2023 (5) TMI 673 - HC - Customs

Seeking exit from EOU scheme - rejection on the ground that petitioner had not submitted periodic performance report during the validity of letter of permission and as agreed in legal undertaking which amounted to non-compliance of the conditions - mere a procedural lapse or otherwise - Chapter VI of Foreign Trade Policy - HELD THAT - As could be seen from the provisions of the scheme, the objective of the clause is to ensure that an entity which has taken some benefit in the form of importing capital goods without payment of duty, the same would not be entitled to exit from the scheme without making good the duties that it had availed off. The objective of the scheme is essentially to ensure that an entity does not take the benefit of the scheme and thereafter withdraw from the scheme and make a profit out of the entire venture. The petitioner admittedly made an application seeking for exit from the scheme and it was its specific case that it had not imported any capital goods or procured any capital goods in respect of project. As could be seen from the finding recorded by the authority, the petitioner had not imported any capital goods or procured any capital goods for setting up the software technology park. It is, therefore, clear that it was not obliged to reimburse any amounts for exiting from the scheme - clause relating to exit from the scheme does not entitle the authority to reject the application on the ground that the periodical performance report had not been furnished. In this case, the authority has in fact stated that the petitioner did furnish the IT park progress report as per its email dated 10.06.2009. The mere noncompliance of a procedural requirement cannot prevent the petitioner from exiting from the scheme. The furnishing of periodic status report did not result in any monetary benefit to the petitioner and it was only procedural requirement which it had to comply. If the petitioner had not taken any monetary benefit by virtue of the licence granted to it, its exit cannot be denied - As far as the argument that an appellate remedy is available, it is to be stated here that the matter is pending before this Court since eight years and after a period of eight years, relegating the petitioner to avail the appellate remedy would neither be just, nor proper. In the light of the fact that the petitioner has not availed any benefit under the scheme, the impugned order cannot be sustained - Petition allowed.

Summary

Issues Involved:
The judgment involves a challenge to an order passed by the Director of Software Technology Parks of India regarding the petitioner's request to exit from the scheme.

Comprehensive Details:

Issue 1: Compliance with Exit Requirements
The order rejected the petitioner's request to exit the scheme due to alleged non-compliance with conditions, specifically regarding the submission of periodic performance reports. The petitioner was instructed to vacate non-software technology park units and reapply for exit with proof of vacation.

Issue 2: Relevant Legal Provisions
The petitioner, licensed as an infrastructure service provider, was entitled to benefits under Chapter VI of the Foreign Trade Policy. Clause 6.18 of Chapter VI addresses exit from the EOU scheme, emphasizing the need for approval, duty payment, and formal notifications for exit.

Issue 3: Objective of Exit Clause
The scheme aims to prevent entities from benefiting from duty exemptions without fulfilling obligations. Entities seeking to exit must settle duty liabilities and obtain a "No Dues Certificate" before final debonding, ensuring no unjust profit from the scheme.

Issue 4: Petitioner's Position
The petitioner claimed not to have imported or procured capital goods, thus not obligated to reimburse any amounts for exiting the scheme. The authority's findings confirmed the petitioner's position regarding capital goods.

Issue 5: Compliance vs. Procedural Requirements
The authority's rejection based on missing periodic reports was challenged, highlighting that the petitioner did submit the IT park progress report. Non-compliance with a procedural requirement should not hinder exit if no monetary benefit was gained.

Issue 6: Availability of Appellate Remedy
The Deputy Solicitor General argued against granting discretion due to missing reports being an essential license term. The delay in pursuing appellate remedies after eight years rendered it unjust to deny the petitioner's exit based on procedural non-compliance.

Conclusion:
Considering the petitioner's lack of monetary benefit from the scheme, the court quashed the order and directed the authority to permit the petitioner to exit. The writ petition was allowed, granting relief to the petitioner after the prolonged legal process.