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2019 (4) TMI 87 - HC - CustomsAdvance Authorisation Scheme - Export Promotion Schemes - transfer of Authorisation from the old unit to the new IEC - automatic extension of the export obligation period after amalgamation of the company - existence of company to which the original Authorisation was issued - fulfillment of export obligation after amalgamation Policy Relaxation Committee concluded that the merger with the new company had taken place after the expiry of export obligation period, namely, (i) the IEC number of M/s Lubi Submersible Ltd. had been surrendered on 14.3.2013; (ii) during this period of 36 months, the petitioner could discharge only 7.78% export obligation; (iii) The petitioner would not be able to file shipping bills in the new IEC for old Authorisations due to limitation of system software at ICEGATE Customs; and (iv) Extension beyond 48 months is not considered and that period has lapsed in March, 2014. In view of the above, the petitioner was asked to get its case regularised in terms of Para 4.49 of the Handbook of Procedures, 2015-2020. petitioner made another application dated 30.11.2016 to the Policy Relaxation Committee to re-consider its decision which also not resulted in any relief and was rejected vide order dated 14.5.2018 Held that - A perusal of the order dated 14.5.2018 of the Appellate Committee shows that the Policy Relaxation Committee had called upon the Regional Authority to explain why the amendment was not allowed when the High Court had allowed amalgamation of the two companies. It was stated that the merger took place after the expiry of the export obligation period and the IEC number of M/s Lubi Submersibles was surrendered on 14.3.2013. In the opinion of this court, the grounds of rejection as stated in the impugned order do not appear to be germane. Paragraph 4.22 of the Hand Book of Procedures, 2009-14 provides that the fulfillment period of export obligation under an Advance Authorisation shall commence from the authorisation issue date, unless otherwise specified and further provides that the export obligation shall be fulfilled within thirty six months except in the case of the categories specified therein. The paragraph further provides that in case of inputs mentioned in Appendix 30A, the export obligation period be specified against each entry therein and facility of extension of export obligation period shall not be permitted in case of Advance Authorisation issued for these inputs and that the Regional Authority shall make endorsement in the Advance Authorisation to that effect. While it is true that an Advance Authorisation is non-transferable, it would mean that it cannot be transferred from one entity to another. But in this case, upon M/s Lubi Submersibles having been amalgamated with M/s Arvind Iron Pvt. Ltd., M/s Lubi Submersibles lost its identity and ceased to carry on business, and therefore, the question of fulfillment of the export obligation thereafter by Ms. Lubi Submersibles would not arise - the obligation to fulfill the export obligation of the Transferor Company viz. M/s Lubi Submersibles was on the transferee Company, namely, M/s Arvind Iron Pvt. Ltd. which was soon thereafter converted to M/s Lubi Industries Pvt. Ltd. and then to M/s Lubi Industries LLP. The respondents seek to take action against the petitioner M/s Lubi Industries LLP in respect of non-fulfillment of the export obligation of M/s Lubi Submersibles but refuse to transfer the Advance Authorisations of the Transferor Company to the IEC of the Transferee Company on the specious plea that there is no provision for transfer of Advance Authorisation. In this case, since by virtue of the order of amalgamation, the Advance Authorisations also stand vested in the petitioner M/s Lubi Industries LLP, it is not as if the Advance Authorisation is being transferred to another person, but it is the person whom the respondents seek to hold liable to fulfill the export obligation who is seeking transfer of Advance Authorisation to its IEC number so as to enable it to fulfill the export obligation of M/s Lubi Submersibles. It cannot be gainsaid that in view of the fact that M/s Lubi Submersibles ceased to exist upon its amalgamation with M/s Arvind Iron Pvt. Ltd., the question of M/s Lubi Submersibles fulfilling the export obligation would not arise and it is only the Transferee Company which can fulfill the export obligation. On account of the applications being rejected on the ground that there is no provision for transfer, the petitioner could not show any exports against the Advance Authorisations in questions despite having been engaged in the business of export all throughout that period. Thereafter, the petitioner once again applied before the Policy Review Committee, both, for transfer of Advance Authorisation, as well as for extension of export obligation period - it is apparent that the Appellate Committee has not applied its mind to the controversy in issue and has merely placed reliance upon the orders passed by the subordinate authorities, without taking into consideration the fact that it was these very orders which had given rise to the review appeal. This court is of the opinion that the impugned order dated 14.5.2018 passed by the Appellate Committee suffers from the vice of nonapplication of mind to the relevant issues and is contrary to the provisions of the Handbook of Procedures, 2009-14, the Circular dated 16.11.2011 as well as the Public Notices issued in this regard from time to time, which renders the impugned order unsustainable in law - Petition allowed.
Issues Involved:
1. Amendment of Advance Authorisations by substituting name and IEC number. 2. Extension of export obligation period. 3. Validity of the orders passed by the authorities under the Foreign Trade Act. 4. Applicability of the Circular dated 16.11.2011 and Public Notice dated 24.10.2017. 5. Rejection of the petitioner’s applications by the Policy Relaxation Committee and the Appellate Committee. Detailed Analysis: 1. Amendment of Advance Authorisations by Substituting Name and IEC Number: The petitioner sought to amend four Advance Authorisations by substituting the name and IEC number of the petitioner, M/s Lubi Industries LLP, in place of the previous entities due to amalgamation and merger. The petitioner argued that the amalgamation and merger of entities necessitated the change in the name and IEC number on the Authorisations. The court noted that the petitioner had applied for such changes immediately after the new entity came into existence. The respondents' refusal to amend the Authorisations on the ground that there was no provision for such transfer was deemed unreasonable, especially considering the Circular dated 16.11.2011, which provided for such amendments. 2. Extension of Export Obligation Period: The petitioner requested an extension of the export obligation period for fulfilling the obligations under the Advance Authorisations. The court observed that paragraph 4.22 of the Handbook of Procedures, 2009-14, provided for the extension of the export obligation period, except for inputs listed in Appendix 30A. The Policy Relaxation Committee's decision to reject the extension on the ground that there was no provision for such extension was found to be inconsistent with the Handbook of Procedures. The court highlighted that the petitioner's applications for extension were made timely, and the refusal to grant extensions was not justified. 3. Validity of the Orders Passed by the Authorities: The orders passed by the Policy Relaxation Committee and the Appellate Committee were challenged by the petitioner as being arbitrary and unreasonable. The court found that the decisions of these authorities were based on incorrect facts and a misinterpretation of the relevant provisions. The Appellate Committee's reliance on the orders of the subordinate authorities without proper application of mind was criticized. The impugned orders were quashed for being contrary to the Handbook of Procedures, the Circular dated 16.11.2011, and subsequent Public Notices. 4. Applicability of the Circular Dated 16.11.2011 and Public Notice Dated 24.10.2017: The court emphasized the relevance of the Circular dated 16.11.2011, which provided for the amendment of licences/authorisations by changing the old IEC to the new IEC in cases of amalgamation/merger. The respondents' failure to consider this Circular while rejecting the petitioner's applications was deemed improper. Furthermore, the Public Notice dated 24.10.2017, which allowed for the extension of the export obligation period for Advance Authorisations issued under the Foreign Trade Policy, 2009-14, was also applicable to the petitioner's case. The respondents' refusal to apply these provisions was found to be arbitrary. 5. Rejection of the Petitioner’s Applications by the Policy Relaxation Committee and the Appellate Committee: The Policy Relaxation Committee and the Appellate Committee had rejected the petitioner's applications for changing the IEC number and extending the export obligation period. The court found that these rejections were based on incorrect grounds and a failure to consider relevant provisions and Circulars. The decisions were found to be mechanical and lacking proper reasoning. The court quashed these decisions and directed the Joint Director General of Foreign Trade to amend the Authorisations and grant an extension of the export obligation period. Conclusion: The court quashed the impugned orders of the Appellate Committee and the Policy Relaxation Committee, directing the Joint Director General of Foreign Trade to amend the Advance Authorisations by substituting the name and IEC number of the petitioner and extending the export obligation period by six months. The court found the authorities' refusal to amend the Authorisations and grant extensions to be arbitrary, unreasonable, and contrary to the relevant provisions and Circulars.
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