2022 (11) TMI 353 - HC - Customs

Denial of exemption from Basic Customs Duty to goods imported by the Transferees under Transferrable Duty Free Import Authorisation (DFIA) - Seeking initiation of appropriate action against their erring Officers who have failed to deny exemption from Basic Customs Duty to goods imported by the Transferees under Transferrable Duty Free Import Authorisation (DFIA) - non-fulfilment of condition contained in first proviso to condition (iii) of the Custom Notification No.19 of 2015 and/or issued Transferrable DFIAs contrary to the provisions and spirit of Foreign Trade Policy. HELD THAT - The petitioner cannot seek any action against the officers of the respondents who have reasonably construed the provisions of the FTP or the conditions of the Notification as per the plain language thereof. What petitioner seeks is to read into the provisions of FTP namely in Paragraphs 4.12(i) and 4.12(ii) and also in the first proviso to Condition (iii) of the Customs exemption notification, further words namely the same quality, technical characteristics and specification , which are specifically omitted. Such beneficial DFIA scheme which is intended for export promotion, cannot be construed in such manner as suggested by the petitioner. Such recourse would be ex facie erroneous and illegal. It is amply clear that whereas these further words i.e. same quality, technical characteristics and specification are categorically used in Paragraph 4.30 of FTP and also in the second proviso to the condition (iii) of the Customs Notification No.19 of 2015, however they are absent in Paragraph 4.12 of FTP and also in first proviso to condition (iii) of the said Customs Notification. These further words i.e. same quality, technical characteristics and specification cannot be read in Paragraph 4.12and also in first proviso to condition (iii). These further words would apply only while making declaration in shipping bills in respect of sensitive inputs specified in Paragraph 4.30 of FTP, while issuing DFIA in respect of such specified sensitive inputs, or while duty free import of such specified sensitive items under such DFIA to establish close nexus with the specified sensitive inputs used. Neither the officers nor any Transferee of a transferrable DFIA issued by the office of DGFT can be subjected to any of the impediments as suggested by the petitioner in the garb of public interest. The officers of the respondents are rightly complying with these binding precedents. Neither the officers of the respondents can be proceeded against for complying with the provisions and notification while following such binding precedents, nor can a Original Licence Holder or a Transferee can be denied issuance of any DFIA or exemption under a Transferrable DFIA by subjecting them to any such unintended onerous condition or declaration, direction for which are sought in the petition - no action is warranted against the officers of the respondent-Union of India even on prima facie basis. The PIL is liable to be dismissed.

Issues Involved:
1. Failure to deny exemption from Basic Customs Duty under DFIA despite non-fulfillment of conditions.
2. Issuance of Transferrable DFIAs contrary to Foreign Trade Policy.
3. Interpretation of the condition (iii) of Custom Notification No.19 of 2015.
4. Application of quality, technical characteristics, and specifications in DFIA.
5. Alleged revenue leakage due to improper application of DFIA conditions.
6. Validity of past judgments and precedents regarding DFIA.

Detailed Analysis:

1. Failure to Deny Exemption from Basic Customs Duty under DFIA Despite Non-fulfillment of Conditions:
The petitioner argued that the officers of the respondent-Union of India have failed to deny exemption from Basic Customs Duty to goods imported under Transferrable DFIA, despite non-fulfillment of the condition contained in the first proviso to condition (iii) of Custom Notification No.19 of 2015. The petitioner contended that the officers did not enforce the requirement of establishing a close nexus for the quality, technical characteristics, and specifications of the imported material and the material used in the export product, leading to revenue leakage.

2. Issuance of Transferrable DFIAs Contrary to Foreign Trade Policy:
The petitioner sought directions for the respondents to initiate action against officers who issued Transferrable DFIAs contrary to the provisions and spirit of the Foreign Trade Policy. The petitioner emphasized that the officers should restrict duty-free import entitlement under any Transferrable DFIA already issued, only as per specific material actually used with declared quality, technical characteristics, and specifications, notwithstanding Paragraph 4.27(i) of FTP and the Standard Input Output Norms.

3. Interpretation of Condition (iii) of Custom Notification No.19 of 2015:
The subject condition (iii) for exemption from Basic Customs Duty under Custom Notification No.19 of 2015 specifies that the description, value, and quantity of materials imported must be mentioned in the authorization and within specified limits. The petitioner argued that the first proviso to condition (iii) should be read to include quality, technical characteristics, and specifications, similar to the second proviso which applies to sensitive inputs specified in Paragraph 4.30 of FTP.

4. Application of Quality, Technical Characteristics, and Specifications in DFIA:
The court clarified that the words "same quality, technical characteristics and specification" are categorically used in Paragraph 4.30 of FTP and the second proviso to condition (iii) of the Customs Notification No.19 of 2015, but are absent in Paragraph 4.12 of FTP and the first proviso to condition (iii). Therefore, these further words cannot be read into Paragraph 4.12 and the first proviso to condition (iii). The requirement of declaring these particulars applies only to sensitive inputs specified in Paragraph 4.30.

5. Alleged Revenue Leakage Due to Improper Application of DFIA Conditions:
The petitioner contended that the officers' failure to apply the provisions and conditions with a restrictive meaning resulted in significant revenue leakage. The court found no merit in this contention, stating that the officers reasonably construed the provisions of the FTP and conditions of the Notification as per the plain language thereof.

6. Validity of Past Judgments and Precedents Regarding DFIA:
The petitioner cited judgments from various High Courts and Tribunals which construed the DFIA Scheme contrary to the petitioner's contentions. The court referred to the judgment of the Hon'ble Allahabad High Court in Sachin Pandey vs. UOI and the judgment of the Bombay High Court in Shah Nanji Nagsi Exports Pvt. Ltd. vs. UOI, which upheld the current interpretation of the DFIA Scheme. The court found no reason to deviate from these precedents and dismissed the petitioner's arguments.

Conclusion:
The court concluded that the contentions and prayers of the petitioner were without merit. The officers of the respondents reasonably construed the provisions of the FTP and conditions of the Notification. The court dismissed the PIL, stating that no action was warranted against the officers of the respondent-Union of India, and upheld the validity of past judgments and precedents regarding the DFIA Scheme.

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