Tripura High Court dismisses plea seeking action against erring Officers for exempting imported goods from Basic Customs Duty under Transferrable Duty Free Import Authorisation
The Tripura High Court has dismissed a Public Interest Litigation (PIL) seeking direction to initiate appropriate action against their erring Officers who have failed to deny exemption from Basic Customs Duty to goods imported by the Transferees underTransferrable Duty Free Import Authorisation (DFIA).
The petitioner seeks directions to initiate appropriate action against their erring Officers who have failed to deny exemption from BasicCustoms Duty to goods imported by the Transferees under TransferrableDuty Free Import Authorisation (DFIA) despite non-fulfilment of conditions contained in first proviso to condition (iii) of the Custom Notification No.19 of 2015 and/or issued Transferrable DFIAs contrary to the provisions and spirit of Foreign Trade Policy. He contends that the officers of the respondent-Union of India have failed in their constitutional and statutory obligation to confer exemption from duty under Custom Notification No.19 of 2015 to only those Transferees of DFIAs, who fully satisfy all the provisions of Foreign Trade Policy in its true spirit and also satisfy the conditions particularly condition (iii) of the said Notification.
The petitioner contended that first proviso to condition (iii) is erroneously being construed to only require establishing a broad nexus of the material to be imported and the material actually used in the export product, only for their specific name,description or quantity. He contends that in the first proviso to condition (iii)close nexus ought to be established even for the quality, technical characteristics and specifications of the material to be imported and the material actually used in the export product. He contends that the officers of the respondent-Union of India have failed to apply these provisions and conditions with such restrictive meaning in the actual spirit of the ForeignTrade Policy, and that such failure is resulting in huge revenue leakage. Theinputs referred in paragraphs 4.12 (i) and 4.12 (ii) of FTP can be either procured domestically or can be imported goods. In either event he contends that not only the specific name/description and quantity, but also quality,technical characteristics and specifications shall be declared for such material actually used in the export of the resultant product. In effect he contends that requirements applicable in second proviso to condition (iii)though appear to be construed as restricted to sensitive input items specified in Paragraph 4.30 of the Foreign Trade Policy, shall equally apply to all inputs under first proviso to condition (iii) which are referred in paragraphs4.12 (i) and 4.12 (ii) of FTP even if they are other than sensitive items, and that the words “the quality, technical characteristics and specifications”shall be read even into the first proviso to condition (iii) and in Paragraph 4.12 of the Foreign Trade Policy. He also submits that although the substantive condition (iii) of Notification No.19 of 2015 refers to the words“of materials imported”, the words “the material used” in the first proviso would also include not only the material imported but also even the material which is domestically procured. The petitioner further submits that irrespective of the fact that the words “same quality, technical characteristics and specifications” are used only in second proviso to condition (iii), the same shall also be necessarily read even in the first proviso to condition (ii).
The petitioner further contended that to restrict duty exemption in public interest, the officers shall be directed to issue anyTransferrable DFIA or to strictly restrict duty free import entitlement under any Transferrable DFIA already issued, only as per any specific material actually used with quality, technical characteristics and specifications declared by the exporter/original license holder under Appendix 4H,notwithstanding Paragraph 4.27(i) of FTP and the Standard Input OutputNorms.
It is also submitted by the Petitioner that Exporters, Traders andImporters are importing goods by availing exemption without showing the actual use in the export goods by contending that they are post export replenishments and, therefore, are not required to satisfy the actual user condition under DFIA Scheme. In many of the input goods, though the input items in SION appear to be of ‘specific entries’, but they are actually generic entries’. However, they are being imported as ‘specific entries under DFIAs without establishing close nexus as stated above and cleared without payment of duty. He had also given examples that in theAutomotive industry, ‘Automotive Spare Parts’ are considered as generic entries and permitted goods specified under the SION are considered asspecific entries. Similarly, in the Food category, it is claimed that ‘FoodIngredients’ are generic entries and items specified in the SION are specific.He has also placed on record certain judgments of different High Courts andTribunal which have construed the DFIA Scheme contrary to what the petitioner is contending and he submits that such judgments are erroneous and the issue requires consideration.
The Division Bench of Chief Justice Indrajit Mahanty and Justice S.G. Chattopadhyay noted that whereas these further words i.e. “samequality, technical characteristics and specification” are categorically used inParagraph 4.30 of FTP and also in the second proviso to the condition (iii) ofthe Customs Notification No.19 of 2015, however they are absent inParagraph 4.12 of FTP and also in first proviso to condition (iii) of the saidCustoms Notification. These further words i.e. “same quality, technical characteristics and specification” cannot be read in Paragraph 4.12and alsoin first proviso to condition (iii). These further words would apply only while making declaration in shipping bills in respect of sensitive inputs specified in Paragraph 4.30 of FTP, while issuing DFIA in respect of such specified sensitive inputs, or while duty free import of such specified sensitive items under such DFIA to establish close nexus with the specified sensitive inputs used.
‘It is clear that Paragraph 4.30 is an exception to the aboveParagraph 4.27(i) of FTP regarding eligibility for issuance of DFIA.Therefore, wherever sensitive inputs specified in Paragraph 4.30 are used,the DFIA would be issued to permit import of only those material which shall not only be of the specific name/description or quantity, but also having close nexus having “the same quality, technical characteristics andspecification”, as the material used in the export of resultant product. Theexporter would also be required to declare all these particulars of materials used in the shipping bill’, the Bench further noted.
There is also no merit in the contention of the petitioner that although the substantive condition (iii) of Notification No.19 of 2015 concerns mentioning in Transferrable DFIA the details “of materialsimported”, in the first proviso the words “as the material used” for the purpose of ascertaining the “material permitted to be imported” would include not only the “material imported” but also even such material used which is “domestically procured” , observed the Court.
Further,it is observed by the High Court that the Appendix 4H is “Register for accounting the consumption and stocks of duty free imported or domestically procured raw materials, components, etc., allowed under Advance Authorisation/DFIA”.The said Appendix 4H is prescribed in terms of Paragraph 4.57 of Handbook Of Procedure to ascertain from the exporter/original licence holder accounting of consumption and stock of duty free goods allowed underDFIA, whether imported or domestically procured. The said Appendix 4H isin consonance with Paragraph 4.27(i) of FTP and not in derogation thereof It nowhere stipulates requirement of declaration of quality, technical characteristics and specifications either of the inputs used for the exported product or of the duty-free goods imported or domestically procured.
None of the decisions of Courts and Tribunalreferred by the petitioner as erroneous actually suffer from any infirmity fortaking a contrary view. The officers of the respondents are rightly complying with these binding precedents. Neither the officers of the respondents can be proceeded against for complying with the provisions and notification while following such binding precedents, nor can a Original Licence Holder or aTransferee can be denied issuance of any DFIA or exemption under a Transferrable DFIA by subjecting them to any such unintended onerous condition or declaration, direction for which are sought in the petition , held the Bench.
‘In view of the above, no action is warranted against the officers of the respondent-Union of India even on prima facie basis. On the contrary the contentions of the petitioner and interpretation put forth by him to seek action against the officers and to seek further directions in alleged public interest are ex facie erroneous’, the order reads.