In this second part, we deal with the legalities & the policy provisions regarding the clubbing & redemption. The latest policy provision made Vide Public Notice No. 32/2015-2020 dtd. 18.10.2017 reads as under:
4.38 Facility of Clubbing of Authorisations
(i) No clubbing of Authorisations issued on or before 31st March 2009 shall be allowed.
(ii) Request for clubbing shall be made in ANF – 4C to the concerned RA who has issued the Authorisations.
(iii) Facility of clubbing of Advance Authorisations shall be available only for redemption/regularisation of such Authorisations and no further import or export shall be allowed.
(iv) Facility of clubbing shall also be available for Advance Authorisations for Annual Requirement issued during Foreign Trade Policy period 2009-14 and 2015-20, wherever exports and imports have taken place as per Standard Input Output Norm s (SION) notified.
(v) Only Authorisations under which similar duty exemption has been availed shall only be allowed to be clubbed. Such Authorisations may pertain to different financial years.
(vi) In case, exports are made outside EO period of any Authorisation, EO extension may be allowed before clubbing of such authorisation, as per Para
4.42 of Handbook of procedures on payment of composition fee.
(vii) Only such Advance Authorisations shall be clubbed where exports under all Authorisations have been made within the initial/ extended EO period of the earliest issued Authorisation.
(viii) Clubbing shall be permitted only when there is a shortfall in fulfillment of export obligation occurred in the first authorization and excess exports are made in subsequent Authorisations. However, this condition may not be insisted when validity period (for import) of Authorisations runs concurrently and imports made in subsequent authorisation falls within validity period (for import) of the first authorisation and such import made within validity period of first authorisation are on pro-rata, equal to or in excess to the extent of exports made in first authorisation. Subsequent Authorisations issued after expiry of validity of first Authorisation shall not be allowed to be clubbed.
(ix) Clubbing of Authorisations issued with different EO periods shall also be allowed.
(x) Accounting of exports made outside expiry of initial or extended EO period of earliest issued authorisation shall not be taken i nto consideration for EO fulfillment after clubbing of such Authorisations.
(xi) Inputs which are common in all Authorisations shall only be clubbed and duty free inputs shall be accounted for as per SION/Ad-Hoc Norms fixed by NC. In other words all inputs covered in all Authorisations need not be same.
(xii) Minimum value addition as prescribed in FTP and procedures for the export product will be required to be maintained on clubbing. Upon clubbing, if shortfall in value or quantity is noticed, the same shall be regularized under the provisions of Para 4.49 of HBP 2015-20.
(xiii) After clubbing, Authorisations shall for all purposes, be deemed to be one Authorisation. The value addition would be calculated on the basis of total CIF and total FOB arrived at after clubbing the Authorisations.
(xiv) No clubbing shall be permitted in respect of Authorisations where misrepresentation I fraud have come to the notice of RA. Further, no clubbing of Authorisations, where EODC/redemption letter has already been issued or adjudication orders have already been passed by RA/Customs Authority, shall be permitted.
It is pertinent to point out that no Export Promotion policy can be more ridiculous than this. This is despite the fact that clubbing for redemption policy provision has been in force for more than one & a half decade now. Further, it is pertinent to point out that six days later, the DGFT issued another Public Notice bearing No. 34/2015-2020 dtd. 24.10.2017 relaxing the provisions announced vide the PN 32/2015-2020 dtd. 18.10.2017. Any reader will understand that whether this is not a poor joke & an outright assault on the common sense! Now, let us examine what is wrong with the legal provisions.
The PN 32 prohibits clubbing of AAs issued before 31.3.09 whereas six days later the PN 34 restores clubbing of AAs as early as 1.4.2002. What changed between these six days! Is this arbitrary & whimsical approach tolerable? Another pertinent point is that the Apex court has settled the law that substantive legitimate entitlements cannot be denied to the beneficiary due to a procedural lapse. There are two substantive requirements for the discharge of EO under an AA. 1. Exports under the AA & 2. Realization of Export Proceeds. Now, if these two compliances are met by the exporter, can the DGFT deny the vested substantive beneficial rights to the exporter in contempt of the Supreme Court? What is the DGFT trying to say & set as an example? Can this idiocy be allowed in the name of the Export Promotion policy? Alternatively, this idiocy is established by the redemptions in case of an individual AA. Is the DGFT obligated to redeem the AA issued in 2002 today if the exporter produces the relevant documents for EO discharge or not then can the DGFT not comprehend the blunder being committed? Why the DGFT should deny the redemption just because clubbing is resorted to? Why the DGFT lose the sight of the fact that after clubbing, all the AAs clubbed are treated as one only? Why the DGFT then create such idiotic obstacles in an export promotion policy?
The clause (vi) of the PN 32 says that if exports are made outside EO period of any AA, EO extension may be allowed before clubbing of such AA, as per Para 4.42 of HBP on payment of composition fee whereas the clause (vii) of the PN 32 says that only such AAs shall be clubbed where exports under all Authorisations have been made within the initial/ extended EO period of the earliest issued Authorisation. Any person with little common sense will understand that the clause (vi) & clause (vii) of the PN No. 32 are not in consonance with each other therefore the DGFT has made a grave error. The DGFT should comprehend the implication of the legal provision before putting the same in the policy. Please note that in mathematical terms if the exports will have to be within the initial/ extended EO period of the earliest issued Authorisation then that will set the outer limits of EO period & any other AA will never need any extension as such. This is elementary mathematics but then that too is violated by the miraculous Indian bureaucracy.
The clause (viii) of the PN 32 says that Clubbing shall be permitted only when there is shortfall in fulfilment of export obligation occurred in first AA and excess exports are made in subsequent AA. Once again, nothing can be more ridiculous than this because then the DGFT is trying to say that I favour the defaulters i.e. who have failed to discharge the EO in the specific AA issued first. Why should the DGFT ever do that? Is the real motivation that these defaulters are cash cows & they will very easily fall for corruption & take care of them & therefore this give & take approach needs to be protected? Nobody will ever come to know that what was done in case of an individual file & further to provide the extra shield of protection, the clubbing is outside the online system as such. However, hurriedly, the DGFT adds that this condition will not be a deterrent provided imports are within the validity of the first AA. Why the DGFT is hell bent on punishing the exporter for prior exports & what the applicable law is if there are excess exports on prorata basis in not the first authorisation but an authorisation issued subsequently. The point of law is that why the import condition does not appear in clause (vi) & (vii) & whether the DGFT is aware that imports under replenishment clause are permissible. The DGFT should at the very least honour the basics of the law & other specific provisions of the FTP/HBP. Any person will understand that why the DGFT should simply deny the imports under replenishment clause just because clubbing facility is used by the exporter? What is the rationale for it? Lastly, why do you need the last sentence that “Subsequent Authorizations issued after expiry of validity of first Authorisation shall not be allowed to be clubbed.” When both the exports as well as imports have to be within the initial/extended validity of the 1st AA there cannot be any way that clubbing of AAs with an AA issued beyond the validity of the first AA can be possible. Last but not the least important is the fact that if the issue of AA is delayed inordinately then why should the exporter alone be punished when the exporter has conducted exports & the exports are within the initial/extended validity of the 1st AA.
The clause (x) of the PN 32 says that accounting of exports made outside expiry of initial or extended EO period of earliest issued AA shall not be taken into consideration for EO fulfilment after clubbing of such AAs. Now, once again, the application of mind is missing. Why the DGFT needs to put in clause (x) when clause (vi) already exists.
There is a provision for revalidation in the FTP/HBP on the payment of the applicable fee. Similarly, there is a provision for Export Obligation Period (EOP) extension in the FTP/HBP on the payment of the composition fee, if applicable. The use of revalidation & EOP extension are specific policy provisions & is beneficial vested rights of the exporter therefore the same cannot be violated just because the exporter is using the clubbing facility to redeem the AAs. The DGFT should comprehend that the revalidation & EOP extension can be done on the basis of pro-rata enhancement at any point of time depending upon the facts of the actual exports under the AA. The DGFT should further understand that replenishment imports & exports after filing the AA application are valid in terms of the law. The DGFT should not lose focus that the mandate of the Parliament is to facilitate the exporters & not to con the exporters by imposing restrictions, which have no rationale. This is simply driven by common sense therefore why the DGFT should apply an unnecessary restriction to curb the freedom of the exporter in conducting his business & become the stumbling block when no undue advantage accruing to the exporter out of the revalidation & EOP extensions being carried out in terms of the FTP/HBP. Please note that if the exports & imports are within the initial/extended validity of the 1st AA & the exporter pays the applicable fees for revalidation/EOP extension then the DGFT cannot have any grouse against the exporter & there cannot be any EOP extension fee collected from an efficient exporter i.e. one who has done excess exports in the AA issued first because idiocy cannot be advanced in the name of the export promotion policy. The DGFT should once again see two things. 1. Can you collect EOP extension fees in case exports in excess are conducted in an AA? The answer is emphatic No. 2. Please see clause (xiii) of the PN 32 which says that “After clubbing, Authorisations shall for all purposes, be deemed to be one Authorisation”. The clubbed AAs are deemed to be one therefore, how can the DGFT deny the EOP extension fees in case of clubbing?
Earlier, the DGFT put in a condition that one of the AAs to be clubbed should be valid as on the date of making the clubbing request. This was idiotic because clubbing results in redemption therefore no imports or exports can take place afterwards. However, I had to pursue the matter for long before this idiocy was removed. However, the policymakers work with alacrity & tenaciously for their vested interest. Vide Public Notice No. 79 (RE-2010)/ 2009-14 dtd 13th October, 2011 such Advance Authorisations shall be clubbed which have been issued within 36 months from the date of issue of the earliest Authorisation. This surreptitiously extended the validity period of the authorizations to almost 6 years for the purpose of clubbing at the cost of 0.5% penalty of the shortfall in EO. The penalty was same for delay beyond 3 years for up to 3 years extended use because the original export obligation period was 3 years only. I am very clear in my mind that the policymakers are not stupid enough that they do not understand the idiocies pointed out but since there is no responsibility & accountability in the rotten system, nobody seems to care. This article is sent to those responsible in MoC & MoF to respond if they find anything wrong & I undertake to provide the response in the best interest of the nation. The simple point is that there is no need to float any reward schemes for the exporters if only the legitimate & WTO compatible entitlements are given to the exporters in a genuine manner.
(Above are personal view of Author and he can be reached at email@example.com)