In this case, supply has been made by the petitioner to FTWZ for onward shipment at the behest of the purchaser, UTEXAM, to a location of its choice. This modus operandi is supported by the documentation placed on record by the petitioner.
Thus, DHL logistics, the FTWZ, merely offers a facility to the petitioner to warehouse its consignments that are to be exported. The destination is decided by UTEXAM, which is the ultimate purchaser, which has paid the petitioner in USD for the consignment. The stipulation in Clause (vii) deals with exports made by a unit in the FTWZ. DHL, the FTWZ does not export the consignments but only facilitates such exports. The exports are thus, by the petitioner through DHL to a destination abroad.
To a query as to why the transaction was so structured, the petitioner explains stating that the consignments in question were, purchases by UTEXAM on behalf of Colgate Palmolive for supply at any number of the units of the latter. As and when the destination is decided, DHL is intimated of the same and the consignments shipped to that destination.
The exports in this case have already taken place at the point when the petitioner executes the relevant documents and the consignments are stored in the FTWZ, awaiting confirmation of the destination. This would avoid the circuitous route of shipment to UTEXAM at Ireland, and then onward to a final destination accompanied by multiple transportation costs and logistical complications. The role of DHL in this transaction is that of a warehouse and nothing more. The concept of ‘ship to’ and ‘bill to’, as used in this case, has been recognised under the GST regime, as commercial compulsions dictate, that transactions are to be structured in the most economical and least cumbersome manner in terms of time, procedure and expense involved.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
W.P.Nos.28778, 28783 and 28784 of 2019 pray for a direction to the Deputy Commissioner of Customs/R2 to register scrips bearing No.0319167227 dated 28/05/2018 for Rs.45,03,800.00 (scrip No.1), No.0319191300 dated 10/10/2018 for Rs.4,41,870/- (scrip No.2) and No.0319170001 dated 13/06/2018 for Rs.16,31,840/- (scrip No.3) and issue Telegraphic Release Advise under paragraph 3.08 of Hand Book of Procedure.
2. W.P.No.28777 of 2019 prays for issuance of Writ of Certiorari to quash communication dated 09.07.2019 passed by the Authorised Officer Free Trade Zone, Mannur Village, Sriperumbudur (JM FTZ SEZ/ Mannur) Kancheepuram – 602 105/R2.
3. Since the scrips in question were issued by the Additional Director General of Foreign Trade, Mumbai, the aforesaid authority has been impleaded as R3 by order of this Court dated 01.10.2019.
4. The brief facts that are germane to the disposal of the issues arising from these Writ Petitions are as follows:
i) The petitioner is an exporter of menthol and natural essential oils.
ii) The instant transactions form part of the supply of the commodities to various purchasers, who in turn supply the same to Colgate Palmolive.
iii) The petitioner admittedly claims benefits under the Customs Act, 1962 and allied policies, such as duty drawback as well as benefits under the Goods and Services Tax Act, 2017 (in short ‘GST Act’), such as input tax and other available
iv) The petitioner, wishing to avail the benefit under the Merchandise Exports from India Scheme (MEIS) which was part of the Foreign Trade Policy, effective 01.04.2015, made an application to R3 and was issued scrips 1, 2 and 3 by R3. These scrips were current for the period 2018 to 2020 and have not been cancelled at any time. Benefit under the MEIS Scheme is computed on the basis of 2% Free on Board (FOB) of the value of the transaction which is set-off against future imports. Thus, no cash refunds are contemplated.
v) A request was made for registration of scrip Nos.1 and 3 on 11.06.2018 and 19.06.2018 respectively. The original scrips and all required details were submitted. R2 was requested to issue a Telegraphic Release Advise (TRA) to the
vi) Certain other documents were called for in connection with the application and a personal hearing was also afforded to the
vii) R3, in the meanwhile, sought the details of the supplies made against all bills of exports confirming those in respect of which MEIS benefit had been sought.
viii) Detailed responses were filed by the petitioner to the effect that the supplies made were not covered under any of the ineligible categories of exports stipulated under the relevant provisions of the Foreign Trade Policy.
ix) There was a further exchange of communication inter se R3 and the petitioner and detailed submissions made in the course of personal hearing.
x) As there was no progress thereafter, the petitioner sought return of the scrips sent for registration in order to ensure their safety. The scrips were returned without registration.
xi) A similar request was made for registration of scrip No.3 on 04.07.2019 and again all originals and annexures were enclosed. This scrip was also returned by R2 without registration, accompanied by the impugned order dated 09.07.2019, wherein the request of the petitioner for registration has been rejected.
xii) Thus, in summary, scrips1 and 3 have been returned by R3 without registration and scrip No.2 by R2 also without registration with the impugned order rejecting the request for registration of scrip No.2.
xiii) Though no specific rejection has been made in regard to the applications for registration in regard to scrip1 and 3, there is no dispute on the question that the stand adopted by R2 for rejection of registration of scrip No.2 applies on all fours to scrip Nos.1 and 3 as well.
5. The arguments of Mr.Prakash Shah, learned counsel appearing for Mr.S.Muthu Venkataraman, learned counsel for the petitioner are as follows:
i) All three scrips have been validly issued after due application of mind and enquiry by R3. Thus the rejection of the application for registration by R2 is not just contrary to law but amounts to review of the original order passed, for which there is no provision under either the policy or any regulation.
ii) The scrips have not been cancelled at any time till their expiry or even thereafter and hence in the absence of cancellation, for which a specific procedure is statutorily provided, R2 has no authority to have rejected registration and TRA.
iii) Reference is made to Section 9(4) of Foreign Trade (Development and Regulation) Act, 1992 (in short ‘FTDR Act’), which provides for a procedure for cancellation of Admittedly, this procedure has not been invoked and hence the scrips, being valid, ought to have been registered as requested by the scrip holder.
iv) In response to the argument put forth by R2 to the effect that the original document (two scrips) have been taken back by the petitioner, the petitioner would state that it is only for the purpose of ensuring their safety. In any event it is not the case of the revenue that had they been allowed to be retained by the respondents, R2 would have registered the same. In fact, there is no dispute that the impugned order of rejection would apply in regard to all three scrips.
v) As regards the question of ineligibility to the benefit of MEIS Scheme, the petitioner relies on paragraphs 3.04/Chapter 3 of the Merchandise Exports from India Scheme, reading as follows:
Foreign Trade Policy
Exports from India Schemes
The objective of schemes under this chapter is to provide rewards to exporters to offset infrastructural inefficiencies and associated costs.
3.01 Exports from India Schemes
There shall be following two schemes for exports of Merchandise and services respectively;
(i) Merchandise Exports from India Scheme (MEIS).
(ii) Service Exports from India scheme (SEIS).
Merchandise Exports from India Scheme (MEIS)
Objective of the Merchandise Exports from India Scheme (MEIS) is to promote the manufacture and export of notified goods/products.
3.04 Entitlement under MEIS
3.06. Ineligible categories under MEIS
The following exports categories/sectors shall be ineligible for Duty Credit scrip entitlement under MEIS:
(i) Supplies made from DTA units to SEZ units.
(ii) Export of imported goods covered under paragraph 2.46 of FTP;
(iii) Exports through trans-shipment, meaning thereby exports that are originating in third country but trans-shipped through India;
(iv) Deemed Exports;
(v) SEZ/EOU/EHTP/BTP/FTWZ products exported through DTA units;
(vi) Export products which are subject to Minimum export price or export
(vii) Exports made by units in FTWZ.
According to the petitioner, the exports in question do not fall within the prohibited categories, as enumerated in clause 3.6 of the scheme.
6. As answering the question of entitlement of the petitioner to the benefit of the scheme requires some factual particulars, the petitioner was asked to produce purchase orders/commercial invoices containing the terms and conditions between the petitioner and the buyer, UTEXAM. These documents have been filed as part of document compilation dated 22.06.2021, also supplied to the respondents. No objection has been raised by learned counsel for the respondents for admission of the same and for being considered in the resolution of the issues arising in this matter.
7. The following documents have been filed.
Purchase Order 84/85
Jindal Drugs Pvt. Ltd
229 Nariman Point, Mumbai 400 021
Kind Attention: Mr.Ajay Jindal
Business Award –Cornmint Oil Redistilled M07595 & Cornmint Oil Tri-rectified M08377
|Colgate Subsidiary||CP Global (Excluding India)||CP Global (Excluding India)|
|Delivery at||FIZW at Mannur/Vallarpuram
Village, Sirperumbudur Taluka,
|FTZW at Mannur/Vallapuram Village, Sriperumbudur Taluka, District
Kanchipuram, TN 602 105
|Utexam Logistics Limited||Utexam Logistics Limited|
|Product Name||Cornmint Oil Redistilled (M07595)||Cornmint Oil Tri-rectified M08377|
|Quantity in Kilogram||43,200 Kg||28,800 Kg|
|Inco Term||Delivered at FTZ Warehouse||Delivered at FTZ Warehous|
|Price||USD $ 18.8 per Kg||USD $ 20.4 per Kg|
|Payment Terms||Within 45 days from receipt of goods at FTZW||Within 45 days from receipt of goods at FTZW|
|Palletized Load||Yes (Please refer Pallet Specification attached)||Yes (Please refere Pallet Specification attached)|
|Lot Size||7,200 -14,400 Kg/8,000 – 16,000 Kg||7,200 -14,400 Kg/8,000 – 16,000 Kg|
|Packing||New Gl Drum of 100 Kg/200Kg capacity each||New Gl Drum of 100 Kg/200Kg capacity each|
|Delivery at FTZW||Delivered within 2 months from BAL Date||Delivered within 2 months from BAL Date|
|Name of the Commercial entity||Jindal Drugs Pvt. Ltd.||Jindal Drugs Pvt. Ltd.|
|Shelf Life||Minimum 3 years||Minimum 3 Years|
8. The terms and conditions at clause 2 and 10 of the Purchase Order, require the manufacturing facility of the petitioner to be approved by the ultimate beneficiary, Colgate and to this effect, state as follows:
2. Your Manufacturing location is Taloja, India.. Any change in Manufacturing Location will have to be approved by Colgate well in advance. GMP and Technical compliance is a must in order to maintain supply continuity.
11. Colgate reserves the right to withdraw or terminate the award at any time in case of non-compliance to delivery schedules, quality issues on specifications, contamination and off-standard/damaged packaging.
9. Apart from Purchase Order Nos.84/85 dated 27.02.2019 and 93/94 dated 10.04.2018, Tax invoices dated 03.04.2018, 06.04.2018, 08.05.2019 and 01.06.2019 (filed as sample invoices) reveal that Jindal Drugs Private Limited, the petitioner herein, the The manufacturing location has its facility at Taloja, Maharashtra, the invoice has been drawn on UTEXAM at Ireland and supply of the consignment is to DHL Logistics, which is a Free Trade Warehousing Zone (FTWZ).
10. Statements of Bank Realisation Certificate (BRC) dated06.2018 od Citi Bank NA, Mumbai ICG Branch have also been placed on record evidencing receipt of consideration in US dollars in relation to the exports made. The application filed under MEIS Scheme contains, among various other particulars, the shipping bill details as follows:
DIRECTORATE GENERAL OF FOREIGN TRADE 44
Merchandise Exports From India Scheme – E-COMMERCE VERSION ANF 3A
Similar details in regard to shipping bills accompany the other two applications as well.
11. Upon a comparison of the above details contained in the bills of export of goods under which the petitioner has claimed duty drawback, with the bills of the parties to the transaction, I find that the numbers and date tally. It is thus clear that the export documents have been executed by the petitioner. The petitioner also confirms that the FTWZ has neither claimed nor been granted any benefit under MEIS Scheme in regard to the instant transactions. If at all such claims had been advanced, they would have been barred under the provisions of 3.06 (vii) of the policy note.
12. The impugned order reads thus:
OFFICE OF THE AUTHORISED OFFICER JMATADEE FREE TRADE ZONE (P) LTD., PERAMBAKKAM ROAD, MANNUR VILLAGE, VALARPURAM POST, SRIPERUMPUDUR, KANCHEPURAM DISTRICT, TAMIL NADU – 602 105
F.No: MEIS/jindal drugs/JMFTWZ/01/2018
M/s.Jindal Drugs P. Ltd.,
12-A, 12th floor, Baktawar,
229, Nriman Point, Mumbai – 400 021.
Sub: Registration of MEIS scrip No.0319191300 dt.10.10.2018 for Rs.4,41,870/- Reg.
Please refer to your letter dt – 04.07.2019 wherein this office was requested to register the abovementioned scrip. Also refer to the letter 4-7-19 wherein a request for issue of TRA was made.
It is submitted that a para 3.06 of the Foreign Trade Policy, which deals with the Ineligible categories under MEIS, it is clearly mentioned that:
“The following exports categories/sectors shall be ineligible for Duty Credit scrip entitlement under MEIS
(i) Supplied made from DTA units
(vii) Exports made by units in FTWZ.”
In your case it is observed that Supplies have been made from M/s.Jindal Drugs P Ltd. a DTA unit to M/s.DHL Logistics P Ltd on A/c of M/s.Utexam Logistics Limited, Ireland a foreign client. The exports have been made by DHL Logistics (P) Ltd which is in the FTWZ.
Hence it appears that such exports are ineligible for Duty Credit scrip under MEIS and hence the Original scrip along with its enclosures is returned herewith, without being registered in the FTWZ.
Yours faithfully, XXXX
13. Part II of Handbook of procedures, specifically paragraph 3.01 dealing with MEIS Scheme and clause (h) thereof, read as follows:
PART – II
Handbook of Procedures
Exports from India Schemes
(h) RA shall process the electronically acknowledged bills files and scrip shall be issued after due scrutiny of electronic documents. After scrutiny, if the officer has reasonable suspicion of wrong classification/mis-declaration in any application, in such cases officer may, after approval of this senior officer/Head of the Office, seek physical documents for scrutiny. On receipt of such documents, the officer must decide the claim within 7 working days. In cases, where the claim is rejected, a speaking order shall be issued.
14. The procedure set out for issuance of scrips is deemed to have been scrupulously adhered to by R3 and this is clear from a reading of clause (h) above. The presumption in Clause (h) is that the scrips should be issued only after due scrutiny and, upon the slightest suspicion that the claim may be unacceptable, the Officer has to call for physical documents and decide the fate of the claim by way of a speaking order, if rejected. The issuance of the scrip thus pre-supposes due application of mind by R3 to all relevant stipulations. Clause 3.06 which sets out ineligible categories must thus be assumed, not just to have caught the attention of R3 but to have been thoroughly examined, prior to issuance of the scrip.
15. Moreover, the provisions of Section 9(4) of the FTDRAct reads as follows:
9. Issue, suspension and cancellation of licence. –
The Director General or the officer authorised under sub-section (2) may, subject to such conditions as may be prescribed, for good and sufficient reasons, to be recorded in writing, suspend or cancel any licence granted under this Act: Provided that no such suspension or cancellation shall be made except after giving the holder of the licence a reasonable opportunity of being heard.
(5) An appeal against an order refusing to grant, or renew or suspending or cancelling, a licence shall lie in like manner as an appeal against an order would lie under section
16. A detailed procedure for cancellation of the scrips has been set out under Section 9(4) of the FTDR Act, extracted In the absence of this procedure having been invoked, the categoric presumption is that R3 continues to hold the view that the scrips are valid. Though R3 has been impleaded in the matter as early as on 1st October, 2019, it is only in the counter filed in May, 2021 that R3 has, toeing the line of the customs authorities, stated that the transaction is ineligible. The explanation put forth for non-cancellation by Mr.Chandrasekaran is that the matter was subjudice. Though this is hardly a convincing argument, I leave that at that.
17. The question of eligibility to the Scheme is fundamental to the prayer sought by the petitioner. Para 3.06 of the Scheme sets out seven categories of transactions/entities that would be ineligible for the benefits of MEIS. I have extracted the same at pargraph 5 of this order and do not repeat it again for the sake of brevity.
18. The first is, supplies effected by a Domestic Tariff Area (DTA) to a unit situated in a Special Economic Zone (SEZ), the second, export of imported goods covered under paragraph46 of the Free Trade Policy, third, exports through trans-shipment, i.e,. exports originating from elsewhere and routed to another destination through India, fourth, deemed exports, fifth, products of SEZ/EOU/EHTP/BTP/FTWZ exported through the DTA, sixth, exports which are subject to Minimum Export price or export duty and lastly, the seventh, exports made by units in SEZ. The first and last prohibitions are held against the petitioner.
19. Supplies made by a DTA unit to a SEZ unit would be paid for by the SEZ unit. In this case, admittedly, the consideration received is from Ireland, in US dollars. The BRC dated 29.06.2018 evidences this position.
20. Moreover, in this case, supply has been made by the petitioner to FTWZ for onward shipment at the behest of the purchaser, UTEXAM, to a location of its choice. This modus operandi is supported by the documentation placed on record by the petitioner.
21. Thus, DHL logistics, the FTWZ, merely offers a facility to the petitioner to warehouse its consignments that are to be exported. The destination is decided by UTEXAM, which is the ultimate purchaser, which has paid the petitioner in USD for the consignment. The stipulation in Clause (vii) deals with exports made by a unit in the FTWZ. DHL, the FTWZ does not export the consignments but only facilitates such exports. The exports are thus, by the petitioner through DHL to a destination abroad.
22. To a query as to why the transaction was so structured, the petitioner explains stating that the consignments in question were, purchases by UTEXAM on behalf of Colgate Palmolive for supply at any number of the units of the latter. As and when the destination is decided, DHL is intimated of the same and the consignments shipped to that destination.
23. The exports in this case have already taken place at the point when the petitioner executes the relevant documents and the consignments are stored in the FTWZ, awaiting confirmation of the destination. This would avoid the circuitous route of shipment to UTEXAM at Ireland, and then onward to a final destination accompanied by multiple transportation costs and logistical complications. The role of DHL in this transaction is that of a warehouse and nothing more. The concept of ‘ship to’ and ‘bill to’, as used in this case, has been recognised under the GST regime, as commercial compulsions dictate, that transactions are to be structured in the most economical and least cumbersome manner in terms of time, procedure and expense involved.
24. Dr. Babu, raises an objection to the maintainability of the Writ Petition stating that the impugned order is appealable. I, however, find no statutory redress provided as against the impugned order though there is one provided as against an order cancelling the scrips under the FTDR Act had such order been passed. This submission is thus rejected.
25. The interpretation put forth by the petitioner is accepted, the impugned order is set aside and this Writ Petition No costs. Connected Miscellaneous Petitions are closed.
26. The scrips are for the months of May, October and June, 2018 with a validity of two years expiring on 27.05.2020, 09.10.2020 and 12.06.2020. These Writ Petitions have been filed on 19.06.2019 when the scrips were alive and current. Thus, in order to effectuate the relief granted now, there is a consequential direction to R3 to re-validate scrips bearing No.0319167227 dated 28/05/2018 for Rs.45,03,800.00 (scrip No.1), No.0319191300 dated 10/10/2018 for Rs.4,41,870/- (scrip No.2) and No.0319170001 dated 13/06/2018 for Rs.16,31,840/- (scrip No.3) and extend the same for the duration of the pendency of these Writ Petitions. The TRAs will be issued immediately thereafter and the aforesaid exercise will be carried out within a period of four (4) weeks from today.