As per the mandate of the Parliament, the DGFT is the facilitator & therefore the name change to Director General of Foreign Trade took place as early as 1993 but it appears that till date what is facilitation is not understood in the right perspective. To my mind name change has made no difference because the mindset shows no sign of facilitation. The mindset does not change because corrupt practices wield power & nobody wants to give up that abuse & manipulation. The ground reality is therefore pathetic in terms of facilitation & qualify to be shameful & disgusting.
This is the story of Vadodara, RA. The online submission for the closure of Advance Authorization issued on 29.08.2022 is made. More precisely, the request is for Bond waiver as exports stand completed. However, the RA, Vadodara raises frivolous discrepancies & the matter is taken up with the policymakers that withholding of the Bond Waiver due to the frivolous nature of the discrepancies & consequent harassment is untenable but to no avail.
Now, we talk about the discrepancies in a threadbare manner. The first discrepancy raised is that Cenvat declaration is not submitted. In replies, the following is brought to the notice of the officials.
The Cenvat regime is replaced by GST w.e.f. 1.7.2017. The AA is dtd. 29.08.2022 therefore as on that date, the Cenvat regime was no longer applicable therefore the demand for Cenvat declaration is legally not valid. However, the RA, Vadodara officials continued to repeat that it is required as specified by the DGFT despite the fact that Cenvat credit is no longer in operation. Not only this, the official went ahead with the claim of a badge of honour saying that all exporters give the Cenvat declaration & the CA/Central Excise authority certifies that declaration & since it is continuing even after 5 years from the lapse of the Cenvat regime, this requirement is beyond challenge & cannot be dispensed with & no bond waiver can be granted. Therefore, it is crystal clear that even under the GST regime, merrily an invalid Cenvat declaration is being accepted by the DGFT offices & even after pointing out the discrepancies, no one seems to be bothered. The arrogance has no limits in the sense that you can complain to the policymakers but then they will prefer to keep mum & show no courage whatsoever to rectify the wrong. To my mind, this is a serious issue because how a wrong declaration can be taken per force by the DGFT offices & the professionals/Central Excise authorities are in a position to issue such a certificate to the exporters. I was refused a Central Excise certificate in reference to production & consumption just because the issuing authority is specified as Central Excise instead of the Central Excise & CGST therefore I am very sure that no C. Ex. authority has issued any certificate to the AA holders.
Further please note that a future event can never be certified by any authority or any professional & this does not require any proof because there is no control over the future with anyone. The imported material can be lost through many ways like floods, fire, theft etc. or cannot be put to use due to lockout etc. Therefore, in any case no futuristic certification can be demanded or valid. The Foreign Trade Policy paragraph 4.16 (ii) is therefore not tenable. We told Vadodara RA official that our Chartered Accountant is a sane person & he says that he cannot issue any certificate in respect of a futuristic event then to my utter surprise, the RA, Vadodara official instead of accepting the truth goes on to say that I know the Chartered Accountants who will issue the certificate & we will accept the same & we will introduce such CAs to you as if this is the role assigned by the DGFT to RA, Vadodara. This in effect means that there is no escape from the idiocy but to comply because the RA, Vadodara officials are completely managing the show to complete the format filling & filing it in their records to complete compliance.
Further, the point of law is that how a third party like Central Excise or a Chartered Accountant can issue a certificate on behalf of the licencee. It can be only be on the basis of a verbal/written assurance given by the licencee therefore Central Excise or a Chartered Accountant should believe the exporter & issue a certificate but the DGFT does not believe the exporter when the exporter is submitting a signed declaration. How this outsourcing leading to avoidance of any responsibility on the part of the DGFT of any nature is acceptable? The licencee has correctly specified in the declaration that inputs imported under the AA will be used in the manufacture of IGST payable goods (Cenvat regime is no longer operational w.e.f. 01.07.2017). There is no application of mind & merrily the DGFT continues with the Cenvat declaration, the exporter is forced to give that & the professionals issue a certificate in respect of an event beyond their control & nobody bothers about it thus closures of AAs issued under GST regime is happening all along on the basis of wrong declarations since the advent of the GST regime. There was a notification issued regarding the exemptions & corresponding change made in the Customs Notification but then the callous attitude in respect of the other compliances cannot be questioned just because ego of the policymakers are way too important. The DGFT accepts declarations given by the exporter at the time of filing the application but why the declaration is unacceptable at the time of Bond waiver is very intriguing.
We reproduce the extract from the Declaration given by us:
Quote:
We hereby declare that the goods imported under replenishment clause against Advance Authorisation No. XXX dtd. ZZZ will be utilized in the manufacture of IGST payable goods in the manufacturing facility specified in the Advance Authorisation even after Bond Waiver. This condition is binding on us in respect of the advance authorization as we will avail IGST exemption in respect of the inputs to be imported under the Advance Authorisation.
Unquote:
This declaration is completely correct & binding & safeguards the interest of the department therefore needs to be accepted without any question.
As pointed out earlier, Para 4.16 (ii) of the FTP binds the licencee to utilize the inputs even after completion of the export obligation in the manufacture of dutiable goods whether within the same factory or outside by a supporting manufacturer. The said condition appears in each & every authorization by way of reference therefore binding on the licencee. The said condition appears in the relevant Customs Notification No. 18/2015 therefore binding on the exporter. As a matter of fact, the Customs authorities take a bond from the licencee for the compliance of the said condition to ensure compliance Therefore adequate safeguards are under implementation. Therefore, whether the Central Excise or Chartered Accountant wrongly issues the certificate or not, the licencee is bound by this condition in any case. The repetition of it through a declaration or a wrongly issued certificate is of no consequence at the time of bond waiver.
The persons, who understands the basics of the law will understand that the poor joke is that Para 4.16 of the FTP is condition applicable to each & every licence & appearing in the Customs notification therefore there is no escape from it & the declaration/certificate issued by the Central Excise or Chartered Accountant is of no consequence because violation of any condition specified in the policy/Advance authorization/Customs notification is actionable for penal action both under the FTDR Act, 1992 as well as the Customs Act, 1961 Therefore, by any standard, the demand is frivolous & therefore untenable.
The moot point is that the due diligence exercised by the licencee & the Chartered accountant is of no relevance even if it is established in several ways beyond any element of doubt that Central Excise or Chartered Accountant Certification process is wrong but then it is the problem of the DGFT & not that of the RA, Vadodara. This is how the export promotion authority values the contribution of the exporters & this is then termed as facilitation!
The next frivolous deficiency is in respect of the utilization report. Here again, the demand is frivolous because there is EDI exchange between the Customs as well as the DGFT in existence as on date on real-time basis & the export import data is delivered by the customs & appears in the Bond waiver application. Therefore, the facts of imports & exports are updated on the DGFT website through the message exchange system. You will note that the export data stands transmitted because exports have taken place under the AA but no import data is available because no imports have taken place. If imports had been conducted under the AA, then only the data of imports would be reflected. Please note that therefore there is no reason to get utilization report from the Customs authorities. Once again, the RA, Vadodara official kept harping that the exporters are giving the utilization report therefore it is mandatory.
RA, Vadodara official also pointed out that there is a time lag in the transmission of the data therefore this is called for but then it was pointed to the attention of the RA, Vadodara that the data in the servers is updated at the end of the day everyday & the Bond waiver application is uploaded more than 10 days ago therefore there is no scope to make manipulative presumptions. Then the plea was changed that since this is the first request, you need to get the utilization report & then it was pointed out that once the system approach is adopted, then RA, Vadodara can obtain this from the port of registration through e mail in any case specifically, if necessary. As a licencee, we have given declaration that the data submitted on the server is true & correct & in case of violation this is punishable. Therefore, once again, just by introducing a physical utilization report a backdoor entry for systemic corruption is reintroduced because there is no free lunch in this world. It is in this sense; the utilization report is of significance & all sane pleas fall on deaf ears.
Further, RA Vadodara is simply presuming that imports could have taken place without any basis & another plea is that the message exchange system is not working properly between the DGFT & the Customs department. Please note how it can be possible that the system should not function properly when the Bill of Entry is the most important document for taking the input IGST credit & that data is properly available in the GSTN database. If the data is getting uploaded in the GSTN then why transmission to the DGFT should fail. Finally, it is significant to point out that if everything fails then too the RA, Vadodara can put an overriding condition in the Bond waiver saying that waiver is granted on the basis of declaration by the exporter that no imports have taken place under the advance authorisation & if there is any wrong with the declaration then the customs will revert & not provide the benefit of bond waiver. Therefore, there are several ways possible to facilitate the exporter but then RA, Vadodara is not interested in implementing any one of them.
Priorly the RA, Vadodara asked for Pollution Control Board certificate/Factory License/Latest Electricity to prove manufacturing capacity despite Udyam Certificate & RCMC as Manufacturer Exporter was available on record. Therefore, the harassment is repeatedly taking place & not an aberration & we were compelled to call for appropriate action by the policymakers then too but to no avail.
Further, the RA, Vadodara indulges in diplomacy by writing an email saying that getting an AA is like ordering food on Zomato & the valid points of law raised regarding the Cenvat declaration & utilization certificate will be taken up with the higher authorities but then the RA, Vadodara will not implement & grant valid Bond Waiver & the policymakers do not show any courage to rectify the wrongs or intervene & all this goes on in the name of export promotion & facilitation. The DGFT started computerization in 1988 & this is the state of affairs in 2023 in spite of all the tall claims in the field of software services!
(Author can be reached at [email protected])
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Idiocies perpetuate Corruption
The government & the bureaucracy has been harping about the ease of doing business as well as India climbing the Index for ease of doing business but then this is only god for showcasing or fooling the beneficiaries but the ground reality is shameful & disgusting to a point that the DGFT prefers to look the other way & keep mum even when the idiocy is staring in the face.
The certificate cannot be issued in respect of a future event by a professional or the Excise authorities & the DGFT cannot denounce the system unilaterally when the CBIC & DGFT have put the system in place. If even such idiocies are allowed to prevail so that the exporters are harassed to o end then what is the sense in having the position of DGFT is the moot question? Why the DGFT is not in a position to take appropriate action & stop the wrongs.
It is pertinent to point out that these submissions are sent to all concerned in the DGFT but nobody responds because the wrongs are staring in the face. Therefore, stubbornness to perpetuate a corrupt practice is baffling!
Idiocies perpetuate Corruption
The Apex Court has finally settled in case of ASSTT. COMMR., COMMERCIAL TAX DEPARTMENT Versus SHUKLA & BROTHERS {2011 (22) S.T.R. 105 (S.C.)} that a reasoned speaking order is to be essentially issued in each & every case & the following is clearly spelt out in the order.
Reasoned judgment is mandatory requirement of procedural law. – Non-recording of reasons could lead to dual infirmities; firstly, it may cause prejudice to the affected party and secondly, more particularly, hamper the proper administration of justice. These principles are not only applicable to administrative or executive actions, but they apply with equal force and, in fact, with a greater degree of precision to judicial pronouncements.
Reasoned judgment has become indispensable part of basic rule of law and mandatory requirement of procedural law by practice and by virtue of judge made law.
The doctrine of audi alteram partem has three basic essentials. Firstly, a person against whom an order is required to be passed or whose rights are likely to be affected adversely must be granted an opportunity of being heard. Secondly, the concerned authority should provide a fair and transparent procedure and lastly, the authority concerned must apply its mind and dispose of the matter by a reasoned or speaking order. This has been uniformly applied by courts in India and abroad.
it is essential that administrative authorities and tribunals should accord fair and proper hearing to the persons sought to be affected by their orders and give sufficiently clear and explicit reasons in support of the orders made by them. Then alone administrative authorities and tribunals exercising quasi-judicial function will be able to justify their existence and carry credibility with the people by inspiring confidence in the adjudicatory process. The rule requiring reasons to be given in support of an order is, like the principle of audi alteram partem, a basic principle of natural justice which must inform every quasi-judicial process and this rule must be observed in its proper spirit and mere pretence of compliance with it would not satisfy the requirement of law. …”
Reasons are the soul of orders. Non-recording of reasons could lead to dual infirmities; firstly, it may cause prejudice to the affected party and secondly, more particularly, hamper the proper administration of justice. These principles are not only applicable to administrative or executive actions, but they apply with equal force and, in fact, with a greater degree of precision to judicial pronouncements.
The principle of natural justice has twin ingredients; firstly, the person who is likely to be adversely affected by the action of the authorities should be given notice to show cause thereof and granted an opportunity of hearing and secondly, the orders so passed by the authorities should give reason for arriving at any conclusion showing proper application of mind. Violation of either of them could in the given facts and circumstances of the case, vitiate the order itself. Such rule being applicable to the administrative authorities certainly requires that the judgment of the Court should meet with this requirement with higher degree of satisfaction. The order of an administrative authority may not provide reasons like a judgment but the order must be supported by the reasons of rationality. The distinction between passing of an order by an administrative or quasi-judicial authority has practically extinguished and both are required to pass reasoned orders.
It is difficult to comprehend that why the Export Promotion authority i.e. the DGFT will not issue a reasoned speaking order or honour the provision of Appeal in the FTDR Act but continue with the idiocies endlessly.
Idiocies perpetuate corruption
In each & every law, there is a scope for appeal but in the Export Promotion Policy & the Handbook of Procedures, there is no provision for it. This is even though Section 15 of the FTDR Act provides for it. Therefore, the DGFT has snatched the vested powers by the FTDR Act & assumed absolute powers. This simply results in perfect gaming of the system. The officials at the working level simply cite a policy provision to harass & when you take up the matter with the DGFT, all pleas for the rectification fall on deaf ears. Can this be an acceptable way of the functioning of the Export Promotion authority? The idiocies of the provisions are staring in the face & need immediate redressal but then absolute authority snatched by not providing the appeal provision makes life difficult for the exporters beyond redemption & leaves no room for any justice.
Idiocies perpetuate corruption.
At the very least, the policy makers should comprehend how the DGFT portal runs & whether it is in compliance of the DGFT policy & the CBIC notifications or not & if the portal is in operation, then can the DGFT selectively denounce the DGFT portal? Can this be ever acceptable because this discretion can only be termed as whimsical. Please note that as per the EDI message exchange system between the Customs & the DGFT, the data of the exports as well as the imports should be auto uploaded on the DGFT portal. The exporter knows the facts & if anything is missing for any reason then the exporter can go to the repository & fetch the data in respect of a particular Advance Authorization & not only that if there is a non EDI Bill of Entry then the exporter can upload the Bill of Entry data & finally the exporter can even fetch the data from the ICEGATE Server also. Now, please note that, there cannot be any clearance without the data being successfully stored on the ICEGATE server therefore once all these options are checked by the DGFT then there is no scope for any error. In any case, the DGFT cannot denounce the system put in operation along with the consent of the CBIC. Therefore, idiocies cannot be advanced by the DGFT officials to demand a non- utilization certificate under any circumstances. It is very surprising that the policy makers pretend to be not aware of all these aspects of the DGFT portal but permit down the line officials to harass the exporters for no reason, which simply tantamount to cheating & corruption & therefore untenable.
It is established beyond any element of doubt that manual unutilization certificate is an idiocy & in 2019 when Mr. Vivek Johari was the CCC, Mumbai-II, I had established this & then RLA, Mumbai called for the report by email. I reiterate that the exporters cannot be harassed to no end & good sense should prevail & immediate action taken in the matter.
Idiocies perpetuate corruption.
Please note that corruption does not always mean money exchanging hands but corruption is a state of mind & systemic corruption is the worst form of corruption & that is the reason that public perception of the bureaucracy does not change. The bureaucracy pretends & does not respect common sense even. The bureaucracy is only interested in demonstrating that they are the authority & therefore neither responsible nor accountable. The establishment may claim that corruption has reduced but that is per force because there is no way out of automation & it was not possibly to run administration manually but there is no change in the mindset of the bureaucracy as evident in this case study because what is most important is the ego of the bureaucracy. Let the wrongs prevail, exporters suffer & pay the price of the idiocies but no one seems to be bothered just because the big force behind the systemic corruption is to keep mum & not to issue a reasoned speaking order even when the issue is taken up with those at the helm. Nothing can be more shameful & more disgusting. It all happens because there is no application of mind visible in analyzing the implication of a policy provision put in implementation & then there is a closed & obstinate mind. The idiocy is in full display when the bureaucracy says that everybody is complying with the policy provision ignoring common sense even. When this happens, you know, there is no justice in the system & therefore you need to stand up for your education & call out the wrongs for ensuring that entitlements of the exporters are disbursed in a dignified manner as they are doing a service to this nation. The last & not the least important point is that people are so afraid that they are not willing to raise their voice against the wrongs staring in terms of defying common sense, but they meekly succumb to the compliance of an idiocy. This is never a good sign in a democracy. Every Indian citizen is duty bound to raise their voice against systemic corruption people need to appreciate that doing your duty as a honest citizen does not make you anti India/establishment. This is for all the exporters from this country & not an individual case.
The point is that the DGFT & CBIC put the online portal & software for completion of processes electronically but then the DGFT is denouncing the Same unilaterally & nothing can be more idiotic than this for obvious reasons. However, further idiocy is that the DGFT accepts the same system selectively for redemptions. How such discrimination be acceptable without assigning any reasons or any application of mind visible. Can the system be dependent upon the whims & fancy of the official in position discarding the actionable declaration given by the exporter while uploading the Bond Waiver request. The DGFT accepts several declarations while issuing or amending the authorisations then why the declarations in respect of the bond waiver be unacceptable. Last but not the least important is the fact that the DGFT can qualify the bond waiver granted for customs to verify the position claimed by the exports to stop any misuse. The physical un-utilization report out side the system is completely unacceptable as it entails harassment, opens floodgates for manipulation & corruption & therefore unacceptable outrightly. More so because DGFT is a facilitator as per the mandate of the Parliament & cannot burden the exporters in terms of the compliance costs & render them uncompetitive in the international markets.
The DGFT put up this portal with lot of fanfare & noise but the same is full of glitches & the exporters are suffering on everyday basis & this is unacceptable? Did the DGFT purposefully put up something, which is not tested & validated just to show that digital systems are operational.
Really speaking, I am ashamed of writing all this but because of the exporters & exports from this country, I am overwhelmingly compelled to do it.
I reiterate that good sense should prevail.
Idiocies perpetuate corruption
I am unable to understand why the policymakers should not be able to understand the implications of the policy & the wrongs in the policy & how such policy makers can ever formulate a policy in favour of the exporters when they have a completely closed mind. Please see the following provision in the relevant customs notification:
Quote:
(v) that in respect of imports made after the discharge of export obligation in full, if facility under rule 18 (rebate of duty paid on materials used in the manufacture of resultant product) or sub-rule (2) of rule 19 of the Central Excise Rules, 2002 or of CENVAT Credit under CENVAT Credit Rules, 2004 has been availed, then the importer shall, at the time of clearance of the imported materials furnish a bond to the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, binding himself, to use the imported materials in his factory or in the factory of his supporting manufacturer for the manufacture of dutiable goods and to submit a certificate, from the jurisdictional Central Excise officer or from a specified chartered accountant within six months from the date of clearance of the said materials, that the imported materials have been so used:
Unquote:
The DGFT is an Export Promotion official but not willing to rectify a wrong, which has been demonstrated in several ways. Now, please specifically see the provision contained in the Customs Notification. The Customs is the implementation authority of the FTP/HBP & they only take a bond from the exporter regarding the use of the material in the factory specified in the AA & in dutiable goods & allow six months time for use & then a certificate has to be submitted issued by the CA/Central Excise. At the very least, the DGFT should be well aware or care to examine the provisions of law when an issue is raised. The ego of the officials cannot be bigger than the national interest in any case & the officials should have the humility to accept the wrong & rectify it. Even the Revenue Authority understands that no certificate can be issued in respect of an event, which will take place in future but the DGFT is not prepared to accept that even after everything is laid threadbare for the attention of the DGFT & rectification. Why this should be acceptable to any exporter & how can this be continued?
It is pointed to the attention of the DGFT one more thing that the imposition of this condition universally is not correct! It is then for the DGFT to solve this to understand what the good tenets of the policy are & why it is essential for the policy maker to understand the implication of each & every provision in the FTP/HBP because spoon feeding is not the correct approach.
I don’t take up an issue if it is not legally proper because policy cannot be a whimsical manifestation of the mind of the official in position & the country has suffered a lot on this count but no more.
Idiocy perpetuates corruption
If the common sense can be defied by the policymakers then nothing can be more disgusting & shameful.
Please see below what is the reply given in respect of a certificate to be issued by a professional in respect of an event which will take place in future?
Can a certificate be issued by a professional in respect of an event which is to take place in future
No, a certificate cannot be issued in respect of an event that is to take place in the future. A certificate is a document that attests to the occurrence or completion of a particular event or process. It provides evidence or verification of something that has already happened, not something that is yet to happen.
For example, a certificate of completion can be issued for a course once the course requirements have been satisfied and the participant has finished the program. A certificate of insurance can be issued after an insurance policy has been purchased and is in effect.
In the case of an event that is to take place in the future, a certificate cannot be issued until after the event has taken place and the relevant information or requirements have been verified.
Therefore, the DGFT is requested not to crack a poor joke in every case of bond waiver of the AA to be carried out. However, even this common sense acceptance is denied then you know that the Export Promotion Policy is only for showcasing & not for implementation. This is for all to see that what is the way, the policy makers behave .& how & why the corruption perpetuates. The moot question is that whether such officials can ever make a clean & clear Export Promotion Policy which will enable India to realize its true potential in exports.