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IN THE HIGH COURT AT CALCUTTA
Arijit Banerjee, J.
Sesa International Ltd. & Anr. - Petitioners
Vs.
Director General of Foreign Trade & Ors. - Respondents
WP Nos. 1118 of 2014 & 350 of 2015
Decided On : 05-10-2016
FOREIGN TRADE - Duty Free Import Authorization (DFIA) - Transferability - Exemption from payment of additional customs duty - Merchant exporter - CENVAT facility - Interpretation of Policy and relevant provisions - Principles of natural justice - Order passed in violation of Court's order - Validity.
Fact of the Case:
Petitioner, a merchant exporter, was granted DFIA licenses by the respondent authorities. After fulfilling export obligations, petitioner applied for endorsement of transferability and exemption from additional customs duty. The authorities initially granted the endorsement but later withdrew the exemption based on information that the supporting manufacturers of the petitioner had availed of CENVAT credit.
Finding of the Court:
The Court held that the petitioner was entitled to the benefit of exemption from payment of additional customs duty as it had not availed of CENVAT facility. The Court further held that the impugned orders were passed without following the principles of natural justice and were also in violation of the Court's order of status quo.
Issues: 1. Whether a merchant exporter who has not availed of CENVAT facility is entitled to exemption from payment of additional customs duty under the DFIA scheme? 2. Whether the impugned orders were passed in violation of the principles of natural justice? 3. Whether the order dated 12 December, 2014 was passed in violation of the Court's order dated 3 December, 2014 as extended by the order dated 10 December, 2014?
Ratio Decidendi: 1. The Court held that the emphasis in Clause 4.2.6 (c) of the Policy is on the ‘inputs’ and not on the person who availed of the Cenvat facility. Hence, a merchant exporter who has not availed of CENVAT facility is entitled to the benefit of exemption from payment of additional customs duty. 2. The Court held that the impugned orders were passed without giving an opportunity of hearing to the petitioner, which is a violation of the principles of natural justice. 3. The Court held that the order dated 12 December, 2014 was passed in violation of the Court’s order dated 3 December, 2014 as extended by the order dated 10 December, 2014.
Final Decision: The Court quashed the impugned orders dated 20 November, 2014 and 12 December, 2014 and directed the respondent authorities to suitably extend the validity of the DFIA licenses in question for a period of not less than 3 months from the date of extension.
Arijit Banerjee, J.
1. The disputes in the two writ petitions under consideration arise in relation to the Foreign Trade Policy (in short the ‘Policy’) for the period 2009-14 framed in terms of Sec. 5 of the Foreign Trade (Development Regulation) Act, 1992 (in short ‘the Act’) and the procedure framed for the purpose of implementing the Policy and contained in the ‘Handbook of Procedure’ (in short the ‘Procedure’).
Brief background of the case:-
2. Duty Free Import Authorization (DFIA) is one of the duty exemption schemes under Chapter 4 of the Policy. DFIA is issued to allow duty free import of inputs. DFIA may be either Post-export or Pre-export.
3. The petitioner company is a ‘Merchant Exporter’. Clause 9.39 of the Policy defines merchant exporter as a person engaged in trade activity and exporting or intending to export goods.
4. Since the inception of the 2004-09 Policy, the petitioner company (hereinafter referred to as ‘SESA’) used to apply for issuance of Post-export DFIAs. After getting DFIAs, SESA used to purchase diverse goods from various manufacturers upon payment of duty and all applicable taxes including excise duty and used to export the goods within the time specified in the DFIAs. After discharging its export obligation, SESA used to apply for transferability of the DFIAs under Clause 4.2.6 of the Policy. Upon being satisfied that SESA had fulfilled its export obligations and export proceeds had been realized, the respondent authorities used to endorse ‘transferability’ on the DFIAs, whereupon, the same became freely transferable.
5. Since SESA did not avail of ‘CENVAT’ facility, while endorsing transferability on the DFIAs, the authorities made a note exempting the inputs from additional customs duty/excise duty in terms of Clause 4.2.6(c) of the Policy. On the strength of such endorsement, SESA either imported inputs by itself or transferred the DFIAs to various importers. The goods imported on the basis of such DFIAs were exempted from payment of customs duty/additional customs duty, additional cess, antidumping duty and safeguard duty.
6. In January, 2014, the respondent authorities issued two DFIAs dated 17 January, 2014 and 20 January, 2014 in favour of the SESA. Such licenses were issued against export of non-alloy steel billet and permitted duty free import of non-alloy steel melting scrap. The expiry date for both the licenses was 31 July, 2015.
7. On 17 October, 2014 and 10 November, 2014, SESA applied for endorsement of transferability of the said two DFIAs and exemption from payment of additional customs duty. On 14 November, 2014 a meeting was held in the chamber of the Dy. Director General of Foreign Trade (respondent no. 4). SESA made a grievance that there was being inordinate delay in endorsing transferability on the said licences and the respondent no. 4 assured that the matter was under consideration, and SESA would receive confirmation soon.
8. On 20 November, 2014 the Addl. Director General of Foreign Trade (respondent no. 2) by e-mail requested SESA to submit 12 DFIA licences which had been issued earlier and on which endorsement of transferability had been made. However, SESA had already transferred such licences to third parties. Accordingly, SESA wrote a letter dated 24 November, 2014 for recalling the order dated 20 November, 2014. Subsequently SESA filed WP 1118 of 2014 challenging the said order dated 20 November, 2014 and also praying for a direction on the respondent authorities to make endorsement of transferability on the two licences dated 17 January, 2014 and 20 January, 2014.
9. On 3 December, 2014 I.P. Mukerji, J., passed an order of status quo as regards the concerned licences. On 10 December, 2014 the interim order was extended till disposal of the writ application.
10. When one of the transferees of the said DFIA licences, in connection with permitted imports presented the licence for debiting of dues in lieu of cash payment of additional customs duty, the customs authori
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