New User   Login      
Tax Management India .com TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (5) TMI 1237 - DELHI HIGH COURT

2016 (5) TMI 1237 - DELHI HIGH COURT - 2016 (338) E.L.T. 545 (Del.) - Validity of Customs Notifiaction No. 91/2009 dated 11th September 2009 - restricting the transfer/sale of goods imported using the Served From India Scheme ('SFIS') duty certificates/scrips for the purpose of payment of customs duty - Held that:- it is obvious in the instant case that the impugned notification dated 11th September 2009 issued by the DoR under Section 25(1) of the CA on the one hand and the amendment to the FTP .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tries of the central government, the view taken by the ministry that is primarily responsible for the policy in question, which in this case is the FTP, should prevail. The SFIS was introduced by the Ministry of Commerce and its instrumentality, i.e. the DGFT has been statutorily entrusted with the final word on the interpretation of the FTP. The letter dated 6th September 2013 from the Commerce Secretary to the Revenue Secretary is instructive. It refers to Circular No. 837/14/2006 dated 3rd No .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ASG was unable point out any. Indeed denial of permission to transfer vessels imported more than three years ago only because they were imported under FTP 2004-09 serves no useful or rational purpose. - The stand taken by the DoR appears to be unjustified. The result of such a stand would be that while the transfer of vessels that were imported three years after 1st August 2013 do not require any permission, vessels that were imported more than three years earlier to 1st August 2013 would n .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nt expressed in the relevant paras of the FTP 2004-09 and the HBP which have been adverted to. There is also nothing in the FTP which prohibits the sale of vessels that have completed more than three years after import from being sold in the domestic market. In other words, there is no justification for the DoR to insist that the vessels of the Petitioner that have completed more than three years after import should be transferred only by sale within group companies or managed hotels or be re-ex .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

12th June 2013 issued by the DoR asking the DGFT to keep in abeyance the NOC granted by the PRC is contrary to the legal position explained above and can have no binding effect on the DGFT. On questions of interpretation of the FTP, it is the DGFT whose views will prevail. For the same reason, the stand of the DoR conveyed to the Court through the letter to the DoR, and recorded in the Court's order cannot prevail. Hence, the DoR is restrained from objecting to the transfer/sale of the vessels G .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

jhawan, Senior Standing Counsel for R-1 and R-5 and Mr. Sumit Misra, Advocate. Mr. Sanjay Jain, ASG with Mr. Kirtiman Singh, CGSC, Mr. Waize Ali Noor, Mr. Pranav Agarwal, Mr. R. Ashok & Mr. Sumit Gaur Advocates for R-2, 3 & 4. O R D E R Dr. S. Muralidhar, J: 1. The challenge in the present writ petition by Greatship (India) Ltd. is to the validity of a Customs Notification No. 91/2009 dated 11th September 2009 issued by the Department of Revenue ('Do .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, the Foreign Trade (Development and Regulation) Act, 1992 ('FTDR Act'), the Foreign Trade (Regulation) Rules 1993 ('FTR Rules') and the Foreign Trade Policy ('FTP') 2009-14 as amended on 1st August 2013. 2. The challenge in this petition is also to a letter dated 12th June 2013 sent by the Commissioner of Customs (Exports) (Respondent No.5 herein) informing the Petitioner that the decision of the Policy Relaxation Committee ('PRC') constituted by the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

six ships between 10th January 2008 and 2nd March 2010. These were Greatship Anjali (imported on 10th January 2008), Greatship Akhila (imported on 6th April 2009), Greatship Aarti (imported on 7th October 2009), Greatship Ahalya (imported on 2nd February 2010), Greatship Amrita (imported on 12th February 2010), and Greatship Asmi (imported on 2nd March 2010). The customs duty on the import of the said vessels was paid using the SFIS duty credit scrips. 4. The Petitioner by a letter da .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

DGFT seeking confirmation to proceed with the sale of the said ship in view of the permission granted by the DGFT. A reminder was sent on 9th July, 2013. 5. In the meanwhile the Petitioner also wrote to the Commissioner (Exports) on 22nd March 2013 seeking permission. A further letter was also written on 8th May, 2013 to the Joint Secretary (Drawbacks), DoR seeking approval for transfer of the vessel Greatship Amrita. The Petitioner drew attention to the fact that the said vessel was .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

GFT to keep the said decision in abeyance till the matter was resolved through mutual discussion. 7. On 9th July 2013 the Petitioner wrote to the Joint DGFT (Respondent No.4) again referring to Para 2.43.2 of the HBP and stating that it was going ahead with the sale of Greatship Amrita in light of the NOC granted by the PRC at its meeting on 9th April 2013. The Petitioner sought confirmation for the said move. 8. On 1st August 2013, the DGFT in exercise of the powers unde .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

T that in view of the recent amendment to para 3.12.7 of FTP 2009-14, it would be going ahead with the sale of Greatship Amrita since the said vessel was imported more than three years earlier. 10. On the same day i.e. 6th September 2013 the Commerce Secretary wrote to the Secretary (Revenue) on this issue as under: We are dismayed to receive your D.O. letter No. 605/17/2013-DBK dated 8th August, 2013 in which you have conveyed your reservations about alienation of goods .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

along with Central Excise Circulars have also been examined carefully. The DoR Notification No. 34/006-CE dated 14.6.2006 and Central Excise Circular No. 837/14/2006-CX dated 3.11.2006 mentions in the subject "Procedure for debiting the original scrips issued under SFIS for payment of Central Excise Out in the case of domestic procurement of goods". The relevant portion in para 1 of the Central Excise Circular states: "Duty Free credit scrips earned under the Scheme sh .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of SFIS scrip may not be alienated unconditionally, even after three years of import, can be attributable to this inadvertent choice of words. Some restriction on alienation of an imported good is desirable when the import involves a corresponding obligation. Here the scrip itself is a benefit that has been "earned". Your letter also suggests that an alienation of goods imported procured under SFIS may attract duty. Saddling a benefit like this with additional conditions would be very .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

duty on import through usage of SFIS scrips cannot be asked to pay the duty again and again on sale of goods after 3 years. A further letter was written on 17th/18th February 2014, by the Additional DGFT to the Joint Secretary (Drawback) requesting that the DoR should agree with the DGFT. It was pointed out that where any violation of the terms regarding alienation took place within three years and any such violation was pointed out, the DGFT would have no hesitation in taking action as per the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

itioner wrote to the DoR for permission to sell Greatship Akhila which had been imported on 6th April 2009. However, with there being no response to this request, the Petitioner filed WP (C) No. 616/2015, in which an interim order was passed by this Court on 22nd January 2015, the relevant portion of which reads thus: "In the meanwhile, Greatship Akhila (Anchor Handling Tug cum Supply Vessel), which was imported under the SFIS Scheme, may be permitted to be sold/ re-export/ alien .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

uty was ₹ 9. 18 crores approximately at the time of importation which was exempted because of the SFIS Scheme. There may be other incidental charges and, therefore, to cover the same, the figure of ₹ 12 crores has been arrived at. The vessel may be sold/ re-exported/ alienated only after furnishing of the bank guarantee for ₹ 12 crores. It is made clear that in case the petitioner is entitled to re-export/sell/ alienate under the Foreign Trade Policy of 2009-14, the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

an order dated 5th May 2016 which reads as under: "1. The Court has been shown a copy of a letter dated 29th April 2016 addressed to Mr. Kamal Nijhawan, Senior Standing counsel for the Respondent Nos. 1 and 5 (Department of Customs) by the Director (Drawback), Ministry of Finance, Department of Revenue in which inter alia it is recorded that there were meetings between the Department of Revenue and the Directorate General of Foreign Trade (DGFT) to consider the question whether .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

use), can be dealt by DGFT on merits in terms of Para 2.5 of FTP subject to the condition that export would be without claim for any export incentive, rebate, refund, drawback and/or re-credit of incentive and the condition that bringing back into India shall be treated as fresh import . 3. As far as the present petition is concerned, the Petitioner had sought permission to re-export Supply Vessel Greatship Akhila having identified a Vietnamese buyer. This Court by its order dated 22 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

partment of Revenue and the DGFT have agreed to permit re-export of capital goods imported during 2008-10 using SFIS scrips earned under FTP 2004-09. 5. Consequently, the bank guarantee furnished by the Petitioner shall stand discharged. 6. The writ petition and the application are disposed of in the above terms." 15. What is relevant as far as the present petition, which concerns the other five vessels, is that the letter dated 29th April 2016 of the DoR .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on the same date i.e. 5th May 2016 inter alia noting the stand of the DoR as under: "5. The specific stand of the Department of Revenue, as expressed today in the Court by the Director (Drawback), is that the Department of Revenue would not agree to alienation by way of sale in domestic market of such imported capital goods the duty in respect of which was paid by debiting the SFIS scrips under FTP 2004-09." Submissions of counsel 16. Mr. Balbir Sin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the condition of actual user was subject to the other provisions contained in the HBP. Mr. Singh referred to the decision of the Madras High Court in Tanfac Industries Ltd. v. Assistant Commissioner of Customs, Cuddalore 2009 (240) ELT 341 (Madras). In support of the submission that the benefit under the FTP 2004-09 would continue even under FTP 2009-14, he referred to the decision of this Court in Commissioner of Central Excise and Service Tax, LTU, New Delhi v. Havells India Ltd. 2015 (325) EL .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nder the SFIS in the domestic market even if they had been imported more than three years earlier. 18. There were two principal submissions made by Mr. Jain. He first clarified that the Respondents had no objection to the Petitioner seeking to avail of the facility of payment of customs duty or excise duty as the case may be by utilising SFIS scrips issued in terms of FTP 2004-2009 even under the FTP of 2009-2014. However, according to him, the payment of customs duty or excise duty b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

alienated except within group companies and managed hotels or by way of re-export. 19. In other words Mr. Jain contended that goods that had been imported upon payment of import duty by using SFIS scrips issued under FTP 2004- 2009 came with a 'baggage' of the above conditionalities of non-alienability. According to him the said conditionalities would continue insofar as capital goods were imported under the SFIS under FTP 2004-09 although the said conditionalities were not .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nder FTP 2009-2014 as well. The provisions concerning SFIS in both the FTPs are more or less similar. Clause 2.3 of Chapter 2 of FTP 2004-2009 states as follows: 2.3 Interpretation of Policy If any question or doubt arises in respect of the interpretation of any provision contained in FTP, or classification of any item in the ITC (HS) or HBP-v1 or HBP-v2, or Schedule of DEPB Rates (including content, scope or issue of an authorisation thereunder), the said question or doub .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

entrusted by the statute to implement the FTP, para 2.3 of the FTP 2004-2009 as well as para 2.3 of the FTP 2009-2014 have recognised the DGFT as being the final authority on all matters relating to the interpretation of the FTP. The slight change in FTP 2009-2014 is that under para 2.3(b) a Policy Interpretation Committee could be constituted to aid and advise the DGFT. Under Section 5 of the FTDR Act read with para 2.1 of the FTP 2009-2014, the DGFT has the power to make amendments to the FTP .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ds including spares, office equipment and professional equipment, etc. that are otherwise freely importable under ITC (HS). It states that the imports shall relate to any service sector business of the applicant. 23. As regards non-transferability both para 3.6.4.6 of FTP 2004-2009 and para 3.12.7 of FTP 2009-2014 provide as under: Entitlement/goods (imported/procured) shall be non-transferable (except within group company and managed hotels) and subject to Actual User co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

condition where duty has been paid using SFIS scrips, is continued under FTP 2009-2014. 25. The term 'Actual User' is defined under both FTPs to mean an actual user who may be either industrial or non-industrial. The conditions under which there could be a transfer of the imported goods are contained in the HBP. Para 2.43 of the HBP reads as under: 2.43- Transfer of Imported Goods Freely importable goods can be transferred by sale or otherwise by import .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

p> (iii) Description, quantity and value of goods imported and those sought to be transferred; (iv) Copies of import Authorisation and bills of entry relating to imports made; (v) Terms and conditions of transfer as agreed upon between buyer and seller. 2.43.1 Prior permission of RA shall not, however, be necessary for transfer or disposal of goods, which were imported with Actual User condition, provided such goods are freely importable without Actual Use .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the FTP is concerned. It is, therefore, not possible to agree with the contention of Mr. Jain that the HBP should give way to the FTP. It is only where the HBP is contrary to or inconsistent with the FTP that the latter will prevail. However, since it is the DGFT who has the final word as regards the FTP, and not the Customs Department or any other authority, and it is the DGFT who issues the HBP as well, the question of the HBP not binding the DoR or the DGFT does not arise. The Co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssary for the transfer or disposal of goods, imported with Actual User condition provided such goods are freely importable without Actual User condition on the date of transfer. Further para 2.43.2 of the HBP states that no such prior permission of the RA is required if such transfer or disposal is taking place after two years from the date of import. These provisions have not undergone any change even under FTP 2009-2014 except to the limited extent that the period of two years in para 2.43.2 o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the submission of Mr. Jain that there is a 'baggage' attached to goods imported under FTP 2004-2009 using SFIS scrips for payment of duty and that even if such capital goods are imported more than two years earlier they can never be alienated except to a group company or managed hotel or by way of re-export. Validity of the impugned notification dated 11th September 2009 28. To recapitulate, the DoR issued Customs Notification No. 91/2009 dated 11th September 2009 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

FT to keep in abeyance the decision of the PRC granting NOC to the Petitioner for sale of Greatship Amrita. 29. On examination of Sections 5 and 6 of the FTDR Act and the relevant paras of FTP 2004-2009 and FTP 2009-2014 along with the relevant clauses of the HBP, the Court is satisfied that there is no valid justification for the DoR to oppose the request for alienation/transfer of imported goods in terms of FTP 2004-2009 where duty has been paid using SFIS scrips. As already notice .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

es, the FTP and the HBP are a complete code governing the SFIS. Para 3.12.7 of the FTP 2009-14 has been amended by the DGFT in exercise of his statutory powers under Section 5 of the FTDR Act with effect from 1st August 2013 to permit alienation of goods that have been imported on completion of three years from the date of import. The said notification being statutory in character should equally bind the DoR. 31. The present case reveals the impasse brought about on account of the in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

re imperative that the FTDR Act, FTR Rules, the FTP, the HBP, the CA and notifications issued under the CA are viewed as forming part of one harmonious statutory scheme. They ought to be operationalised in a manner that is coordinated and harmonious and not at cross-purposes. 32. It is obvious in the instant case that the impugned notification dated 11th September 2009 issued by the DoR under Section 25 (1) of the CA on the one hand and the amendment to para 3.12.7 of the FTP 2009-20 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

here is merit in the contention of the Petitioner that in the event of conflict of views between two ministries of the central government, the view taken by the ministry that is primarily responsible for the policy in question, which in this case is the FTP, should prevail. The SFIS was introduced by the Ministry of Commerce and its instrumentality, i.e. the DGFT has been statutorily entrusted with the final word on the interpretation of the FTP. The letter dated 6th September 2013 from the Comm .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

BEC that goods imported by use of SFIS scrip may not be alienated unconditionally, even after three years of import, can be attributable to this inadvertent choice of words." Importantly it was pointed out that "the scrip itself is a benefit that has been 'earned'". This also answers the misconception of the DOR that customs duty can only be paid in cash, and that use of duty credit scrips is only 'revenue foregone'. The position has been explained by the Madras Hi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d to achieve any legitimate objective. The learned ASG was unable point out any. Indeed denial of permission to transfer vessels imported more than three years ago only because they were imported under FTP 2004-09 serves no useful or rational purpose. 35. On the other hand the Petitioner had been impressing on the DoR the need for a much needed clarification as regards its notification dated 19th September 2009 which was impairing greatly its "ability to maintain a healthy fleet .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

within a respectable timeframe afforded to us by the foreign buyers and consequently, we missed opportunity of making strategic sale of our asset." The nature of the industry demanded "that such a transaction is completed without any delay and usually within a tight timeline of two to three weeks." 36. In the circumstances, the stand taken by the DoR appears to be unjustified. The result of such a stand would be that while the transfer of vessels that were imported th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

discrimination in terms of Article 14 of the Constitution particularly since it is based on no rational criteria. In fact it contradicts the intent expressed in the relevant paras of the FTP 2004-09 and the HBP which have been adverted to. There is also nothing in the FTP which prohibits the sale of vessels that have completed more than three years after import from being sold in the domestic market. In other words, there is no justification for the DoR to insist that the vessels of the Petitio .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version