Let us pay attention to the very basics. The Parliament mandates promotion of exports through DGFT as policymaker & Customs administration is put in place to conduct International trade in accordance with the law. Particularly, in case of exports (which is necessary evil for a developing country to subsidize & conduct exports), there is no scope for exploitation & killing the exporters. The exporters are doing a service to the nation & should be treated in a dignified manner but that is not to be. The corruption starts with the manifestation of the poor mindset of the policymakers & exploited by the implementers. The readers will note that the underlying Principle of the export promotion all over the world well governed by the WTO is that the local taxes & duties cannot be exported. However, the Indian bureaucracy, miserably fails in even refunding the legitimate entitlements in a timely & dignified manner. It is really very difficult to comprehend that why the CBIC as well as DGFT’s collective wisdom fails to at least help the small exporters to continue exports in an uninterrupted manner when the International trade remains very restricted by the Corvid pandemic & every export order counts for an economy (which has reportedly contracted @ 23.8% in the opening quarter of 20-21 & there are no signs of revival but economy sliding into depression is the strongest fear gripping every citizen’s mind).

This issue is about how we advance idiocy & exploit the situation. A small-scale exporter, who has been exporting for the last 5 years obtained an Advance Authorization (AA) as the export is import dependent. The AA could be obtained just because it is possible to obtain the same electronically & use it further in the same manner. However, since the exporter has been exporting for the last 2 Financial years & exports are more than Rs. 1 Crore in the FY 19-20, the exporter is entitled to execute an LUT & conduct imports under the AA for the purpose of the discharge of the export obligation (reported reference Circular No. 31/2019-Customs dtd. 13.9.2019). However, the JNCH authorities declined to accept the LUT by way of a verbal objection. It is very surprising that the relevant officials abuse their official position & prefer not to raise the objections. However, the exporter is left with no alternative but to give a reply. The exporter specifies that in respect of an earlier AA, the redemption letter could not be placed on record because of the Covid pandemic but the discharge of the export obligation is verifiable from the Customs database in itself & this data is to be transmitted to the DGFT authorities based on which the redemption letter process is completed by the DGFT in conjunction with the Foreign exchange realization established by the e-BRC (accessible by the Customs authorities). The good sense has prevailed & the objection is dropped. There was another objection raised about the Export Turnover Certificate issued by the Export Promotion Council. It was specified that this requirement needs to be relaxed due to the pandemic (as carried out for several other purposes such as Export Promotion Policy stands extended up to 31.3.21 etc.). However, the JNCH authorities right at the helm are not willing to see any reason but vehemently insistent on compliance to exploit the situation & stop exports (for no fault of the exporter). As on date, the Turnover is to be certified by the relevant Export Promotion Council. However, the readers will note that nothing can be more surprising than this. How can the Export Promotion Council certify the export turnover of the exporter? Is it based on the quarterly returns filed by the exporter? If yes, then why the Customs department cannot accept the export turnover figure given directly by them to the Customs? What is the reason to not trust the exporter? The surprise does not end here. Please note that the MoC extended the FTP & extended the Status Holders certificate validity to 31.3.21 by way of Press release dtd. 31.3.2021. Now, any sane mind would understand that the same facility should have been extended to the small exporters for the purpose of the LUT (because the cost of submission of Bank Guarantee is way too high to remain competitive in exports). Therefore, this was the first major error committed by the MoC/DGFT. It is difficult to comprehend that why the collective wisdom of the Udyog Bhawan should fail in such essentials even! Further, please note that, both the Customs as well as the DGFT stand computerized (Computerization started as early as 1988). Therefore, at the very least, the DGFT should know at the click of mouse, the import & export Figures under an IEC & this data should be easily accessible to one & all. Not only this, the Customs created a Business Identification Number (BIN) in the year 2000 in respect of each & every IEC. This Business Identification Number at the very least should be able to provide you the export & import Turnover figures under an IEC in any case. If this is not even done, then what is the use of running a software system in the Customs department. Such loopholes are resulting in exploitation of the exporters. The loopholes in the system need to be plugged & not allowed to perpetuate corruption. The Customs officials are public servants, who need to serve the exporters to earn their salaries. I reiterate, they need to serve the exporters with dignity & not exploit them. Even this is not the end of the story of visible exploration. In the case of exports, each & every S/B filed in the system carries the complete details including the vale of exports. Therefore, the value of exports during a FY is available with the Customs department at any point of time. Once this data is available & retrievable from the Customs computer systems then the Customs officials should not harass the exporters for giving the turnover certificate from the EPC. The Customs department is the primary custodian of the information & need look to others for doing their work. The Customs officials should use their minds to resolve the problems of the exporters & not abuse their official position. The Principle Chief Commissioner of Customs (PCCC) should know that the Export shipment details in respect of an IEC should be available at the click of mouse & if this is not happening then that idiocy is unacceptable! The same equally applies to the CBIC. If you think, this now ends the story then still you are wrong. The exporters are claiming MEIS & that data is also available both with the DGFT as well as the Customs department. Finally, the exporters are doing exports under refund OF IGST & even that data is accessible to the Customs department (because discharge of IGST liability has to be set off) therefore whichever way you look at it, the Export Turnover data is available with the Customs department & the Customs department is the primary custodian of it therefore Customs cannot hold the exporter to a ransom to obtain a Turnover Certificate from any other authority to secure their vested entitlements.

As I mentioned, corruption starts from the top & any loophole/exploitation by the policymakers does severe damage than the petty corruption in the form of speed money. It requires a change in the mindset rather than framing of the numerous laws (which of course are of no help). The Officials need to understand that they are public servants to serve the country & not own the systems for exploitation but till then the exports need to bear the brunt. If any one has any valid rational objection, just let me know & I will respond.


(Above are personal view of Author and he can be reached at rajiv.pec@gmail.com. Taxguru.in not necessarily subscribe to the views of Author)

Disclaimer: The contents of this article are for information purposes only and do not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

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October 2020