2021 (4) TMI 1208 - HC - Customs

EPCG Scheme - fixation of annual average turnover - export fabrics - issuance of Export Obligation Discharge Certificate - HELD THAT - To discharge the export obligation for import of capital goods for a sum of ₹ 2,88,57,944.00.( ₹ 57,73,588 x 8) in eight years, the average export performance of the petitioner per year would be only ₹ 36,07,243/-. Therefore, it would have been sufficient for the petitioner to maintain an average export performance of ₹ 36,07,243/- per annum only i.e ₹ 2,88,57,944.00/8 - However, the average export performance to be achieved by the petitioner in a year was fixed in the EPCG license dated 6.1.2005 at ₹ 1,97,93,333.33 per annum. The said average export performance of ₹ 1,97,93,333.33 per annum almost equivalent to 68% of the total export obligation to be achieved by the petitioner over a period of eight years for a value of ₹ 2,88,57,944.00 under the said license. Thus, the calculation of average export performance of ₹ 1,97,93,333.33 per annum in the licence was skewed. Failure of the petitioner to achieve a average export performance for the appellant to ₹ 1,97 93,333.33 per annum cannot be to the disadvantage of the petitioner, if the petitioner was in a comfortable position to achieve the export obligation of ₹ 2,88,57,944.00 - In this case, it is the case of the petitioner that between 2002-2003 and 2004-2005 the petitioner had exported goods worth ₹ 39,55,76,700.00 which exceeded the overall export obligation to be achieved by the petitioner for a sum of ₹ 2,88,57,944.00. This would require a proper examination both by the officers of the Ministry of Commerce i.e. the respondent Nos.1 and 3. Case remanded back to the respondents under the Ministry of Commerce and the Ministry of Finance to re-examine the issue a fresh in the light of the above observation and after considering the submission of the petitioner. Benefit of several amnesty schemes which were issued by the Ministry of Commerce from time to time may also be extended if the petitioner is otherwise entitled to the same - petition allowed by way of remand.

Issues Involved:
1. Re-fixation of annual average turnover and issuance of Export Obligation Discharge Certificate (EODC).
2. Quashing of the Order-in-Original dated 05.12.2013 by the Deputy Commissioner of Customs.

Issue-wise Detailed Analysis:

1. Re-fixation of Annual Average Turnover and Issuance of Export Obligation Discharge Certificate (EODC):

The petitioner sought a Writ of Mandamus to direct the respondents to consider their representation dated 29.05.2012 and re-fix the annual average turnover, subsequently issuing an EODC. The petitioner, engaged in the manufacture of ready-made garments, had obtained an Export Promotion Capital Goods (EPCG) license under the Export Import Policy. The license, issued on 06.01.2003, required the petitioner to export five times the CIF value of the capital goods within eight years. The annual average of past export performance was fixed at ?197,933,333.33/-.

The petitioner claimed that due to a general recession, their business was adversely affected, leading to the takeover of their factories and assets under the SARFAESI Act, 2002. They also argued that a mistake was made while applying for the EPCG license, resulting in an incorrect annual average export performance figure. The petitioner contended that they had discharged the export obligation equivalent to the CIF value of the imported capital goods and were not required to achieve the stipulated average value.

The respondents argued that the petitioner did not file any documents to substantiate the discharge of export obligation or maintain the annual average turnover. A Show Cause Notice dated 10.03.2011 was issued, but the petitioner responded only after 14 months, requesting re-fixation of the annual average. The respondents maintained that re-fixation after the expiry of the license was not permissible and that the petitioner had not provided necessary documents to issue the EODC.

The court observed that the petitioner had indeed imported capital goods worth ?57,73,588/- and was required to export goods worth ?2,88,57,944/- over eight years. The petitioner claimed to have exported goods worth ?39,55,76,700/- between 2002-2005, exceeding the overall export obligation. The court directed the petitioner to file a fresh application for discharge of export obligation within 30 days and ordered the respondents to re-examine the issue, considering the petitioner's submissions and any applicable amnesty schemes.

2. Quashing of the Order-in-Original dated 05.12.2013 by the Deputy Commissioner of Customs:

The petitioner sought a Writ of Certiorari to quash the Order-in-Original dated 05.12.2013, arguing that it was not served on them and was sent to an address where the factory had been auctioned. The petitioner claimed to have become aware of the order only after receiving a recovery notice on 26.06.2018.

The respondents contended that the petitioner did not participate in the Show Cause Proceedings and failed to produce documents to show fulfillment of export obligations. Notices for hearings were issued on multiple dates, but the petitioner neither participated nor replied, leading to the impugned order.

The court noted that the petitioner had imported capital goods under the EPCG license and was required to export ready-made garments equivalent to five times the value of the imported goods. The petitioner argued that the average export performance requirement was incorrectly calculated, including exports of fabrics instead of just ready-made garments.

The court set aside the impugned order and remitted the case back to the respondents under the Ministry of Commerce and Ministry of Finance to re-examine the issue afresh. The respondents were directed to consider the petitioner's submissions and any relevant amnesty schemes. The customs department was instructed to await further orders before passing fresh orders on merits.

Conclusion:

The court disposed of W.P.No.20146 of 2018 and allowed W.P.No.31788 of 2018, directing the petitioner to file a fresh application for discharge of export obligation within 30 days. The respondents were instructed to re-examine the issue and pass appropriate orders within six months. No costs were awarded, and connected miscellaneous petitions were also closed.

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