2013 (10) TMI 903 - HC - Customs

Calculation under export obligation - Benefit of Policy circular No.8 (RE-98)/98-99 - impact of foreign exchange fluctuation - devaluation of rupee - Export obligation against EPCG licence - Held that - the export obligation in the licence dated 18th March, 1991, as amended on 3rd February, 1992 is stated in US i.e. US 11,600,459. No equivalent value in rupees is stated - The Government had specifically mentioned the export obligation in the foreign currency which was calculated on the basis of the US Dollar rate prevalent as of that date. Since the Government s scheme was to earn foreign exchange, it ensured that the export obligation was specifically mentioned in the requisite foreign currency. It is noteworthy that the export obligation is spread over a period of 4 to 8 years and conversion of export obligation based on exchange rate on the date of export i.e. after such a long period would be unreasonable in view of the sharp fluctuation in the currency values and continued depreciation of the Indian rupee vis- -vis the US Dollar - policy circular No.8 (RE-98)/98-99, dated 28th May, 1998 was not applicable with retrospective effect especially for an export obligation for which the last shipment was stated to have been made on 14th September, 1995. Therefore the appellant cannot claim any benefit under the said circular. Notably, in any case, the said circular also stipulated that the export proceeds realized in any currency would be converted into USD and the term any currency would refer to the foreign currency realized through exports, since the aim of the scheme was to promote foreign exchange earnings in fully convertible currency. Subsequent de-valuation of the rupee cannot come to the aid of the appellant - Decided against assessee.

Summary

Issues Involved:
1. Calculation of export obligation under the EPCG Scheme.
2. Exchange rate to be used for computing export obligation.
3. Validity of the respondent's communication requiring resubmission of export statements.
4. Applicability of policy amendments and circulars.

Detailed Analysis:

1. Calculation of Export Obligation Under the EPCG Scheme:
The appellant challenged the order of the learned Single Judge, which rejected their plea for using the exchange rate prevailing on the date of the license issuance under the EPCG Scheme for computing export obligation. The appellant was granted permission to import machinery at a concessional duty rate, with an obligation to export goods worth three times the CIF value of the imported capital goods. The license issued on 18th March 1991 required the appellant to fulfill an export obligation of US$ 11,600,459, calculated as three times the CIF value.

2. Exchange Rate to be Used for Computing Export Obligation:
The appellant argued that the export obligation should be calculated based on the exchange rate prevailing on the date of license issuance. They contended that the fluctuating exchange rates should not affect their obligation, as it would be unfair and onerous. However, the respondent maintained that the export obligation was to be fulfilled in USD, as noted on the license, and any devaluation of the rupee should not benefit the appellant. The learned Single Judge agreed with the respondent, stating that the export obligation was fixed in USD and must be discharged in freely convertible currency, irrespective of exchange rate fluctuations.

3. Validity of the Respondent's Communication Requiring Resubmission of Export Statements:
The appellant sought to quash the respondent's communication dated 23rd October 2001, which required resubmission of the export statements. The respondent argued that the appellant was attempting to mislead by converting export values based on the exchange rate at the time of export rather than the rate at the time of license issuance. The learned Single Judge upheld the respondent's position, noting that the export obligation was clearly stated in USD on the license and the appellant's method of calculation was incorrect.

4. Applicability of Policy Amendments and Circulars:
The appellant cited an amendment to the policy dated 28th May 1998, which stated that export proceeds realized in any currency should be converted into USD at the exchange rate prevailing on the date of license issuance. However, the court found that this circular was not applicable retrospectively to the appellant's case, as their last shipment was made on 14th September 1995. The court emphasized that the policy aimed to earn foreign exchange in fully convertible currency and the appellant could not benefit from the subsequent devaluation of the rupee.

Conclusion:
The court dismissed the appeal, finding no merit in the appellant's arguments. The detailed reasoning of the learned Single Judge was upheld, emphasizing that the export obligation was fixed in USD and must be fulfilled in freely convertible currency, irrespective of exchange rate fluctuations. The court also noted that policy amendments and circulars cited by the appellant were not applicable retrospectively.