2019 (2) TMI 1576 - HC - Customs

Supplies to a Special Economic Zone (SEZ) unit - discharge of export discharge obligation - the respondents have rejected the same on the ground that it has failed to file the necessary documents to evidence fulfillment of its export obligations - Held that - It is apparent that Holoflexwas required to submit the statement of export within three months of the expiry of the block year duly certified by a Chartered Accountant and concerned Bank. Holoflex was also required to submit yearly performance of export in electronics format. Admittedly, Holoflex had failed to do so - Further, it was also necessary that Holoflex s name and the EPCG license be indicated on the shipping bills/Bills of Export. It is seen in the present case that the petitioner had not provided the documents as required - It is also relevant to note that in terms of Rule 30 of the Special Economic Zone Rules, 2006, the goods supplied to an SEZ Unit are required to be inspected prior to the issue of Bill of Exports. Filing of Bill of Exports is not a mere formality but serves as a valuable check for ensuring that the goods deemed to have been exported are in fact received by the SEZ Unit and are accounted as Deemed Exports. In the present case, the petitioner had merely filed only Form I which was issued for the purposes of Central Sales Tax Act. Thus, no relief can be granted to the petitioner - petition dismissed.

Summary

Issues:
1. Impugning an order rejecting review petition under Section 16 of FTDR Act
2. Discharge of export obligations by petitioner No.1 (Holoflex)
3. Failure to submit necessary documents for establishing discharge of export obligations
4. Rejection of appeal by Additional DGFT under Section 15 of FTDR Act
5. Imposition of fiscal penalty under Section 11(2) of FTDR Act
6. Non-submission of Bill of Exports and necessary documents
7. Contention regarding transhipment of goods and acceptance of 'I' Form by Nokia
8. Compliance with EPCG authorization conditions
9. Requirement to submit statement of export and yearly export performance
10. Necessity of submitting Bill of Exports under Special Economic Zone Rules

Analysis:

1. The petitioners challenged the rejection of their review petition under Section 16 of the FTDR Act, related to an order rejecting their appeal against export obligation discharge. The controversy centered on Holoflex's claim of fulfilling export obligations by supplying to an SEZ unit, disputed by authorities due to lack of supporting documents.

2. Holoflex, under EPCG authorization, had an export obligation, unmet by submission of necessary documents post the obligation period's expiry. Show cause notices were issued for non-compliance, leading to a fiscal penalty imposition under Section 11(2) of the FTDR Act.

3. Holoflex's defense included supplying to Nokia in the SEZ, supported by documents like a courier agency certificate. However, authorities found the evidence insufficient, resulting in the penalty imposition upheld by the Additional DGFT and DGFT, prompting the petition.

4. The petitioner's arguments included the procedural nature of Bill of Exports, citing a Bombay High Court decision. However, the court emphasized EPCG conditions mandating document submission, including yearly export performance and Bill of Exports under SEZ Rules.

5. The judgment highlighted the petitioner's failure to meet EPCG conditions, especially regarding document submissions and SEZ Rules compliance. The court differentiated this case from precedent where requisite documents were duly furnished, leading to the dismissal of the petition.

6. Ultimately, the court dismissed the petition, underscoring the importance of fulfilling export obligations as per statutory requirements and SEZ Rules, emphasizing the necessity of proper document submissions for compliance.

This detailed analysis covers the issues involved in the legal judgment comprehensively, outlining the key arguments, defenses, and the court's reasoning leading to the dismissal of the petition.