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2017 Supreme(Del) 688
IN THE HIGH COURT OF DELHI AT NEW DELHI
S. RAVINDRA BHAT, NAJMI WAZIRI, JJ.
Bishwanath Industries Ltd. - Petitioner
Versus
Director General, Foreign Trade & Anr. - Respondents
WP(C) 1952 of 1997
Decided On : 28-02-2017
For the Petitioner: Mr. Rajesh Rawal
For the Respondents: Mr. Vivek Goyal, Ms. Vanya Khanna
The main legal point established in the judgment is that the DGFT cannot impose a currency of trade different from the agreed currency of exports between the trading parties.
Headnote:
Advance License - Export Obligation - Foreign Trade (Development and Regulation) Act, 1992, Rule 10 of the Foreign Trade (Regulation) Rules, 1993, Appendix XVII of the Hand Book of Procedure 1992-97, Rule 7(1) of the Foreign Trade (Regulations Rules) 1993, Appendix XIII of the Handbook of Procedures of EXIM Policy 1992-97
Fact of the Case:
The petitioner sought to quash a show cause notice and amend the Advance License to reflect export obligation in Indian Rupees instead of USD. The petitioner had agreed to supply LDPE liner bags to a Moscow based buyer, and the Reserve Bank of India permitted release of advance payment for the exports. The petitioner applied for an Advance License, which was initially rejected but later granted. The petitioner sought amendment of the license, and a show cause notice was issued for non-fulfillment of export obligation. The petitioner contended that the exports were made in Indian Rupees as per the agreement.
Finding of the Court:
The court found that the petitioner had clearly indicated the FOB value of exports in both Indian currency and USD and had not suppressed the mode of payment as advance payment. The court absolved the petitioner of the allegations in the show cause notice. The court also noted that the exports were made in Indian Rupees as per the agreement with the Russian importer.
Issues: The issues revolved around the grant of the Advance License, the mode of payment, and the currency of export obligation. The court also considered the non-fulfillment of export obligation and the respondent's contentions regarding the currency area for the license.
Ratio Decidendi: The court held that the petitioner had not suppressed any material information in the application for the Advance License and that the exports were made in Indian Rupees as per the agreement. The court also emphasized that the DGFT cannot impose another currency of trade on the parties if the agreed currency of exports was Indian Rupees.
Final Decision: The court allowed the writ petition and directed the respondents to amend the Advance License to reflect the export obligation in Indian Rupees instead of USD.
Najmi Waziri, J.
1. This writ petition has sought i) the quashing of a show cause notice dated 07.07.1995 issued by the respondent No. 2 as to why the Advance License dated 14.02.1994 issued to the petitioner be not cancelled and ii) a direction to the respondents to make corrections in the aforesasid Advance License showing export obligation to be made in Indian Rupees for an amount of Rs.14,69,26,650/-instead of USD 45,91,457/-.
2. By an agreement dated 18.06.1991, the petitioner had agreed to supply 21.25 lakh pieces of LDPE liner bags to a Moscow based buyer. The price of each bag was fixed in Indian Rupees i.e. at Rs,.70.00 per piece and the total value of the contract was specified – again as INR14,87,50,000/-(Indian Rupees 148.76 million), equivalent to USD. Notably the quantum of USD was not specified. Terms of payment were: “Advance to the account of seller” i.e. the petitioner was to receive the sale consideration in advance. The delivery time was upto 31.03.1994 (this period was subsequently extended by the buyer). The quality of the product was specified as under:-
“Quality : Width-500 MM+-10MM; Height 1000 MM+15-0 MM; Above seal – 990MM + 15-0MM; Seal Width – 5MM, Below Seal – 10MM+-5MM, Thickness 220 Microns +-15%; Weight of bag – 206 grams +-15%”
3. Upon petitioner’s application dated 04.10.1993, the Reserve Bank of India (RBI) vide its memorandum dated 16.07.1993, permitted release of Rs.72,50,00,000/-into the petitioner’s account through Punjab National Bank as advance from the bank for Foreign Economic Affairs of the USSR in terms of the agreement between the petitioner and the Russian purchaser. The petitioner applied for license under the Duty Exemption Scheme for Value Based Advance License under Appendix XVII of the Hand Book of Procedure 1992-97. It specified the FOB value of exports as Rs.14,69,26,650/-in the column Currency of Exports and the CIF value of imports as Rs.7,34,63,325/-in the column for Currency of Imports. It reflected the corresponding USD values as 45,91,457.81 and 22,95,728.90 respectively. The application also mentioned that the Value Addition would be 100%. In column 20, regarding ‘Payment Mode” the petitioner had stated ‘Advance payment’ and reference was made to the aforesaid agreement dated 18.06.1991.
4. By a letter dated 03.12.1993, the Director General of Foreign Trade (DGFT) informed the petitioner that the Advance Licensing Committee had considered the application and rejected it on the ground that no norms had been fixed for LDPE liner bags. However in its subsequent meeting (No. 34/94) held on 04.01.1994 the ALC decided to grant the Advance License to the petitioner and communicated the same vide its Duty Exemption Entitlement Certificate dated 14.02.94. The description of goods was specified as
“LDPE Moulding Grade 2550.80 MT.(2) Board/While Card Board –
14.16 MT for USD 15,576/-(3) Swan Timber of Species Relevant to be used in Export Product as packing material – 37.17 MT for USD 11,615.62 (the individual CIF value of items at Sr. No. 2 & 3 shall not be utilised for import of other items permitted in the licence)”. The approximate value of CIF was mentioned as Rs.5,69,87,700 equivalent to USD 17,80,867/-. It further specified that the “ firm shall export of 2125000 for LDPE liner bags having LDPE 2429.333 MT. Packed in Packing material made of Board/While Card Board weighing 13.49 MT and processed Timber weighing 35.4 MT for and FOB value of USD 45,91,457/-and realise the proceeds in free foreign exchange only by making exports to GDA (sic) countries in fulfilment of export obligation in this case.”
5. Immediately upon receipt of the said license, vide its letter dated 2.3.94, the petitioner sought an amendment in the advance license to:
“................ to amend the condition at Serial No.4 on the reverse of the licence to read as that
“the foreign exchange to be realised in Indian Rupees by making export to RPA countries. Further also amend FOB value stated on the fron
