TMI Blog2017 (9) TMI 1019X X X X Extracts X X X X X X X X Extracts X X X X ..... cular was not to define the quantum of export obligation but to provide a clarification with regard to maintenance of annual average turnover. Clause (i) of the aforesaid circular clarified that a standalone unit was not required to maintain an annual average export obligation - However, in case where the firm or a company had multiple units, average export obligation after debonding of unit would be fixed by excluding the exports made by the debonded units from the total exports of the firm. If the said circular is read in the context of the FTP 04-09, it is at once clear that the reference to computation of export obligation on the basis of depreciated value of machinery, is inapposite and contrary to the provisions of the FTP 04-09. However, it appears that this error had crept into the circular because a similar clarification was provided by the Policy Circular no. 35 issued on 01.10.1999 and that circular (Circular no. 35) referred to additional export obligation to be six times or eight times the depreciated value of goods (which was in conformity with the then FTP). The same measure seems to have been copied in Circular no. 84 completely ignoring the material change in the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the duty saved, as claimed by the petitioner, or as multiple of the depreciated value on the capital goods as insisted upon by the respondents. The petitioner also claims that amendment of the Authorisation enhancing the export obligation is without jurisdiction. This is disputed by the respondents. 4. Briefly stated, the relevant facts necessary to address the aforesaid controversy are as under:- 4.1 The petitioner is a partnership firm and is engaged in the manufacture of Glass Beads, Chatons etc. The petitioner setup a 100% Export Oriented Unit (hereafter 'EOU') at Valsad in 2005. In terms of the EOU regime, the petitioner was exempt from payment of duty on certain capital goods utilised to setup the said unit. Thereafter, the petitioner sought permission to exit the EOU scheme and to be treated as a unit in the Domestic Tariff Area (hereafter 'DTA'). 4.2 On 23.05.2011, the Development Commissioner, Kandla Special Economic Zone granted the permission for petitioner to exit from the 100% EOU Scheme and migrate to the EPCG Scheme (Export Promotion Capital Goods Scheme) in terms of paragraph 6.18(d) of FTP 09-14 read with paragraph 5.4 of the HOP and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion did not indicate any reason for such amendment. The petitioner objected to such amendment by its letter dated 27.01.2014. 4.7 Thereafter, DGFT issued a deficiency letter dated 28.01.2014 indicating that the petitioner's application was deficient for the following reason:- 1. IT IS INFORMED THAT E.O IS AMENDED AS PER POLICY CIRCULAR 84/DT. 30/4/2009 AS LICENCE WAS TO BE ISSUED ON DEPRECIATED VALUE AND E.O. 6 TIMES OF DEPRECIATED VALUE. THIS IS THE FIRST LIC AFTER THE FIRM WAS DEBONDED FROM EOU. 4.8 The petitioner sent various representations, contesting the aforesaid amendment, however, the same were not accepted; and, on 22.03.2016, the DGFT issued a communication, rejecting the petitioner's representation for re-fixation of the export obligation. The said communication is set out below:- F. No. 01/36/218/102/AM-15/EPCG-I Government of India Ministry of Commerce and Industry (Department of Commerce) Directorate General of Foreign trade ***** 504, Udyog Bhavan, Maulana Azad Road, New Delhi-110 011 Dated 22.03.2016 To, M/s Bright Engineering Works, 5/32,2nd Panjrapole Lane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch was prevalent at that time. 7. Mr. Parikh further contended that in any event, the Circular no. 84 dated 30.04.2009 could not override the FTP 09-14. He relied upon the decision of the Supreme Court in Atul Commodities Private Limited and Ors. v. Commissioner of Customs, Cochin 9: (2009) 5 SCC 46 and the decision of this Court in Yum Restaurants (I) Pvt. Ltd. v. Union of India: 2015 (320) E.L.T. 781 (Del.) in support of his contention. 8. Mr. Sanjeev Narula, learned counsel appearing for the respondent submitted that FTP 09-14 and paragraph 5.4 of HOP only provided for an exit from the EOU regime and did not permit 'conversion' to the EPCG scheme. He earnestly contended that there was a difference between permitting an exit from the EOU scheme and a conversion to the EPCG scheme. He submitted that the exit order permitting conversion to EPCG scheme was issued on 21.07.2011 and, therefore, the circular no. 84 dated 30.04.2009 - having been issued prior to that date - was squarely applicable. He submitted that the provision for conversion from EOU scheme to EPCG scheme was notified by a public notice dated 25.03.2009 (public notice no. 164), which was subsequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... menting the FT D R Act, the rules, orders made thereunder and the FTP. The DGFT has notified the HOP 09-14 in terms of the said delegated power. 13. It is, thus, obvious that DGFT cannot amend or alter the FTP and is bound by the same. In terms of paragraph 2.3 of the FTP, the DGFT is empowered to interpret the FTP. However, the question of interpreting the FTP would arise only where there is any ambiguity or doubt as to any of its provisions. Plainly, the DGFT cannot issue a clarification, which is ex facie contrary to the FTP and HOP (Handbook of Procedures) notified by the DGFT. 14. Chapter 5 of the FTP 09-14 contains the provisions with respect to EXPORT PROMOTION CAPITAL GOODS (EPCG Scheme). In terms of paragraph 5.1 of FTP-09-14, import of capital goods are permitted at zero customs duty, subject to the importer undertaking an export obligation equivalent to the six times of the duty saved on the said capital goods. Paragraph 5.1 of the FTP 09-14 is set out below:- Zero duty EPCG Scheme 5.1 Zero duty EPCG scheme allows import of capital goods for pre production, production and post production (including CKD/SKD thereof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess duty liability arising out of debonding and submit details of such assessment to Customs and Central Excise authorities. Customs and Central Excise authorities shall confirm duty liabilities on priority basis, subject to the condition that the unit has achieved positive NFE, taking into consideration the depreciation allowed. After payment of duty and clearance of all dues, unit shall obtain No Dues Certificate‟ so issued by the Customs and Central Excise authorities, unit shall apply to DC for final deboding. [underlining for emphasis] 16. A plain reading of paragraph 6.18(d) of FTP 09-14, clearly indicates that exit from an EOU scheme may be permitted on payment of duty under the prevailing EPCG Scheme. Thus, clearly the EPCG scheme applicable to the petitioner would be as provided under the FTP 09-14. 17. The contention that the FTP 09-14 only provides for an exit from EOU and not a conversion from EPCG Scheme, is unmerited. A plain reading of paragraph 6.18(d) clearly indicates that a unit exiting from the EOU scheme is, subject to fulfilment of conditions, also eligible to avail of the benefit of the EPCG Scheme for the DTA. Further, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that where one unit of the firm/company opts to debond under EPCG scheme, the average export obligation in respect of the licence issued to the firm/ company (other than the debonding unit) shall remain unchanged. On the debonding unit, the average export obligation shall be fixed by excluding the export made by the debonding unit from the total exports of the firm/company which runs concurrently for all the units of the firm/company. Moreover, an additional export obligation equivalent to 6 times or 8 times of the depreciated value may be imposed on the unit debonding under EPCG scheme as the case may be, depending on the scheme in which unit opts for debonding . However, if a standalone EOU/EPZ unit which to debond under EPCG scheme, there shall be no export obligation for maintenance of the average the only such an obligation under EPCG scheme on a standalone unit shall be imposed which may be equivalent to 6 times or 8 times of the depreciated value, as the case may be, depending upon the scheme in which the unit opts for debonding. The issues with the approval of DGFT. (A.K. Srivastava) 20. It is apparent from the above that the essential purpose of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmerce Directorate General of Foreign Trade Udyog Bhawan, New Delhi Dated the1st April, 2009 CIRCULAR NO. 79(RE:20008/2004-09 To All RAs, Subject-: Terms and conditions to govern EPCG Authorizations issued to DTA unit after conversion from EOU unit. In view of various representations received from different Regional Authorities and individual firms, the issue regarding exit from EOU Scheme and transition to EPCG Scheme has been examined and Para 5.4 of Handbook of Procedures Vol. I (RE:2008) / 2004-2009 has been amended vide Public Notice No. 164 dated 25.03.2009. 2. It has further been decided to clarify with regard to export obligation period and fulfilment of export obligation: (a) The export obligation period for a unit which converts from EOU / SEZ Scheme to EPCG Scheme would be the same as is available to a direct EPCG Authorization Holder i.e. 8/12 years from issue date of EPCG authorization as per Para 5.1 of Foreign Trade Policy (FTP). (b) The unit upon conversion from EOU shall be required to maintain the Annual Average Export Obligation in terms of Para 5.4(i) of FTP. This issues with the approval of DGFT. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates that the central purpose of the circular was not to define the quantum of export obligation but to provide a clarification with regard to maintenance of annual average turnover. Clause (i) of the aforesaid circular clarified that a standalone unit was not required to maintain an annual average export obligation. However, in case where the firm or a company had multiple units, average export obligation after debonding of unit would be fixed by excluding the exports made by the debonded units from the total exports of the firm. If the said circular is read in the context of the FTP 04-09, it is at once clear that the reference to computation of export obligation on the basis of depreciated value of machinery, is inapposite and contrary to the provisions of the FTP 04-09. However, it appears that this error had crept into the circular because a similar clarification was provided by the Policy Circular no. 35 issued on 01.10.1999 and that circular (Circular no. 35) referred to additional export obligation to be six times or eight times the depreciated value of goods (which was in conformity with the then FTP). The same measure seems to have been copied in Circular no. 84 comple ..... X X X X Extracts X X X X X X X X Extracts X X X X
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