TMI Blog2019 (4) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... -2020. petitioner made another application dated 30.11.2016 to the Policy Relaxation Committee to re-consider its decision which also not resulted in any relief and was rejected vide order dated 14.5.2018 Held that:- A perusal of the order dated 14.5.2018 of the Appellate Committee shows that the Policy Relaxation Committee had called upon the Regional Authority to explain why the amendment was not allowed when the High Court had allowed amalgamation of the two companies. It was stated that the merger took place after the expiry of the export obligation period and the IEC number of M/s Lubi Submersibles was surrendered on 14.3.2013. In the opinion of this court, the grounds of rejection as stated in the impugned order do not appear to be germane. Paragraph 4.22 of the Hand Book of Procedures, 2009-14 provides that the fulfillment period of export obligation under an Advance Authorisation shall commence from the authorisation issue date, unless otherwise specified and further provides that the export obligation shall be fulfilled within thirty six months except in the case of the categories specified therein. The paragraph further provides that in case of inputs mentioned i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business of export all throughout that period. Thereafter, the petitioner once again applied before the Policy Review Committee, both, for transfer of Advance Authorisation, as well as for extension of export obligation period - it is apparent that the Appellate Committee has not applied its mind to the controversy in issue and has merely placed reliance upon the orders passed by the subordinate authorities, without taking into consideration the fact that it was these very orders which had given rise to the review appeal. This court is of the opinion that the impugned order dated 14.5.2018 passed by the Appellate Committee suffers from the vice of nonapplication of mind to the relevant issues and is contrary to the provisions of the Handbook of Procedures, 2009-14, the Circular dated 16.11.2011 as well as the Public Notices issued in this regard from time to time, which renders the impugned order unsustainable in law - Petition allowed. - R/SPECIAL CIVIL APPLICATION NO. 14109 of 2018 - - - Dated:- 22-2-2019 - MS HARSHA DEVANI AND DR A. P. THAKER, JJ. For The Petitioners : MR PARESH M DAVE, ADVOCATE with MR AMAL DAVE, ADVOCATE with MR ADITYA TRIPATHI, ADVOCATE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the name and style of M/s Lubi Submersibles Ltd. and M/s Lubi Electricals Ltd. The petitioner expanded its business by establishing various other factories and units. With effect from 1.4.2012, the petitioner s firm came to be merged with one M/s Arvind Iron Pvt. Ltd. by virtue of orders passed by the Gujarat High Court and the petitioner continued its business in the name and style of M/s Lubi Industries Pvt. Ltd. Other formalities of filing the orders and permission of the High Court with the office of the Registrar of Companies etc., were also fulfilled. Thereafter, with effect from 14.2.2013, M/s Lubi Industries Pvt. Ltd. came to be converted into a Limited Liability Partnership, and from then onwards, the petitioner has been conducting the same business in the name and style of M/s Lubi Industries LLP. 4.2 It is the case of the petitioner that it has been regularly exporting the goods, viz., pumps and motors, and even the exports have been increasing year after year. The petitioner has also been availing the benefit of Export Promotion Schemes framed by the Central Government under the Exim Policy and had applied for various Advance Licences/Authorisations, which cam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porters, and such IEC number is always shown in the Authorisation and also in the export documents like shipping bill. On the basis of IEC number and also the Authorisation number in the export documents, the Export Obligation Discharge Certificate (EODC) is issued by the DGFT authorities; and when such EODC is issued in respect of a particular Authorisation, the custom authorities who allowed duty free imports under such Authorisation discharge the bond furnished by the assessee, thereby discharging such person from all the obligations. An IEC number is issued for each of the entities, and thus, a particular entity (be it an individual or a firm or a company) is allotted a separate IEC number by the DGFT authorities. 4.7 In the present case also, separate IEC numbers had been allotted by DGFT authorities to each of the above referred entities, viz., M/s Lubi Submersibles Ltd., M/s Lubi Electricals Ltd., M/s Arvind Iron Pvt. Ltd. and also M/s Lubi Industries Pvt. Ltd. In respect of seven Advance Authorisations involved in this case, names and IEC numbers of M/s Lubi Electricals Ltd. and M/s Lubi Submersibles Ltd. were mentioned therein because the Authorisations were issued in f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations to the new IEC number; however, the Policy Relaxation Committee chaired by the DGFT refused to accept the petitioner s prayer for extension of time beyond forty eight months and recorded the decision in the minutes of the meeting held on 20.9.2016. 4.11 It is further the case of the petitioner that as allowed under the Foreign Trade Act, it submitted applications before the DGFT to consider their case for grant of automatic extension of time for fulfilling export obligations under paragraph 4.42(e) of the Handbook of Procedures. However, such requests made on 30.11.2016 and 9.1.2017 also came to be rejected by the Policy Relaxation Committee in its Meeting No.31/AM-17 held on 6.2.2017. 4.12 Being aggrieved, the petitioner preferred an appeal before the Central Government under section 16 of the Foreign Trade Act. The Central Government heard the petitioner s appeal on 10.1.2018, on which occasion the petitioner s advocate made oral submissions, and also filed a short note with details of the exports made by the petitioner during last five years in support of the prayers in the appeal. However, by an order dated 14.5.2018, the Central Government dismissed the appeal, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sations in question could not be set off against such exports of goods made by the petitioner only because the Authorisations carry the names and IEC numbers of the companies which have been merged and amalgamated, whereas the exports made by the petitioner are in the name of the new entity M/s Lubi Industries LLP having a new IEC number. Therefore, the petitioner s prayers for transferring the existing Authorisations in the name and IEC number of the now existing firm could not have been rejected by the Appellate Committee on mere technical reasons. According to the petitioners, as a result of merger, amalgamation and the like, all assets including import licences of the merged/amalgamated entities stand transferred to the new entity and therefore, the DGFT authorities have acted without jurisdiction in not changing the name and IEC number of the petitioner firm by formal substitution in the pending Authorisations. It is the case of the petitioners that there is no bar or prohibition under the Foreign Trade Act and the Exim Policy for such change or substitution, and it would be only reasonable to allow such changes in the Authorisations for enabling a genuine manufacturer-exporte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act to allow transfer of all pending Authorisations with pending obligations arising under such Authorisations to the petitioner herein. It was submitted that such transfer is only an administrative matter, for which the authorities functioning under the Foreign Trade Act have inherent powers; however, the respondents have adopted an approach which is pedantic in nature and is contrary to their own circular. It was submitted that the circular says that there is power to change IEC but the respondents refuse to consider the same, on account of which the petitioner is exposed to penal liability. 5.1 The attention of the court was invited to the statement of export obligations for in all, four advance Authorisations, including the two Authorisations which are subject matter of the present petition, to point out that the quantum of export obligations which were to be fulfilled is not relevant as the petitioner could have easily set off the export obligations made by them. It was pointed out that out of the four advance Authorisations, the petitioner has followed the procedure in respect of two of the advance Authorisations and the appeal in respect of one of the advance Authorisat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Government may, from time to time, formulate and announce, by notification in the Official Gazette, the export and import policy and may also, in like manner, amend that policy: With effect from 27.8.2010, section 5 came to be substituted and now reads thus: 5 . Foreign Trade Policy.- The Central Government may, from time to time, formulate and announce, by notification in the Official Gazette, the foreign trade policy and may also, in like manner, amend that policy: 5.4 Reference was also made to section 7 of the Foreign Trade Act, which provides for Importer-Exporter Code Number and Licence and lays down that no person shall make any import or export except under an Importer-Exporter Code Number granted by the Director General or the officer authorized by the Director General in this behalf, in accordance with the procedure specified in this behalf by the Director General. Referring to the impugned decision dated 6.2.2017 of the Policy Review Committee, it was submitted that the same refers to conduct and knowledge, and absence of any provision for extension of EOP and change in IEC. Reference was made to the written submissions made by the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocedure for allowing extension of the export obligation period in cases like the present one is wholly illegal, unreasonable and arbitrary. It was urged that despite the fact that all liabilities of the merged companies have to be borne by the petitioner, it is deprived of the advantages available to those companies and that the Circular dated 16.11.2011 has been conveniently bypassed by the authorities. 5.7 Mr. Dave further submitted that because of common sense approach, the IEC number and name was required to be substituted and consequently, some time should have been granted to fulfill the export obligation. Reference was made to the Circular dated 16.11.2011, wherein it has inter alia been provided thus: On account of amalgamation/merger/ acquisition/takeover of IEC holding firm/company by another firm/company, the IEC holder firm/company is required to surrender IEC. In such cases, the assets and liabilities of the IEC holder firm/company is invariably taken over by the newly entity. The pending export obligation in respect of various licences/authorisations issued to the acquired firm/entity constitutes liability and unless it is transferred in the nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as power to extend the export obligation period even in respect of the earlier licences and that the Policy Review Committee has actually exercised such powers. It was submitted that the power to give extension is not only from 5.6.2012 and that the Policy Review Committee has exercised such powers for other periods also. It was submitted that the power has always been there and, therefore, it is now not open for the respondents to say that there is no power. It was submitted that the petitioner has a right to get the IEC and the name changed, and that extension of export obligation period must follow or it becomes academic. 5.10 Reference was made to the deficiency letter dated 14.3.2013 as well as communication dated 25.11.2013 (Annexure G to the petition), to submit that the same are not orders but only communications returning the original licences to the petitioner. Similarly, reference was also made to the deficiency letter dated 14.3.2013 and communication dated 25.11.2013, to submit that even if they are orders, they are non est as no hearing was given and no show cause notice was issued. It was submitted that therefore, these orders are not accepted by the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is given, however, since such right has been denied, the petitioner is entitled to come before this court. It was submitted that the fundamental right of the petitioner under Article 14 of the Constitution of India is violated. 5.13 It was, accordingly, urged that the petition deserves to be allowed by granting the reliefs as prayed for. 6. Vehemently opposing the petition, Ms. Trusha Patel, learned Senior Standing Counsel for the respondents, invited the attention of the court to the reliefs prayed for in the petition, to submit that the petitioner has prayed for a direction to the respondent authorities to amend all four Advance Authorisations by substituting name and IEC number of the petitioner, that is, M/s Lubi Industries LLP in all these Authorisations with extension of export obligation period by six months, or for the period the court may deem fit. It was pointed out that the petitioner in this case has initiated the proceedings for change of IEC number and for extension of export obligation period only in respect of two Authorisations, viz., Advance Authorisations bearing No.081008694 dated 3.3.2010 and No.0810090670 dated 21.7.2010, and that no applications or pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner, to point out that it is specifically stated therein that it is not transferable and the expiry period is 36 months. Reference was made to the condition sheet annexed with the said Advance Authorisation No.0810086954, to point out that it was provided therein that failure to fulfill the export obligation in the manner as prescribed in the Handbook of Procedures VI, 2009-14 shall entail penal proceedings under the provisions of Foreign Trade (Development and Regulation) Act, 1992 and as per the provisions of paragraph 4.28 of the Handbook of Procedures VI, 2009-14 as amended from time to time, and therefore, the petitioner is bound by the Handbook of Procedures VI, 2009-14. 6.4 It was further submitted that in respect of Advance Authorisation dated 3.3.2010, the export obligation period expired on 3.3.2013, whereas the application for extension of EOP and change of IEC number was made on 12.12.2013, after the expiry of the export obligation period was over and that during the subsistence of the export obligation period, no intimation was given to the authorities with regard to the merger or amalgamation of the concerned company. It was further contended that the application m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortant and has to be scrupulously followed. It was pointed out that on 5.6.2012, the policy underwent a change and a new policy was introduced with amendments. It was submitted that the export obligation period was reduced to eighteen months and therefore, it was found necessary to introduce a provision for extension of that period. The attention of the court was invited to paragraph 1.4 thereof, which provides for transitional arrangement . It was submitted that insofar as paragraph 4.42(c), which is the only provision on which the petitioner has relied upon is concerned, it provides for automatic extension. It was submitted that the export obligation period is mandatory and failure to abide by the same would invite penal action. Reference was made to Circular dated 27th July, 2012 on which reliance has been placed by the learned advocate for the petitioner, to point out that under paragraph 3 thereof, certain areas of change in the Foreign Trade Policy which did not require amendments in customs notifications have been stated thereunder. It was pointed out that under clause (c) thereof, it has been, inter alia , provided that in Para 4.1.2 of the Foreign Trade Policy (applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e powers and wide discretion which cannot be challenged. There is nothing on record to establish that bona fide attempts were made by the petitioner to discharge the export obligations. 6.10 Reference was made to the questions which were put to the representatives of the petitioner during the course of inquiry made by the DRI, to submit that in answer to question No.5, the representative had stated that they could not fulfill the export obligation made under the Authorisation No.0810090670 due to lack of export orders and amalgamation with new entity and rejection of request for transfer of Authorisation to new IEC. It was submitted that the petitioner could not fulfill the export orders due to lack of export orders and therefore, it was not possible to fulfill the export obligation. Therefore, the contention that it had exported the goods worth crores of rupees should be rejected. 6.11 Reference was made to rule 6 of the Foreign Trade (Regulation) Rules, 1993, to submit that the same specifically provides that no person shall transfer or acquire by transfer any licence issued by the licensing authority except in accordance with the provisions of the Policy. It was submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he concerned authorities. It was submitted that the first application made by the petitioner was for extension of export obligation period which has not been placed on record. It was submitted that in the appeal under section 16 of the Foreign Trade Act, at a belated stage, the petitioner has incorporated prayers which have rightly not been accepted. 6.13 Referring to the clarification regarding extension of Export Obligation Period (EOP) against Advance Authorisation issued vide D.G.F.T. Policy Circular dated 13.4.2009, it was pointed out that after the Advance Authorisation Scheme was increased to thirty six months from the earlier original EOP of twenty four months, representations were received from the Trade and Industry as to whether the facility shall be available only for the Authorisations being issued from 26th February, 2009 onwards or for the Authorisations issued prior to that date also; pursuant to which it was clarified the facility shall be available to all advance authorisations which are within thirty six months from the date of issuance of the authorisation as on 26th February, 2009 or thereafter. 6.14 In conclusion, it was submitted that the applications m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he can apply for extension of export obligation period for six months from the date of the public notice. Referring to the Public Notice dated 4th June, 2015, it was submitted that the power was there with the Policy Review Committee and it has exercised such powers. Referring to the Minutes of the Meeting dated 3.9.2014 of the Policy Relaxation Committee, it was submitted that the Committee has granted extension in certain cases and has also remanded the cases. It was submitted that the contention that there is no power for extension of export obligation period prior to June, 2012 is, therefore, misconceived as the Policy Relaxation Committee has been exercising such powers. 8. In the backdrop of the facts and contentions noted hereinabove, the following facts emerge. The order of the Company Court allowing merger/amalgamation of four companies with M/s Arvind Iron Pvt. Ltd. with effect from 1.4.2012 is dated 6.11.2012. At that point of time, based upon the order of merger, no application for change of IEC number was made by the petitioner. It appears that immediately thereafter, the name of M/s Arvind Iron Pvt. Ltd. came to be changed to M/s Lubi Industries Pvt. Ltd. and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d during FTP 2009-2014. However, only two extensions of six months each as given in sub-para (c) and in this subpara can be allowed subject to payment of composition fee and under no circumstance Regional Authority shall allow any extension beyond 12 months from date of expiry of EO period. At the time of filing application for second extension, authorisation holder will have to submit a certificate to RA from an independent Chartered Accountant/Chartered Engineer certifying that unutilised imported/domestically procured inputs are available with the applicant. ( d) However, extension in EO period in respect of an Advance Authorisation issued for import of an input listed under Appendix 4J of HBP 2015-2020 or Appendix 30A of Hand Book of Procedures 2009-14 shall not be permitted by RA. ( e) Whenever a ban / restriction is imposed on export of any product, export obligation period in respect of Advance Authorisation already issued prior to imposition of ban, would stand automatically extended for a period equivalent to the duration of ban, without any composition fee. 10. This was followed by another Public Notice No.20/2015- 2020 dated 9th June, 2015, whereby pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TE Customs; and (iv) Extension beyond 48 months is not considered and that period has lapsed in March, 2014. In view of the above, the petitioner was asked to get its case regularised in terms of Para 4.49 of the Handbook of Procedures, 2015-2020. 12. Thereafter, the petitioner made another application dated 30.11.2016 to the Policy Relaxation Committee to re-consider its decision on the following grounds: - The amalgamation of the company was ordered much prior to the expiry of the obligation period; - The expiry of period of extension was on account of erroneous decision of the concerned officer rejecting the valid request of the petitioner to transfer the Advance Authorisation in the new IEC number of the petitioner company; - In terms of the Handbook of Procedures, whenever a restriction is imposed on account of which export obligation could not be fulfilled, the said period would automatically stand extended. In view of the above, it was requested that the transfer of Advance Authorisation may be permitted along with some period of extension to fulfill the pending export obligation. The application came to be rejected by the Policy Relaxation Committee in its me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Advance Authorisation to the new IEC number of the petitioner. Thereafter, the report dated 9.6.2016 was placed before the Committee by the Regional Authority, on the basis of which the Committee erroneously concluded that the merger of the petitioner company had taken place only after the expiry of export obligation period. It was contended that the said report was never tendered to the petitioner and therefore, the petitioner was not in a position to point out the error of fact as enumerated in that report. It was pointed out that the amalgamation was ordered by the Gujarat High Court on 5.12.2012 and thus, it is an undisputed fact that amalgamation of the companies was much prior to the expiry of the export obligation period. It was contended that the subsequent decision dated 6.2.2017 of the Committee was in violation of the principles of natural justice as the Committee had rejected the application of the petitioner for re-consideration on an entirely new ground that was never raised during any of the meetings. It was submitted that the decision of the Policy Relaxation Committee was even otherwise erroneous. Reliance was placed upon the Circular dated 6.11.2011 to submit that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii. The Appellant s claim for automatic extension of the export obligation period after amalgamation of the company by quoting para 4.42(e) of the Handbook of Procedure is not maintainable as the present matter is not covered under the said para. iii. Since the company to which the original Authorisation was issued is not in existence, there is no question of extension of Export Obligation Period (EOP). Moreover, it is not possible to extend the EOP of the new company (the Appellant company) as the transfer of Authorisation to this company was not endorsed by the Authority. iv. The new company i.e. M/s Lubi Industries LLP was fully aware of the assets and liability of the acquired company. They were also aware that export obligation period was expiring in the month of March, 2013. Accordingly, they would be under obligation to pay duty and interest to the exchequer. There was no provisions of export obligation extension under FTP, 2009-2014 where Authorisation is issued having 36 months export obligation period. Further, export obligation period was reduced to 18 months in the amended FTP released on 05.06.2012. 6. After examining the facts of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Advance Authorisation to that effect. 17. From the tenor of the said paragraph, it appears that there is facility of extension of export obligation period except in case of inputs mentioned in Appendix 30A, as otherwise there was no necessity to specify that facility of extension of export obligation period shall not be allowed qua such inputs. The ground put forth by the Policy Relaxation Committee in its meeting held on 6.2.2017 that there was no provision of export obligation period extension in the prevalent policy and procedure, therefore, does not appear to be in consonance with the provisions of paragraph 4.22 of the Handbook of Procedures, which refers to facility of extension of export obligation period. Moreover, this was not the ground for rejection of the application in the decision taken by the Policy Relaxation Committee in its meeting held on 20.9.2016, wherein the ground for rejection was that the merger took place after the export obligation period had expired which was based on the report of the Regional Authority, which in turn, was factually incorrect. The other ground was that extension beyond forty eight months is not considered and that such period has la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bles fulfilling the export obligation would not arise and it is only the Transferee Company which can fulfill the export obligation. It is for taking care of such situations that the Zonal Policy Research Unit of the DGFT has issued the Circular dated 16th November, 2011 which makes provision for transfer of licence/authorisation to new IEC and further provides under clause (c) of paragraph 3 thereof that licences/authorisations should be amended using amendment menu by changing the old IEC with the new IEC of the firm/company acquiring the existing IEC holder. However, ignoring the above circular, the respondents have repelled the request of the petitioner for amendment of the Advance Authorisation by changing the old IEC number of M/s Lubi Submersibles to the new IEC number of the petitioner M/s Lubi Industries LLP. 20. It may be noted that the petitioner, immediately after M/s Lubi Industries LLP came into existence on 12.3.2013, moved applications for amendment of Advance Authorisation in respect of both the above referred Advance Authorisations, viz., Advance Authorisation No.0810086954 and Advance Authorisation No.0810090670, by changing the old IEC to the new IEC. Had the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all these provisions have been ignored and the Appellate Committee has mechanically dismissed the review appeal of the petitioner. 22. In the above view of the matter, this court is of the opinion that the impugned order dated 14.5.2018 passed by the Appellate Committee suffers from the vice of nonapplication of mind to the relevant issues and is contrary to the provisions of the Handbook of Procedures, 2009-14, the Circular dated 16.11.2011 as well as the Public Notices issued in this regard from time to time, which renders the impugned order unsustainable in law. 23. The petition, therefore, succeeds and is, accordingly, allowed to the following extent: The impugned order dated 14.5.2018 passed by the Appellate Committee of the Ministry of Commerce and Industry in respect of Advance Authorisation No.0810086954 dated 3.3.2010, is hereby quashed and set aside. The impugned order dated 22.8.2017 passed by the Policy Relaxation Committee refusing to accept the petitioner s request to change IEC and name in the Authorisation and extension of time for fulfilling the export obligation in respect of Advance Authorisation No.0810090670 dated 21.7.2010, is also hereby quashed and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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