Failure to Fulfil Export Obligations Under Advance Authorization: Delhi HC Quashes Customs Demand After DGFT Confirms Fulfilment [Read Order]

The High Court of Delhi, quashed the customs demand against the assessee after Directorate General of Foreign Trade ( DGFT ) confirmed that the company had fulfilled its export obligations under Advance Authorization.

Anjani Technoplast Ltd.,appellant-assessee, filed appeal CUSAA 178/2022 against the Customs,Excise and Service Tax Appellate Tribunal ( CESTAT ) order dated 8th August, 2022, which had dismissed its application for restoration of appeal against the Order-in-Original dated 10th October, 2014. The Order-in-Original had confirmed a demand of Rs. 5,96,03,154.51/- for allegedly failing to fulfil export obligations after importing goods under Advance Authorization.

The assessee had imported goods under Advance Authorization with a 36-month export obligation and executed a bond for Rs. 5,96,03,154.51/-. The assessee claimed to have fulfilled 47% of the obligation. After partial fulfilment, the Customs Department issued a show cause notice on 10th June, 2014, demanding the full bond amount, which was confirmed by the Order-in-Original.

The assessee filed an appeal, but it was dismissed due to non-payment of pre-deposit. The Policy Relaxation Committee later extended the export obligation period to 133 months on 7th January, 2020. Despite the extension, the assessee could not fully meet the obligation and deposited the proportionate customs duty and interest in September 2020 and April 2021. DGFT then issued an export obligation discharge certificate on 9th March, 2022.

The Delhi High Court, in its order dated 18th January, 2024, noted that the assessee had fulfilled part of the obligation, deposited the remaining duty and interest, and had been issued a redemption certificate, which prima facie discharged the export obligation.

Subsequently, the assessee filed W.P.(C) 4339/2024 challenging the Order-in-Original. The Court directed DGFT to file an affidavit regarding fulfilment of export obligations. DGFT confirmed that the appellant had fully discharged its obligations, taking into account partial exports, duty deposit, and extension by the Policy Relaxation Committee.

The Redemption Certificate of 9th March, 2022 confirmed compliance, and DGFT clarified that any further recovery lay with the Customs Department, not DGFT.

The assessee counsel, stated that CUSAA 178/2022 related to the same Order-in-Original and he did not pursue it as the writ petition had been allowed.

The respondent counsel, stated that when the Order-in-Original was passed, the DGFT’s extension of the export obligation and the redemption certificate were not yet issued.

Justice Prathiba M Singh and Justice Shail Jain noted that events after the Order in Original dated 10th October 2014, especially the issuance of the export obligation discharge certificate on 9th March 2022, had made both the CESTAT proceedings and the appeal before the Court unnecessary.

The court held that, since the petitioner had been granted an extended period of 133 months to complete the export obligation and had obtained the redemption certificate, the Order in Original confirming the demand for non fulfilment no longer had effect. The court therefore set aside the Order in Original.

The high court directed that any pre deposit made by the petitioner for pursuing the CESTAT appeal could be refunded by CESTAT within two months.

CUSAA 178/2022 and W.P.(C) 4339/2024 were disposed of on these terms, and all pending applications, if any, were also disposed of.

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