2014 (9) TMI 219 - HC - Customs

Reduction in the value of entitlement for Advance Authorization - the petitioner, as contended, holding there status of a two star export house, was exempt from furnishing Bank Guarantees in respect of any scheme under the Foreign Trade Policy - It was further submitted that the petitioner was entitled to an Advance Authorization equivalent to 500% of the FOB and/or FOR value of the preceding year s export. - Held that - in terms of paragraph 4.7.1 of the Handbook of Procedures the correct value of Advance Authorization would be five times the export declared by the petitioner i.e. ₹ 38,83,52,050. Therefore, in so far as the impugned communication reflects the petitioner s entitlement to be ₹ 38,83,52,050/-, the same cannot be faulted. - Decided against the assessee. The reference made by the learned counsel for the petitioner to Rule 8 of the Foreign Trade (Regulation) Rules, 1993 which provides for amendment of any licence to rectify any error or omission therein is misplaced. Admittedly, no such application for amendment of the Advance Authorization was made by the petitioner. The DGFT could also not be expected to sou moto make any amendment in the Advance Authorization which had been issued to the petitioner; the necessary figures of exports for making such amendment had also not been furnished by the petitioner along with its application. Given the scheme of the FT(D&R) Act, the Foreign Trade Policy and the role of DGFT, the Handbook of Procedures as notified by the DGFT is to specify the procedure for the purpose of carrying out the policy as formulated by the Central Government. Since the Foreign Trade Policy expressly provides that a status holder will have the privilege of exemption from providing a Bank Guarantee in respect of any scheme, the Handbook of Procedures - which is for providing the procedure in aid of the Foreign Trade Policy - cannot impose a condition which militates against the said Policy. - no need to furnish any bank guarantee - decided in favor of assessee.

Summary

Issues Involved:
1. Entitlement to Advance Authorization value.
2. Requirement for furnishing Bank Guarantees by a Two Star Export House.

Detailed Analysis:

1. Entitlement to Advance Authorization Value:

The petitioner, a two-star export house, challenged the communication dated 31.05.2013 from the Additional DGFT, which limited its Advance Authorization entitlement to Rs. 38,83,52,050/- instead of Rs. 77,03,73,810/- (USD 1,54,07,476.20). The petitioner argued that it was entitled to a higher value based on the exports of the preceding year (2011-12), and the reduction was unjustified. The court examined the relevant provisions of the Foreign Trade Policy and the Handbook of Procedures. According to paragraph 4.7.1 of the Handbook of Procedures, a status holder is entitled to Advance Authorization of 500% of the FOB value of the preceding year's exports. The petitioner applied for Advance Authorization on 14.03.2012, making 2010-11 the relevant preceding year. The exports for 2010-11 were Rs. 7,76,70,410/-, making the correct value of Advance Authorization Rs. 38,83,52,050/-. The court found the impugned communication reflecting this entitlement to be correct and not faulty.

2. Requirement for Furnishing Bank Guarantees by a Two Star Export House:

The petitioner contended that as a two-star export house, it was exempt from furnishing bank guarantees under any scheme of the Foreign Trade Policy. The respondents argued that under paragraph 4.7.3 of the Handbook of Procedures, an authorization exceeding the entitlement required a 100% bank guarantee to Customs Authorities. The court examined the Foreign Trade Policy, which provides privileges to status holders, including exemption from furnishing bank guarantees (paragraph 3.10.4(v)). The court noted that the Handbook of Procedures, which specifies the procedure for implementing the Foreign Trade Policy, cannot impose conditions contrary to the policy. The requirement for a bank guarantee under paragraph 4.7.3 of the Handbook of Procedures was found repugnant to the privilege granted under the Foreign Trade Policy. The court resolved this repugnancy in favor of the Foreign Trade Policy, disregarding the condition imposed by the Handbook of Procedures.

Conclusion:

The court set aside the impugned communication to the extent it required the petitioner to submit the Advance Authorization for endorsement of the Bank Guarantee condition, allowing the petition to this extent. The petition and application were disposed of without any order as to costs.