When you are in the position of power, it is very easy to abuse the authority. On the other hand, it is very difficult for an authority to find courage to accept a mistake & say sorry. This is truer of the Indian bureaucracy than anywhere else in the world because there is no responsibility & accountability in the system. If you will see the articles about the pre-import condition in the AA then you will realize the truth. Here are the links to both the articles-
Please note that the DGFT has been compelled to issue Notification No. 53/2015-20 dtd. 10.01.2019 amending para 4.14 of the FTP 2015-20 to exempt Integrated tax & compensation cess up to 31.3.19.
Now, the readers would please note that if we peruse the 2 articles cited hereinabove & the amendment in the FTP 2015-20 having been carried out, the following is absolutely clear:
1.Internationally, under the aegis of the WTO, the imports linked to exports under Duty exemption scheme are allowed.
2. C. Ex. Duty was a modified Value Added Tax & the AAs then permitted duty exemption as permitted under the WTO regime therefore it is established beyond any element of doubt that duty exemption is compatible with the Value added Tax regime except the fact that the bureaucracy is not interested in permitting that.
3. There are General exemptions operating under the IGST regime therefore Integrated tax exemption in respect of AAs cannot be objected to by the CBIC/GST Council. This once again establishes that question of exemption compatibility in IGST is beyond doubt. Therefore, discarding exemption as non-compatible with the Integrated tax regime is untenable.
4. The DGFT is the Policy maker as finally settled by the Supreme court therefore the EXIM policy cannot be dictated by the GST Council/CBIC.
5. The levy of tax & refund thereof is a corruption perpetuation approach because there is no free lunch in this world.
6. It is clear beyond any doubt that the basic principle of Export Promotion followed all over the world under the aegis of the WTO is that taxes & duties cannot be exported. Therefore, why should the Indian bureaucracy collect, what does not belong to them in the first place.
7. The collection of duty & refund thereof favours the Large businesses because they have excess resources to deploy but it kills the small & medium enterprises as they have limited resources & not very easy access to capital. The bureaucracy seems to be protecting the interest of the large players at the cost of the SMEs. This is immoral & unethical. The SMEs take longer time to utilize their credits.
8. The moot question is that why the Indian bureaucracy wants to give up the imports under the replenishment clause when the WTO permits it.
9. Exemptions & utilization therefore can be very easily monitored through the BIN Number as well as the AAs import export data in the EDI database therefore why this is being objected to by the policymakers. The closed systems are fool proof & need to be implemented rigorously.
10. The exemptions are in operation under the Integrated Tax system for more than a year now & no violations/breaches are reported therefore once again it is established that there are no real problems. The bureaucracy is simply creating ghost problems for their own vested interest.
11. The DGFT has informed about wallet scheme but given no details of it till date. Introducing such complications are of no value. This increases work & acts as constraints on resources by way of the increase in the transaction costs therefore untenable. The exporters are facing very tough times in the International markets & therefore there is no scope to indulge in idiocies.
12. The pre-import condition issue has been examined at the level of various High Courts in the country & it is ruled that it is not proper as such.
13. The readers will note that the condition is for pre-import & not use of the imports in the manufacture of exports therefore it is simply a stumbling block created because the DGFT is the biggest stumbling block in the export promotion. There is absolutely no application of mind visible. The frivolous condition is only dirty manifestation of a sick mind to bring down the exporters by draining them of their resources. The condition is not practicable due to various reasons as explained in the articles cited hereinabove.
14. The complete mess in refunding the duties in relation to the exports is also a reason that exemption needs to be the only way even if this may have a cost for the government.
15. The DGFT/CBIC/GST council should very clear state the reasons for denouncing the exemption route & calling for the payment of duty. The reason being that the bureaucracy is only interested in raising an error in terms of comma or a full stop & gobble up the legitimate entitlement of the exporter or worse still use interpretation to achieve that while processing the refunds.
16. The export promotion policy cannot be a con game wherein the exporters stand cheated by being divested of their legitimate rights just on account of a mere bonafide error. This tendency to deprive the exporter of substantive benefits is outright cheating & disgusting & only gives a bad name to the government therefore avoidable.
Now, let us see the lunatic asylum, which prevails in the implementation of the export promotion policy simply because nobody gains knowledge or becomes wiser just because the government puts you in the position of power. There is no application of mind visible & there is no semblance of facilitation. The policymakers even do not display common sense to understand the implications of the policy provisions & therefore there is undeterred abuse of authority visible in every action.
With the introduction of the GST, the FTP made integrated tax exemption & compensation cess exempt subject to prior import. Further, the readers will note that there was no new notification issued but the old Customs Notification No. 18/2015-Cus. Dtd. 01.04.2015 is amended by way of Notification No. 79/2017-Cus. Dtd. 13.10.2018. The DGFT did not even understand the implication of this amendment or pretends to be ignorant. The point of law is that if I was holding an AA issued on 1.8.17 operating under Notification No. Notification No. 18/2015-Cus. Dtd. 01.04.2015 with exports fulfilled & imports pending then I was denied the IGST & cess exemption retro-respectively though the actions of both the DGFT & CBEC are prospective in nature. The PM & FM are on record to promise that no retro-respective adverse amendments to be implemented but then it appears that the DGFT & CBIC are beyond them. The DGFT & CBIC failed to implement this on prospective basis not by the rule of law but just by bulldozing because no exporter showed the courage to raise voice against the illegality. Can the DGFT & CBIC justify this? If the exporters have been debarred from availing their legitimate rights, then are these authorities not obligated to revalidate the AAs of the exporters for at least six months so that the exporters get the substantive benefits denied to them by way of the illegal amendment. Therefore, the Hon’ble Commerce Minster should take the initiative & restore the vested rights of the exporters immediately.
As on date, in respect of the Notification No. 53/2015-20 dtd. 10.1.19, on the twitter handle, the DGFT specifies that the notification is prospective. Now, once again, the lunacy is self-evident. The exporters are holding AAs under which they have done exports but not conducted imports because the High courts of this country have ruled that the pre-import condition is frivolous. Therefore, in those AAs, where exports have been conducted but imports are pending & will be conducted on or after 10.1.19 then because the imports under AA is no longer linked to prior imports then the imports should be with IGST exemption even under the replenishment condition. To my mind, there should be never any problem created but you cannot be sure of the cunning bureaucracy. The simple reason being that the manipulative Indian bureaucracy by their abuse & with no responsibility & accountability, can interpret prospective to read as an AA issued on or after 10.1.19 &/or both exports & imports beyond that. Therefore, the DGFT needs to clarify the interpretation of the word prospective so that there is transparency & the exporters do not get trapped in a con game.
Last but not the least, this writer has a profound belief that when the government must promote exports & the DGFT is to facilitate the exporters then the DGFT should represent a liberal approach. The DGFT has been compelled to accept that pre-import condition is frivolous therefore why not the DGFT show courage & embrace this factual position smilingly & say sorry to the exporters for the misbehavior of the DRI in collecting the duty levied with penal interest because of the idiocy of the policymakers & implementers & refund the exporters, the duty & interest recovered from them (held to be illegal by the various High Courts). The Honourable Commerce as well as Finance Ministers will be happy to note that once this was the position before the introduction of the GST & implemented today once again after careful consideration then why the exporters should be cheated of the vested rights even after the courts have ruled that the pre-import condition is frivolous. The responsible ministers should make amends & show some grace! The bureaucracy is the real culprit & needs to be taken to task for the whole fiasco.
The readers will note that the bureaucracy is very cunning in approach & the law is purposely drafted in a manner that is open to interpretation so that they can grant favours for rent & deny in those cases who follow the legal route. This needs to stop & until then there is no way corruption can reduce. The last & the Final fact is that the authority wants the exporters to bow down the heads & comply with the whimsical approach but does not want to respect the High Courts, who have held the pre-import condition frivolous. The condition is only perpetuates corruption. The moot question is that why the exporters should be killed by the lunacy of the policymakers? There is no purpose served by lip service or propaganda but for the ministers to deliver in this case?
(Author Rajiv Gupta can be reached at email@example.com and Above are personal views of Author)