TaxTMI 
TaxTMI 
TaxTMI 
2019 (4) TMI 87
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....come in the way of the petitioners in pursuing any other remedy as may be available in law. 3. By this petition under Article 226 of the Constitution of India, the petitioner seeks the following substantive reliefs: "11. In the above premises, the petitioners most respectfully pray as under: [A] That Your Lordships may be pleased to issue a Writ of Certiorari or any other appropriate writ, direction or order, quashing and setting aside appellate order F.No.12013/03/2017-ADJ/AC dated 14.5.2018 (Annexure "K)) made by the Appellate Committee of the Ministry of Commerce and Industry, New Delhi, with all consequential reliefs and benefits; [B] That Your Lordships may be pleased to issue a Writ of Mandamus or any other appropriate writ, direction or order, directing the Joint DGFT, Ahmedabad, the 2nd Respondent herein, to amend all four Advance Authorisations (as per Annexure "F") by substituting name and IEC number of the Petitioner i.e. M/s Lubi Industries LLP in all these Authorisations with extension of export obligation period by 6 months (or the period that may be deemed fit by this Hon'ble Court;" 4. The facts as averred in the petition are that the petitioner, which at....
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....thorisations for import of raw materials duty free. In this petition, the petitioner has not raised any dispute with regard to EPCG Authorisation and the subject matter of this petition is confined to two out of the four Advance Authorisations. 4.4 It is further the case of the petitioner that after the four Authorisations were issued and the petitioner was in the process of fulfilling the export obligations, the then existing firms, M/s Lubi Submersibles Ltd. and M/s Lubi Electricals Ltd. were amalgamated with M/s Arvind Iron Pvt. Ltd. The name of M/s Arvind Iron Pvt. Ltd. was later on changed to M/s Lubi Industries Pvt. Ltd., and this entity was converted into a Limited Liability Partnership on 14.2.2013. 4.5 An exporter holding an Advance Authorisation is allowed to import raw materials specified in the Authorisation duty free by virtue of various notifications issued under the Customs Act, 1962. For discharging export obligation flowing from any such Authorisation, the exporter is required to show the Authorisation number in export documents like shipping bill and export invoice, so as to enable the customs officers as well as the Directorate General of Foreign Trade (DGFT) a....
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.... of obligations flowing from such Authorisations. It is the case of the petitioner that when the exports during the period from February 2013 were made on the export invoices and shipping bills of M/s Lubi Industries LLP, it was not possible for the petitioner to issue such export documents with the name and IEC numbers of the entities whose names and IEC numbers were recorded in the Authorisations. According to the petitioner, the Customs EDI system would not accept such documents, and it was even otherwise not proper to export goods under the documents of Authorisation holders when such entities no longer existed by virtue of amalgamation and merger as referred to hereinabove. 4.9 The petitioner, therefore, lodged an application before the Joint Director General of Foreign Trade, Ahmedabad, for changing the name of the licence holder in respect of the Authorisations in question, and also for extension of time for fulfilling export obligations in respect of such Authorisations. In respect of Advance Authorisation No.0810086954 dated 3.3.2010, such application was made on 12.3.2013, but the same was rejected by order dated 14.3.2013. The petitioner filed a review application on 25....
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....tioner before the Central Government against the order of the Policy Relaxation Committee dated 22.8.2017. 4.14 It appears that during the proceedings before the authorities under the Foreign Trade Act, the Directorate of Revenue Intelligence, Noida Regional Unit, initiated investigation in respect of the above referred Advance Authorisations as the export obligations under such Authorisations had not been fulfilled by the petitioner. After completing the inquiry, a show cause notice came to be issued by the Additional Director General, DRI dated 22.3.2018 calling upon the petitioner to show cause as to why the goods imported under the seven Authorisations referred to therein should not be confiscated; why customs duties aggregating to Rs. 4,01,50,127/- should not be demanded and recovered from the petitioner; why interest should not be recovered on the custom duties foregone; and why penalty should not be imposed on the petitioner; and also as to why amounts of Rs. 9.46 crores (rounded off) deposited by the petitioner should not be appropriated against the liabilities of duty, interest and penalty. 4.15 It appears that the petitioner has filed a detailed reply in response to the....
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....ange in the name and constitution of the petitioner has taken place and a new IEC number has also been allotted to the petitioner under section 7 of the Foreign Trade Act; and therefore, it was not possible for the petitioner to offer any of the exports made during the intervening period against Authorisations bearing the previous name and the previous IEC number in the export documents like shipping bills. It was submitted that if the petitioner's application and prayer for amendment of the Authorisations by substituting the new name and IEC number had been allowed by the authorities, then export obligations for all pending Authorisations could have been easily fulfilled by the petitioner, inasmuch as substantial exports exceeding what was required under the Authorisations in question have been made by the petitioner during the intervening period, and the exports of similar goods are being made regularly even today. Therefore, the view adopted by the authorities, including the appellate committee, that there was no provision in the policy to transfer the Authorisation to the new IEC is ex facie unreasonable and illegal. It was urged that since the amalgamation and merger have take....
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....enge, get validated by additional grounds later brought out. We may here draw attention to the observations of Bose J. in Gordhandas Bhanji, AIR 1952 SC 16: "Public orders, publicly made, in exercise of a statutory authority cannot be construed in the light of explanations subsequently given by the officer making the order of what he meant, or of what was in his mind, or what he intended to, do. Public orders made by public authorities are meant to have public effect and are intended to effect the actions and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order itself." Orders are not like old wine becoming better as they grow older." It was submitted that in the light of the principles enunciated in the above decision, the impugned orders have to be considered on the grounds set out therein and new grounds cannot be added by way of affidavit. 5.3 The attention of the court was also invited to the decision of the Policy Review Committee taken in its meeting dated 6.2.2017, to submit that the Committee has adopted a very pedantic view. It was submitted that the petitioner had made the application for ....
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....5.6 The attention of the court was invited to the Public Notice dated 24.10.2017 on the subject of one time relaxation of export obligation extension and clubbing of advance Authorisations and more particularly, to paragraph 2 thereof, which provides for "Extension of Export Obligation Period", to submit that the same also covers the exports made under Advance Licences/Authorisations issued under Foreign Trade Policy 2002-07, Foreign Trade Policy 2004-2009 and Advance Authorisations issued prior to 5.6.2002 under Foreign Trade Policy 2009-14. It was submitted that therefore, the said public notice also covers the period involved in the present case. It was submitted that only on the ground that there is no provision in the Hand Book of Procedure for transferred the Advance Authorisation to the new IEC number, the petitioners' application has been rejected. It was submitted that there are sufficient provisions in the Act as well as the Foreign Trade Policy and public notices and circulars issued from time to time, which permit the extension of export obligation period as well as for transfer of IEC number and therefore, the petitioner's reasonable request for transferring the Author....
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....ence(s)/Authorisation(s) with outstanding export obligation should be directly amended by substituting the existing IEC with the new IEC. It was submitted that therefore, the burden or obligation to make appropriate amendment in case of merger is on the appropriate authority of the Government. It was submitted that when the Government itself has laid down the procedure and when it is the obligation of the authorities to substitute the IEC and name, the stand now taken that under the Handbook of Procedure, there is no provision to change IEC and name, is wholly irrational and unreasonable. 5.8 The attention of the court was also invited to the Trade Notice No.03/2018-19 dated 25th April, 2018 on the subject of applicability of provisions of Para 2.20 of HBP, 2015-20 on Advance Authorisations issued under 2009-2014, FTP, wherein it has been provided that Regional Authorities may allow revalidation of Advance Authorisation/DFIA, under the provisions of Para 2.20 of HBP, 2015-2020, which has been amended vide Public Notice 38 dated 11.2017, even if authorisation is issued under FTP, 2009-14, provided conditions stipulated in the said public notice are fulfilled. 5.9 Reference was mad....
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.... petitioner falls under clause (b) of paragraph 2 thereof, which provides that for the exports made after 36 months but within 48 months shall be regularized on payment of composition fees as provided thereunder. It was submitted that the case of the petitioner would fall under the said clause provided the respondents substitutes the IEC number. It was submitted that therefore, the stand of the respondents is wholly arbitrary and unreasonable. It was submitted that the petitioner is not in a position to apply under the said public notice dated 24th October, 2017 because the new entity is not recognized. It was submitted that this is not a case of default and that the petitioner is a going concern and is continuously exporting goods, however, only because the IEC number is not substituted, it cannot get the benefit of any of the schemes. It was submitted that under the Scheme of 2009-2014 also, the benefit of extension of EOP was available. It was submitted that the Onetime Settlement Scheme applies to all whether or not appeal has been filed and that the orders passed by the authorities below have been disputed and have not become final. It was submitted that while considering the ....
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....ly, and in respect of the other two Advance Authorisations, it came to an end on 3.3.2013 and 21.7.2013 respectively. It was pointed out that by an order dated 6th November, 2012, that is, after the period of export obligation in respect of the first two Advance Authorisations came to an end, the amalgamation came into effect from 1st April, 2012. 6.1 It was pointed out that the applications for change of EOP dated 14.3.2013 and 25.11.2013 made by the petitioner came to be rejected by the regional authority, but were not challenged by the petitioner to submit that therefore, such orders are binding upon the petitioner . 6.2 It was pointed out that the petitioners have initiated proceedings in respect of the two Advance Authorisations dated 3.3.2010 and 21.7.2012, whereas no proceedings have been initiated in respect of the Advance Authorisations dated 7.7.2009 and 1.10.2009 and hence, insofar as the two Advance Authorisations in respect of which no proceedings have been initiated, no relief can be claimed in the present petition. As noted hereinabove, the learned counsel for the petitioner has not pressed reliefs prayed for in the petition insofar as the Advance Authorisations da....
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....nvited to the decision dated 20.9.2016 of the Policy Review Committee, to point out that the Committee has recorded that the Authorisation in question was obtained in the name of M/s Lubi Submersibles Ltd. having initial export obligation period of 36 months and that during this period, the petitioner could discharge only 7.78% of the export obligation. The merger with new company, that is, M/s Lubi Industries LLP took place after the expiry of the export obligation period and that the IEC code of M/s Lubi Submersible Ltd. has been surrendered on 14.3.2013. It was pointed out that the petitioner was directed to get the case regularized in terms of paragraph 4.49 of the Handbook of Procedures, 2015-2020; however, the petitioner did not do so. 6.6 It was pointed out that the demand notice is in respect of four Advance Authorisations. The attention of the court was invited to paragraph 4.22 of the Handbook of Procedures as existing prior to 5.6.2012, which provided that fulfillment period of export obligation under an Advance Authorisation shall commence from Authorisation issue date, unless otherwise specified. Export obligation shall be fulfilled within thirty six months except in ....
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....ategory "a" and "b" of paragraph 2 thereof, would be entitled to extension provided the petitioner applies before 31.3.2018. It was submitted that the petitioner's case does not fall either under category "a" or category "b" of paragraph 2 thereof, nor has it applied before 31.3.2018 and hence, the public notice cannot be applied to the facts of the case of the petitioner. Moreover, the circular does not invalidate the orders made by the authority. It was submitted that in this case, the petitioner has not made any application for regularization as contemplated under paragraph 4.49 of the Handbook of Procedures though it was specifically directed to do so while rejecting its application. 6.8 Insofar as the Circular dated 16th November, 2011 on which reliance has been placed by the learned advocate for the petitioner is concerned, it was pointed out that in this case, the IEC number was surrendered on 4.3.2013 and that the exercise as envisaged in the said circular was required to be undertaken before such surrender. It was submitted that the fact regarding merger was not intimated to the authorities at the relevant time. Moreover, the entire exercise was undertaken only on 12.3.20....
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....g policy/procedure relaxation in terms of paragraph 2.58 of the Foreign Trade Policy in the prescribed ANF-2D. It was pointed out that the petitioner had sought relaxation in terms of paragraph 2.58 of the Foreign Trade Policy and that the petitioner had stated that the period of 48 months is not relevant for allowing automatic extension under Para 4.42(e) of the Handbook of Procedures. Referring to item 14 thereof, it was submitted that there is a basic difference between extension of EOP and revalidation. It was submitted that general meaning of the term "revalidation" cannot be resorted to when there is a specific meaning assigned to it in the scheme itself. It was submitted that the application of the petitioner was for automatic extension and that the earlier orders were not challenged and that the same have merely been produced on record to show the past history. It was submitted that the petitioner had relied upon paragraph 4.42(e) of the Handbook of Procedures and that the initial application was for automatic extension and that even before the reviewing authority, they have made a conscious case only for automatic extension of export obligation period. It was submitted tha....
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....eizure, penalty and confiscation" to submit that no action has been taken thereunder till date. It was submitted that the right to get the name substituted is a vested right as the right of the merged party gets transferred to the transferee. It was submitted that if the petitioner were to get relief of transfer of IEC number, it should be granted reasonable time for exporting the goods. Reference was made to the contents of the Foreign Trade Policy to point out that paragraph 4.22 thereof provides for export obligations to be fulfilled within thirty six months. Para 4.22.1 thereof provides for automatic extension which does not require an application to be made. Para 4.22.2 relates to exports in anticipation of extension and Para 4.23 pertains to revalidation of authorisation. Reference was made to the definition of "revalidation" in Black's Law Dictionary, Tenth Edition. It was submitted that Para 4.23 does not say that the application has to be made before the expiry of the export obligation period. 7.1 Referring to the Public Notice dated 7th November, 2001, it was pointed out that the same provides that in respect of Advance Licences for physical exports issued on or after 1.....
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....2020, notifying amendments in the Handbook of Procedures. One such amendment was in paragraph 4.42 wherein it was provided thus: "7. Amendment in paragraph 4.42: Amended paragraph 4.42 shall read as under:- "4.42. Export Obligation (EO) Period and its Extension: (a) Period of EO fulfillment under an Advance Authorisation shall commence from date of issue of Authorisation, unless otherwise specified. The period of EO fulfillment is given in paragraph 4.22 of FTP. (b) Regional Authority may consider a request of Advance Authorisation holder for one extension of EO period upto six months from the date of expiry of EO period subject to payment of composition fee of 0.5% of the shortfall in EO. Authorisation holder will have to submit a self declaration to RA stating that unutilised imported/domestically procured inputs are available with the applicant. (c) Request for further extension of six months after first extension as in (b) above can be considered by Regional Authority, provided Authorisation holder has fulfilled minimum 50% export obligation in quantity as well as in value, on pro-rata basis. This will be subject to payment of composition fee @ 0.5% per month on un....
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....pplication for second extension, authorisation holder will have to submit a certificate to RA from an independent Chartered Accountant/Chartered Engineer certifying that unutilised imported/domestically procured inputs are available with the applicant." 11. Thus, by virtue of the said amendment, paragraph 4.42 of the Foreign Trade Policy, 2015-2020 was made applicable to Advance Authorisations issued during the duration of Foreign Trade Policy, 2009-14. Thereafter, the petitioner made an application dated 27.10.2015 to the Policy Relaxation Committee to order transfer of IEC number and extend the export obligation period for fulfilling the obligation of the Authorisation pending against M/s Lubi Submersibles, which came to be rejected on 9.6.2016 on the basis of a report dated 9.6.2016 submitted by the Regional Authority. On the basis of the report, the Policy Relaxation Committee concluded that the merger with the new company had taken place after the expiry of export obligation period, namely, (i) the IEC number of M/s Lubi Submersible Ltd. had been surrendered on 14.3.2013; (ii) during this period of 36 months, the petitioner could discharge only 7.78% export obligation; (iii)....
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....ing the company by another company. The applicant has quoted Para 4.42(e) of HBP, 2015- 2020, which states that "Whenever a ban/restriction is imposed on export of any product, export obligation period in respect of Advance Authorisation already issued prior to imposition of ban, would stand automatically extended for a period equivalent to the duration of ban, without any composition fee." Committee noted that the instant matter is not covered by the said para since, in the case under consideration no ban on export product permitted in the Authorisation was imposed by the Government. Therefore, provision quoted by the applicant is not applicable to the present matter. The committee, therefore, did not accede to the request and reiterate its earlier decision taken in PRC meeting No.18/AM17 dated 20.09.2016. The applicant is hereby directed to get the case regularised in terms of para 4.49 of HBP, 2015-2020." 13. Being aggrieved, the petitioner filed a review under section 16 of the Foreign Trade (Development and Regulation) Act, 1992 before the Central Government contending that pursuant to the initial application of the petitioner dated 20.7.2015, a report of the Regio....
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....tion was to end viz. 3.3.2013, there was a period of four months available to the petitioner to fulfill the export obligation. However, since the petitioner's request to transfer the IEC in the name of the amalgamated entity was not approved by the Committee, the petitioner was not able to fulfill the export obligation within such period of four months. In this view of the matter, the petitioner submitted that if a suitable extension is granted in view of the Circular dated 16.11.2011 and as per Para 4.42 of the Handbook of Procedures, then the petitioner would be in a position to fulfill the export obligation even at this stage within a period of four months from the date of grant of such extension. 14. The Appellate Committee, by the impugned order dated 14.5.2018, has dismissed the appeal by holding thus: "5. After examining the facts of the case and hearing the oral and written submissions of the Appellant, the Appellate Committee in the Department of Commerce comes to the following conclusions: i. Even though the Appellant had applied for transfer of Authorisation from the old unit to the new IEC, the Regional Authority rejected their request as there is no provision ....
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....lled within 36 months except in case of supplies to projects/turnkey projects in India/abroad under deemed exports category where EO must be fulfilled during contracted duration. EO period for Advance Authorisations issued with input(s) as amended in Appendix 30A shall be as per the period stipulated against each entry therein. Facility of extension of EOP shall not be allowed in case of Advance Authorisation issued for these inputs. RA shall make an endorsement in Advance Authorisation to this effect." 16. Thus, paragraph 4.22 of the Hand Book of Procedures, 2009-14 provides that the fulfillment period of export obligation under an Advance Authorisation shall commence from the authorisation issue date, unless otherwise specified and further provides that the export obligation shall be fulfilled within thirty six months except in the case of the categories specified therein. The paragraph further provides that in case of inputs mentioned in Appendix 30A, the export obligation period be specified against each entry therein and facility of extension of export obligation period shall not be permitted in case of Advance Authorisation issued for these inputs and that the Regional A....
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....s was on the transferee Company, namely, M/s Arvind Iron Pvt. Ltd. which was soon thereafter converted to M/s Lubi Industries Pvt. Ltd. and then to M/s Lubi Industries LLP. 19. From the facts as emerging from the record, the respondents seek to take action against the petitioner M/s Lubi Industries LLP in respect of non-fulfillment of the export obligation of M/s Lubi Submersibles but refuse to transfer the Advance Authorisations of the Transferor Company to the IEC of the Transferee Company on the specious plea that there is no provision for transfer of Advance Authorisation. In this case, since by virtue of the order of amalgamation, the Advance Authorisations also stand vested in the petitioner M/s Lubi Industries LLP, it is not as if the Advance Authorisation is being transferred to another person, but it is the person whom the respondents seek to hold liable to fulfill the export obligation who is seeking transfer of Advance Authorisation to its IEC number so as to enable it to fulfill the export obligation of M/s Lubi Submersibles. It cannot be gainsaid that in view of the fact that M/s Lubi Submersibles ceased to exist upon its amalgamation with M/s Arvind Iron Pvt. Ltd., t....
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....dvance Authorisations in questions despite having been engaged in the business of export all throughout that period. Thereafter, the petitioner once again applied before the Policy Review Committee, both, for transfer of Advance Authorisation, as well as for extension of export obligation period, which came to be rejected as referred to hereinabove. 21. From the reasons recorded by the Appellate Committee for rejecting the review application, it is apparent that the Appellate Committee has not applied its mind to the controversy in issue and has merely placed reliance upon the orders passed by the subordinate authorities, without taking into consideration the fact that it was these very orders which had given rise to the review appeal. The Appellate Committee has failed to take into consideration the fact that there is a provision in the Handbook of Procedures for extension of export obligation period. Moreover, there are subsequent Public Notices which extend the time of the export obligation period to include even the Advance Authorisations issued under Foreign Trade Policy, 2009-2014. The Circular dated 16th November, specifically provides for transfer of Advance Authorisation ....