CBIC & DGFT: Why the JNCH Customs indulges in manipulative interpretation —Part 1
The DGFT & CBIC have embraced a systems-driven approach to enhance monitoring capabilities. However, despite these efforts, there are instances where corrupt practices persist. Some individuals within these agencies resort to dubious methods to manipulate the system, causing undue hardship for exporters. Delays and discrepancies in processing redemption applications, particularly at RA, Mumbai, have become commonplace, prolonging the ordeal for exporters. Also Read:CBIC & DGFT: Manipulative Interpretation by JNCH Customs – Part 2
Despite the availability of automated systems like EODC/Redemptions, there are instances where these processes are not honored, leading to exploitation. The lack of action from authorities to address these longstanding issues is concerning. With advancements in technology, accessing relevant circulars and judicial pronouncements has become easier, questioning the necessity of numerous bureaucratic layers.
Previously, there was a more responsive approach from DGFT and CBIC authorities. However, the current bureaucratic environment appears less receptive. This attitude fosters an environment where Customs at JNCH take advantage of situations, such as demanding bank guarantees contrary to established guidelines, leading to increased costs for exporters.
The prevalence of such practices raises questions about where the money is directed, evident from the inflated bills of Customs Brokers in cases where redemptions are pending. This highlights the urgent need for greater accountability and transparency within the system.
In this case study, the exporter, a longstanding status holder, faces challenges due to inefficiencies within the DGFT, resulting in delayed redemptions for nine Advance Authorisations. These delays stem from various issues such as legacy problems, frivolous queries, and the inability of RA, Mumbai to resolve matters effectively. However, it’s important to note that despite these setbacks, the exporter is not in default as exports have occurred, and all necessary documentation has been submitted to the DGFT.
Despite the exporter’s compliance, the JNCH Customs is withholding acceptance of LUTs for six other Advance Authorisations, citing an illegal demand for a 10% Bank Guarantee. This demand contradicts clear judicial pronouncements and CBIC circulars outlining the responsibilities in such situations. This manipulative interpretation aims to hinder the exporter’s operations, despite their contribution to earning foreign exchange for the nation.
Efforts to address these issues with the Chief Commissioner have been met with reluctance to intervene, which undermines the purpose of their role within the system. A reasoned speaking order is necessary from the JNCH customs department to clarify the situation, yet it remains elusive.
Furthermore, there’s a concerning pattern of selective interpretation of Circular 58/2004-Cus, where specific paragraphs are cherry-picked to the detriment of the exporter. Judicial precedents emphasize the need for a comprehensive and diligent approach to interpreting circulars, making selective determinations unacceptable.
However, the JNCH customs department chooses to selectively focus on the following aspect to bulldoze the exporter:
Quote:
3. In this regard your attention is once again invited to para 5 of Circular 58/2004-Cus dated 21.10.2004 which is reproduced below :
“In individual cases where the jurisdictional Commissioner of Customs/ DGFT authority /EPCG Committee/ALC/ is satisfied that a higher quantum of Bank Guarantee is justified on account of risk to revenue, 100% BG may be taken by the Customs after recording the reasons therefor in file.”
Unquote:
Now, any person with little knowledge of the law will understand that nothing can beat such insanity & there cannot be any reply to such insanity. It’s clear that the JNCH Customs believe they have unchecked authority and demand unwavering compliance without any room for objection. However, it’s essential to highlight that when authorities resort to deceitful tactics, it eventually reflects back on them, exposing their own shortcomings.
Quote:
3.2. BG exemption as specified in Para 3.1 above shall be admissible subject to the following conditions:
| (a) | The license holder has not defaulted on the export obligation in respect of any Advance License/EPCG Licence issued to him in the past. The BG exemption shall stand withdrawn if DGFT or Customs comes across default in export obligation against any Advance License/EPCG License issued. |
Unquote:
Thus, it is crystal clear that if there is a default in the fulfillment of the export obligation then only in those circumstances, there can be a demand for the Bank Guarantee & not otherwise but then the JNCH Customs wants to bulldoze the exporter & succumb to the illegality. The CBIC circular is unambiguous therefore can any sane person ever think that no one in the whole of JNCH can even understand the very basics. The moot question then is why the officials should stoop so low & destroy the institutions. What is the ulterior motive?
Finally, now, please see the relevant extract of the notification, which is of prime significance to reach a logical conclusion by way of even a cursory reading:
Quote:
3 The bond under Advance License and EPCG Schemes shall be furnished in the format annexed to this Circular. The bond shall cover the duty ordinarily leviable on the goods but for the exemption. The bond shall be backed by a Bank Guarantee or cash security as per the norms prescribed in the following paragraph. Guarantee from a financial institution like IDBI, ICICI, UTI etc. may also be accepted in lieu of Bank Guarantee.
3.1 The Bank Guarantee/cash security shall be taken as per the following norms for the purpose of permitting clearance of imported goods under Advance License/EPCG Schemes.
| Category of Importer | Quantum of Bank Guarantee/cash security |
| (a) All exporters who have an export turnover (physical exports) of Rs 5 crores in current or preceding financial year and having a good track record of three years of exports | Nil |
| (b) Public Sector Undertaking | Nil |
| (c) Star Export House | Nil |
| (d) Manufacturer exporters registered with Central Excise, who have been exporting during the previous two financial years and have minimum export of Rs. 1 crore or more during the preceding financial year. | Nil |
| (e) Manufacturer exporters registered with Central Excise, who have paid central excise duty of Rs.1 crore or more during the preceding financial year. | Nil |
| (f) Manufacturer exporters who are not covered under (a), (b),(c),(d) & (e) above. | 25% |
| (g) Others | 100% |
3.2. BG exemption as specified in Para 3.1 above shall be admissible subject to the following conditions:
| (a) | The license holder has not defaulted on the export obligation in respect of any Advance License/EPCG Licence issued to him in the past. The BG exemption shall stand withdrawn if DGFT or Customs comes across default in export obligation against any Advance License/EPCG License issued. |
| (b) | For the purpose of availing BG exemption in terms of Para 3.1 above, the exporter shall submit the proof of export performance or payment of duty, as the case may be, duly certified by the jurisdictional Superintendent of Central Excise in case he is registered with the Central Excise. In cases where the exporter is not registered with the Central Excise, but he is a registered member of an Export Promotion Council, he shall produce a certificate from the concerned Export Promotion Council. In other cases the exporter shall produce a certificate duly authenticated by a practicing Chartered Accountant, who is registered with the Central Excise Department for payment of service tax, along with evidences of export to the satisfaction of the Assistant Commissioner or Deputy Commissioner. The Chartered Account issuing the certificate will mention his STC code and other registration details in the certificate. |
| (c) | The License holder should not have been penalized under the provisions of the Customs Act, 1962, the Central Excise Act, 1944, the Foreign Exchange Management Act (FEMA), 1999 or the Foreign Trade (Development and Regulation) Act, 1992 during the previous three financial years. |
Unquote:
The readers would thus see that exemption from the execution of a bank guarantee is a concession & the exporter cannot be deprived of it whimsically saying that EODC/Redemption letter is not submitted. The concession can only be withdrawn if there is a default & the default can only be determined by the relevant DGFT officials. All this is settled by way of the judicial pronouncements therefore appropriate mention was made in the submissions. Further, it is specified that the undersigned had taken up this issue earlier also with the Board in view of several judicial pronouncements because the exporters were harassed for no fault of theirs due to delay in EODC/Redemption letters. It was clearly brought to the notice of the board that there was an error in time limits set (because the export can take place on the last day of EOP & grant 360 days of credit & therefore exporter may require even more than a year beyond the EO period to submit the redemption documents to DGFT itself) & that the delay is being exploited to the hilt because any concession was costing the exporters upwards of Rs.10,000 for accepting the LUTs at JNCH at that point of time. Subsequently, CBIC was compelled to issue another Circular in relation to the non- submission of the EODC/Redemption & clearly specifies what is to be done in such cases. It cannot be the case of the JNCH Customs that the CBIC officials as well as the judiciary does not understand anything & even if that is so then they are free to take up the matter in the appropriate for a rather than bulldoze the exporters to succumb to illegalities. We will talk about the said circular in detail & subsequently about the judicial pronouncements as well as the DGFT so that the exporters are not harassed just because the DGFT is incompetent in handling the redemptions in a timely manner but that does not give rights to the customs to harass the exporters in any way. The exporters need to be treated with dignity & vested rights implemented in a user-friendly manner. Yes, the digitization has reduced the corruption in the system but surprisingly the cost of the importers & exporters has not come down as much therefore it is essential to find out why that is so & to also ensure that no new ways to perpetuate corruption are permitted to be implemented by way of manipulative interpretation.
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(Author can be reached at rajivgupta.pec@gmail.com)
Author Bio
This is absolutely correct, such manipulative technic are not only limited to Export but also impacting Import. Ultimately trade is the only sufferer. CBIC must understand that such unclear Circulars or Notifications are tools in hand of officials to make trade suffers. Moreover any amendment in existing Circular, must be supported by copy of exact approval passed by Board to understand the thought behind.