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2015 (1) TMI 934 - HC - CustomsConstitutional validity of circular dated 4th March, 2013 - Ultra vires to Articles 14 & 19(1)(g) of the Constitution of India and/or Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 - show cause notice was issued alleging that assessee were not eligible for availing Cenvat Credit in respect of the storage and warehousing charges of the Acetic Acid on the ground that part of Acetic Acid was also traded by the petitioners, and trading being an exempt service, the Cenvat Credit was not eligible. - Suppression of facts - Invocation of larger period - Imposition of penalty. Held that - A bare perusal of the circular would reveal that it prescribed revised norms for execution of bond and bank guarantee under Advance License and EPCG Schemes. It expressly refers to the Foreign Trade Policy and the exemptions thereunder in favour of such exporters who have export turn over of at least ₹ 5 Crores. The hand book of procedures has been referred to and in cases of direct import, before clearance of goods through customs, licence holder shall execute a legal undertaking / bank guarantee with the Customs Authority in the manner as may be prescribed by them. In the light of the policy provisions (FTP) the issue regarding execution of bonds / bank guarantee under the aforementioned schemes was reviewed by the Board and in supersession of the earlier circular, the circular dated 21st October, 2004 was issued. Revised norms could have been prescribed by the Board, namely, Central Board of Excise and Customs for the purpose of furnishing bond and bank guarantee under the schemes. Para 3.1 of this circular refers to the Star Export House. The bank guarantee exemption in para 3.1 is admissible subject to the conditions stipulated in this circular and para 3.2(c) further stipulates that the license holder should not have been penalized under the provisions of the Customs Act, 1962 and the Central Excise Act, 1944. Further, every misuse of Advance License scheme dis-entitles the holder of the license from availing of the benefits and privileges. Thus, consistent with the stipulations and the conditions in the Foreign Trade Policy the norms have been prescribed and revised and which always stipulated that the benefits or bank guarantee exemption is admissible subject to the license holder not being proceeded or penalized under the Central Excise Act, 1944. Circular further revised the norms and which have been prescribed by the earlier circular dated 21st October, 2004 which itself came to be amended by circular No.17/2009 and 32/2009. It was further amended by circular No.6/2009 dated 18th January, 2011. The last amendment and which has been put in issue before us contained in para 3.2(c) is now notified by the Central Board of Excise and Customs vide this circular of 4th March, 2013. It has been stated that prior to the issuance of the amended circular of 2011 one of the explicit criteria for denying benefit to the license order is that license holder should not have been penalized. However, the issue of penalty imposed for technical offences had arisen. Therefore an affidavit was insisted from the license holder with regard to the offences recorded as other than technical offences and for which the said license holder had been booked during the three previous financial years. If that was revealed then in cases of such violations benefit of exemption from bank guarantee should not be extended. Attention of the Board was invited by Exporters Trade Association s and Field Forming to the fact that by these amendments the benefit of availing of bank guarantee will be denied even before the show cause notice imposing penalty has been adjudicated. That is how the Board reviewed the matter and it restored the position prior to issuance of the circular No.6/2011 dated 18th January, 2011. When larger public interest is sought to be sub-served by denying exemption to such Advance License holders from the condition of furnishing of bank guarantee that we are of the opinion that the mandate enshrined in Articles 14 & 19(1)(g) of the Constitution of India has not been violated. The benefits are under the export promotions / reward schemes and which finds recognition in the Foreign Trade Policy as well. When the Foreign Trade Policy and consistent therewith the Board circulars aim at not giving any privileges, special status and exemptions to the category of persons who are proceeded against for violations or breaches of the aforementioned enactments then the insistence by the Commissioner on the petitioners furnishing a Bank guarantee of 25% vide communication dated 9th December, 2014, cannot be faulted. We do not think and as a result of the discussion that the Foreign Trade Policy has been amended or overridden by any stipulations in the Customs Department circular or the communication impugned in the present Writ Petition. Far from taking such a stand or step the Customs authorities have acted consistent with both the Foreign Trade Policy and the Foreign Trade Act, 1992. The mandate of both Acts, namely, Foreign Trade Act and the Customs Act, 1962 do not favour grant of any exemptions or special privileges to those who have been penalized or proceeded against or booked for cases which are referred to in para-4 of the circular / notification dated 4th March, 2013. - Decided against petitioners.
Issues Involved:
1. Validity of the circular dated 4th March, 2013. 2. Compliance with Articles 14 and 19(1)(g) of the Constitution of India. 3. Compliance with Section 5 of the Foreign Trade (Development and Regulation) Act, 1992. 4. Authority of the Customs Department to amend the Foreign Trade Policy. 5. Requirement of furnishing a bank guarantee by the petitioners. Detailed Analysis: Validity of the Circular Dated 4th March, 2013: The petitioners challenged the circular dated 4th March, 2013, which amended the earlier circular dated 21st October, 2004. The impugned circular revised norms for execution of bank guarantees under Advance Authorization (AA), Duty Free Import Authorization (DFIA), and Export Promotion Capital Goods (EPCG) schemes. The petitioners argued that this circular imposed unreasonable restrictions on their fundamental rights and was discriminatory. The court noted that the circular was issued to ensure compliance with the Customs Act, 1962, and the Central Excise Act, 1944, and aimed to prevent misuse of the Advance License scheme. The court found that the circular was consistent with the Foreign Trade Policy and did not violate any statutory provisions. Compliance with Articles 14 and 19(1)(g) of the Constitution of India: The petitioners argued that the circular violated Articles 14 and 19(1)(g) of the Constitution of India, which guarantee equality before the law and the right to practice any profession or to carry on any occupation, trade, or business. The court held that the circular did not violate these constitutional mandates. It was noted that the circular aimed to serve larger public interest by denying exemptions to those who were penalized for violations of the Customs Act and the Central Excise Act. The court found that the circular did not impose unreasonable restrictions and was not discriminatory. Compliance with Section 5 of the Foreign Trade (Development and Regulation) Act, 1992: The petitioners contended that the circular was ultra vires to Section 5 of the Foreign Trade Act, which empowers only the Central Government to amend the Foreign Trade Policy. The court observed that the circular did not amend the Foreign Trade Policy but merely prescribed norms for execution of bank guarantees, which was within the powers of the Customs authorities under the Customs Act, 1962. The court held that the circular was consistent with the Foreign Trade Policy and did not override it. Authority of the Customs Department to Amend the Foreign Trade Policy: The petitioners argued that the Customs authorities were not empowered to amend the Foreign Trade Policy. The court clarified that the Customs authorities did not amend the Foreign Trade Policy but issued the circular to prescribe norms for execution of bank guarantees under the schemes. The court held that the Customs authorities acted within their powers under the Customs Act, 1962, and the Foreign Trade Policy recognized the authority of the Customs Department to prescribe such norms. Requirement of Furnishing a Bank Guarantee by the Petitioners: The petitioners were required to furnish a bank guarantee equal to 25% of the duty amount for clearance of consignments under Advance Licenses. The petitioners argued that they were exempt from furnishing bank guarantees as per the Foreign Trade Policy. The court noted that the petitioners were penalized for violations under the Central Excise Act, 1944, and the Customs Act, 1962. The court held that the exemption from furnishing bank guarantees was conditional and not applicable to those who were penalized for such violations. The court found that the requirement of furnishing a bank guarantee was justified and consistent with the circular and the Foreign Trade Policy. Conclusion: The court dismissed the Writ Petition, holding that the circular dated 4th March, 2013, was valid and did not violate the constitutional mandates or the Foreign Trade Act. The court upheld the requirement of furnishing a bank guarantee by the petitioners and found no merit in the petitioners' contentions. The rule was discharged with no order as to costs.
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