2014 (4) TMI 946 - HC - Customs

Refund of amount recovered Invocation of Bank guarantee - Discharge of Export Obligation - Free shipping bills and DEEC Shipping bills - Held that - From the order passed by the first respondent and the Appellate Authority, it is clear, the bills produced by assessee are free shipping bills and not DEEC Shipping bills - Unless aseessee discharges his export obligation and produces discharge certificate from the competent authority, the petitioner cannot contend that Bank guarantee cannot be invoked According to Paras 4.25 and 4.26 of the Handbook the license holder shall furnish EP copy of shipping bill(s) containing details of shipment effected or bills of export in case of export to SEZ - Before discharging BG/LUT against physical exports, the Customs shall verify that the details of the exports as given in the Redemption Certificate are as per their records. Assessee sought for conversion of free shipping bills into DEEC Shipping bills that has not been granted Thus, Respondents 1 and 2 have invoked the Bank guarantee - As the Bank guarantee has already been invoked, it may not be appropriate to direct the Respondents 1 and 2 to refund the amount unless the petitioner produces the discharge certificate from the competent authority regarding discharge of export obligation - As and when the petitioner produces the discharge certificate, the Respondents 1 and 2 may consider refund of the amount which has been realised by invoking the Bank guarantee Decided against assessee.

Issues:
1. Invocation of Bank guarantee by Respondents 1 and 2.
2. Fulfillment of export obligation by the petitioner.
3. Conversion of free shipping bills into DEEC shipping bills.
4. Legal validity of invoking Bank guarantee without demand.
5. Applicability of duty exemption/remission scheme.

Analysis:

1. Invocation of Bank guarantee by Respondents 1 and 2:
The petitioner sought a writ of mandamus to direct Respondents 1 and 2 to refund Rs. 2,17,41,000, recovered through Bank guarantee issued in 2013. The Court noted that the Bank guarantee was invoked due to the petitioner's failure to convert free shipping bills into DEEC shipping bills. The Court emphasized that unless the petitioner produces a discharge certificate proving export obligation fulfillment, the Bank guarantee invocation was justified.

2. Fulfillment of export obligation by the petitioner:
The petitioner claimed to have fulfilled its export obligation by exporting EDC terminals under an advance license. However, discrepancies in the shipping bills led to rejection of the request for conversion. The Court highlighted the importance of providing proper documentation and discharge certificates to prove fulfillment of export obligations before seeking refund of the invoked Bank guarantee amount.

3. Conversion of free shipping bills into DEEC shipping bills:
The petitioner's request to convert free shipping bills into DEEC shipping bills was denied by authorities, leading to the invocation of the Bank guarantee. The Court emphasized that without meeting the necessary requirements, such conversion cannot be granted, and the Bank guarantee was rightfully invoked in the absence of proper documentation.

4. Legal validity of invoking Bank guarantee without demand:
The petitioner argued that the Bank guarantee was illegally invoked without a valid demand. However, the Court held that in cases where export obligations are not met as per scheme requirements, the invocation of Bank guarantees can be justified, as seen in the present situation where the petitioner failed to convert shipping bills as required.

5. Applicability of duty exemption/remission scheme:
The Court referred to the duty exemption/remission scheme guidelines, emphasizing the need for license holders to furnish proper documents, including shipping bill copies, to prove export obligation fulfillment. The Court highlighted the importance of following the scheme requirements and obtaining necessary certificates before seeking relief or refund of amounts recovered through Bank guarantees.

In conclusion, the Court dismissed the writ petition, stating that unless the petitioner provides a discharge certificate from the competent authority regarding export obligation fulfillment, the refund of the amount recovered through the invoked Bank guarantee cannot be directed. The judgment underscores the significance of adhering to scheme guidelines and fulfilling obligations before seeking legal remedies.

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