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TMI Blog2016 (10) TMI 379X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the authority and so far as possible in favour of a party who would be affected by the imposition of liability or withdrawal of benefit. Authorities for this proposition are legion. The idea of such exemption is to give an incentive to exporters to boost exports which in turn enhances the foreign exchange reserve of the country. If such exporter has not availed of the Cenvat facility, then it cannot be deprived of the benefit of exemption from payment of additional customs duty just because the manufacturer of the export product has availed of the Cenvat facility. That would, in my opinion, be contrary to the spirit and intent of the Policy. It is not disputed that SESA has purchased the export goods upon full payment of excise duty and in any event, the question of double benefit can arise only if the same entity avails of the same benefit twice. Such is not the case here. The manufacturer of the export products and SESA are two distinct entities and any Cenvat facility availed of by the manufacturer cannot be said to be a benefit reaped by SESA. The direction of DGFT Authorities on the Customs Authorities not to allow exemption of additional customs duty to SESA or to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FIAs. After discharging its export obligation, SESA used to apply for transferability of the DFIAs under Clause 4.2.6 of the Policy. Upon being satisfied that SESA had fulfilled its export obligations and export proceeds had been realized, the respondent authorities used to endorse 'transferability' on the DFIAs, whereupon, the same became freely transferable. (5) Since SESA did not avail of 'CENVAT' facility, while endorsing transferability on the DFIAs, the authorities made a note exempting the inputs from additional customs duty/excise duty in terms of Clause 4.2.6 (c) of the Policy. On the strength of such endorsement, SESA either imported inputs by itself or transferred the DFIAs to various importers. The goods imported on the basis of such DFIAs were exempted from payment of customs duty/additional customs duty, additional cess, anti- dumping duty and safeguard duty. (6) In January, 2014, the respondent authorities issued two DFIAs dated 17 January, 2014 and 20 January, 2014 in favour of the SESA. Such licenses were issued against export of non-alloy steel billet and permitted duty free import of non-alloy steel melting scrap. The expiry date for both th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 November, 2014 issued by the Addl. Director General of Foreign Trade is arbitrary, illegal, issued in violation of principles of natural justice and without jurisdiction. The order did not give any reason or ground for re- submission of the concerned licences. Neither any show cause notice was issued nor opportunity of hearing was given to SESA before issuance of the said order. The said order was passed obviously with the purpose of deleting/rectifying the endorsement on the DFIAs allowing exemption from payment of additional customs duty. There is no provision of review under the 1992 Act or in the Rules and Regulations framed thereunder or in the Policy. Hence the order is not sustainable. (12) Learned Counsel for SESA then submitted that the moot issue is whether SESA, a merchant exporter, is entitled to exemption from payment of additional customs duty consequent to exports made under post-export DFIA scheme, which the respondents have granted for the last several years. In recognition of its performance, DGFT has granted a certificate recognizing SESA as a 'Star Export House'. The only contention of the respondent authorities is that since the purported support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of applicable additional customs duty/excise duty. While endorsing transferability, authorisation would bear a note as to liability of such additional customs duty/excise duty. However, in case where CENVAT facility has not been availed, exemption from additional customs duty/excise duty would be available even after endorsement of transferability on DFIA. (15) He then referred to Sec. 3(a) of the Central Excise Act, 1944 which states that there shall be levied and collected a duty of excise to be called the Central Value Added Tax (CENVAT) on all excisable goods including goods produced or manufactured in special economic zones which are produced and manufactured in India, at the rates set forth in the first schedule to the Central Excise Tariff Act. Under the Cenvant Credit Rules, 2004 a manufacturer or producer of final products or a provider of a taxable service is allowed to take credit of, inter alia, a duty of excise specified in the first schedule to the Excise Tariff Act leviable under the Excise Act. Taxation of the inputs had the cascading effect on the value of the final product. To avoid this, Cenvat Credit Rules, 2004 were introduced, by virtue of which a manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansferability on eight numbers of licences between 20 October, 2014 and 27 October, 2014. This also goes to show that availing of Cenvat credit by the manufacturer of the export product did not disentitle a merchant exporter like SESA to get the benefit of exemption from payment of additional customs duty. (20) Mr. Deb then submitted that in the current Policy for the period 2015-20, DGFT has changed the definition of the term 'supporting manufacturer' as well as the conditions for validity and transferability of DFIA. However, the new definitions and provisions contained in the current Policy cannot be applied retrospectively nor the Policy provides for its retrospective application. (21) Learned Counsel then referred to notification no. 98/2009-Customs dated 11.09.2009, whereby in exercise of powers conferred by Sec. 25 (1) of the Customs Act, 1962, the Central Government exempted materials imported into India against the DFIA from the whole of the additional customs duty, safeguard duty and anti-dumping duty subject to conditions mentioned therein. Condition no. 2 mentioned in the said notification provides that after discharge of export obligation as specified in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of Revenue. Learned Counsel relied on a portion of the said letter which reads as follows:- In terms of DGFT's notification No. 49(RE-1007)/2004-2009 dated 14.11.2007 (copy enclosed for ready reference), this Customs House is following the directions contained in the aforesaid notification i.e. in all the cases of imports, who sought clearance against the transferability DFIA authorization are required to submit certificate from the concerned Central Excise authority to the effect that the license holder have not availed any CENVAT under CENVAT credit rules and on the basis of that certificate goods are assessed without charging additional customs/excise duty. (24) Learned Counsel submitted that the combined effect of the Policy, the aforesaid circular dated 30 September, 2009, the Calcutta Customs letter dated 3 December, 2008 along with the customs notification dated 11 September, 2009 is that the deciding factor is as to whether or not the licence holder has availed of the Cenvat facility. In the instant case, SESA has not availed of Cenvat facility and as such is entitled to transferability as also exemption from payment of additional customs duty. Withdrawal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the export products. (29) Mr. Deb relied on a decision of the Hon'ble Apex Court in the case of Rao Shiv Bahadur Singh-vs.-The State of Vindhya Pradesh, AIR 1953 SC 394. He relied on the observation of the Hon'ble Supreme Court at paragraph 5 of the judgment to the effect that although it is not permissible to supplant a clear and obvious lacuna in a statute and imply a right of appeal, it is incumbent on the court to avoid a construction, if reasonably permissible on the language, which would render a part of the statue devoid of any meaning or application. He also relied on a decision of the Apex Court in the case of The Commissioner of Income Tax, Gujarat-vs.-M/s. Raman and Co., AIR 1968 SC 49, wherein at paragraph 9 of the judgment, the Hon'ble Supreme Court observed, inter alia, as follows:- avoidance of tax liability by so arranging commercial affairs that charge of tax is distributed is not prohibited. A taxpayer may resort to a device to divert the income before it accrues or arises to him. Effectiveness of the device depends not upon considerations of morality but on the operation of the Income Tax Act Legislative injunction in taxing statutes may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the endorsements on the DFIAs allowing exemption from payment of additional customs duty and accordingly SESA had been directed to submit the 12 DFIAs. (32) Learned Addl. Solicitor General submitted that one of the main objects of the Foreign Trade Policy formulated by the Central Government in exercise of power under Sec. 5 of the Foreign Trade Act is to boost exports so as to enhance foreign exchange earnings for the country. Chapter 4 of the Policy lays down the Advanced Authorisation Scheme. Clause 4.2.6 of the Policy deals with transferability of licence. (33) SESA being a merchant exporter and not a manufacturer, it is not entitled to avail of Cenvat benefit at all. Hence, it was not out of choice that SESA did not avail of Cenvat credit. Learned Counsel submitted that only if a party was entitled to avail of Cenvat credit but chose not to do so, would the party be entitled to the benefit of exemption from payment of additional customs duty. (34) Learned Counsel referred to Rule 3 of the Cenvat Credit Rules, 2004. He submitted that Cenvat credit is available only to a manufacturer or a producer. He submitted that additional customs duty is nothing but central excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnecessary certification of the obvious fact by the Central Excise Authority only to convey a false impression that no Cenvat facility was availed of on the inputs used in the exports consignments so as to avail of the undue benefit of exemption from payment of additional customs duty. This clever ploy worked for quite some time and SESA successfully misappropriated Government Revenue. This wilful deception would have continued for much longer had not the DRI informed the respondents about the fact of Cenvat facility being enjoyed by the supporting manufacturers of SESA. Learned Counsel submitted that the decision to withdraw the benefit of exemption from additional customs duty was rightly taken to avoid availment of double benefit by SESA and such decision is in consonance with the stated Policy of the Government of India. Contention of the Customs Authorities:- (37) Mr. Bharadwaj appearing for the Customs Authorities submitted that the Customs Authorities have merely implemented the decision of the DGFT contained in its letter dated 12 December, 2014 to withdraw the benefit of exemption from payment of additional customs duty in respect of the DFIA licences that had been i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enefit of exemption from payment of additional customs duty. Learned Counsel for DGFT on the other hand submitted that it was not out of choice that SESA refrained from availing of the Cenvat facility. Being a merchant exporter and not a manufacturer, SESA was not at all entitled to avail of such facility. So, it was not a case where SESA had forgone the benefit of Cenvat facility since such benefit was in the first place not applicable to SESA. Learned Counsel for DGFT imputed dishonesty on the part of SESA in submitting certificates from the jurisdictional Central Excise Authority and contended that the same was done only to give an impression that CENVAT facility had not been availed of in respect of inputs that were utilized to manufacture the export products. The short case of learned Counsel for DGFT is that if Cenvat Credit Facility was availed of by the manufacturer of the products which SESA exported, in respect of the inputs, SESA would not be entitled to the benefit of exemption from payment of additional customs duty. Learned Counsel submitted that the emphasis in Clause 4.2.6 (c) of the Policy is on the 'inputs' and not on the person who availed of the Cenvat f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to give an incentive to exporters to boost exports which in turn enhances the foreign exchange reserve of the country. If such exporter has not availed of the Cenvat facility, then it cannot be deprived of the benefit of exemption from payment of additional customs duty just because the manufacturer of the export product has availed of the Cenvat facility. That would, in my opinion, be contrary to the spirit and intent of the Policy. It is not disputed that SESA has purchased the export goods upon full payment of excise duty and in any event, the question of double benefit can arise only if the same entity avails of the same benefit twice. Such is not the case here. The manufacturer of the export products and SESA are two distinct entities and any Cenvat facility availed of by the manufacturer cannot be said to be a benefit reaped by SESA. (43) In view of the aforesaid, I am of the opinion that the direction of DGFT Authorities on the Customs Authorities not to allow exemption of additional customs duty to SESA or to the transferees of the licenses in question is erroneous and not sustainable. However, there are other grounds also on which the impugned orders are liable to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be open to the said party to contend that an order in violation of the principles of natural justice is a nullity and its existence should be ignored by the Court. (b) M/s. R. B. Shreeram Durga Prasad And Fatehchand Nursing Das- vs.-Settlement Commission (IT WT), (1989) 1 SCC 628. At paragraph 7 of the judgment the Hon'ble Apex Court held, inter alia, as follows:- We are definitely of the opinion that on the relevant date when the order was passed, that is to say, 24th August, 1977 the order was a nullity because it was in violation of principles of natural justice. See in this connection, the principles enunciated by this Court in State of Orissa v. Dr. (Miss) Binapani Dei and Ors., [1967] 2 SCR 625 as also the observations in Administrative Law by H.W.R. Wade, 5th Edition, pages 310-311 that the act in violation of the principles of natural justice or a quasi-judicial act in violation of the principles of natural justice is void or of no value. In Ridge-vs.-Baldwin, 1964 AC 40, and Anisminic Ltd.-vs.-Foreign Compensation Commission, (1969) 2 AC 147, the House of Lords in England has made it clear that breach of natural justice nullifies the order made in breach. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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