The requirement for a status holder to provide a bank guarantee to the Custom Authorities was contrary to policy and liable to be disregarded.

Vibhu Bakhru, J.

1. The petitioner is a two star export house status holder and has filed the present petition impugning the communication dated 31.05.2013 issued by the office of Additional Director General of Foreign Trade (hereinafter referred to as “Additional DGFT”). By the said communication, hereinafter referred to as the ‘impugned communication’, the Additional DGFT had informed the petitioner that it’s entitlement under the Advance Authorization No. 0510324315 dated 09.05.2012, was limited to a sum of Rs.38,83,52,050/- instead of Rs.77,03,73,810/- (USD 1,54,07,476.20). The petitioner was further advised to submit the said Advanced Authorization for endorsement of Bank Guarantee condition for the differential amount.

2. It is the petitioner’s case that it was exempt from the condition of furnishing bank guarantees in respect of any scheme framed under the Foreign Trade Policy. Further, according to the petitioner, it was entitled to Advance Authorization of a higher value and, therefore, the reduction in the value of Advance Authorization as indicated in the impugned communication was not justified.

3. The learned counsel for the petitioner submitted that under the Foreign Trade Policy, the petitioner, holding there status of a two star export house, was exempt from furnishing Bank Guarantees in respect of any scheme under the Foreign Trade Policy. It was further submitted that the petitioner was entitled to an Advance Authorization equivalent to 500% of the FOB and/or FOR value of the preceding year’s export. It was contended that the Advance Authorization in question was issued to the petitioner on 09.05.2012 and, therefore, the exports during the year 2011-12 were to be considered for calculating the value of the Advance Authorization. It was pointed out that the Advance Authorization was computed on the basis of goods exported by the petitioner in the year 2010-11, which could not be considered as “preceding year’s export”. It was next contended by the learned counsel for the petitioner that Bank Guarantees, if any, would be furnished only to the Customs Authorities and the Additional DGFT could not demand the same.

4. The learned counsel for the petitioner referred to the counter affidavit filed on behalf of the respondents and submitted that the petitioner’s claim for Advance Authorization based on the exports made in the year 2011-12 was not disputed as the stand of the respondents was that in the event the petitioner required an amendment in the Advance Authorization, the same could be amended under the Foreign Trade policy.

5. The learned counsel appearing for the respondents referred to paragraph 4.7.1 of the Handbook of Procedures, which specified the manner of computing the entitlement of an exporter for Advance Authorization. The learned counsel further drew the attention of this Court to paragraph 4.7.3 of Handbook of Procedures, which specifically provided that an applicant would be entitled to authorization in excess of the entitlement subject to furnishing of 100% bank guarantee to the Customs Authority to cover the exemption from Customs Duty. It was submitted that the impugned communication was in conformity with the said clause and the petitioner had been advised to submit the Advance Authorization for endorsement of the Bank Guarantee condition for the amount in excess of its entitlement.

6. The learned counsel further referred to the petitioner’s application for the Advance Authorization, filed electronically on 14.03.2012, and pointed out that the FOB value of exports (i.e. Rs.7,76,70,410/-) mentioned in the application pertained to the licensing year 2010-11. He submitted that on the basis of the figure submitted by the petitioner, its entitlement to Advance Authorization would be Rs.38,83,52,050/- and the Advance Authorization obtained by the petitioner for a higher value was clearly erroneous. Consequently, the Additional DGFT had called upon the petitioner to endorse the Advance Aut