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M/s. Bright Engineering Works Versus The Union of India And Ors.

2017 (9) TMI 1019 - DELHI HIGH COURT

EPCG scheme - whether under FTP 09-14 read with Handbook of Procedures, the export obligation under the applicable EPCG scheme is to be computed as multiple 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? - amendment of the Authorisation enhancing the export obligation - jurisdiction. - Held that: - the purpose of Circular No. 35 (RE-99)/99-2000 was to clarify the manner in which export obligat .....

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84 (RE:2008/2004-09), indicates 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 expor .....

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r 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 manner of calculating the export obligations as effected by FTP 04-09; the measure of export obligations as provided in FTP 04-09 and FTP 09-14 had changed to multiple of duty saved and not the value of capital goods. - There is .....

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uestion, whether DGFT had the power to amend the authorisation - petition allowed - decided in favor of petitioner. - W.P.(C) 2564/2017 & CM No.11087/2017 - Dated:- 15-9-2017 - MR VIBHU BAKHRU J. Advocates who appeared in this case: For the Petitioner: Mr. Devan Parikh, Sr. Advocate with Mr. Mahesh Agarwal, Mr. Rishi Agrawala, Mr. Rishabh Parikh and Ms. Anachla Mullick. For the Respondents: Mr. Sanjeev Narula, CGSC with Mr. Abhishek Ghai. JUDGMENT VIBHU BAKHRU, J 1. The petitioner has filed the .....

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#39;) was six times the duty saved on the capital goods and not their depreciated value. 2. The petitioner was also issued an Authorisation (licence) computing the export obligation on the basis as claimed by the petitioner. However, the Authorisation was sought to be amended subsequently, after the petitioner had sought a discharge certificate of its export obligation and closure of the Authorisation. 3. The principal controversy involved in the present petition is whether under FTP 09-14 read .....

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ss 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 ( .....

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ermitted to import the goods on concessional duty (or zero % customs duty), subject to the importer committing to export goods of a specified value. While applying for permission to migrate from EOU scheme to EPCG scheme, the petitioner also, by an application dated 31.05.2011, applied to respondent no.2 (DGFT) indicating the duty saved to be ₹2,04,56,219.53/- and reflecting the corresponding export obligation as six times the same value at ₹12,27,37,317.18/-. 4.4 The petitioner' .....

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,333.33/-. 4.5 According to the petitioner, the stipulation to maintain average export obligation was not applicable as the petitioner's unit in question was the only unit engaged in exports and, therefore, was to be treated as a standalone unit. Admittedly, the requirement of maintaining an average annual export turnover is applicable only in cases where a person/entity has multiple units engaged in exports and therefore, the average annual turnover of other units have to be excluded in det .....

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uthorisation. Thereafter, the petitioner received a communication dated 23.01.2014 from the DGFT unilaterally enhancing the export obligation from ₹12,27,37,317.18/- to ₹51,14,05,488/-. The said communication 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. .....

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unication 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, C.P. Tank Road, Mumbai 400 004 Subject: Re-fixation of EO consequent upon debonding from EOU to EPCG scheme. Sir, This has reference to your representation dated 30.11.2015 for re-fi .....

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ssues with the approval of Competent Authority. 4.9 The aforesaid clarification is impugned in the present petition. Submissions 5. Mr. Devan Parikh, learned Senior Advocate appearing for the petitioner submitted that there was no allegation of fraud and concealment of any fact and, therefore, the respondents could not unilaterally amend the authorisation after the petitioner had fulfilled the specified export obligation. He submitted that the petitioner had no power to amend the licence as ther .....

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14. He referred to paragraph 5.1 of the FTP 09-14 in support of his contentions. He contended that the DGFT‟s reliance on Policy Circular no. 84 of 30.04.2009 was misplaced. According to him, Circular no. 84/2004-09 dated 30.04.2009 was issued to clarify an earlier notice (Circular no. 79 dated 01.04.2009), regarding the maintenance of average annual export turnover in case of entities having multiple units. He submitted that the reference to export obligation equivalent to six / eight tim .....

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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 perm .....

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f the Foreign Trade (Regulation) Rules, 1993, the licensing authority was entitled to amend any licence and, therefore, the power of the DGFT to amend any EPCG authorisation could not be questioned. He relied upon the decision of the Bombay High Court in Bhilwara Spinners Ltd. v. Union of India (UOI) through the Secretary, Ministry of Commerce and Industry, Department of Commerce and Ors.: 2011 (267) ELT 49 (Bom.) in support of his contention. Reasoning and Conclusion 10. The Foreign Trade (Deve .....

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may also, in the like manner, amend that policy. 11. Section 6 of FT (D & R) Act provides for appointment of DGFT and his functions and reads as under:- 6. Appointment of Director General and his functions.- (1) The Central Government may appoint any person to be the Director General of Foreign Trade for the purposes of this Act. (2) The Director General shall advise the Central Government in the formulation of the export and import policy and shall be responsible for carry that policy. (3) .....

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y the Central Government. Paragraph 2.4 of FTP 09-14 also empowers DGFT to specify the procedure to be followed by an exporter / importer / licensing authority / competent authority for the purposes of implementing 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 emp .....

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ro 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 as well as computer software systems) at zero Customs duty, subject to an export obligation equivalent to 6 times of duty saved on capital goods i .....

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vided in the HBPv1. All other provisions pertaining to concessional 3% duty EPCG scheme under this Chapter, to the extent they are not inconsistent with the above provisions of zero duty EPCG scheme, shall be applicable to the zero duty EPCG scheme also. The zero duty EPCG scheme will be in operation till 31.3.2011. 15. The provisions containing EOUs are included in Chapter 6 of the FTP 09-14. Paragraph 6.18 of the FTP 09-14 provides for an exit from the EOU scheme. The relevant extract of parag .....

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hall be handed over to an agency nominated by DoC, at price to be determined by that agency. (d) An EOU/EHTP/STP/BTP unit may also permitted by DC to exit from the scheme at any time on payment of duty on capital goods under the prevailing EPCG Scheme for DTA Units. This will be subject to fulfilment of positive NFE criteria under EOU scheme, eligibility criteria under EPCG scheme and standard conditions indicated in HBP v 1. (e) Units proposing to exit out of EOU scheme shall intimate DC and Cu .....

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y 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 S .....

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EOU/ a relocated SEZ unit, while converting to a DTA Unit, may apply for an EPCG authorization in ANF alongwith documents prescribed therein. No Objection Certificate‟ should be produced from concerned Development Commissioner. 18. In the counter affidavit filed on behalf of the respondents, it is also suggested that the FTP 09-14 distinguishes between a zero duty / 3% EPCG Scheme and EPCG authorisation obtained after conversion from EOU to the EPCG Scheme. However, Mr Narula could not po .....

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dient to refer to the relevant circulars. By the Circular no. 35 dated 01.10.1999, the DGFT issued a clarification for fixing export obligation for units debonding under the EPCG Scheme. The said circular is set out below:- Government of India Ministry of Commerce Directorate General of Foreign Trade (P.C.IV Division) Policy Circular No. 35 (RE-99)/99-2000 Dated 1.10.99 To ALL LICENSING AUTHORITY ALL COMMISSIONER OF CUSTOMS Subject: Debonding of EOU/EPZ units under EPCG Scheme. Attention is invi .....

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cases has also been examined. It is clarified 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 a .....

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reciated 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 above circular was to clarify the manner in which export obligation was to be computed in case of a firm or a company having multiple units and entities having a standalone unit. The FTP as applicable prior to FTP 04-09 provided for computation of export obligation on the bas .....

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gation equivalent to 8 times of duty saved on capital goods imported under EPCG Scheme . 22. The DGFT also issued a public notice dated 25.03.2009 (public notice no. 164) to amend paragraph 5.4 of HOP 2004-09 (Volume I). The said notification reads as under:- TO BE PUBLISHED IN THE GAZETTE IF INDIA (PART-I, SECTION-I) GOVERNMENT OF INDIA MINISTRY OF COMMERCE AND INDUSTRY DEPARTMENT OF COMMERCE PUBLIC NOTICE NO. 164 (RE-2008)/2004-09 NEW DELHI: the 25th March, 2009 In exercise of powers conferred .....

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er. This issues in public interest. (R.S.Gujral) Director General of Foreign Trade ex-officio Additional Secretary to the Govt. of India 23. Thereafter, the DGFT issued Circular no. 79 dated 01.04.2009, clarifying that the export obligation for a unit, which converts from EOU to EPCG Scheme would be the same as available to a direct EPCG authorisation holder. The said circular is set out below:- F. No. 01/36/218/88/AM09/EPCG-I Government of India Ministry of Commerce& Industry Department of .....

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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 s .....

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would require to maintain the annual average export obligation. It is in the aforesaid context, the DGFT issued the circular dated 30.04.2009, which reads as under:- F. No. 01/36/218/88/AM09/EPCG-I Government of India Ministry of Commerce & Industry Department of Commerce Directorate General of Foreign Trade Udyog Bhawan, New Delhi Dated the 30th April, 2009 CIRCULAR NO. 84 (RE:2008/2004-09 To All RAs, Subject-: Terms and conditions for issue of EPCG authorizations to EOU units after conver .....

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verage and the unit shall be required to maintain only additional export obligation equivalent to six/eight times of the depreciated value. (ii) In case one unit of a firm / company opts to debond from EOU to EPCG Scheme, while other unit(s) are DTA units, then the average export obligation in respect of the licences issued to the firm / company (other than debonding unit) shall remain unchanged and the average EO after debonding of the unit shall be fixed by excluding the exports made by the de .....

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f 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 cont .....

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