2010 (10) TMI 896 - HC - Customs

EPCG Scheme - import of second-hand machinery - petitioner s application for grant of licence under EPCG scheme rejected - EPCG licence on provisional basis issued and called for the petitioner to submit an undertaking to the effect that in the event of the authority at the Headquarters/1st respondent not concurring with the decision to allow import of second-hand capital goods of Indian origin under EPCG Scheme the petitioner would pay 100% of duty saved amount together with 15% interest thereon from the date of import of capital goods - petitioner willingly submitted an undertaking to that effect - higher authorities viz. Respondent Nos. 1 and 2 declined for grant of EPCG licence as it goes contra to the policy circulars of the Government and the clarifications contained therein - letter requesting the petitioner to pay duty with 15% interest immediately to the customs authorities and to furnish the copy of challan Held that - petitioner-firm ought to have instructed the Bank to allow the Customs Department to invoke the bank guarantee. The petitioner instead of doing so seemingly with a sole view to evade the duty payable to the Exchequer initiated the present proceedings invoking the writ jurisdiction. This Court does not deem it just and proper to go into the validity or otherwise of the impugned order for the mere reason that the petitioner-firm cannot even challenge the same as they themselves satisfied over grant of a provisional EPCG Licence with a clear written undertaking on their part in a stamp paper as mentioned above and subsequently enjoyed the benefits of the provisional EPCG licence by clearing the imported goods. Under such circumstances the Department is perfectly justified in invoking the Bank Guarantee so as to recover the customs duty due from the petitioner after rejection of their request by the Headquarters Writ Petition is dismissed as devoid of merits

Summary

Issues:
1. Rejection of EPCG license application for importing second-hand machinery of Indian origin.
2. Interpretation of Foreign Trade Policy regarding import of second-hand capital goods.
3. Legal validity of rejecting EPCG license and invoking Bank Guarantee.

Issue 1: Rejection of EPCG license application
The petitioner's application for an EPCG license to import second-hand machinery of Indian origin was initially rejected by the 2nd respondent. Despite an appeal, the 3rd respondent provisionally issued the license with conditions, including an undertaking to pay duty saved amount with interest if the Headquarters disagreed with the decision. However, the license was ultimately rejected by the higher authorities, leading to the impugned order dated 4-7-2005. The petitioner was then directed to pay duty with interest immediately, and the Bank Guarantee was to be invoked. The petitioner challenged these actions through a writ petition.

Issue 2: Interpretation of Foreign Trade Policy
The petitioner argued that the policy circular dated 15-7-2005, prohibiting the import of second-hand capital goods of Indian origin under the EPCG Scheme, should not apply retrospectively. They contended that the Foreign Trade Policy allowed the import of second-hand capital goods without age restrictions. The respondents, however, maintained that the policy circular was clarificatory and had not been withdrawn. They cited previous circulars supporting the restriction on Indian origin goods. The Court analyzed the sequence of events and found that the petitioner had accepted the provisional license and undertaken to pay duty, thus lacking the standing to challenge the subsequent rejection based on policy clarifications.

Issue 3: Legal validity of rejecting EPCG license and invoking Bank Guarantee
The Court noted that the petitioner had willingly accepted the provisional license and agreed to the conditions, including paying duty with interest in case of rejection by the Headquarters. As the petitioner did not challenge the rejection earlier and enjoyed the benefits of the provisional license, the Court found their challenge to be without merit. The Court dismissed the writ petition, stating that the Department was justified in invoking the Bank Guarantee to recover the customs duty owed by the petitioner.

In conclusion, the Court dismissed the writ petition, emphasizing that the petitioner had accepted the provisional license and undertaken to pay duty, making their challenge invalid. The Court allowed the Department to proceed with invoking the Bank Guarantee for duty recovery in accordance with the law.