Govt. can’t seek coercive Recovery of remaining Customs Duty in indirect manner by blocking Export Incentives: Rajasthan HC [Read Order]

The Rajasthan High Court held that the government cannot seek coercive recovery of remaining Customs Duty in an indirect manner by blocking export incentives.

The petitioner, M/s M.k. Exim (India) Limited is a company registered under the Companies Act. During the period between May, 2002 to March, 2003 the petitioner had made certain exports under advance authorization licence. A show-cause notice was issued to the petitioner by the Directorate of Revenue Intelligence (‘DRI’ for short) on 18.07.2006 alleging that the petitioner had failed to fulfill its export obligations. Primarily allegations against the petitioner were that the raw material imported by the petitioner was without payment of duty and which was to be utilised for the purpose of manufacturing of goods for export, was clandestinely diverted in the local market and the export goods were manufactured with the aid of locally produced raw material (copper rods). The petitioner resisted the show cause notice. The Joint Director General of Foreign Trade passed an order on 15.09.2014 in which he directed the petitioner to pay customs duty with interest to the extent of utilisation of the licence and 1% of TR and further payments including penalty of one time of CIF value on a particular consignment. The petitioner has challenged the said order passed by the Deputy Director General of Foreign Trade. 

The reason for the petitioner to approach this Court at this stage appears to be fast advancing the last date under MEIS for making an application for receiving export incentives under the said scheme. The department has issued a trade notice on 11.09.2018 which pertains to making online applications for MEIS under the system driven approval mechanism. This trade notice specifically provides that this facility will not be available besides others, to those applicant-firms who are placed in the denied entity list or suspended IEC or cancelled IEC. This is where the shoe pinches so far as the petitioner is concerned.

The division bench of Justice Uma Shanker Vyas and Justice Akil Kureshi held that most common instance of action leading to refusal of licenses occurs when firms default in export obligation fulfillment under various export promotion schemes. The licensing authorities in such cases will place the firm in DEL after serving a demand notice for fulfilling the obligation within a reasonable time. In cases relating to fraud and mis-declaration licensing authority would also examine that there was any connivance of the department officials. Basically the intention and effect of placing an entity in DEL is to deprive the facility of granting advance authorization license to it.

“In view of the above discussion it is directed that the respondents shall permit the petitioner to make an application within the time envisaged in the scheme for the incentive under MEIS scheme and consider the same on merits in terms of the provisions made under the scheme,” the court said.

To Read the full text of the Order CLICK HERE

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