2018 (3) TMI 290 - HC - Customs

Deliver/release of the outstanding quantities of replenishment gold pertaining to seven exports made by the petitioner under the Replenishment Scheme of the Foreign Trade Policy 2015 -2020 - what the petitioner is seeking is a benefit in terms of the policies which the competent authorities framed under the Foreign Trade (Development and Regulation) Act, 1992. Held that - we do not see how the third respondent and which apprehends any action being taken against it by the competent authorities and particularly respondent Nos.1 and 2 can, in the facts and circumstances peculiar to this case, insist on the furnishment of a Bank Guarantee only. We have noted that Fixed Deposit or Bank Guarantee is a condition which has been insisted upon initially from the letter dated 27 1 2017, addressed by the third respondent. In that letter, the third respondent says that the petitioner has been supplied gold under the Replenishment Scheme till date. However, the transactions under the scheme are currently under investigation by the Central Government Agencies. In the circumstances, the third respondent would consider the supply of gold under the said scheme subject to the petitioner providing a Fixed Deposit/Bank Guarantee towards the customs duty. This will be used as a cover for the third respondent s liability under the Bond and the Bank Guarantee, except on duty free gold to be supplied to the petitioner. The third respondent stated that the security would be discharged on release of the Bond and the Bank Guarantee by the Customs authorities. It was clarified that the third respondent supplies gold as replenishment of the quantity of gold jewellery exported and it has no relation to the percentage of customs duty of gold being sold in the market. As such the third respondent is not liable for any change in customs duty or incidental losses/gains. Interest of justice would be served if the petitioner executes an Indemnity Bond, indemnifying respondent No.3 against all the claims that would be raised by the competent authorities in the Central Government and exercising powers under the Customs Act, 1962, the Central Excise Act, 1944 and the FTDR Act, 1992 - petition disposed off.

Issues Involved:
1. Entitlement to Replenishment Gold
2. Requirement of Security for Replenishment
3. Compliance with Foreign Trade Policy (FTP) and Related Notifications
4. Investigation by Central Government Agencies
5. Alternative Remedies and Jurisdiction
6. Indemnity Bond as an Alternative to Security

Detailed Analysis:

1. Entitlement to Replenishment Gold:
The petitioner sought a writ of mandamus directing the respondents to release the outstanding quantities of replenishment gold under the Foreign Trade Policy (FTP) 2015-2020 without insisting on any security. The petitioner relied on para 4.32 r/w para 4.33 of the FTP, claiming eligibility for gold as an input from the Nominated Agency either in advance or as replenishment post-export. The court acknowledged that the petitioner is entitled to replenishment of the gold used in the manufacture of gold jewellery exported by the petitioner.

2. Requirement of Security for Replenishment:
The third respondent insisted on security in the form of a Fixed Deposit/Bank Guarantee towards customs duty, citing ongoing investigations by Central Government Agencies. The petitioner argued this was undue harassment and contrary to the scheme. The court noted that the third respondent's insistence on security was due to the ongoing investigation and the potential liability under the customs duty bond and bank guarantee.

3. Compliance with Foreign Trade Policy (FTP) and Related Notifications:
The respondents argued that the petitioner must comply with the FTP and the DGFT Notification dated 23-2-2017, which required proof that the petitioner had not availed Cenvat credit or input rebate. The petitioner contended that these requirements were not relevant to the scheme and that the third respondent was misinterpreting the policy. The court highlighted that the FTP and related notifications mandated certain conditions, including the non-availment of Cenvat credit, which the petitioner needed to fulfill.

4. Investigation by Central Government Agencies:
The third respondent cited an ongoing investigation by the Directorate of Revenue Intelligence (DRI) and other Central Government Agencies as a reason for insisting on security. The court acknowledged the investigation and the third respondent's obligation to comply with the customs duty bond and bank guarantee requirements, justifying the insistence on security.

5. Alternative Remedies and Jurisdiction:
The third respondent argued that the petitioner had an alternative and equally efficacious remedy of an appeal and should have approached the Director General of Foreign Trade (DGFT) for clarification. The court noted this argument but proceeded to address the petition on its merits, considering the specific circumstances of the case.

6. Indemnity Bond as an Alternative to Security:
The court considered the petitioner's offer to indemnify the third respondent against all claims and liabilities arising from the replenishment transactions. The court directed that, in the peculiar facts and circumstances of the case, the petitioner should execute an Indemnity Bond in lieu of furnishing a Fixed Deposit/Bank Guarantee. This bond would indemnify the third respondent against any claims or demands raised by the competent authorities. The court clarified that this order should not be treated as a precedent for future cases.

Conclusion:
The court disposed of the writ petition by directing the respondents to accept an Indemnity Bond from the petitioner instead of a Fixed Deposit/Bank Guarantee. The replenishment gold should be released within four weeks of receiving the bond. The court emphasized that this decision was specific to the petitioner's case and should not be considered a precedent. There was no order as to costs.

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