Whether extension of expired advance license is allowed to fulfil export obligations when non fulfilment of export was due to adverse market conditions?

PJ/CASE LAW/2016-17/3050

Case: UNIWORTH LTD. Vs JOINT DIRECTOR GENERAL OF FOREIGN TRADE
Citation: 2015 (325) E.L.T. 871 (Cal.)
Issue: Whether extension of expired advance license is allowed to fulfil export obligations when non fulfilment of export was due to adverse market conditions?
Brief Facts: The writ petitioner was issued nine advance licences. Seven were issued between 3rd April, 2007 and 17th July, 2007. Two were issued on 25th February, 2009 and 26th February, 2009.
These advance licences were issued under a scheme which was part of the import and export policy of our country. An importer was given the benefit of duty free import. The imported items had to be used as inputs of manufacture. The manufactured goods had to be exported to bring in foreign currency as export proceeds. Here, the raw material permitted to be imported duty free was yarn.
It appears that in relation to the advance licences issued in 2007, the writ petitioner fulfilled their export obligation. But they could not fulfil their export obligation with regard to the two advance licences issued in 2009.
For the failure of the petitioner to fulfil their export obligation, a show cause notice was issued by the first respondent authorities. It was adjudicated upon on 11th July, 2014 by an order imposing a penalty of Rs. 25 lacs for the each of the licences, on the petitioner and its Directors.
The petitioner preferred an appeal from the said order which is pending before the Director General of Foreign Trade.
However, there appears to be a change in the circumstances in or about November, 2014. It appears from the letter of the petitioner to the Joint Director of foreign Trade dated 28th November, 2014 that the overseas buyer had renewed its order to import the subject goods from the petitioner. Since, in the meantime, the validity of the licences had expired the petitioner could not export the goods and claim the benefit thereof.
An order is prayed for extension of these licenses to effect the aforesaid export.
Appellants’ Contention: Mr. Kundu, learned senior advocate appearing for the petitioner submits that this failure on the part of the petitioner was not deliberate but was due to adverse market conditions and cancellation of the order by the exporter.
Respondent’s Contention: The extension of licenses are seriously resisted by Mr. Roy appearing for the respondents. He submits that the validity of the licences has expired. The petitioner should not be allowed to effect the exports. Adjudication is pending before the said appellate authority. Any order of this court will interfere with the same.
Reasoning of Judgement: One needs to take a reasonable view of the whole matter. The petitioner was permitted to import yarn duty free on their undertaking to export the stipulated quantity of goods within a specified period of time. The whole purpose of issuance of the advance licences was to promote export with the incentive of duty remission if the export obligation was fulfilled. If for any bona fide reason an importer/exporter has been unable to fulfil his export obligation within the stipulated time, his case for extension of the validity period of the licence or licences should be reasonably considered. In order to reasonably consider such extension, it is important whether the belated export which he proposes to make is genuine or not. If the belated export is genuine, the purpose of the policy of generating more export earnings, by granting duty remission incentives would be fulfilled. This has to be ascertained. Only the circumstances will bear this out.
At the moment, as an interim order to allow the petitioner to fulfil its export obligation against advance licences at Serial Nos. 8 and 9 of page 50 of the writ petition on the basis of the expired licences, without prejudice to the rights and contentions of the parties. The petitioner will be allowed to fulfil the export obligation but at the moment no benefit is to be received by the writ petitioner. The writ petitioner should be able to fulfil this export obligation by 31st March, 2015. The position will be reviewed by this court after that period.
In the meantime, the appeal before the Director General of Foreign Trade is to remain stayed. The respondent authorities will not take any coercive steps against the writ petitioner till 23rd April, 2015 or until further orders, whichever is earlier.
Decision: Interim order to allow assessee to fulfil export obligation and proceedings with DGFT stayed
Comment: In this case, the assessee has not fulfilled the export obligation due to adverse market conditions. Penalty is imposed upon the assessee for non-fulfilment. Thereafter assessee requested for extension of expired advance licences on receipt of fresh export orders.
The High Court held that the whole purpose of Advance Licence scheme is to promote exports. If export obligation not fulfilled due to any bona fide reason within stipulated time, extension of validity of licence requires reasonable consideration. Petitioner is allowed to fulfil export obligations against expired licences without receiving any benefit for time being, till further review by High Court after carrying out export

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PJ/CASE LAW/2016-17/3050

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