2020 (3) TMI 203 - HC - Customs

Jurisdiction - power of Recovery of Interest - failure of the petitioner to fulfill the conditions of Export Promotion Capital Goods scheme licence read with Notification No.160/92-Cus., dated 20.04.1992 issued under Section 25(2) of the Customs Act, 1962 - It is the contention of the learned counsel for the petitioners that the authorities under the Foreign Trade (Development and Regulation) Act, 1992 do not have power to either collect customs duty or levy interest. HELD THAT - While considering the provisions of the Foreign Trade (Development and Regulation) Act, 1992, the Export and Import Policy and the relevant Handbook of Procedures, it has to be kept in mind that the customs duty under Notification No.160/92-Customs dated 20.04.1992 was issued to implement the Policy - The Notification No.160/92-Customs dated 20.04.1992 was not independent of Export and Import Policy of the Ministry of Commerce. The petitioners having agreed to bind to the conditions of the license issued in terms of the Foreign Trade (Development And Regulation) Act, 1992, the Export and Import Policy and the relevant Handbook of Procedure the Foreign Trade (Development And Regulation) Act, 1992 cannot approbate and reprobate - Therefore, it is not open for the petitioners to state that the Officers of the Ministry of Commerce have no power to levy of interest. It is not open for the petitioners to state that the respondents had no authority to demand interest on the custom duty foregone even though the petitioners failed to discharge export obligation undertaken by them. When the impugned orders were passed, the Customs Notification No.46/2013-Cus dated 26.09.2013 had not been issued. As per the said notification, in case of default of export obligation, the amount of interest to be paid by an importer shall not exceed the amount of duty if such regularisation has been dealt in terms of public notice of the Government of India, in the Ministry of Commerce No.22 (RE-2013)/2009-14 dated 12.08.2013 - The Ministry of Commerce had considered the difficulties faced by the manufacturer exporters like the petitioners and had therefore over a period of time relaxed the rigours by reducing the interest. Earlier, Public Notice No.5/(RE-99)/1997-2002 dated 06.04.1999 was issued giving an opportunity to persons like the petitioners to regularise the default by extending the period of export obligation upto 31.03.2001 provided applications were made by such manufacturer-exporters within the stipulated time and a bond was executed undertaking to pay customs duty together with 24% interest from the date of import upto 30.09.2001. The petitioners are entitled to reduction of the interest in terms of the policy decision taken by the Ministry of Commerce in their public notice - the cases remanded back to the original authority namely, the Joint Director of General of Foreign Trade, the licensing authority to re-determine the interest to be paid by the respective petitioners in terms of Customs Notification No.46/2013-Cus dated 26.09.2013 - petition allowed by way of remand.

Issues Involved:
1. Whether interest can be imposed under the Foreign Trade (Development and Regulation) Act, 1992 for failure to fulfill EPCG scheme conditions.
2. Authority of respondents under the Foreign Trade (Development and Regulation) Act, 1992 to collect customs duty and interest.
3. Applicability of various judicial precedents to the case.
4. Validity of the demand for interest by respondents.
5. Recalculation of interest as per amended notifications.

Detailed Analysis:

1. Imposition of Interest under Foreign Trade (Development and Regulation) Act, 1992:
The core issue in both writ petitions was whether the interest sought to be recovered from the petitioner could be imposed under the Foreign Trade (Development and Regulation) Act, 1992 due to the petitioner's failure to fulfill the conditions of the EPCG scheme licence. The court noted that the petitioners had imported capital goods at a concessional rate of customs duty under Notification No.160/92-Cus dated 20.04.1992, which was issued to implement the Export and Import Policy. The petitioners executed bonds agreeing to pay interest at 24% if they failed to discharge the export obligation. The court held that having availed the benefits of the scheme, the petitioners could not dispute the power to demand interest.

2. Authority to Collect Customs Duty and Interest:
The petitioners contended that the authorities under the Foreign Trade (Development and Regulation) Act, 1992 did not have the power to collect customs duty or levy interest, arguing that such powers were vested with the officers under the Ministry of Finance, Department of Revenue, under the Customs Act, 1962. The court rejected this argument, stating that the customs duty foregone at the time of import was backed by a bank guarantee furnished to the Director-General of Foreign Trade, and the bond executed by the petitioners included an undertaking to pay interest.

3. Judicial Precedents:
The petitioners relied on several judicial decisions, including the Supreme Court's rulings in India Carbon Ltd. vs. State of Assam and V.V.S. Sugars vs. Govt. of Andhra Pradesh, to argue against the imposition of interest. However, the court found these decisions not applicable to the present case, emphasizing that the Foreign Trade (Development and Regulation) Act, 1992, the Export and Import Policy, and the relevant Handbook of Procedures constituted a complete code. The court also noted the Supreme Court's decision in Rexnord Electronics and Controls Limited vs. Union of India, which upheld the obligation to pay interest as per the bond executed by the importer.

4. Validity of Demand for Interest:
The respondents justified the demand for interest, asserting that the petitioners were bound by the conditions of the EPCG scheme and the bonds executed by them. The court agreed, stating that the petitioners, having failed to fulfill the export obligation, were liable to pay interest as per the terms of the bond and the policy. The court emphasized that the petitioners could not approbate and reprobate by accepting the benefits of the scheme while disputing the conditions attached to it.

5. Recalculation of Interest:
The court noted that the Ministry of Commerce had issued Public Notice No.22 (RE-2013)/2009-2014 dated 12.08.2013, which capped the interest payable in case of default to a maximum of the duty foregone. This was implemented by Customs Notification No.46/2013-Cus dated 26.09.2013. The court directed the Joint Director of General of Foreign Trade to re-determine the interest payable by the petitioners in terms of this notification, ensuring that the interest amount did not exceed the proportionate customs duty on the shortfall in the export obligation. The court ordered that any excess payment appropriated towards interest should be refunded to the petitioners.

Conclusion:
The court disposed of the writ petitions, setting aside the impugned orders and remitting the cases back to the original authority for re-determination of interest as per the amended notification. The court emphasized that the petitioners were bound by the conditions of the EPCG scheme and the bonds executed by them, and the respondents were justified in demanding interest for the failure to fulfill the export obligation.

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