c

Case Law Details

Case Name : M. k. Exim (India) Limited Vs Union of India (Rajasthan High Court)
Appeal Number : D.B. Civil Writ Petition No. 6753/2021
Date of Judgement/Order : 17/12/2021
Related Assessment Year :

M. k. Exim (India) Limited Vs Union of India (Rajasthan High Court)

We have also perused the guidelines issued by the Directorate General of Foreign Trade under circular dated 31.12.2003 for maintaining the denied entities list. It records that most common instance of action leading to refusal of licenses occurs when firms default in export obligation fulfillment under various export promotion schemes. The licensing authorities in such cases will place the firm in DEL after serving a demand notice for fulfilling the obligation within a reasonable time. In cases relating to fraud and mis-declaration licensing authority would also examine that there was any connivance of the department officials. Basically the intention and effect of placing an entity in DEL is to deprive the facility of granting advance authorization license to it.

The contention that unless and until the petitioner pays up the entire duty and penalty imposed under the orders passed by the DGFT and custom authorities the petitioner cannot claim any export incentive under the new scheme is completely unacceptable. Both the orders are under challenge before the first appellate authorities. Respective statutes require pre-deposit of certain amounts upon which rest of the recoveries would be suspended. If the petitioner has no such protection under law, the department can recover the amounts through coercive means and perhaps even from the petitioner’s entitlement of intensives under the export promotion scheme in quest. But once this mechanism is statutorily put in place and followed by the assessee, the Government of India cannot seek coercive recovery of the remaining amounts in indirect manner by blocking the export incentives under unrelated schemes and future consignments.

FULL TEXT OF THE JUDGMENT/ORDER OF RAJASTHAN HIGH COURT

The petitioner has prayed for a direction to remove the name of the petitioner from the Denied Entity List (‘DEL’ for short) forthwith. The petitioner has further prayed for accepting the online application for availing the benefit of Merchandise Export from India Scheme (‘MEIS’ for short) for which the last date for making application for receiving benefits prescribed is 31.12.2021 as per the notification of the Government of India Ministry of Commerce and Industry dated 16.09.2021.

Brief facts are as under:-

The petitioner is a company registered under the Companies Act. During the period between May, 2002 to March, 2003 the petitioner had made certain exports under advance authorization lisence. A show-cause notice was issued to the petitioner by Directorate of Revenue Intelligence (‘DRI’ for short) on 18.07.2006 alleging that the petitioner had failed to fulfill its export obligations. Primarily allegations against the petitioner were that the raw material imported by the petitioner was without payment of duty and which was to be utilised for the purpose of manufacturing of goods for export, was clandestinely diverted in the local market and the export goods were manufactured with the aid of locally produced raw material (copper rods). The petitioner resisted the show cause notice. The Joint Director General of Foreign Trade passed an order on 15.09.2014 in which he directed the petitioner to pay customs duty with interest to the extent of utilisation of the licence and 1% of TR and further payments including penalty of one time of CIF value on a particular consignment. The petitioner has challenged the said order passed by the Deputy Director General of Foreign Trade. Such appeal is pending.

Parallelly the Customs Department also issued a show-cause notice against the petitioner for the same transaction and this culminated into an order in original being passed by the Commissioner of Customs Nhava Sheva on 22.01.2019. He confiscated copper rods imported by the petitioner during the said period but offered fine in lieu of such confiscation. He also imposed custom duty of Rs.45,25,531/-towards the duty forgone at the time of import. Such amount would be paid with interest and penalty. He also imposed personal penalties. This order also the petitioner has challenged and the appeal is pending before the appellate authority.

On account of the involvement of the petitioner in the said case, the Assistant Director General of Foreign Trade, Jaipur passed an order on 27.07.2005. This order is not produced on record, copy of which tendered today is taken on record. This order records that petitioner had obtained an advance licence in the year 2002. The petitioner was asked to furnish the proof of export obligations being discharged which the petitioner failed to do. Therefore it was ordered that issuance of further licences to the petitioner-firm should be denied till further orders. On 06.05.2010 the authorities of DGFT also passed a formal order placing the petitioner in Denied Entity List. This order is not produced on record but we are informed that petitioner has challenged the same in the appeal and the appeal is pending.

The reason for the petitioner to approach this Court at this stage appears to be fast advancing last date under MEIS for making application for receiving export incentives under the said scheme. The department has issued a trade notice on 11.09.2018 which pertains to making online applications for MEIS under the system driven approval mechanism. This trade notice specifically provides that this facility will not be available besides others, to those applicant-firms who are placed in the denied entity list or suspended IEC or cancelled IEC. This is where the shoe pinches so far as the petitioner is concerned.

Custom duty dues cannot be recovered indirectly by blocking Export Incentives

Learned counsel for the petitioner submitted that on one hand the department has taken a long time in giving final adjudication on the show-cause notices issued. The appeals in both the cases decided by DGFT and Custom Department are pending. The decision to deny the export benefits to the petitioner were taken on 27.07.2005 and thereafter on 06.05.2010. More than ten years later without any further progress in the petitioner’s challenge to the orders in original, the petitioner is being denied the benefit of export incentives in relation to entirely different transactions. He submitted that after 31.12.2021 since the scheme is being discontinued, if the petitioner is not allowed to apply for the benefit of export incentives such benefits would be lost forever.

On the other hand learned counsel for the department has opposed the petition contending that export incentive is not a vested right of an exporter. It is a concession granted by the Government of India and depends on its discretionary exercise of powers. Our attention was drawn to Section 9 of the Foreign Trade (Development and Regulation) Act, 1992 and Rule 7 of the Foreign Trade Regulation Rules 1993 in support of this contention. He submitted that the petitioner is involved in serious case of avoidance of duty by clandestine diversion of goods meant for export, in local market. The petitioner has not discharged the duty and financial liabilities imposed by the adjudicating authorities. In view of such facts the petitioner cannot be granted export incentive under the scheme. He argued that petitioner has not challenged the trade notice dated 11.09.2018.

As is well known, to encourage exports in order to earn foreign exchange and to make the export goods originating from the country cost competitive in international market, the Government of India comes up with the export incentives from time to time which are framed in different mechanisms. It is undoubted that the export incentives are in the nature of waiver of duty by the Government of India and cannot be claimed by any exporter as a matter of right or dehors the terms of the scheme. So much is sufficiently well established through the series of judgment of Supreme Court and statutory provisions. However once an export scheme is framed and implemented by the Government of India, an exporter must get the benefit under the scheme as long as the terms and conditions for claiming the incentives are satisfied. The petitioner in the present case is interested in receiving the export benefits under MEIS. The only reason why the petitioner is blocked from making application for such purpose is that on account of alleged past misdeeds, the petitioner has been placed in the denied entity list which would be sufficient to disqualify the petitioner to claim any other benefit of MEIS.

We have noted the relevant facts. To sumarise such facts, we may recall that on the allegations of the unauthorized diversion of imported goods in the local market during the period 2002­2003 the DGFT as well as custom authorities have passed the orders in original in the year 2014 and 2019 respectively. Against both these orders the petitioner has filed appeals and which appeals are pending. In the meantime the Assistant Director General of Foreign Trade on 27.7.2005 discontinued the facility of granting further licences to the petitioner. On 06.05.2010 the name of the petitioner was placed in denied entity list. Before passing of these two orders neither any notice or opportunity of hearing was granted to the petitioner. Be that it may, as long as these orders stand, their impact would undoubtedly fall within the spheres of its applicability. In other words the department would not give any further advance authorization license to the petitioner and thus would be open for the department to deny the petitioner the facility of making imports of raw materials for the purpose of export without payment of duty, going by the petitioner’s past track record. However to project such events into the petitioner’s future exports and for which the Government of India has announced duty incentives, would not be permissible unless the scheme itself so provides. Any other view would result into the petitioner being placed in a black list and before which no hearing or opportunity was granted.

Nothing has been brought to our notice from the MEIS scheme suggesting that for any past unrelated events of dispute between the department and the petitioner, export incentive in the presentie would be denied to the exporter. The contention that without challenging the condition contained in the trade notice dated 11.09.2018 the petitioner cannot finally succeed is too technical and in any case is not a valid one. The trade notice pertains to the facility for applying the benefit under MEIS under the system driven approval mechanism. This part is totally procedural and this trade notice cannot decide the rights of the petitioner under the scheme. It may be that for those who are placed in denied list or suspended list, the fast tracked procedure of system driven approval mechanism may not be made available. This is not the same thing as to suggest that such entities for unrelated events could be denied the benefit of export incentives under the scheme if all conditions are satisfied.

We have also perused the guidelines issued by the Directorate General of Foreign Trade under circular dated 31.12.2003 for maintaining the denied entities list. It records that most common instance of action leading to refusal of licenses occurs when firms default in export obligation fulfillment under various export promotion schemes. The licensing authorities in such cases will place the firm in DEL after serving a demand notice for fulfilling the obligation within a reasonable time. In cases relating to fraud and mis-declaration licensing authority would also examine that there was any connivance of the department officials. Basically the intention and effect of placing an entity in DEL is to deprive the facility of granting advance authorization license to it.

The contention that unless and until the petitioner pays up the entire duty and penalty imposed under the orders passed by the DGFT and custom authorities the petitioner cannot claim any export incentive under the new scheme is completely unacceptable. Both the orders are under challenge before the first appellate authorities. Respective statutes require pre-deposit of certain amounts upon which rest of the recoveries would be suspended. If the petitioner has no such protection under law, the department can recover the amounts through coercive means and perhaps even from the petitioner’s entitlement of intensives under the export promotion scheme in quest. But once this mechanism is statutorily put in place and followed by the assessee, the Government of India cannot seek coercive recovery of the remaining amounts in indirect manner by blocking the export incentives under unrelated schemes and future consignments.

Before closing we may record that since the petitioner has challenged the order dated 06.05.2010 by filing appeal and in any case such order is not available on record before us, we do not go into the petitioner’s first prayer for deleting the name from denied entity list and leave it to the petitioner to pursue the appeal.

In view of the above discussion it is directed that the respondents shall permit the petitioner to make an application within the time envisaged in the scheme for the incentive under MEIS scheme and consider the same on merits in terms of the provisions made under the scheme.

The petition is disposed of accordingly.

Download Judgment/Order

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

Join Taxguru Group on Whatsapp

taxguru on whatsapp WHATSAPP GROUP LINK

Join Taxguru Group on Whatsapp

taxguru on whatsapp WHATSAPP GROUP LINK

Join Taxguru Group on Whatsapp

taxguru on whatsapp WHATSAPP GROUP LINK

Join Taxguru Group on Whatsapp

taxguru on whatsapp WHATSAPP GROUP LINK

Join Taxguru Group on Whatsapp

taxguru on whatsapp WHATSAPP GROUP LINK

Join Taxguru Group on Whatsapp

taxguru on whatsapp WHATSAPP GROUP LINK

Join Taxguru Group on Whatsapp

taxguru on whatsapp WHATSAPP GROUP LINK

Join Taxguru Group on Whatsapp

taxguru on whatsapp WHATSAPP GROUP LINK

Join Taxguru Group on Whatsapp

taxguru on whatsapp WHATSAPP GROUP LINK

Join Taxguru Group on Whatsapp

taxguru on whatsapp WHATSAPP GROUP LINK

Join Taxguru Group on Telegram

taxguru on telegram TELEGRAM GROUP LINK

More Under Income Tax

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

January 2022
M T W T F S S
 12
3456789
10111213141516
17181920212223
24252627282930
31