Any Provision made by DGFT in the Hand book of Procedures, which is inconsistent with the Foreign Trade Policy is liable to be set aside
BRG Iron & Steel Co. (P.) Ltd. (the Petitioner) is a two star export house status holder. The Additional DGFT vide letter dated May 31, 2013 informed that the Petitioner entitlement under the Advance Authorization dated May 9, 2012, was limited to a sum of Rs. 38,83,52,050/- instead of Rs. 77,03,73,810/-. Hence, the Petitioner was advised to submit the aforesaid Advanced Authorization for endorsement of Bank Guarantee condition for the differential amount.
Being aggrieved, the Petitioner filed a Writ Petition before the Hon’ble High Court of Delhi, wherein the Petitioner contended that in terms of Clause (v) of Para 3.10.4 of the Foreign Trade Policy (the FTP), Export and Trading House status holders are exempt from furnishing Bank Guarantee in Schemes under FTP. Hence, the Petitioner is exempt from furnishing Bank Guarantee in respect of Schemes under the FTP. Further they are entitled to an Advance Authorization equivalent to 500% of the FOB and/or FOR value of the preceding year’s export. Advance Authorization was issued to the Petitioner on May 9, 2012 and, therefore, the exports during the year 2011-12 were to be considered for calculating the value of the Advance Authorization.
On the other hand, the Revenue submitted that since the Petitioner applied for Advance Authorization electronically on March 14, 2012, the expression ‘preceding year’ ought to be construed as 2010-11. Further, in terms of Para 4.7.1 of the Hand book of Procedures (the HBP), an Advance Authorization in excess of the entitlement would be permitted on furnishing of a Bank Guarantee to the Customs Authorities to cover exemption from Custom duties.
The Hon’ble High Court of Delhi, inter alia, held as under:
Thus, the Hon’ble High Court set aside the requirement of submitting the Advance Authorization for endorsement of the Bank Guarantee condition in case of ‘status holders’.