2020 (2) TMI 1453 - HC - Customs

Imposition of Fiscal Penalty - supplies made by the petitioner to SEZ - fulfilment of conditions of the license by importing the capital goods at concessional rate of Customs Duty in violation of Exim policy or not - fulfilment of export obligation or not - Rule 23 of the SEZ Rules 2006 - HELD THAT - The appellant was required to follow the Handbook of Procedures. Therefore since the paragraph 5.13(b) of the Hand Book of Procedures governs the procedure for the fulfilment of the export obligations under of Chapter 5 of the EPCG scheme the supply to the Nokia SEZ shall be governed by para 5.13(b) - in light of para 5.13(b) of the HBP the appellant has fulfilled its export obligation as mandated by the EPCG scheme. It is trite that when a method has been laid down has laid down it necessarily prohibits the doing of the act in any other manner than that which has been prescribed and thus the mandate of submission of the Bills of Entry cannot sustain - In Taylor v. Taylor as notably followed in Nazir Ahmed v. King Emperor 1936 (6) TMI 11 - PRIVY COUNCIL and a plethora of judgments of the Supreme Court the most well-known being perhaps State of Uttar Pradesh v. Singhara Singh 1963 (8) TMI 43 - SUPREME COURT conclude the issue in law in favour of the appellants. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Challenge to order passed by DGFT in review application under FTDR - Appellant's import under EPCG scheme - Discharge of export obligation - Show cause notices for fiscal penalty - Appellant's responses and submissions - Rejection of appeal by Additional DGFT - Review by DGFT - Impugned orders before Learned Single Judge - Appeal against judgment.

Analysis:
The appellant, a license holder under the EPCG scheme, imported capital goods in 2005 with an export obligation to be fulfilled before license expiry in 2013. Subsequently, a Product Purchase Agreement was entered into with Nokia India Pvt. Ltd., leading to consignments supplied to Nokia SEZ. Post license expiry, show cause notices were issued regarding export obligation fulfillment and import violations. Appellant responded with evidence of export fulfillment, including certificates and letters. However, DGFT imposed fiscal penalty based on insufficient evidence.

The appellant contended that supplies to Nokia SEZ constituted deemed exports under SEZ Rules and Handbook of Procedures, fulfilling export obligations. The appellant submitted supply invoices and bank realization certificates as evidence of export fulfillment. The appellant argued against the requirement of bills of export, citing the Handbook of Procedures.

The respondent's counsel agreed with the appellant's reasoning, acknowledging the fulfillment of export obligations. The Court analyzed the conditions of the EPCG authorization and concluded that the appellant had complied with the Handbook of Procedures, specifically para 5.13(b), governing export obligation fulfillment. Citing legal principles prohibiting acts not done in prescribed manners, the Court quashed the Single Judge's order, allowing the appeal.

In light of the appellant's compliance with SEZ Rules and Handbook of Procedures, the Court found the export obligations fulfilled. Relying on established legal principles, the Court set aside the Single Judge's order, emphasizing the necessity of adherence to prescribed methods in statutory provisions. The appeal was allowed, overturning the judgment against the appellant.