, an importer/exporter is required to strictly follow the conditions of paragraph 4.1.3 (4.03 of Foreign Trade Policy (2015-20). According to the respondents, it is the prerogative of the petitioners to decide whether they are willing to continue with their pattern of business of exporting in anticipation of Advance Authorisation or would prefer to use the duty free materials for the purpose of manufacture of the export goods, which would be exported un....
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....ifications, offered exemption from the integrated tax leviable under sub-section (7) of section 3. However, such exemption was not absolute. Two specific conditions were imposed, viz., (i) export obligation has to be fulfilled through physical exports only; (ii) the exemption is subject to pre-import condition, which implies that only after the import of the goods is commenced, such goods are required to be used for manufacture of export goods, which will be ultimately exported. 5.5 It is the case of the respondents that the DGFT and the Department of Revenue could have used a cut-off date and Advance Authorisations issued after 13.10.2017 could have been declared to have been eligible for such benefits only, but they did not do so. It was kept open ended to extend benefit to the importers, who might have followed those two conditions, even in respect of the Advance Authorisations issued to them earlier. In case of insertion of the cut-off date, it would have made them ineligible for the benefit, therefore, the policy makers, in their own wisdom, kept the door ajar for the eligible importers, to enjoy the benefit, irrespective of the date/period of issuance of Advance Authorisatio....
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....phased manner, for use in the process of manufacture of the finished goods, which in turn would be exported, towards the said Advance Authorisation only. It is not necessary to import in totality, one is allowed to import in piecemeal, if need be. The only condition is that the very materials imported duty free under a specific Advance Authorisation, have to be used for manufacture of the goods to be exported under the said Advance Authorisation towards discharge of export obligation. Physical incorporation of the duty free imported materials in the export goods is the demand for pre-import condition, which is required to be religiously followed. 5.9 The aspect of physical incorporation of the input materials in the export goods have been covered under para 4.03 of the Foreign Trade Policy (2015-20). According to the respondents, a combined reading of para 4.03 of the Foreign Trade Policy in force at the time of issuance of the Authorisations, and the Notification No.31/2003 dated 1.8.2013 read with Circular No.3/2013 (RE-2013) dated 2.8.2013, makes it obvious that benefit of exemption from payment of customs duty is extended to the input materials, subject to strict condition tha....
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....xports are either nil or far less. It is evident that the imported materials have not been utilized in entirety for manufacture of the export goods, and therefore, "pre-import condition" is violated." 5.11 It is asserted that each and every importer had two options, either to continue paying IGST on the goods imported under Advance Authorisations, without bothering about the physical export/pre-import condition, as they had been doing, since 01.07.2017, or to avail benefit of IGST, but for that they were required to comply with pre-import condition. 6. On behalf of the first respondent- Union of India, an affidavit-in-reply has been filed by the Deputy Director General of Foreign Trade, wherein it has been averred that the Government of India has been taking various steps towards boosting India's share in the international trade. Therefore, the Directorate General of Foreign Trade, Department of Commerce, Government of India, has been formulating and implementing the Foreign Trade Policies under section 5 of the Foreign Trade (Development and Regulation) Act, 1992. The present Foreign Trade Policy, 2015-20 provides a framework for increasing exports of goods and services as well....
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....0 have been incorporated and given effect through Customs Notification No.79/2007-Cus. Dated 13.10.2017. Therefore, the condition of pre-import in respect of inputs to be incorporated in the export product under Advance Authorisation cannot be stated to be arbitrary. 8. Mr. Paresh Dave, learned counsel for the petitioner in Special Civil Application No.14558 of 2018, vehemently assailed the impugned condition of pre-import by submitting that this condition is wholly unreasonable and illegal because it would severely hamper exports of goods from India and it would be virtually impossible for most of the manufacturersexporters (if not for all of them) to avail benefit of Advance Authorisation scheme because of the pre-import condition. It was contended that this condition which has now been laid down for Advance Authorisations has no nexus with the objective of the Advance Authorisation scheme and that this condition appears to have been inserted in para4.14 of Foreign Trade Policy and also in the customs exemption notification without any rationale, basis or objective. It was argued that such condition has no nexus with the objective of encouraging exports for which Advance Authori....
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....es, it will be allowed by way of credit and ultimately have to be returned, but in the process, the funds get blocked. Therefore, such condition is ultra vires articles 14 and 19(1)(g) of the Constitution of India. 8.3 Reliance was placed upon the decision of the Supreme Court in the case of Express Newspapers v. Union of India, (1985) 1 SCC 641, for the proposition that even if the power to grant exemption under section 25 of the Customs Act, 1962 is assumed to be a legislative power and a notification issued by the Government thereunder amounts to a piece of subordinate legislation, even then the notification is liable to be questioned on the ground that it is an unreasonable one. It was submitted that there has been no "pre-import condition" in respect of duty free imports under Advance Authorisation scheme in the past, and therefore, it is not understandable as to why such a condition is now imposed by the Central Government with regard to the Advance Authorisation scheme. It was pointed out that all import duties leviable on goods imported in India against a valid Authorisation have been exempt right from the time when the Central Government has introduced the scheme of Advan....
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....aining a file number for an Advance Authorisation. However, this procedure is set at naught in view of the "preimport condition" now imposed vide paragraph 4.14 of the Foreign Trade Policy and clause (xii) of Notification No.18/2015-Cus. It was contended that the fact that the Central Government has not made any change in paragraph 4.14 of the Hand Book of Procedure accompanying the Foreign Trade Policy, 2015-20, also signifies that "pre-import condition" has no nexus with any objective sought to be achieved under the Advance Authorisation scheme. Such condition is, therefore, not a bona fide restriction on genuine manufacturer-exporters and has been imposed in colourable exercise of powers and deserves to be struck down as such in the interest of justice. 8.5 It was submitted that the Advance Licence scheme, now called Advance Authorisation, has been in operation for more than a decade; and this scheme under the Foreign Trade Policy as well as exemption from import duties allowed under the Customs Act for goods imported against Advance Licence/Authorisation have been successfully implemented in the form that existed prior to 13.10.2017. In other words, even without "pre-import co....
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....or refund. But substantial funds of the manufacturer-exporters would remain blocked for a long time, and any procedural irregularity or infraction while claiming ITC or refund would result in a situation where such credit would remain unutilized with the manufacturerexporters. Thus, "pre-import condition" does not result in any revenue accrual for the Union Government and, therefore, also, such condition has no rationale or logical connection with the policy and purpose of the GST, nor with the Foreign Trade Act and the Foreign Trade Policy framed thereunder. 8.8 It was further submitted that compliance of "pre-import condition" is even otherwise an impossibility because it is not possible for manufacturer-exporters like the petitioners to satisfy the revenue officers about utilization of the goods imported against a particular Authorisation in relation to manufacture of finished goods exported for fulfillment of export obligations of that Authorisation. Only in case of goods having identification marks like serial number or machine number and the like, it may be possible to establish utilization of such goods imported against a particular Authorisation in respect of that particul....
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.... v. Union of India, 2018 (360) ELT 483 (Guj.), wherein the court referred to the decision of the Supreme Court in the case of W.P.I.L. Ltd. v. Commissioner of Central Excise, Merut, 2005 (181) E.L.T. 359 (SC), wherein the court considered a case where exemption notification was withdrawn and a fresh notification was issued shortly thereafter exempting duty of excise on parts used in manufacturing of power driven pumps. The court noted that there was a consistent policy of the Government of India to grant such exemption. The later notification did not grant exemption for the first time. It was held that such notification was merely clarificatory and hence, would apply with retrospective effect. The court also placed reliance upon the decision of this court in the case of Gujarat Paraffins Pvt. Ltd. v. Union of India, 2012 (282) E.L.T. 33 (Guj.), where the court has considered a case where the Government of India had taken corrective measure of reintroducing the exemption after a gap of about sixteen months, and held that such exemption would have retrospective effect. It was submitted that in the facts of the present case, there was no condition of pre-import insofar as the Advance ....
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.... in article 19(1) is challenged, the onus of proving to the satisfaction of the court that the restriction is reasonable lies upon the State. It was submitted that this is not a case of first time exemption. Now that they seek to place restriction, the respondents must show that the condition has been inserted is to remove some evil, else such condition would be violative of the petitioner's right under article 19(1)(g) of the Constitution of India. It was, accordingly, urged that there being no rationale behind introducing the condition of pre-import which has no nexus with the object sought to be achieved by the Advance Authorisation Scheme, the same is violative of the petitioner's fundamental rights under article 19(1) of the Constitution of India, and deserves to be set aside. 9. Mr. Abhishek Rastogi, learned counsel with Mr. Pratyushprava Saha, learned advocate for the petitioners in Special Civil Applications No.15184 and 15186 of 2018 and Mr. Aayush Mehrotra and Mr. Digant Popat, learned advocates for the petitioners in Special Civil Application No.15743 of 2018, submitted that Notification No.18/2015-Customs dated 1.4.2015 was issued in public interest and hence, the subs....
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....s made under the licence. That further begs the question whether the fulfillment of the conditions should be looked at qua the transaction or qua the Advance Authorisation. (c) It is also unclear whether, in order to satisfy the "preimport condition", the petitioners are required to showcase records indicating one-to-one co-relation of the imported inputs with the finished products. While it may be possible for the automobile sector to adhere to this requirement, as its inventory of inputs can be easily identified in its exported products, it may not be possible for the petitioners to identify inputs based on the date of import, once they get mixed with the stock of inputs already procured. (d) The petitioners businesses are such that exports will occur as per export orders received and it may not be possible to fulfill export obligations or meet its export orders when they follow "pre-import condition". There may also be instances where a batch of inputs is imported, refined and exported before the next batch is imported. This would mean that there would be intermittent or overlapping transactions of import and export, in such cases, the petitioners would be penalized for viol....
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....on of any additional obligation that is required to be fulfilled other than execution of a bond. Similarly, in condition (v), the process to be followed in case where the imports follow the discharge of export obligation has been laid out. As per this process, the Advance Authorisation holder is only required to furnish a bond in case it was availing the benefit under rule 18 or 19 of the erstwhile Central Excise Rules, 2002 or CENVAT Credit Rules, 2004. As per this process, the duty exemption benefit shall still be available if the bond as required is furnished. However, as per condition (vi), where the Advance Authorisation holder has not availed the benefit under rule 18 or 19 of the erstwhile Central Excise Rules, 2002 or CENVAT Credit Rules, 2004, and sufficient proof is submitted to that extent by the Advance Authorisation holder, there is no requirement to furnish any bond. It was submitted that in view of conditions (v) and (vi), it is clear that the intention is to provide the benefit of Advance Authorisation on imports made post-exports. In such a scenario, extending benefit in relation to IGST only to imports under pre-import condition, as laid out in condition (xii), is....
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.... violation of the principles contained in Article 14 of the Constitution of India and that, such policy decisions are not amenable to judicial review. The court placed reliance upon its earlier decision in the case of State of Rajasthan v. J. K. Udaipur Udyog Ltd., (2004) 7 SCC 673, wherein it was observed that exemption is a privilege. In fiscal matters, the concession granted by the State Government to the beneficiaries cannot confer upon them legally enforceable right against the Government to grant a concession, except to enjoy the benefits of the concession during the period of its grant. Enjoyment is defeasible one and can be taken away in exercise of very power under which such exemption was granted. It was submitted that therefore, there is no vested right in the petitioners to claim continuation of the earlier policy. 10.1 Reliance was also placed upon the decision of the Supreme Court in the case of Shri Bakul Oil Industries v. State of Gujarat, (1987) 1 SCC 31, wherein the court held that a concession can be withdrawn at any time and no time limit can be insisted upon before the concession is withdrawn. The court held that as the State was under no obligation, in any ma....
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....y with certain exceptions depending upon the settings on which the provision has been placed in the statute and the object and purpose to be achieved. If exemption is available on complying with certain conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the noncompliance of which would not affect the essence or substance of the notification granting exemption. It was submitted that in the absence of the impugned condition, the petitioners would be getting double benefit by claiming input credit on the imported goods and not paying taxes on the export. 10.5 The learned senior standing counsel further reiterated the contentions raised in the affidavit-in-reply filed on behalf of the respondents. It was, accordingly, urged that the petitions do not merit acceptance and the impugned condition being part of fiscal policy, no intervention is warranted by this court. 11. In rejoinder, Mr. Paresh Dave, learned counsel for the petitioners submitted that the three reasons assi....
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....id impose a burden with retrospective effect without any justification. It was submitted that the above decision would be squarely applicable to the facts of the present case, inasmuch as the same factors, parameters and considerations would prevail even after coming into force GST regime and hence, there is no rational or reasonable basis for imposition of the impugned condition of pre-import. It was submitted that the object of the scheme is (a) boosting of exports, (b) employment generation, and (c) making the exporter and exports competitive in the international market; and therefore, the condition of pre-import has no nexus with the object sought to be achieved and it on the contrary sets the Advance Authorisation Scheme at naught and hence, should be struck down. 11.1 Insofar as the contention raised by the learned advocate for the respondents that this being a fiscal policy, judicial review is barred, the learned counsel placed reliance upon the decision of the Supreme Court in the case of Express Newspapers v. Union of India (supra), wherein the court held that the claim made on behalf of the Government that the impugned notifications are beyond the reach of administrative....
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....SION). (iii) Import of drugs from unregistered sources shall have pre-import condition." "4.14 Details of Duties exempted Imports under Advance Authorisation are exempted from payment of Basic Customs Duty, Additional Customs Duty, Education Cess, Anti-dumping Duty, Countervailing Duty, Safeguard Duty, Transition Product Specific Safeguard Duty, wherever applicable. Import against supplies covered under paragraph 7.02 (c), (d) and (g) of FTP will not be exempted from payment of applicable Anti-dumping Duty, Countervailing Duty, Safeguard Duty and Transition Product Specific Safeguard Duty, if any." "4.16 Actual User Condition for Advance Authorisation (i) Advance Authorisation and/or material imported under Advance Authorisation shall be subject to 'Actual User' condition. The same shall not be transferable even after completion of export obligation. However, Authorisation holder will have option to dispose of product manufactured out of duty free input once export obligation is completed. (ii) In case where CENVAT/input tax credit facility on input has been availed for the exported goods, even after completion of export obligation, the goods imported against such....
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....otification. However, section 3 of the Customs Tariff Act, 1975 came to be amended by substituting sub-section (7) and sub-section (9) thereof, whereby levy of integrated tax as leviable under section 5 of the Integrated Goods and Service Tax Act, 2017 and levy of Goods and Service Tax compensation cess at such rate as is leviable under section 8 of the Goods and Service Tax (Compensation to States) Cess Act, 2017 [GST compensation cess] came to be incorporated therein. Sub-section (7) and sub-section (9) of section 3 of the Customs Tariff Act, as amended, reads thus: "(7) Any article which is imported into India shall, in addition, be liable to integrated tax at such rate, not exceeding 40% as is leviable under section 5 of the Integrated Goods and Services Tax Act, 2017 on a like article on its supply in India, on the value of the imported article as determined under sub-section (8). (9) Any article which is imported into India shall, in addition, be liable to the Goods and Services Tax compensation cess at such rate, as is leviable under section 8 of the Goods and Services Tax (Compensation to States) Cess Act, 2017 on a like article on its supply in India, on the value of the....
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.... 19. Thereafter, the Central Government issued an amending notification dated 13th October, 2017 in exercise of powers under sub-section (1) of section 25 of the Customs Act, 1962 being Notification No.79/2017-Cus dated 13.10.2017 inter alia amending the opening paragraph of Notification No.18/2015- Cus dated 1.4.2015 whereby the material imported into India was exempted from the whole of the duty of customs leviable thereon which is specified in the First Schedule to the Customs Tariff Act and from the whole of the additional duty leviable thereon under sub-sections (1), (3) and (5) of section 3, integrated tax leviable thereon under sub-section (7) of section 3 and goods and services tax compensation cess leviable under sub-section (9) of section 3 of the Customs Tariff Act. The amending notification also introduced a proviso in condition (viii), after the proviso which reads thus: "Provided further that notwithstanding anything contained hereinabove for the said authorisations where the exemption from integrated tax and the goods and services tax compensation cess leviable thereon under sub-section (7) and sub-section (9) of section 3 of the Customs Tariff Act, has been avail....
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....reign Trade Policy, it would be necessary to examine the relevant provisions of the Foreign Trade Policy and Handbook of Procedure to understand how the scheme of Advance Authorisation operates. 22. Paragraph 4.27 of the Foreign Trade Policy envisages exports in anticipation of authorisation and as noticed earlier, in terms of the cycle of import-manufacture-export carried out by the petitioners, the delivery time allowed by the overseas buyers is about three to four months. The approximate time taken for the entire cycle from receipt of export order to transportation for export of overseas buyers, as put forth by the petitioners, is as follows: Sr. No. Particulars Normal time taken 1 Application for Advance Authorisation and granting the Authorisation 3 to 4 weeks 2 Locating a supplier, price negotiations, placing purchase order and delivery of inputs/ materials at Indian Port (Normal transit time in sea transportation being 3 to 4 weeks). 3 months 3 Customs clearance and transportation from the Port to the factory 1 week to 10 days 4 Manufacture of finished goods by utilizing imported materials 10 days to 15 days 5 Transportation of the goods from factory....
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....is extracted herein below for ready reference: "9.10 Primarily DRI has taken up cases involving violations of the provisions of the recently amended Policy in terms of para 4.14 of the Foreign Trade Policy (2015-20) read with Customs Notification No.79/2017 dated 13.10.2017. The cases can be divided into two broad categories a. IGST benefit being availed against Advance Authorisations, for which export obligations have been discharged through deemed exports, either in full or partially. This is in clear contravention of the requirement of the Policy and the Customs notification, which demand, fulfilling EO through physical exports only, therefore, the importers are not eligible for IGST exemption. b. IGST benefit availed against Advance Authorisations without observing the pre-import condition. Again, such non-observance of pre-import condition is in direct conflict with the basic requirement of para 4.14 & the customs notification, and the goods, so imported, become ineligible for such benefit of IGST against such imports. The test of fulfillment of pre-import condition is being determined in the following manner: (i) If the importer fulfills part or complete export obl....
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....ation in terms of paragraph 4.27 of the Handbook, since the raw material used in the goods so imported would not have been imported under that particular advance licence, the "pre-import condition" would be held to be violated and consequently, the importer would be denied exemption from levy of integrated tax and GST compensation cess. Thus, an importer who manufactures goods in a cycle as delineated in some of the earlier paragraphs, would no longer be in a position to do so and all exports made in anticipation of authorisation as permitted by paragraph 4.27 of the Handbook of Procedure would be held to be in breach of the "pre-import condition" insofar as levy of integrated tax and GST compensation cess are concerned. Therefore, in respect of all Advance Authorisations which were subsisting on the date when the exemption notification in respect of integrated tax and GST compensation cess was issued, the condition of preimport would be likely to have been violated and the importer would not be entitled to the benefit of exemption. 27. Considering the above interpretation of the condition of physical export and pre-import put forth by the DRI, it is more or less impossible to mak....
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....ort condition. Silk in any form, Raw Sugars, Natural Rubbers, Tea Spices and precious metals etc are allowed to be imported under pre-import condition only. As already stated, pre-import condition is in-built within the Advance Authorization Scheme itself, and in terms of Para 4.04 of the Policy, which is integral part of the Policy since its inception, it has been continually hammered upon the potential exporters, that they are allowed to import those inputs under Advance Authorisation scheme, which would be physically incorporated in the export goods." Thus, even according to the respondents, there is a specific provision in the Foreign Trade Policy specifying inputs which are to be imported under pre-import condition, viz. paragraph 4.13. Therefore, if a condition of preimport has to be put in respect of any input, ideally such input should find place in paragraph 4.13 of the Foreign Trade Policy, which is not so in the present case. Due to the condition of pre-import contained in paragraph 4.14 and condition (xii) of the notification, though the inputs imported by the petitioners may not fall within the categories enumerated in paragraph 4.13 of the Foreign Trade Policy and are....
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....splitting it into two imaginary set of Authorizations, for which requirement of compliances are different." 31. Reference may also be made to paragraph 5 of the letter dated 3.4.2018 of the Directorate of Revenue Intelligence addressed to the petitioner M/s Maxim Tubes Company Private Limited (Annexure-R), wherein it has been stated thus: "5. Combined provisions of the Policy and the subject Customs Notification, clearly mandate only imports under pre-import condition would be allowed with the benefit of such exemption. Therefore, no such exemption can be availed, in respect of the Advance Authorizations, against which exports have already been made before commencement of import. In particular because, an Advance Authorisation cannot be bifurcated or compartmentalize to make a portion of import made under it conforming Pre-import condition, and the rest otherwise." 32. Thus, in terms of the interpretation put forth by the DRI as referred to hereinabove, compliance is required of the authorisation as a whole and in case the condition of preimport is violated, the entire Advance Authorisation gets vitiated. Consequently, even paragraph 4.27 of the Handbook, which is specificall....
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....uty are concerned, are subject to condition of pre-import insofar as integrated tax and GST compensation cess are concerned, thereby setting at naught the first part of paragraph 4.14, inasmuch as if the very same inputs are subject to the condition of pre-import qua some levies, it would amount to importing the inputs subject to the condition of pre-import even qua the other levies. Thus, an anomalous situation has arisen, whereby the second part of paragraph 4.14 is inconsistent with the first part thereof and renders the first part redundant. 35. The Foreign Trade (Development and Regulation) Act, 1992 has been enacted to provide for development and regulation of foreign trade by facilitating imports into, and augmenting exports from India and for matters connected therewith or incidental thereto. The Foreign Trade Policy, 2015-2020 has been notified in exercise of powers conferred under section 5 of the Foreign Trade (Development and Regulation) Act, 1992. The objective of the Foreign Trade Policy, 2015-2020, as stated in the affidavit-in-reply of the Director General of Foreign Trade is to provide a framework for increasing exports of goods and services as well as generation ....
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.... of pre-import, the exporters would be liable to make upfront payment of IGST/Compensation Cess on import of inputs, thereby defeating the objective of preventing cash blockage of exporters. When a scheme is formulated by the respondents, it has to be workable as a whole. The scheme of Advance Authorisation has been working smoothly without any hitch for all these years (nothing has been pointed out on behalf of the respondents that there were any difficulties or irregularities on account of non-imposition of the "pre-import condition"), therefore, in the absence of anything adverse, there was no necessity to change the scheme by subjecting the two levies referred to in sub-section (7) and sub-section (9) of section 3 of the Customs Tariff Act to the condition of pre-import. More so, when the Foreign Trade Policy has a separate paragraph 4.13 which provides for "pre-import condition" in respect of specific inputs, there is no rationale for placing a condition of pre-import qua any inputs than those specified under paragraph 4.13. As discussed hereinabove, though in paragraph 4.14 the condition of pre-import is not qua specific inputs, but for availing benefit of exemption from levy....
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....015-2020, which specifically demands for such physical incorporation of imported material in the export goods, which is possible only when imports are made prior to export; does not explain as to why when physical incorporation was already provided under paragraph 4.03, there was any necessity to impose condition of pre-import under paragraph 4.13. Such contention therefore, does not merit acceptance. Besides, such contention also flies in the face of paragraph 4.27 of the Handbook, which specifically allows imports in anticipation of Advance Authorisation. 40. The stand of the respondents before this court is that the petitioners have a choice not to avail of the benefit of Advance Authorisation if they are not happy with the conditions therein and that the petitioners cannot dictate what the policy should be. In the opinion of this court, the take it or leave it stand adopted by the respondents in the various affidavits filed before this court, does not behove the Central Government. The Government cannot grant a benefit on the one hand and take it away on the other, and say that it is open for the beneficiary to take it or leave it. Such benefit then becomes illusory and conseq....
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....spect of other levies under section 3 of the Customs Tariff Act, amounts to replenishment merely because the taxes which were earlier in the nature of sales tax etc., are now subsumed in the goods and services tax. Furthermore, the learned counsel for the respondents has not been able to explain the same to this court. Moreover, insofar as replenishment is concerned, there are special schemes under the Foreign Trade Policy, which are specifically replenishment schemes. The Advance Authorisation scheme does not envisage replenishment of inputs and hence, there is no question of replenishment involved insofar as this scheme is concerned. 43. Insofar as the benefit of zero-rating resulting in double benefit is concerned, rule 3(1)(vii) of the Cenvat Credit Rules allows credit. Prior to July, 2017, if duties were paid under subsections (3) and (5) of section 3 of the Customs Tariff Act, credit was admissible. However, now the levies under subsections (3) and (5) of section 3 of the Customs Tariff Act are replaced by sub-sections (7) and (9) of section 3 of the Customs Tariff Act and there is no change in the basic scheme warranting a different procedure. 44. At this stage, reference ....
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.... Advance Authorisation and the historical background as well as the contentions advanced on behalf of the respondents, and considering the fact that for years together right since the inception of the Advance Authorisation Scheme, the Government did not find any nexus between the condition of pre-import and the objective of this Scheme, this court is of the considered view that the impugned exemption notification and paragraph 4.14 of the Foreign Trade Policy, to the extent the same are subject matter of challenge in these petitions, cannot be said to meet with the test of reasonableness. 48. In the light of the above discussion, this court is of the view that paragraph 4.14 of the Foreign Trade Policy whereby a condition of pre-import has been put for availing the benefit of exemption from levy of integrated tax and GST compensation cess vide Notification No.33/2015-2020 dated 13th October, 2017 as well as the condition (xii) inserted in Notification No.18/2015 dated 1st April, 2015 vide Notification No.79/2017 dated 13.10.2017, are ultra vires the scheme of the Foreign Trade Policy, 2015-2020 and the Handbook of Procedure and are, therefore, required to be quashed and set aside.....