There cannot be absolutely no quarrel with the fact that the DGFT is mandated to be the authority to facilitate the exporters. Therefore, it is really very surprising that why the DGFT should create stumbling blocks in the smooth implementation of the legal provisions contained in the FTP/HBP.  I am really very startled by the fact that what is the motivation of the bureaucracy in duping the fellow citizens in granting the legitimate entitlements. Why the bureaucrats pretend to be idiots? You can fight ignorance but how do you fight the crooked bureaucracy when they are simply pretending! The case in point is that of pre-import condition in case of Advance Authorization.

I did the first article (11.6.18) on the imposition of pre-import condition as soon as the details of the Advance authorization (AA) were available in the public domain & here is the link to the said article. ( The article explained in threadbare manner that the pre import condition is a very cunning manifestation of the dirty minds of the Indian bureaucracy i.e. the elite cadre of IAS/IRS/ITS to deny the vested rights of the Indian exporters. There was absolutely no rocket science involved in this but then when the bureaucracy is more interested in perpetuating corrupt practices then there is no way that even common sense can prevail. The readers will note & recall from the article that under the aegis of the WTO, Advance Authorization is a legitimate instrument to promote exports & under the said scheme, imports under replenishment scheme are permissible. India being a signatory, there was absolutely no reason for the Indian bureaucracy to deny the replenishment imports to the Indian exporters. Any sane person will understand that imposition of unnecessary restrictions results in increasing the transaction costs of the exporters therefore it is outrightly antithetical to the export promotion objective & therefore unacceptable. The readers will also note that the WTO & its members are not foolish enough to permit imports under replenishment clause if that is not essentially required. Finally, the basic principle of export promotion is that taxes & duties cannot be exported therefore whether the exchequer forgoes the collection of taxes & duties by way of pre-imports or replenishment imports, there is no reason for the export promotion policy to interfere. Therefore, right under the aegis of the WTO, the crime of interference without any application of mind is self-evident.

Now, we see the other facts at the level of the DGFT. Please note that as on today, Advance Authorizations operate under Actual User Condition therefore there is no way that any manipulation at the level of the exporter can be possible at all. Therefore, there is absolutely no reason to impose pre-import condition. Next, the idiocy is that the AA imposes the prior import condition only i.e. imports should take place prior to the export of goods under the respective AA. There is no further requirement that the imported goods must be used in the manufacture of exports then what is the real purpose of the imposition of the prior import condition? If the goods are to be imported prior to exports, then why the imported goods should not be used in the manufacture of export goods as in other cases like the import of bulk drugs etc. Please note that though law is not a rational code but at the same time lunacy & abuse by the policymakers is unacceptable. The policymakers cannot raise a bogey of abuse by the exporters in case of imports under replenishment & get away with it. The policymakers cannot fool around in any case. Therefore, once again, it is crystal clear that pre-import condition imposition is frivolous. The article “DGFT & CBEC: Why this lunacy in the name of export Promotion Policy?” was not only put in the public domain but was mailed to all concerned with the export promotion in the country in the bureaucracy. The bureaucracy normally fights through the stooges whenever such loopholes in the policy framework are exposed but, in this case, there was absolutely no response even after vehement follow up. Once again, it simply goes to show that the bureaucracy is bent upon robbing the exporters of the legitimate vested rights & pretending to ignorant to perpetuate abuse. The worst does not stop here. The DGFT & CBIC are permitting he exporters to commit the violation of the Pre-import condition & then the DRI is initiating action against the exporters & not only recovering the IGST but interest also? Once again, the common sense is missing in this action & that is if violation of the Pre-import condition is the crime then why the Basic Customs duty & the cess too is not recovered because the violation is applicable to that exemption also? I am constrained to point this out because in the Indian bureaucracy, the whims & fancy of the officials prevail rather than the rule of law! The readers will agree that there cannot be any other poor joke than this? Finally, please see the ultimate joke. GST is a Value Added Tax (VAT) system. Prior to this, we had Cenvat & Modvat & that too were a VAT system & at that point of time, for decades, the replenishment condition was in operation. Are the present policymakers trying to say that the earlier incumbents were foolish enough & allowed loopholes & they are the wisest ones? If they are the wisest ones, then they should show in a transparent manner what is the issue being addressed through prior import condition? Why they are not willing to do that? What is there to be so secretive?

Not only, under the aegis of the WTO but examination of the domestic policies tells you the wrongs, but the issue has been a subject matter of judicial pronouncements & several high courts in the country reportedly pronounced the pre-import condition to be frivolous. Even then, the bureaucracy is hell bent upon making the life of the exporters miserable. It cannot be the case of the DGFT & the CBIC that the two authorities & the lawyers could not plead the merits of their case but then too they will continue the abuse as they will take up the case to the Supreme Court. All the high Courts cannot be wrong in analysing the cases therefore why the good sense not allowed to prevail? I doubt seriously whether the Indian bureaucracy is purposefully trying to kill the Indian exporters.

Lastly, I approached the Policy Relaxation Committee (PRC) to relax the committee. I was guided by the relaxation of the pre-import condition in certain cases where pre-import condition was imposed in the past. The discretions are unwelcome feature. The writer had asked for a reasoned speaking order & even that is not made available. Why the PRC should conduct itself in this manner? The minutes categorically state that the larger issue of the removal of the pre-import condition is under examination at the highest level but then in case of exports, the decisions must be taken in a timely manner? Where is the efficiency & what is the efficiency? In case of 20:80 Gold import rip off scheme everything was wrapped up in few days whereas in the case of pre-import conditions several months have passed & there are several HC judgements already available in favour of the exporters. Then why the DGFT cannot uphold the policy acceptable under the aegis of the WTO? Why the DGFT wants the exporters to be treated as petty criminals by the DRI when they are doing a service to this nation?

There was lot of hope raised about working in the best interest of the nation but you see what is the ground reality. The idiocy/lunacy remains the hallmark of the policy & there is not to question why? I have had discussions with several officials & they all sing in chorus the denouncement of these whimsical policies but then in the stifled environment no body is willing to take up the cudgels & even call spade a spade. However, if we have to increase exports to grow the GDP in excess of 7-8% then such lunacy needs to stop right away. I am a die hard optimist & firmly believe that where the bureaucracy has failed miserably, the learned honourable ministers will indulge & stop this nuisance right away.

(Author Rajiv Gupta  can be reached at [email protected])

(Above are personal views of Author)

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  1. Rajiv Gupta says:

    Dear Mr. Narendra,
    I fully understand what you are saying. Today, the PRC is doing a job of glorified dealing hand & that too in a mechanical manner. The exporters are made to pay a fee & come to Delhi & further drained of the resources. The DGFT & PRC has no vision & sensitivity to help exporters.
    You may approach the Customs to incorporate the AA No. in the S/Bs in terms of S 149 of the Customs Act provided you claimed MEIS & you held the AA on the date of export. Tell Customs that the shipment was subject to inspection at the port. There is documentary evidence regarding the manufacture of goods & exports therefore amendment needs to be carried out based on documentary evidence. It is difficult but with the realm of the law.
    The DGFT need to see the track record of the exporter & remember to err is human & levy a penalty but cannot deny the substantive legitimate entitlement after the fact of the exports is established.
    Please write to the Commerce Minister as well as the Prime Minister about why the exporters should be subjected to such injustice of denial of legitimate benefits simply because of an innocuous error.

  2. Rajiv Gupta says:

    Dear Mr. Narendra,
    You can try with the Customs department for incorporating the AA Number, if you have claimed the MEIS. You need to point out that the shipment was subject to inspection at the time of export & there is documentary evidence at the time of shipment in the form of AA in existence.
    I see the minutes of the PRC. The present DGFT has no vision about the interest of the exporters. However, certain cases get through & i dont understand how because not even a reasoned order is issued. There is no free lunch in this world. PRC is doing the job of a glorified dealing hand of handling relaxations, revalidations, EOP extensions, clubbing etc. & that too in a very shoddy manner.
    Also, please write to the Commerce Minister & the Prime Minister that why a bonafide error cannot be rectified & why should the exporter be made to lose an entitlement?

  3. Rajiv Gupta says:

    I am pleased to share with all the good news that finally, the truth is upheld & the DGFT has been compelled to remove the pre-import condition. The point of concern is that why such lunacy occur in the first place & when the policymakers are caught killing the exporters then why they are allowed to continue in their position?

  4. narendra says:

    Dear Rajiv Sir,
    I fully agree with the views.
    Today functioning of the DGFT is narrow minded and rigid approach. We have presented one case for relaxation and regularization of three shipping bills which does not bear the advance license details. Our request denied by the PRC and case rejected.. What is the remedy now ? where to knock the doors for EASE OF DOING BUSINESS for export community ?? Why PRC does not think with OPEN MIND and relax the strict and stringent conditions ? why they do not think OUT OF THE BOX ? what is the use of PRC ??

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April 2021