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TMI Blog2016 (5) TMI 1237X X X X Extracts X X X X X X X X Extracts X X X X ..... FTP, should prevail. The SFIS was introduced by the Ministry of Commerce and its instrumentality, i.e. the DGFT has been statutorily entrusted with the final word on the interpretation of the FTP. The letter dated 6th September 2013 from the Commerce Secretary to the Revenue Secretary is instructive. It refers to Circular No. 837/14/2006 dated 3rd November 2006 issued by the CBEC under the Ministry of Finance which acknowledged that payment of customs duty could be made by using the duty credit scrips. The Court posed a query to the learned ASG whether denying permission to alienate goods imported under the SFIS when the FTP 2004-09 was operational while permitting such alienation if goods were imported under the SFIS under FTP 2009-14 was based on any rational criteria or was designed to achieve any legitimate objective. The learned ASG was unable point out any. Indeed denial of permission to transfer vessels imported more than three years ago only because they were imported under FTP 2004-09 serves no useful or rational purpose. The stand taken by the DoR appears to be unjustified. The result of such a stand would be that while the transfer of vessels that were imported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - S. MURALIDHAR VIBHU BAKHRU JJ For the Appellant: Mr. Balbir Singh, Senior Advocate with Mr. Rishi Agrawala, Mr. Nakul Mohta Mr. Rubal Maini, Advocates. For the Respondent: Mr. Sanjay Jain, ASG with Mr. Kamal Nijhawan, Senior Standing Counsel for R-1 and R-5 and Mr. Sumit Misra, Advocate. Mr. Sanjay Jain, ASG with Mr. Kirtiman Singh, CGSC, Mr. Waize Ali Noor, Mr. Pranav Agarwal, Mr. R. Ashok Mr. Sumit Gaur Advocates for R-2, 3 4. O R D E R Dr. S. Muralidhar, J: 1. The challenge in the present writ petition by Greatship (India) Ltd. is to the validity of a Customs Notification No. 91/2009 dated 11th September 2009 issued by the Department of Revenue ('DoR'), Ministry of Finance under Section 25 (1) of the Customs Act, 1962 ('CA') restricting the transfer/sale of goods imported using the Served From India Scheme ('SFIS') duty certificates/scrips for the purpose of payment of customs duty. It is contended that inasmuch as the impugned notification stipulates an absolute bar on transferability of goods imported under the SFIS, it is violative of Articles 14, 19 (1) (g) and 300A of the Constitution of India, Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel Greatship Amrita. The Petitioner drew attention to the fact that the said vessel was imported in February 2010, i.e., more than three years earlier and that in terms of para 2.43.2 (a) of the HBP prior permission of RA shall not be required for disposal of imported goods after a period of two years from the date of import. 6. The DoR by the impugned letter dated 12th June, 2013 informed the Petitioner that the decision taken by the PRC on 9th April 2013 was contrary to para 3.12.7 of FTP 2009-2014 and para 3.11.6 of the HBP and therefore it had asked the DGFT to keep the said decision in abeyance till the matter was resolved through mutual discussion. 7. On 9th July 2013 the Petitioner wrote to the Joint DGFT (Respondent No.4) again referring to Para 2.43.2 of the HBP and stating that it was going ahead with the sale of Greatship Amrita in light of the NOC granted by the PRC at its meeting on 9th April 2013. The Petitioner sought confirmation for the said move. 8. On 1st August 2013, the DGFT in exercise of the powers under Section 5 of the FTDR Act read with para 2.1 of the FTP 2009-14 amended para 3.12.7 of the FTP 2009-14 to read as under: 3.12.7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hoice of words. Some restriction on alienation of an imported good is desirable when the import involves a corresponding obligation. Here the scrip itself is a benefit that has been earned . Your letter also suggests that an alienation of goods imported procured under SFIS may attract duty. Saddling a benefit like this with additional conditions would be very harsh. I request you to reconsider the issue. 11. Another letter was written on 10th December 2013, by the Commerce Secretary to the Revenue Secretary stating that it was not appropriate to compare SFIS with EPCG Scheme where the export obligation is mandated to be fulfilled in a specified period. According to the Commerce Ministry a 3 year period is sufficiently long time to ensure that the goods imported by an SFIS holder get depreciated. An exporter who has already paid duty on import through usage of SFIS scrips cannot be asked to pay the duty again and again on sale of goods after 3 years. A further letter was written on 17th/18th February 2014, by the Additional DGFT to the Joint Secretary (Drawback) requesting that the DoR should agree with the DGFT. It was pointed out that where any violation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as ultimately sold to a Vietnamese buyer by way of re-export on 17th June, 2015 with the Petitioner submitting a bank guarantee for the value of ₹ 12 crores. The said writ petition was disposed of by this Court by an order dated 5th May 2016 which reads as under: 1. The Court has been shown a copy of a letter dated 29th April 2016 addressed to Mr. Kamal Nijhawan, Senior Standing counsel for the Respondent Nos. 1 and 5 (Department of Customs) by the Director (Drawback), Ministry of Finance, Department of Revenue in which inter alia it is recorded that there were meetings between the Department of Revenue and the Directorate General of Foreign Trade (DGFT) to consider the question whether capital goods imported during 2008-10 using Served From India Scheme (SFIS) scrips under the Foreign Trade Policy (FTP) 2004-09 can be exempt from the condition of actual user and be made eligible for alienation by applying the notification dated 1st August 2013 issued by the DGFT. 2. The letter then records that an agreement has been reached between the Department of Revenue and the DGFT that specific individual cases of export sale of goods (other than goods defective or un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Submissions of counsel 16. Mr. Balbir Singh, learner Senior Advocate appearing for the Petitioner, submitted that in terms of the FTP 2004-09 which includes the HBP, alienation or transfer by sale of imported goods is permissible, without prior permission of the RA of the DGFT, if it is done two years after the date of import. It is, therefore, contended that the condition imposed by the impugned notification is contrary to FTP 2004-09. Mr Singh referred to the various paras of FTP 2004-2009 as well as FTP 2009-2014 and submitted that the condition of actual user was subject to the other provisions contained in the HBP. Mr. Singh referred to the decision of the Madras High Court in Tanfac Industries Ltd. v. Assistant Commissioner of Customs, Cuddalore 2009 (240) ELT 341 (Madras). In support of the submission that the benefit under the FTP 2004-09 would continue even under FTP 2009-14, he referred to the decision of this Court in Commissioner of Central Excise and Service Tax, LTU, New Delhi v. Havells India Ltd. 2015 (325) ELT 840 (Del). 17. Mr. Sanjay Jain, the learned ASG, stated that he was appearing before the Court on behalf of both the DoR an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FTPs are more or less similar. Clause 2.3 of Chapter 2 of FTP 2004-2009 states as follows: 2.3 Interpretation of Policy If any question or doubt arises in respect of the interpretation of any provision contained in FTP, or classification of any item in the ITC (HS) or HBP-v1 or HBP-v2, or Schedule of DEPB Rates (including content, scope or issue of an authorisation thereunder), the said question or doubt shall be referred to the DGFT whose decision thereon shall be final and binding. 21. The DGFT is a statutory authority exercising powers in terms of Section 6 of the FTDR Act. Under Section 6 (2) of the FTDR Act, the DGFT shall advise the Central Government in the formulation of the FTP and shall be responsible for carrying out that policy. In exercise of his powers under Section 6 (2) of the FTDR Act, the DGFT has issued the HBP which is a part of the FTP manual. Since the DGFT is entrusted by the statute to implement the FTP, para 2.3 of the FTP 2004-2009 as well as para 2.3 of the FTP 2009-2014 have recognised the DGFT as being the final authority on all matters relating to the interpretation of the FTP. The slight change in FTP 2009-2014 is that under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... along with supporting documents shall be furnished with request for grant of permission for transfer, to RA concerned: (i) Reasons for transfer of imported material; (ii) Name, address, IEC number and industrial Authorisation registration, if any, of transferee; (iii) Description, quantity and value of goods imported and those sought to be transferred; (iv) Copies of import Authorisation and bills of entry relating to imports made; (v) Terms and conditions of transfer as agreed upon between buyer and seller. 2.43.1 Prior permission of RA shall not, however, be necessary for transfer or disposal of goods, which were imported with Actual User condition, provided such goods are freely importable without Actual User condition on date of transfer. 2.43.2 Prior Permission of RA shall not be required for transfer or disposal of imported goods after a period of two years from the date of import. However, transfer of imported fire-arms by the importer/Authorisation holder shall be permitted only after 10 years of import with approval of DGFT. 26. As already noticed it is the DGFT who issues the HBP. In terms of the FTDR Act, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tification dated 11th September 2009 28. To recapitulate, the DoR issued Customs Notification No. 91/2009 dated 11th September 2009 under Section 25 (1) of the CA restricting the transfer/sale of goods imported using the SFIS duty certificates/scrips for the purpose of payment of customs duty. It is contended that inasmuch as the impugned notification stipulates an absolute bar on transferability of capital goods imported under the SFIS, the said notification is ultra vires the FTDR Act and the FTR Rules. A challenge also laid to the letter dated 12th June 2013 from the DoR to the Petitioner stating that it had asked the DGFT to keep in abeyance the decision of the PRC granting NOC to the Petitioner for sale of Greatship Amrita. 29. On examination of Sections 5 and 6 of the FTDR Act and the relevant paras of FTP 2004-2009 and FTP 2009-2014 along with the relevant clauses of the HBP, the Court is satisfied that there is no valid justification for the DoR to oppose the request for alienation/transfer of imported goods in terms of FTP 2004-2009 where duty has been paid using SFIS scrips. As already noticed there is no such prohibition in FTP 2004-2009 and definitely not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33. There is merit in the contention of the Petitioner that in the event of conflict of views between two ministries of the central government, the view taken by the ministry that is primarily responsible for the policy in question, which in this case is the FTP, should prevail. The SFIS was introduced by the Ministry of Commerce and its instrumentality, i.e. the DGFT has been statutorily entrusted with the final word on the interpretation of the FTP. The letter dated 6th September 2013 from the Commerce Secretary to the Revenue Secretary is instructive. It refers to Circular No. 837/14/2006 dated 3rd November 2006 issued by the CBEC under the Ministry of Finance which acknowledged that payment of customs duty could be made by using the duty credit scrips. In particular it was pointed out that the expression duty free credit scrip had been used incorrectly and that the correct phrase should have been duty credit scrips . It was suggested that the insistence by CBEC that goods imported by use of SFIS scrip may not be alienated unconditionally, even after three years of import, can be attributable to this inadvertent choice of words. Importantly it was pointed out that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... except by way of re-export or within the group or to managed hotels, come what may. While it is not clear what revenue is sought to be protected in that process, it surely subjects the importer of goods that fall in the latter category to discrimination. Such denial of permission would attract the vice of impermissible discrimination in terms of Article 14 of the Constitution particularly since it is based on no rational criteria. In fact it contradicts the intent expressed in the relevant paras of the FTP 2004-09 and the HBP which have been adverted to. There is also nothing in the FTP which prohibits the sale of vessels that have completed more than three years after import from being sold in the domestic market. In other words, there is no justification for the DoR to insist that the vessels of the Petitioner that have completed more than three years after import should be transferred only by sale within group companies or managed hotels or be re-exported. 37. For all of the above reasons the Court holds that the impugned Customs Notification No. 91/2009 dated 11th September 2009 under Section 25 (1) of the CA to the extent it restricts the transfer/sale of goods imported ..... X X X X Extracts X X X X X X X X Extracts X X X X
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