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TMI Blog2011 (7) TMI 786X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner prior to shipment. Clearance of cotton consignments by Customs was directed to be made after verifying that the contract had been registered. Consequent upon the modification, the Government of India in the Ministry of Textiles issued a Memorandum on 7 September 2010. The Memorandum stated that exports of cotton could be made against valid Export Authorization Registration Certificates (EARCs) issued by the Textiles Commissioner, Mumbai. Guidelines for EARCs were issued under the Memorandum. Para 3 of the guidelines required each applicant to submit EARC applications in the form set out in Annexure I 'A', I 'B' or I 'C', as the case may be, accompanied by scanned copies of export contracts. The procedure was to take place online. The guidelines stipulated as follows: "On being satisfied that the information furnished in AnnexureI 'A', I 'B' and I 'C' as the case may be, is duly completed in all respects, the Textile Commissioner or his authorized officers (Joint Textile Commissioner/Director/ Deputy Director/ Assistant Director) shall issue Export Authorisation Registration Certificate in prescribed form as at AnnexureII with a validity of shipment period of 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not be rejected. The ground on which this action was proposed was that by seeking EARCs in respect of two export contracts executed by KKM International with foreign buyers, the Petitioners had attempted to secure EARCs by using the contract of another seller which was an abuse of the online system and an attempt to secure a higher quantity of cotton out of the export surplus permitted by the Government for the cotton year 201011. Another ground which was mentioned was that there was a discrepancy between the destination stated in the contracts and as stated in the applications. 6. Following the issuance of the notice to show cause, an order was passed on 14 December 2010 by which the applications of the Petitioners for the issuance of EARCs in respect of eight contracts were rejected on the ground of willful misdeclaration. The first order of rejection was set aside by a Division Bench of this Court on 11 February 2011 on the ground that there was a breach of the principles of natural justice. In the meantime, the jurisdiction came to be transferred from the Textiles Commissioner to the DGFT on 16 December 2010 in pursuance of a notification under Section 5 issued by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssued in respect of raw cotton. The EARCs issued to the Petitioners are reflected at Serial Nos. 619, 835, 837, 949, 951 and 952. As a matter of fact, the list also contains the other three EARCs in respect of which physical delivery was issued to the Petitioners. Hence, the contention of the Petitioners is that they had entered into firm contracts with foreign buyers in terms of the Memorandum dated 7 September 2010 and their entitlement for EARCs was reflected on the website of the Textiles Commissioner. However, physical delivery of the EARCs remained to be effected by the time the show cause notice was issued on 25 November 2010. According to the Petitioners, the DGFT has improperly treated their applications as fresh applications governed by the new policy, which is impermissible. The fact that 675 bales have been allotted to the Petitioners confirms their eligibility but the prorata principle under the new policy has been wrongly made applicable to them. The Textiles Commissioner had put up on the website lists of EARC applications received, of applications with deficiencies and those applications in respect of which EARCs were issued. Moreover, a circular was issued by the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which would then have to be submitted by the exporter to Customs authorities prior to shipment. Under the Memorandum dated 7 September 2010 of the Government of India in the Ministry of Textiles, applications for the grant of EARCs had to be accompanied by copies of export contracts. Hence it is only when an exporter had already entered into an export contract that an application could be moved for the grant of an EARC. The Memorandum stipulated that on being satisfied that the information furnished in Annexure I 'A', I 'B' or I 'C', as the case may be, is duly complete the Textiles Commissioner or the authorized officer, shall issue an EARC in the prescribed form with a shipment period of 45 days. An EARC duly signed and sealed was to be issued to the applicant for submission to the Customs authorities prior to shipment. At the relevant time, on 30 September 2010, the exportable surplus was notified at 55 lac bales in respect of raw cotton. The Press note stipulated that the aggregate quantity would be allotted on a first come first served basis with effect from 1 October 2010 and the period of shipment of 45 days would be reckoned from the date of issue of the EARC or 15 December ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the jurisdiction shifted from the Textiles Commissioner to the DGFT. The Deputy Director General, Foreign Trade in his impugned communication dated 19 April, 2011 proceeded to make an allotment of only 675 bales to the Petitioners on the application of the prorata principle. By the new policy that was notified on 25 December 2010, allocation was to be done on a prorata basis in respect of the balance quantity that had remained for cotton season 20-10-2011 after taking into account data for exports made between 1 November 2010 and 15 December 2010, within the over all limit of 55 lac bales of raw cotton. 13. The website of the Textiles Commissioner had disclosed separately lists of (i) applications received; (ii) applications which suffered from deficiencies and which were liable to be rejected; and (iii) applications in respect of which EARCs had been issued. In so far as the Petitioners are concerned, their applications figured in the list of EARCs issued. The disclosure made on the website of the Textiles Commissioner was regarded as a valid basis for authenticating EARCs in a Standing Order of the Commissioner of Customs (Exports) dated 3 January 2011. Prior to that St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came to the knowledge of the issuing authority that the Petitioners had tried to surreptitiously secure benefits by using the contract of another seller to whom EARCs had already been issued in the prescribed format. Once this came to the knowledge of the issuing authority and facts were brought to the notice of the Textiles Commissioner, it became necessary to enquire into the conduct of the Petitioners which was recorded in the order dated 14 December, 2010, and which in turn, necessitated the subsequent cancellation of the generated status displayed on the website in respect of the eight applications of the Petitioners. 15. The show cause notice which was issued to the Petitioners, on 25 November, 2010 contains an allegation of misdeclaration. That was the basis of the first order of rejection dated 14 December 2010. The fresh order that has been passed by the DGFT on 19 April 2011 is silent on that aspect of the matter. DGFT has proceeded on the erroneous assumption that the Petitioners had made a fresh application for allocation. This is erroneous because the Petitioners had made an application for the allotment of a certain quantity of raw cotton and after the issuanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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