Settlement of cases involving default in export obligation under Advance Licence/EPCG Schemes by Settlement Commission - Customs - 053/02

Circular No. 53/2002-Cus., dated 20-8-2002 F.No. 607/16/2001-DBK Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs, New Delhi Subject: Settlement of cases involving default in export obligation under Advance Licence/EPCG Schemes by Settlement Commission. It has come to the knowledge of Board that Mumbai Bench of Settlement Commission has entertained and finally settled duty liability in cases involving default in export obligation under Advance Licence/EPCG Schemes. Under Advance Licence/EPCG Schemes, at the time of import of goods, the licence holder is made aware of his duty liability and to ensure fulfilment of specified export obligation, he gives Bond/BG to DGFT/ Customs. The said Bond/BG clearly lays down that duty concession/ exemption under Advance Licence/EPCG Schemes is being extended to the licence holder provided that he fulfills the specified export obligation and in the event of failure he would be liable to pay differential customs duty plus interest @24% per annum on such duty. In other words, in all such cases, the licence holder is made aware of his liability right in the beginning at the time of import of goods. 2. In terms of Section 127B(1) of the Customs Act, Settlement Commission is empowered to entertain applications for settling disputes only in those matters where the party had not made full and true disclosure of his duty liability before the proper officer. Since in cases involving default in EO under Advance Licence/EPCG Scheme, the licence holder is well aware of his duty liability, DOR had felt that it is not correct on the part of Settlement Commission to have entertained such cases. Since the provisions of Section 127A(b) and Section 127B(1) of the Customs Act were not very clear, this matter was referred to Ministry of Law for their opinion. Vide opinion dated 29-7-2002 of the Ministry of Law they have clearly said that Settlement Commission has no jurisdiction to entertain such applications in view of Section 127B(1) of the Customs Act and, therefore, the question of granting waiver of interest in such cases by the Settlement Commission also does not arise. Copy of MOL's opinion, dated 29-7-2002 is enclosed for ready reference. In view of opinion of MOL, appropriate action should be taken to safeguard revenue interest. 3. Suitable standing orders may also be issued for information/action of customs field formations under your charge. 4. Receipt of this Circular may kindly be acknowledged. Department of Legal Affairs The Administrative department seeks to be advised as to whether the Settlement Commission has got jurisdiction under Section 127B(1) of Customs Act, 1962 to dispose of the matters in respect to payment of differential Customs Duty and interest imposed upon it for making default in export obligation as per policies. 2. The reference has been explained in detail vide p. 1-3 of notings. The record transpires that to promote export of Indian goods, the Government has announced various export promotion schemes from time to time. Under such schemes, Advance Licence Scheme and Export Promotion Capital Goods Scheme are under operation under Advance Licence Scheme. Advance Licence are issued permitting duty free goods of imports. Under EFCG scheme, the import of capital goods is permitted on concessional rate of duty which are required in the manufacture of export product specified in the licence. Under these schemes, the licence holder are under an obligation to fulfil the Export Obligation specified in the licence. In the event of default in export obligation under the above mentioned two schemes, there are provisions in the Exim Policy that in the event of default licence holder shall have to pay differential customs duty along with interest @ 24% per annum on such duty. 3. The importers/exporters are required to furnish the bond/bank guarantee before the custom authorities and the same is only a declaration of liability caused on the licence holder. 4. Section 127B of the Act deals with the matter in which Settlement Commission can entertain the applications by the importers/exporters for settlement of the disputes which reads as under : " 127B. Application for settlement of cases. - (1) Any importer or exporter or any other person (hereinafter referred to as the applicant in this Chapter) may, at any stage of a case relating to him make an application in such form and in such manner as may be specified by rules, and containing a full and true disclosure of his duty liability which has not been disclosed before the proper officer, the manner in which such liability has been incurred, the additional amount of customs duty accepted to be payable by him and such other particulars as may be specified by rules including the particulars of such dutiable goods in respect of which he admits short levy on account of misclassification or otherwise of goods, to the Settlement Commission to have the case settled and such application shall be disposed of in the manner hereinafter provided. 5. A bare reading of the said section makes it clear that the Settlement Commission can entertain applications for settling the disputes only in those matters where the importers/exporters had not made full and true disclosure of his duty liability before the proper officer. Here in the present matters, parties had already declared the goods imported by them. The importers/exporters were under an obligation to fulfil the export obligation to get the benefit of the scheme. In default thereof, as per bond/bank guarantee, they were under an obligation to pay differential customs duty along with an interest of 24%. As such, it is not a dispute of misdeclaration or non-declaration. It is a case of non-fulfilment of export obligations as per law/policy. Under Section 127B of the Act, the words "which has not been disclosed before the proper officer" make it clear that such matters are beyond the jurisdiction of Settlement Commission. When Settlement Commission has no jurisdiction to entertain applications for settling of the case in such matters then, the question of waiver of interest in such matters also does not arise. 6. In view of the above, we concur with the views of the department that the Settlement Commission can settle the disputes in the matters where the importers had not made disclosure of his duty liability before the proper officer and Settlement Commission cannot waive the interest in such matters.