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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.10079 OF 2010
Piramal Glass Limited ]
(formerly known as Gujarat Glass Limited) ]
having their registered office Nicholas ]
Pirmal Tower, Peninsula Corporation Park, ]
Ganpatrao Kadam Marg, Lower Parel, ]
Mumbai. ig ] ..Petitioner
V/s.
1. The Union of India ]
(Through the Secretary, Ministry of Law ]
and Justice Department of Legal Affairs ]
Branch Secretariat, Aaykar Bhavan ]
Annex, 2nd Floor, New Marine Lines, 2]
Mumbai - 420 020. ]
]
2. The Director General of Foreign Trade, ]
Government of India, Ministry of ]
Commerce & Industry, Department ]
of Commerce, Udyog Bhawan, ]
New Delhi - 110 011 ]
]
3. The Zonal Joint Director General of ]
Foreign Trade, New CGO Building, ]
Churchgate, Mumbai - 400 020. ]
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4. The Foreign Trade Development Officer, ]
New CGO Building, Churchgate, ]
Mumbai - 400 020. ]
]
5. The Commissioner of Customs (Export ]
Promotion) having his office at Jawahar ]
Customs House, Nhava Sheva, ]
Dist. Raigadh. ] ..Respondents.
Mr. V. Sridharan with Mr. Prakash Shah and Mr. Jas Sanghvi i/b. PDS
Legal for the appellant.
Mr. D.J. Khambata, Additional Solicitor General with Mr. Rui Rodriques
and Mr.A.S. Rao for the respondents.
CORAM : J.P. DEVADHAR AND MRS. MRIDULA BHATKAR, JJ.
JUDGMENT RESERVED ON : 25TH FEBRUARY, 2011
JUDGMENT PRONOUNCED ON : 3RD MARCH, 2011
JUDGMENT (PER J.P. DEVEDHAR, J.)
1) Rule, returnable forthwith. By consent, the petition is taken
up for final hearing.
2) The petitioner is aggrieved by the communication dated
03/05/2010 issued by the Director General of Foreign Trade (DGFT) as
also 11 orders in original all dated 26/11/2010 passed by the Jt. DGFT,
Mumbai.
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3) By communication dated 03/05/2010 the DGFT has
informed the Jt. DGFT, Mumbai that during the period 2004-05, Duty
Free Replenishment Certificates (‘DFRC’ for short) ought to have been
issued to the petitioner, for import of duty free inputs which were set out
in the Standard Input Output Norm (SION) notified by the DGFT on the
date of exports and not as per the SION notified subsequent to the
exports. Based on the above communication, the Jt. DGFT, Mumbai by
11 orders in original all dated 26/11/2010 has demanded duty with
penalty from the petitioner in respect of the ‘Formers’ imported duty free
by the holder of the DFRC’s issued to the petitioner on the ground that
the ‘Formers’ were not covered under the SION notified by the DGFT on
the date of exports effected by the petitioner.
4) Ordinarily, we would have relegated the petitioner to avail
the alternate remedy of appeal against the orders in original dated
26/11/2010 which are impugned in this Writ Petition. However, since the
said orders in original are based on the communication issued by the
DGFT on 3/5/2010 and the validity of the said communication is
challenged, we have deemed it proper to entertain the Writ Petition and
decide the issue on merits.
5) The petitioner is engaged in the business of manufacture
and export of glass bottles, perfumary bottles, vials, etc. During the
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period 2004-05 the petitioner had exported several consignments of
glass bottles and opted for DFRC licences.
6) Under the EXIM Policy 2002-2007 the exporters were
eligible for incentives by way of Advance licence / DFRC / DEPB (Duty
Exemption Pass Book). Advance licence permits duty free import of
inputs which are physically incorporated in the export product. DFRC /
DEPB licences permit duty free replenishment of inputs used in the
export product. In the present case, we are concerned with the duty free
import of inputs under DFRC’s issued to the petitioner. Para 4.1, 4.2,
4.2.3 and 4.2.4 of 2002-2007 policy are relevant for deciding the issues
raised in the petition and the same are reproduced hereinbelow:-
“4.1 The Duty Exemption Scheme enables duty free import of inputs
required for export production. An Advance Licence is issued
under Duty Exemption Scheme. The Duty Remission Scheme
enables post export replenishment / remission of duty on inputs
used in the export product. Duty Remission scheme consist of (a)
DFRC and (b) DEPB. DFRC permits duty free replenishment of
inputs used in the export product. The DEPB scheme allows
drawback of import charges on inputs used in the export product.
4.2 DFRC is issued to a merchant-exporter or manufacturer-exporter
for the import of inputs used in the manufacture of goods without
payment of basis customs duty, and special additional duty.
However, such inputs shall be subject to the payment of additional
customs duty equal to the excise duty at the time of import.
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4.2.3 DFRC shall be issued only in respect of products covered under
the Standard Input Output Norms as notified by DGFT. However,
in respect of Standard Input Output Norms which are subject to
“actual user” condition or where the input(s) is allowed with prior
import condition or for import of fuel under the general norms,
DFRC shall be issued with actual user condition for these inputs.
In cases where Standard Input Output Norms allow import of
Acetic Anhydride, Ephedrine and Pseudo Ephedrine, DFRC shall
be issued provided these items are specifically deleted from the
list of import items.
4.2.4 DFRC shall be issued for import of inputs as per SION as
indicated in the shipping bills. The validity of such licences shall
be 18 months. DFRC and or the material(s) imported against it
shall be freely transferable. However, DFRC with actual user
condition or the material(s) imported against it shall not be
transferable. ”
7) From the aforesaid policy provisions it is clear that after
export, the exporters are issued DFRC’s for import of inputs used in the
export product, which are covered under the SION notified by the DGFT
and also indicated in the shipping bills.
8) As per the SION notified by the DGFT, originally six inputs
eligible for duty free import under heading ‘Chemical & Allied Product SI
No. A3016’ in respect of the products exported by the petitioner. By a
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Public Notice dated 12/04/2004 the DGFT amended the SION so as to
include two more inputs viz. “Formers’ & ‘Packing material’ under SI No.
A3016. Thus, as per the amended SION, an exporter of glass bottles
became entitled to import eight inputs enumerated in entry A3016 of
SION without payment of duty.
9) In the present case, the petitioner had applied for DFRC’s
from time to time after the SION was amended on 12/4/2004. In the
said applications, the petitioner claimed DFRC’s for duty free import of all
the eight inputs used in the products exported prior to 12/4/2004 as also
exported subsequent to 12/4/2004. The licensing authority under the
DGFT accordingly issued several DFRC’s during the period 2004-05.
The said DFRC’s specifically permitted duty free import of all the eight
items including Formers & packing materials irrespective of the fact that
the petitioner had exported goods prior to 12/04/2004 or subsequent to
12/4/2004.
10) Under the EXIM policy 2002-07 the DFRC’s being freely
transferable, the petitioner transferred the DFRC’s to third parties for
consideration. Those third parties have imported inputs including
formers & packing materials duty free under the DFRC’s issued to the
petitioner by the office of the DGFT, within the validity period i.e. within
24 months from the issuance of DFRC’s.
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11) Subsequently, on 18/12/2007 it appears that the Audit
Authority raised an objection to the effect that Formers & packing
materials which were included in the SION by Public Notice dated
12/4/2004 could not be allowed to be imported under DFRC’s where the
exports were made prior to 12/4/2004. Thereupon the Jt. DGFT sought
clarification in that behalf from the DGFT. By the impugned
communication dated 3/5/2010 the DGFT clarified thus :-
“To,
The Jt. DGFT,
Mumbai
Subject: Classification regarding effective date of import against
DFRC – M/s. Gujarat Glass Ltd.
Sir,
With reference to this office letter of even number
dated 26-4-2010 on the above mentioned subject, I am directed to
further clarify that SION available on the date of export is requiredto be taken into consideration and not that as per SION modified
subsequent to exports. DFRC being cost export replenishment
scheme has to be linked to the date of exports. ”
12) Accordingly, 11 show cause notices were issued in January-
February, 2010 calling upon the petitioner to show cause as to why
customs duty with interest and penalty should not recovered from the
petitioner in respect of Formers & Packing materials imported under the
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DFRC’s issued to the petitioner during the period 2004-2005, because
‘Formers / packing materials’ were included in the SION on 12/4/2004,
whereas the exports were made prior to 12/4/2004 and in such cases
formers / packing materials could not be allowed duty free import under
the DFRC’s issued to the petitioner.
13) The petitioner objected to the issuance of the show cause
notices as also the claim to recover duty with interest and penalty.
However, rejecting the contentions of the petitioner, 11 impugned orders
in original were passed on 26/11/2010 confirming duty, interest and
imposed penalty upon the petitioner and its Directors. Challenging the
communication dated 3/5/2010 and also 11 orders in original dated
26/11/2010 the present petition is filed.
14) Mr. Sridharan, learned counsel appearing on behalf of the
petitioner submitted that the communicated dated 3/5/2010 is contrary to
the Exim policy, because the policy provides for duty free importation of
inputs used in the export product and it is not in dispute that formers &
packing materials are inputs used in the product exported by the
petitioner. He submitted that para 4.2.3 of the policy ensures that the
DGFT verifies the inputs used in the export product and notifies the
same in the SION so that the DFRC is issued only for import of inputs
used in the export product and not any other inputs. Similarly, para
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4.2.4 of the policy requires that the DFRC’s are issued for duty free
import of inputs used in the export product which are notified in the SION
and indicated in the shipping bills. The object is to ensure that the
exporter in the shipping bills submitted to the customs authorities
declares that the exports are made with a view to import inputs used in
the export product which are covered under the SION notified by the
DGFT. In the present case, it is not in dispute that the Formers &
packing materials are inputs used in the manufacture of glass bottles
and, therefore, the petitioner was entitled to and in fact allowed to import
the same duty free under the DFRC’s issued to the petitioner. The fact
that the DGFT recognised that the Formers / packing materials are
inputs used in the export product and notified the same in the SION on
12/4/2004, it does not mean that prior to 12/4/2004 the Formers /
packing materials were not inputs used in the export product.
15) Mr. Sridharan further submitted that the inputs covered
under the SION as on the date of issuance of DFRC and not on the date
of export are relevant. In support of the above contention, reliance is
placed on the decision of the Apex Court in the case of S.B.
International Ltd. V/s. Asstt. Director Foreign Trade reported in (1996) 62
E.L.T. 164 (S.C.) and a decision of this Court in the case of Sonia
Fisheries V/s. Union of India reported in (1997) 90 E.L.T. 22 (Bom).
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16) It is further submitted on behalf of the petitioner that in the
present case the DFRC’s were issued by construing the policy provisions
to the effect that the inputs covered under the SION as on the date of
issuing the licence is relevant. On the basis of the validly issued
DFRC’s duty free imports have been made by the third parties to whom
the said DFRC’s were legally transferred. Assuming that the authorities
issuing the DFRC’s had wrongly construed the provisions of the policy,
the imports already made as per the DFRC’s cannot be faulted and the
DGFT cannot issue a clarification so as to adversly affect the imports
already made pursuant to the validly issued DFRC’s. In the present
case, neither the DFRC’s are cancelled nor the items specifically
included in the DFRC’s have been deleted. Relying on the decision of
this Court in the case of A.V. Industries V/s. Union of India reported in
(2005) 187 ELT 9 (Bom), it is contended that even if there is any
bonafide mistake on the part of the authority issuing the DFRC’s, the
petitioner cannot be penalised for that bonafide mistake committed by
the licensing authorities. The alleged mistake in the DFRC’s, if any,
were corrected in time by deleting the two items, the importers to whom
DFRC’s were sold would have imported items other than Formers /
Packing materials. Therefore, it is contended that the communication
dated 3/5/2010 being contrary to the policy be quashed and set aside.
Consequently, the orders in original dated 26/11/2010 passed on the
basis of the communication dated 3/5/2010 seeking to recover duty,
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interest and penalty from the petitioner who is not even the importer
deserve to be quashed and set aside.
17) Mr.Khambata, learned Additional Solicitor General (‘ASG’ for
short) appearing on behalf of the respondents, on the other hand
submitted that the communication dated 3/5/2010 merely clarifies the
policy provisions as they stood at the relevant time and, therefore, no
fault can be found with the communication dated 3/5/2010. As regards
the validity of the orders in original all dated 26/11/2010, he submitted
that the petitioner must be directed to avail the statutory remedy of
appeal provided under the Act.
18) On the merits of the case relating to the issuance of DFRC’s
permitting the duty free import of ‘Formers / Packing materials’, the
learned ASG submitted that admittedly on the dates on which exports
were made ‘Formers / packing materials’ were not included in the SION.
As per para 4.2.3 of the 2002-2007 policy, DFRC’s have to be issued
only in respect of those inputs which are included in the SION. Unlike
Advance licences, the DFRC’s are issued for import of inputs used in the
product which are already exported. Therefore, it is the date of export
which is relevant for issuing DFRC and on the date of export if the input
is not covered under SION, the said input cannot be allowed to be
imported duty free under the DFRC. In other words, since ‘Formers’
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were not included in the SION on the date of export DFRC could not be
issued to the petitioner for import of ‘Formers’.
19) It is further contended by the learned ASG that para 4.2.4 of
the 2002-2007 policy clearly provides that the DFRC shall be issued for
import of inputs as per SION as indicated in the shipping bills. The
petitioner had indicated in the shipping bills that six items are inputs
which are used in the export product and the petitioner had not included
‘Formers / packing materials’ as inputs used in the export product.
Therefore, DFRC’s could not be issued for duty free import of ‘Formers
packing materials’ as they were not indicated in the shipping bills. The
fact that the said two items were erroneously included in the DFRC’s, it
does not mean that the said two items could be imported duty free,
especially when the said two items were not included in SION on the
date of export and the said two items were not declared in the shipping
bills. The submission is that in respect of the exports effected upto
11/4/2004 DFRC’s could not be issued for duty free import of ‘Formers /
packing materials’ and, therefore, duty with interest would be recovered
even if the said items were cleared duty free under the DFRC’s wrongly
issued to the petitioner.
20) Relying on a Division Bench decision of the Madras High
Court in the case of Adani Exports Ltd. V/s. Union of India reported in
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(2003) 151 ELT 520 (Mad) which is upheld by the Apex Court, the
learned ASG submitted that DFRC’s could be issued for import of duty
free inputs which are specifically set out in the SION on the date of
exports and not on the date of issuance of DFRC’s. In the present case,
the petitioner in his application had erroneously claimed DFRC on
‘Formers / Packing materials’ even though the same were not covered
under SION on the date of export. The DFRC’s were granted on the
basis of the application made by the petitioner. The error committed in
issuing DFRC’s for duty free import of Formers / Packing materials came
to light when the Audit Authority raised the objection. The said objection
was confirmed by the DGFT vide communication dated 3/5/2010. The
petitioner while making the applications for DFRC’s had executed an
undertaking to the effect that the contents of the application if proved to
be incorrect or false, then the petitioner would be liable for penal action
or other consequences. Since the claim of the petitioner for duty free
import of ‘Formers / Packing materials’ which were not included in the
SION on the date of export is found to be incorrect, the petitioner in
terms of the undertaking given, is liable to pay duty, interest and also
liable for penalty. The fact that the duty demand on packing materials
has been dropped as the same are allowable as per General Policy for
‘packing material’ under the Hand Book of Procedures, Vol II for SION,
the petitioner cannot escape liability to pay duty with interest and penalty
on the ‘formers’ which were erroneously allowed importation on account
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of the misdeclaration made by the petitioner. Accordingly, the learned
ASG submitted that no fault can be found with the communication dated
3/5/2010 as well as the orders in original all dated 26/11/2010.
21) We have carefully considered the rival submissions.
22) The basic dispute in the present case is, whether DFRC
under the 2002-2007 policy was liable to be issued in respect of the
inputs which are covered under the SION on the date of export or in
respect of inputs covered under the SION on the date of issuing DFRC ?
23) Perusal of para 4.1 and para 4.2 of the EXIM policy, 2002
-2007 clearly shows that DFRC’s were to be issued for duty free import
of inputs used in the export product. Since the DFRC’s were issued
after the product is exported, to prevent any abuse, the policy provides
that the DGFT must approve the inputs that are used in the export
product. That is why para 4.2.3 of the policy provides that DFRC shall
be issued only in respect of the products covered under the SION as
notified by the DGFT. Para 4.2.3 of the policy cannot be construed to
mean that the DGFT has the discretion not to include an input used in
the export product in the SION. In other words, the policy provides that
all inputs used in the export product are eligible for duty free import to
the extent permitted under the DFRC, however, the said inputs must be
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noticed by the DGFT.
24) Since the exports as well as the imports are regulated by the
customs authorities, para 4.2.4 of the policy provides that DFRC shall be
issued for import of inputs as per SION as indicated in the shipping bills.
This para further ensures that the exporter while submitting shipping bills
to the customs authorities declares that the exports are effected with a
view to import inputs used in the export product which are notified in the
SION.
25) Where the DGFT by a public notice amends the existing
SION by adding an input used in the export product, then the exporter is
entitled to import that input duty free to the extent permitted under the
DFRC. No doubt that until an input is is notified under the SION, DFRC
cannot be issued in respect of the input. But once the DGFT notifies an
input under the SION as an input used in the export product, then there
is no reason as to why DFRC cannot be issued in respect of that input,
even if the product was exported prior to the issuance of the public
notice by the DGFT. In other words, for issuing DFRC what is relevant
is that the inputs must be notified under the SION and not the date on
which it is notified. Thus, reading the policy provisions as a whole, it is
evident that DFRC has to be issued for duty free import of inputs used in
the export product which are notified under the SION and the fact that an
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input was not notified on the date of export cannot be a ground to deny
duty free import of that input under the DFRC, because the object of the
policy was to allow duty free import of the inputs used in the export
product and not restricted to the inputs notified on the date of export.
26) The fact that the ‘Formers / packing materials’ are inputs
used in the product exported by the petitioner is confirmed by the Central
Excise authorities. Even the DGFT has confirmed, though belatedly,
that ‘Formers / packing materials’ are inputs used in the product
exported by the petitioner. There is nothing in the policy to suggest that
DFRC has to be issued in respect of the inputs notified under the SION
on the date of export. Even the public notice dated 12/4/2004 does not
state that the ‘Formers / packing materials’ shall be treated as inputs
used in the export product with effect from 12/4/2004. Therefore, the
petitioner was entitled to seek DFRC for duty free import of ‘Formers /
packing materials’ along with other inputs set out in the SION and
consequently, issuance of DFRC’s for duty free import of ‘Formers /
packing materials’ in respect of exports effected prior to 12/4/2004
cannot be faulted.
27) It is contended on behalf of the revenue that if the argument
of the petitioner that the date of export is not the relevant date for issuing
DFRC is accepted, then, it would mean that where subsequent to the
export an input is deleted from SION, then, DFRC cannot be issued in
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respect of that input even though the said input was covered under the
SION on the date of export. There is no merit in this argument,
because, the DGFT can delete an input covered under the SION only if
the DGFT comes to the conclusion that its earlier decision to include that
input under SION was erroneous. In such a case, if the DFRC was not
issued in respect of the exports effected prior to the deletion, then the
question of issuing DFRC after the deletion of the input does not arise at
all. In the present case, it is not in dispute that the Formers / Packing
materials are inputs used in the product exported by the petitioner. The
fact that the DGFT notified the same on 12/4/2004 does not mean that
prior to 12/4/2004 the said items were not inputs used in the export
product. When the object of DFRC is to permit duty free import of inputs
used in the export product, that object cannot be defeated on the ground
that the input was notified under the SION subsequently and the same
was not indicated in the shipping bills submitted at the time of export.
28) In the present case, even the authorised officer interpreted
the policy to mean that irrespective of the date of export once the
Formers / packing materials were notified as inputs used in the export
product DFRC licences have to be issued irrespective of the date of
export, and accordingly issued the DFRC’s in favour of the petitioner.
The very fact that even after the Audit Authority raised objection, the Jt.
DGFT deemed it fit to seek clarification from the DGFT clearly shows
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that the issue was debatable and was not free from doubt. Therefore,
the DGFT could not have issued clarification on 3/5/2010 so as to
prejudicially affect the interests of the exporters / third parties, who had
imported ‘Formers / packing materials’ on the basis of the DFRC’s issued
by the office of the Jt. DGFT several years ago. In other words, even if
it is held that the Licensing authorities were in error in interpreting the
provisions of the policy, in the facts of the present case, since the
DFRC’s have been fully utilized much prior to the realisation of the
mistake committed by the licensing authority, the petitioner cannot be
saddled with any liability in respect of imports already made.
29) It is not the case of the revenue that the DFRC’s have been
issued on account of fraud or misrepresentation on the part of the
petitioner. The only grievance of the revenue is that the petitioner ought
not to have included ‘Formers / packing materials’ in the applications
seeking DFRC’s because on the date of export, neither the said items
were included in the SION nor the said items were indicated by the
petitioner in the shipping bills and, therefore, in terms of the undertaking
given at the time of export, the petitioner is liable to pay duty with interest
and also liable for penalty for importing ‘Formers’ duty free, because
‘Formers / packing materials’ were not included in the SION on the date
on which the petitioner exported the manufactured products.
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30) We see no merit in the above contention, because, the
requirement of the policy that the DFRC has to be issued in respect of
inputs used in the export product which are covered under the SION and
indicated in the shipping bills is to ensure that inputs other than those
inputs used in the export product are not imported under the DFRC
licences. In the present case, it is an admitted fact that ‘Formers /
packing materials’ are inputs used in the export products not only by the
Central Excise authorities but also by the DGFT. Since these inputs
were not notified on the date of export, the same could not be indicated
in the shipping bills. But, as soon as these inputs were notified under
the SION, the petitioner became entitled to import the same under the
DFRC. Therefore, the petitioner cannot be accused of being guilty of
misdeclaring the items for import in the applications seeking DFRC’s.
Neither the bonafides of the petitioner in making applications seeking to
import ‘Formers / packing materials’ under the DFRC’s are in doubt nor
the bonafides of the officer in issuing DFRC’s to the petitioner allowing
duty free import of ‘Formers / packing materials’ are in doubt. In such a
case, the action of the respondents in seeking to recover duty from the
petitioner on the ground that the import of those items, were erroneously
allowed under the DFRC’s cannot be sustained.
31) It is surprising to note that even after the Audit objection and
clarification issued by the DGFT, till date the DFRC’s in question have
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neither been declared to be invalid nor the items ‘Formers / packing
materials’ contained in the said DFRC’s have been deleted. So long as
the ‘Formers / packing materials’ continue to be covered under the
DFRC’s in question, the duty free imports under the DFRC’s cannot be
said to be contrary to law and consequently recovering any duty on
import of ‘Formers / packing materials’ under the said DFRC’s does not
arise at all.
32) Strong reliance was placed by the counsel for the revenue
on the decision of the Madras High Court in the case of Adani Exports
(supra) wherein it is held that in the case of pass book scheme, the
credits have to be calculated only on the basis of the norms as they were
existing on the date of exports. In that case, Adani Exports had availed
the pass book scheme under the 1992-1997 policy and had exported
goods covered under Entry 7 of SION, under which they were entitled to
the credit of the customs duty payable on 227 kilos of vitamin mixes for
export of every metric ton of vitamin mixes. With effect from 1/4/1997
new EXIM police for 1997-2002 came into force under which pass book
scheme was discontinued by the Central Government. Similarly, with
effect from 1/4/1997 new SION came into force wherein the entry
regarding vitamin mixes was bifurcated into vitamin mixes and mineral
mixes and the permissible quantity under the new SION for vitamin
mixes was 27 kg. for export of every metric ton of vitamin export. The
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question was, whether Adani Exports who had exported goods under the
1992-97 policy and eligible to the credit of customs duty payable on 227
kgs. of vitamin mixes on export of every metric ton of vitamin mixes
could be denied that credit on the ground that under the new SION
which came into force with effect from 1/4/1997 the permissible quantity
was only 27 kg. per M.T. The Madras High Court answered the question
by holding that the entitlement of the petitioners therein to the credit
earned on account of the exports made during the period when the pass
book granted to them was valid, could not be set at naught by relying on
the subsequent SION norms which came into effect from 1/4/1997.
33) The above decision of the Madras High Court does not in
any way support the case of the revenue. In that case, the vested right
accrued to the exporter on the date of export could be denied on account
of the subsequent change in the SION. In the present case, the vested
right on the date of export was to receive DFRC’s for duty free import of
inputs used in the export product as notified by the DGFT. The DGFT
has notified that the ‘Formers / packing materials’ are inputs used in the
export product. The fact that the public notice was issued on 12/4/2004
it does not mean that the ‘Formers / packing materials’ were not inputs
used in the products exported prior to 12/4/2004. The notification issued
on 12/4/2004 merely confirms the factual position, prevailing on the date
of export, namely the ‘Formers / packing materials’ were the inputs used
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in the product exported by the petitioner. The said notification does not
impair the vested right of the petitioner but in fact augments the vested
right of the petitioner. Therefore, the decision of the Madras High Court
does not in any way prejudice the case of the petitioner.
34. We find merit in the argument of the petitioner that assuming
the revenue is right in contending that ‘Formers / packing materials’
could not be imported duty free in respect of exports effected prior to
12/4/2004, then firstly, the licensing authorities could not to have issued
DFRC’s permitting duty free import of inputs including formers / packing
materials. Having issued DFRC and having allowed duty free import of
‘Formers’ under DFRC, it is not open to the revenue to contend that the
duty free import is unauthorised. Secondly, if the petitioner was
intimated about the alleged mistake in the DFRC’s, then the parties to
whom the DFRC’s were sold would have imported only those inputs
which are permissible for duty free import. Once the ‘Formers / packing
materials’ have been imported duty free as per the DFRC’s validity
issued by the licensing authorities and the said items have even now
continue to remain in the DFRC’s issued to the petitioner, the question of
demanding any duty on the ‘Formers / packing materials’ imported under
the said DFRC’s issued by the licensing authorities does not arise at all.
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35) In the result, the communication dated 3/5/2010 as also the
11 orders in original all dated 26/11/2010 are quashed and set aside.
Rule is made absolute in the above terms with no order as to costs.
(MRS. MRIDULA BHATKAR, J.) (J.P. DEVADHAR, J.)
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