2019 (1) TMI 985 - HC - Customs

Duty Drawback - Section 74 of Customs Act, 1962 - re-export of aircraft - commercial use of engine - requirement of Guaranteed Remittance Declaration - applicability of the Foreign Exchange Management (Export of Goods and Services) Regulations, 2000 - Held that - The exemptions under the original Regulation 4, by and large envisioned non-commercial export. Significantly, Regulation 4 (f) has dealt with the export of aircraft or aircraft engine and spare parts but for overhauling and/or repairs abroad subject to their re-import into India . The other condition was goods imported free of cost on re-export basis. The amendment by Regulation 4 generally empowered RBI subject to the terms and conditions stipulated by it to promote the export - In case the Revenue s stand were to be accepted, the petitioner would be bound to file a Guaranteed Remittance Declaration, which in turn would imply that it would remit back the amounts. The declaration is to ensure that the exporter i.e. Indian resident by Regulation 7 of the said regulations would receive the concerned amount. The requirement of a waiver, in the alternative, would arise only if the principal requirement of the GR declaration is at all attracted. In this case, it is undisputed that the exporter i.e. owner and the person entitled to the engine were one and the same i.e. the petitioner. Having regard to these circumstances, the necessity for blind adherence to a declaration and further necessity for waiver, in the opinion of the Court was entirely uncalled for. There is sufficient indication in the Regulations i.e. the manner of definition of export and even the phraseology of Regulations regarding non-commercial exports that in cases like the present one, if compelling circumstances lead the original owner to bring in goods to remedy an unforeseen eventuality, such as the need to fly back an aircraft, it is not to be subjected to such requirements. The absurdity is writ large on the face of the record. The Court is of the opinion that there is no question of respondents/Customs Authorities insisting that the GR requirement was mandatory or that, in its absence, exemption from RBI was necessary - petition allowed.

Summary

Issues Involved:
1. Entitlement to duty drawback under Section 74 of the Customs Act.
2. Requirement of Guaranteed Remittance Declaration under FEMA Regulations.
3. Compliance with procedural formalities for re-export of imported goods.
4. Refund of penalty and interest due to the petitioner.

Issue-wise Detailed Analysis:

1. Entitlement to Duty Drawback under Section 74 of the Customs Act:
The petitioner sought directions for the Customs authority to pass appropriate orders on its duty drawback claim under Section 74 of the Customs Act, 1962. The petitioner, who owns and leases aircraft, had imported an engine to facilitate the re-export of an aircraft detained by Customs Authorities. The Customs authorities detained the engine, and the petitioner approached the High Court, which allowed the re-export of the engine upon furnishing a bank guarantee. The petitioner paid ?17.09 crores and later succeeded in the appeal before CESTAT, which set aside the penalty and confiscation orders. The petitioner claimed duty drawback under Section 74, arguing that the engine was identifiable, imported on payment of duty, and re-exported within the stipulated period. The Court found that the petitioner was entitled to the duty drawback as the goods were re-exported within two years and were identifiable.

2. Requirement of Guaranteed Remittance Declaration under FEMA Regulations:
The Customs authorities contended that the petitioner failed to submit a Guaranteed Remittance Declaration as required under the Foreign Exchange Management (Export of Goods and Services) Regulations, 2000. The petitioner argued that the requirement was inapplicable as the engine was imported solely to fly back the aircraft, not for commercial use. The Court noted that the FEMA Regulations primarily deal with commercial exports and that the peculiar circumstances of the case did not necessitate adherence to the Guaranteed Remittance Declaration. The Court held that the insistence on such a declaration was unwarranted and that the petitioner did not need an exemption from the RBI for the duty drawback claim.

3. Compliance with Procedural Formalities for Re-export of Imported Goods:
The petitioner complied with the procedural formalities, including amending the bill of entry and obtaining permission for re-export from the Additional Commissioner. The Customs authorities initially detained the engine and imposed conditions for its release, which the petitioner fulfilled. The Court observed that the petitioner acted in compliance with the legal requirements and facilitated the re-export of the engine within the permissible period under Section 74 of the Customs Act.

4. Refund of Penalty and Interest Due to the Petitioner:
The petitioner had to approach the Court multiple times to seek relief, including the refund of the penalty amount deposited during the appeal. The Court directed the Customs authorities to release the penalty amount with interest, as permissible under Section 75A of the Customs Act. The Court reiterated its directions from a previous case (W.P.(C) 6544/2018) for the Customs authorities to ensure the refund of the amount with interest to the petitioner’s account, whether in India or overseas, as per the petitioner’s preference.

Conclusion:
The High Court allowed the writ petition, quashed the order-in-original dated 24.11.2016, and directed the Customs authorities to process the petitioner’s duty drawback claim and release the amounts within four weeks. The Court emphasized that the petitioner’s compliance with legal formalities and the peculiar circumstances justified the duty drawback claim without the need for a Guaranteed Remittance Declaration. The Court also ordered the refund of the penalty amount with interest to the petitioner’s designated account.