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TMI Blog2025 (1) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... r did not accept the plea of the appellant that it had fulfilled export obligation since the appellant had earlier written to DGFT that it had fulfilled its export obligation and DGFT by a letter dated 10.05.1999 had discharged the appellant from the export obligation. So long as the time period for discharging the obligation under the EPCG License dated 29.12.1994 was extended by DGFT and the appellant fulfilled its obligation under the License before the expiry of the said extended period, it cannot be urged by the custom authorities that the appellant had not fulfilled its export obligation. It does not matter if the appellant had made further exports to fulfill the export obligation after discarding the exports made by Sundram Exports. This step was taken by the appellant as a matter of abundant caution when it came to the knowledge of the appellant that the Directorate of Revenue Intelligence was examining the over-valuation of goods by Sundram Exports. The finding recorded by the Commissioner that this was done in a fraudulent manner by the appellant is without any basis. In fact, DGFT did not question this act of the appellant and in fact issued the discharge certificate. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xport Promotion Capital Goods Scheme in terms of the Import Policy 1992-1997. 4. The EPCG License No. P/CG/2133756 dated 29.12.1994 [EPCG License dated 29.12.1994 imposed an obligation on the appellant to export products worth USD $2,482,135 within five years from the issuance of the License. The appellant also furnished a bank guarantee of Rs. 1,06,07,000/- equal to 100% of the duty saved. The appellant claims that it manufactured CD-ROMs specified in the EPCG License dated 29.12.1994 and exported them to fulfill the export obligation stipulated in the License. The said export obligation was fulfilled by the appellant by also exporting the CD-ROMs through third parties like Sundram Exports, a merchant exporter. Sundram Exports purchased the CD-ROMs from the appellant and exported the same worth US $1,945,600. The DGFT, by a letter dated 10.05.1999, confirmed that the appellant had fulfilled their export obligation against EPCG License dated 29.12.1994. The appellant was, therefore, free from the bank guarantee and the letter of undertaking dated 16.01.1995. 5. The appellant also obtained another EPCG License No. P/CG/2133308 dated 06.07.1994 [EPCG License dated 06.07.1994 ]. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that CDROMs exported by the appellant through Sundram Exports were over-valued and should not be counted towards the fulfillment of export obligation. The show cause notice also proposed to demand customs duty in respect of capital goods imported under the second EPCG License dated 06.07.1994. 8. The appellant and Sunil Wadhwani, Director of the appellant, filed replies to the show cause notice and denied that customs duty had been evaded by them on the import of capital goods. It was stated that EPCG License dated 06.07.1994 was valid for fulfilling export application upto 05.07.1999, which period was extended initially upto 05.07.2000 by DGFT and thereafter upto 31.03.2001 by Public Notice dated 06.04.1999 issued by DGFT. The appellant also pointed out that the said EPCG License dated 06.07.1994 was still being utilized and accepted by the customs at the airport for fulfilling the export obligation and so the show cause notice issued during the validity of the export obligation period of the EPCG License was pre-mature. It was also stated that earlier they had included the exports made through Sundram Exports in its exports obligations but because of the seriousness of the all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank guarantee was released vide letter dated 10.05.1999. M/s Super Cassette Industries Ltd. claimed and availed benefits under EPCG Scheme of the said export of CD ROMs being declared as Supporting Manufacturer in the Shipping Bills. M/s Super Cassette Industries Ltd. being the actual importer of the capital goods under EPCG Scheme on its own could not fall under the category of Supporting Manufacturer as only the actual importer of capital goods and not the supporting manufactures could take the export value for the purpose of fulfillment of export obligation and availment of EPCG benefits. The export of CD ROMs could not also fall under the category of third party export in view of non-fulfilment of conditions mentioned in the Ministry of Finance's Circular No. 120/95-Cus. dated 23.11.95. Thus M/s Super Cassette Industries Ltd. had wrongly and fraudulently discharged export obligations under the said EPCG Licence by resorting to suppression of facts and willful mis declaration. M/s Super Cassette Industries Ltd., therefore, had not fulfilled the export obligations against the subject EPCG licence no. P/CG/2133756 dt. 29.12.94 and had thus violated the conditions imposed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Sundram Exports Pvt. Ltd. and they fulfilled export obligation within extended period without including the FOB value of CD ROM s. Since in this case the substitution of exports of CD ROM s in question by other exports for fulfillment of export obligation was made by them within the original validity period of export obligation before submission of their case to DGFT for discharge of export obligation. I am inclined to accept their plea in the matter. (emphasis supplied) 11. The relevant portion of the order passed by the Commissioner in respect of Sunil Wadhwani is as follows: 42(E)3 All these facts clearly indicate that Shri Sunil Wadhwani Director of M/s. Super Cassette Industries Ltd. entered into conspiracy in collusion of various persons associated with M/s. Sundram Exports Pvt. Ltd. and M/s. Netcompware Pvt. Ltd. to grossly inflate the export of CD ROM s by these firms in order to wrongly and fraudulently avail undue export benefits under EPCG and DEPB schemes and actual involvement of Shri Sunil Wadhwani in the conspiracy is proved beyond doubt. Although the export obligation under both the EPCG licences were later fulfilled by them without incorporating the FOB value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been fulfilled by the appellant within the time granted by DGFT and so the duty demand is not sustainable; (ii) The DGFT, by a letter dated 10.05.1999, redeemed the bank guarantee and the letter of undertaking furnished by the appellant and released the appellant of any further export obligation in 1999. Subsequently, DGFT, by a letter dated 27.05.2003, discharged the appellant and Sunil Wadhwani from their liabilities after the appellant had fulfilled the export obligation, excluding the export made by Sundram Exports, within the time extended by DGFT. Thus, even if the disputed exports made through Sundram Exports are ignored, the appellant had fulfilled the export obligation against EPCG License dated 29.12.1994; (iii) Once DGFT authorities had exercised jurisdiction and was satisfied that the export obligation was fulfilled by the appellant within the stipulated time and the bank guarantee was redeemed, the customs department will have no jurisdiction to question and sit in judgment over the order passed by DGFT. In this connection, reliance has been placed on the judgments of the Supreme Court in Titan Medical Systems Pvt. Ltd. vs. Collector of Customs, New Delhi [ 2003 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in five years from the date of issue of the EPCG License. 19. The second EPCG License is dated 06.07.1994 under which the appellant was obliged to fulfill export obligation of USD $6,133,526 by 05.07.1999, which period was initially extended by DGFT upto 05.07.2000 and later upto 31.03.2001 by Public Notice dated 06.04.1999 issued by DGFT. 20. The dispute in the present appeals is only with respect to the EPCG License dated 29.12.1994 as the Commissioner has found as a fact that the appellant had fulfilled the export obligation under the EPCG License dated 06.07.1994. 21. In respect of the EPCG License dated 06.07.1994, the Commissioner noticed that initially the appellant had included CD-ROMs exported by Sundram Exports in the export obligation, but later the appellant made further exports to fulfill the export obligation. In this connection the Commissioner noticed that the further exports made by the appellant, after excluding the exports made by Sudram Exports, were within the original validity period of export obligation before submission of their case to DGFT for discharge of export obligation. It is in such circumstances that the Commissioner held that the appellant had disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of this License, the Commissioner did not accept the plea of the appellant that it had fulfilled export obligation since the appellant had earlier written to DGFT that it had fulfilled its export obligation and DGFT by a letter dated 10.05.1999 had discharged the appellant from the export obligation. 26. This distinction drawn by the Commissioner in respect of EPCG License dated 29.12.1994 is an artificial distinction which has no bearing on the discharge obligation of the appellant. So long as the time period for discharging the obligation under the EPCG License dated 29.12.1994 was extended by DGFT and the appellant fulfilled its obligation under the License before the expiry of the said extended period, it cannot be urged by the custom authorities that the appellant had not fulfilled its export obligation. It does not matter if the appellant had made further exports to fulfill the export obligation after discarding the exports made by Sundram Exports. This step was taken by the appellant as a matter of abundant caution when it came to the knowledge of the appellant that the Directorate of Revenue Intelligence was examining the over-valuation of goods by Sundram Exports. The f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, 1993 [the FDTR Rules] and made the following observations: 104. As we read the various provisions enshrined in the FTDR Act alongside the FTP as well as the FTDR Rules, we find ourselves unable to recognize a right that may be said to inhere in the customs authorities to doubt the issuance of an instrument. We, in the preceding parts of this decision, had an occasion to notice the relevant provisions contained in the FTDR Act and which anoint the DGFT as the central authority for the purposes of administering the provisions of that statute and regulating the subject of import and exports. The FTP 2015-20 in unequivocal terms provides in para 2.57 that it would be the decision of the DGFT on all matters pertaining to interpretation of policy, provisions in the Handbook of Procedures, Appendices, and more importantly, classification of any item for import/export in the ITC (HS) which would be final and binding. The FTP undoubtedly stands imbued with statutory authority by virtue of Section 5 of the FTDR Act. 105. Of equal importance are the FTDR Rules and which too incorporate provisions conferring an authority on the Director General or the licensing authority to suspend or canc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an instrument which owes its origin to the FTDR Act alone. It is these factors, as well as the role assigned to the DGFT which perhaps weighed upon courts to acknowledge its position of primacy when it come to the interpretation of policy measures referable to the FTDR Act as well as issues of classification emanating therefrom. (emphasis supplied) 29. The Delhi High Court referred to the views earlier expressed by the Delhi High court in Simplex Infrastructure Ltd. vs. Union of India and others [ 2014 SCC Online Del 7747 ] and noticed that the views expressed by the Gujarat High Court in Alstom India Ltd. vs. Union of India and another (No. 2) [ 2014 SCC Online Guj 15952 ] had been approved. The Delhi High Court also referred to the judgment of the Allahabad High Court in PTC Industries Ltd. vs. Union of India and others [ 2009 SCC Online All 2138 ] and the judgments of the Bombay High Court in Pradip Polyfils Pvt. Ltd. vs. Union of India [ (2004) 173 E.L.T. 3 (Bom) ], Autolite (India) Ltd. vs. Union of India [ 2003 SCC Online Bom 1313 ] and Commissioner of Customs (E.P.) vs. Jupiter Exports Ors. [ 2007 SCC Online Bom 467 ]. Ultimately, the Delhi High Court held: 108. ***** We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the absence of any adjudication having been undertaken by DGFT. In other words, an action for recovery of benefits claimed and availed would have to necessarily be preceded by an order of the competent authority under the FDTR Act that the certificate or script had been illegally obtained. 32. This judgment, when applied to the facts of the present case, would clearly mean that the custom authorities cannot question the discharge certificate issued by DGFT in respect of the obligation to be fulfilled by the appellant under EPCG License dated 29.12.1994, unless DGFT itself takes a prior decision that the appellant had not discharged the obligation under the said EPCG License. In this view of the matter, the custom authorities could not have questioned the discharge of the export obligation given by DGFT to the appellant in respect of the EPCG License dated 29.12.1994 in the absence of any prior determination regarding the said License by the DGFT. 33. Once it is held that the custom authorities had no jurisdiction to issue the show cause notice, the confiscation of goods or the imposition of penalty upon the appellant or upon Sunil Wadhwani, Director of the appellant, does not a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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