TMI Blog2020 (3) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... bind to the conditions of the license issued in terms of the Foreign Trade (Development And Regulation) Act, 1992, the Export and Import Policy and the relevant Handbook of Procedure the Foreign Trade (Development And Regulation) Act, 1992 cannot approbate and reprobate - Therefore, it is not open for the petitioners to state that the Officers of the Ministry of Commerce have no power to levy of interest. It is not open for the petitioners to state that the respondents had no authority to demand interest on the custom duty foregone even though the petitioners failed to discharge export obligation undertaken by them. When the impugned orders were passed, the Customs Notification No.46/2013-Cus dated 26.09.2013 had not been issued. As per the said notification, in case of default of export obligation, the amount of interest to be paid by an importer shall not exceed the amount of duty if such regularisation has been dealt in terms of public notice of the Government of India, in the Ministry of Commerce No.22 (RE-2013)/2009-14 dated 12.08.2013 - The Ministry of Commerce had considered the difficulties faced by the manufacturer exporters like the petitioners and had therefore ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /08-09/ECA-I/1583 of the 2nd respondent Additional Director General of Foreign Trade (as an Appellate Authority) under the provisions of the Foreign Trade (Development and Regulation) Act, 1992 against the order dated 13.02.2008 bearing reference F.No.32/95/181/00045/AM05 of the 3rd respondent Joint Director-General of Foreign Trade, Coimbatore. 5. The Joint Director General of Foreign Trade had earlier passed an order dated 13.02.2008 and had imposed a penalty of ₹ 1,63,44,084/- on the petitioner in W.P.No.22282 of 2009 under Section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992 pursuant to Show Cause Notice dated 02.05.2005 bearing reference F.No.32/95/181/00045/AM05. 6. By the impugned order dated 27.11.2008, the 2nd respondent Additional Director-General of Foreign Trade (as an Appellate Authority) has partly allowed the appeal by reducing the penalty to ₹ 50,000/-, but at the same time has imposed interest at 15% from 16.09.1993 to 31.12.2003 amounting to ₹ 5,78,232/- as against the customs duty foregone at the time of import for a sum of ₹ 2,52,090/-. 7. In both the cases, the petitioners have imported capital goods on paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Imports (Control) Order, 1955 and the Customs Act, 1962. 9. Para- 45 of the said Policy reads as under : A manufacturer- exporter shall be required to execute with the licensing authority an indemnity-cum-guarantee bond, supported by a bank guarantee, in the specified form for the value and period as mentioned in the licence. However, after the manufacturer-exporter has fulfilled 50% of the export obligation, the licensing authority may discharge the bank guarantee and require the manufacturer-exporter to execute a legal undertaking(LUT) for fulfillment of the remainder of the export obligation. The licensing authority may exempt an Export House/Trading House/Star Trading House from the requirement of furnishing an indemnity-cum-guarantee bond supported by a bank guarantee and may allow it to execute instead a legal undertaking (LUT) In addition, the license holder was also liable to pay interest at 24% per annum on the amount of duty saved, from the date of import of the 1st consignment to the date of payment. This was without prejudice to any other action that may be taken under the Imports (Control) Order, 1955 and the Customs Act, 1962. 10. In addition, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. It is the case of the petitioners that the Central Government, Department of Revenue, Ministry of Finance in the exercise of power vested with it under Section 25(1) of the Customs Act, 1962 had issued Notification No. 160/92-Cus dated 20.4.1992 for the aforesaid purpose and the said Notification does not contemplate interest in case there was a failure to discharge the export obligation. 17. It is submitted that the importer at the time of clearance of the capital goods under the said scheme was merely required to make a declaration before the Asst. Commissioner of Customs, in such form as he may declaration before the Asst. Commissioner of Customs as the officer may specify, binding upon himself to pay on demand an amount equal to the duty leviable on such capital goods but for the exemption contained therein in respect of which the conditions specified in column (2) of the table were complied with. Text of Notification No.160/92-Cus dated 20.04.1992 reads as under:- MINISTRY OF FINANCE (Department of Revenue) NOTIFICATION New Delhi, the 20th April, 1992 No. 160/92-CUSTOMS G.S.R. 423(E).-In exercise of the powers conferred by sub-section (1) of Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment required for Research and Development activity; (ii) Export and Import Policy means the Export and Import Policy, 1st April 1992-31st March 1997 published vide Public Notice of the Government of India in the Ministry of Commerce No.1-1TC (PN)/92-97 dated the 31st March, 1992; (iii) Licensing authority means an authority competent to grant a licence under the Import (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947 (18 of 1947). [F. No. B. 31/7/92-TRU] RAJIV SHARMA, Under Secy. 18. It was further submitted that under the provisions of the Foreign Trade Development And Regulation Act, 1992, the officers are empowered only to impose penalty. They neither have the authority to collect customs duty nor interest and that function is left to the officers under the Ministry of Finance, Department of Revenue under the provisions of the Customs Act, 1962. 19. The learned counsel for the petitioner in W.P.No.38158 of 2003 placed reliance on the following decisions in support of the present writ petitions:- i) India Carbon Ltd., Etc vs. The State of Assam, 1997(6) SCC 479 ii) V.V.S.Sugars vs. Govt. of Andhra Pradesh and Ors, AIR 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Pradesh AIR 1999 (SC) 2124. He submits that the authorities under Foreign Trade (Development and Regulation) Act, 1992, have no powers to demand interest under the provisions of the Foreign Trade (Development and Regulation) Act, 1992. 24. It is therefore submitted that the decisions rendered against importers in the cited cases do not constitute a binding ratio decidendi and therefore prayed for allowing the writ petitions. In this connection reference was made to the following decisions of the Honourable Supreme Court:- i) Commissioner of Income Tax vs. M/s. Sun Engineering Works (P) , 1992 Supp 1 SCR 732 ii) Krishena Kumar and Anr. Etc. Etc. vs. Union of India and Ors, 1990 AIR 1782, 1990 SCR (3) 352 iii) Mohandas Issardas And Ors. Vs. A.N.Sattananthan And Ors. AIR 1955 Bom 113 (1954) 56 BomMLR 1156 25. It was further submitted that Notification No.160/92-Cus dated 20.04.1992 along with host of other Customs Notifications were amended by Notification No.46/2013-Cus dated 26.09.2013 capping the interest payable in case of default to a maximum of the amount equivalent to the duty foregone at the time of import. Similarly, a reference was also made to few ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ules, 1993 as it stood during the relevant period stipulated that the goods covered under the license shall not be disposed of except in accordance with the provisions of the Policy or in the manner specified by the licensing authority in the license and that a licence was required to execute a bond for complying with the terms and conditions of the license. 31. Learned counsel for the customs department relied upon the decision of the Honourable Supreme Court in Union of India Versus Madras Steel-Re-Rollers Association 2012 (278) ELT 584 (S.C) to state that the officers of the Ministry of Commerce are bound by the circular/public notices issued by the Department and therefore the respondents were justified in demanding interest. 32. The learned counsel for the Customs Department (4th respondent in W.P.No.38158 of 2003) also drew attention to Public Notice No.05/(Re- 99)/1997-2002 dated 06.04.1999 of the Ministry of Commerce, wherein the period to discharge export obligation was extended to 31.03.2001 the licence who had failed to discharge the exportobligation could apply for extension of the export obligation on submission of bank guarantee covering the customs duty in pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Handbook of Procedure as amended from time to time with respect to export obligation. 38. The licenses were issued in terms of the said Policy and the Policy mandated that the petitioners had to execute a bond in terms of the Handbook of Procedure. Thus, having taken advantage of the scheme, it is not open for the petitioners to state that the respondents have no power to demand customs duty and/or levy of interest thereon. 39. In fact, the custom duty foregone at the time of import was backed with the Bank Guarantee which was also furnished in favour of the licensing authority namely the Director-General of Foreign Trade. The bank guarantee also was invoked by the office of the Director General of Foreign Trade. 40. The background of the facts that in which the above decision came to be rendered has to be kept in mind. The said decision cannot be applied straightaway. While considering the provisions of the Foreign Trade (Development and Regulation) Act, 1992, the Export and Import Policy and the relevant Handbook of Procedures, it has to be kept in mind that the customs duty under Notification No.160/92-Customs dated 20.04.1992 was issued to implement the Policy. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion, did not have any jurisdiction to waive the amount of interest payable under the bond, we do not see that any jurisdictional error has been committed by it in directing the payment of the said amount which is otherwise payable. In any event the appellant is not prejudiced thereby as irrespective of such direction, the appellant was bound to pay the interest payable under the bond. 46. In my view, it is not open for the petitioners to state that the respondents had no authority to demand interest on the custom duty foregone even though the petitioners failed to discharge export obligation undertaken by them. 47 . In the case of the petitioner in W.P.No. 22282 of 2009 that there was a 27% shortfall in the discharge of export obligation. Accordingly, the petitioner was called upon to pay proportionate customs duty and interest at 15% between 16.9.1993 up to 10.12.2003 even though the petitioner had executed a bond undertaken to pay interest at 24%. 48. As on 11.12.2003, the respondents have arrived as the proportionate customs duty demanded by the petitioner as ₹ 2,52,090/- and interest at 15% amounting to ₹ 3,86,840/- totaling to ₹ 6,38,000,930/- a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (EO) can be regularised by the authorisation holder on payment of applicable customs duty, corresponding to the shortfall in export obligation, along with interest on such customs duty; but the interest component to be so paid shall not exceed the amount of customs duty payable for this default. [Here is an example: Suppose the default in EO is 100%, this would mean the complete duty saved amount has to be refunded. The interest on this duty saved amount has to be calculated from the date of import till the date of payment. The interest component under this dispensation would be limited to the duty saved amount. If the duty saved amount were ₹ 150, then the interest component would be limited to ₹ 150 and therefore for regularising this case the maximum amount to be paid by the authorisation holder would be ₹ 300. However, for the same duty saved amount of ₹ 150, if the default in EO were 30%, then the corresponding duty saved amount becomes ₹ 45 (30% of ₹ 150). Hence the interest component will be limited to ₹ 45. Thus, duty + interest will not exceed ₹ 90 for this regularisation of 30% default in EO for a duty saved am ..... X X X X Extracts X X X X X X X X Extracts X X X X
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