Delhi High Court denies the Benefit Under Duty-Free Credit Entitlement Scheme (DFCE) to the Petitioner on grounds of Ineligibility

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In M/S Kanak Exports vs. Union of India and Ors., M/s Adani Export Ltd. opposed the order issued by Respondent No.3 dated 28.12.2017. The order held that the Petitioner was ineligible under the DFCE to get any benefit. 

The Duty-Free Credit Entitlement Scheme (DFCE) is given to a merchant-exporter or manufacturer-exporter. It helps in importing products used in the manufacturing of goods. This Scheme is also very helpful as one doesn’t have to pay Basic Customs Duty and Additional Special Duty. 

Facts of the Case

The Government of India notified Policy 2002-2007 on Export-Import (EXIM) as under Section 5 of the Foreign Trade Act (Development and Regulation), 1992. On 28.01.2004, Notification No.28 amended Paragraph 3.7.2.1 of Chapter III of the EXIM Act.

Petition in the High Court of Gujarat and Bombay 

  • Adani Exports Ltd had filed a writ petition before the Gujarat High Court and the High Court of Bombay. The petition opposed, inter alia, the validity of the notification as well as the Public Notice No.40. Both the High Courts in separate judgments on 23.07.2004 and 04.07.2005, allowed the said Writ Petition in part. 
  • The Gujarat High Court held that the notification was to stop the change of export orders from one Company to another belonging to the same business. Thus, it was of a clarifying nature. It purposed to show the increased export success of the other company. The Bombay High Court also held the same. But, set aside the Public Notice dated 28.01.2004 as being ultra vires. 

Before the Supreme Court

  • The Parties challenged the judgments before the Supreme Court using special leave petitions. The Supreme Court disposed of the appeal. The Court held the targets achieved were by fraudulent means. Thus, any vested right is not accumulated in favour of these exporters.

Review Petition in the Supreme Court

  • Feeling aggrieved from the above decision, the complainant requested a Review Petition (Civil). But, the Supreme Court denied the same. 
  • The Petitioner thereafter filed a revised application before the Respondent No.3. Contending that, out of the total exports of Rs.1070.35 crores made by them between 01.04.2003 to 31.03.2004, exports of Rs. 355.69 crores had become ineligible.
  • The said had become ineligible as mentioned above, in view of the exclusion set out in Notification dated 28.01.2004. This left the eligible exports at Rs.714.66 crores entitled to the benefit of the DFCE Scheme. 

The Respondent no.3 also rejected the submission by its Impugned Order/Letter. This was rejected on the basis of the Supreme Court’s decision and observation. The Respondent found the Petitioner not liable for any benefit under the DFCE Scheme. 

Hence, they were not entitled to a claim.

The present petition is before The Delhi High Court.

Contentions of the Petitioner

The counsel for the petitioner submitted that the Impugned Order should be set aside. 

The Supreme Court only considered the validity of the Writ Petition (Civil) and not the eligibility of the petitioner for any benefit under the DFCE.

Further, the allegations of fraud need to be with the supporting material. Therefore, mere presumptions and surmises cannot be the basis. In the present case, neither in the Impugned Order nor the counter affidavit referred to any investigation against the petitioner. He further submits, that to deny the Petitioner the benefit of the scheme would be discriminatory.

Contentions of the Respondent

The counsel submitted that the Supreme Court had denied the relief. It is thus, not available to the petitioner. The petitioner, in fact, seeks to re-agitate the relief denied to it by the Supreme Court.

Court’s Observation

The judgment by the SC was considered, where the letter addressed by the Joint Secretary, Govt. of India, Central Board of Excise and Customs, to the DGFT was seen into. And also various other contemporaneous letters/Circulars/Minutes of Meeting. They did so to find a lead up to the issuance of the Notifications dated 21.04.2004 and 23.04.2004. They also took note of the counter affidavit filed by the Union of India. This affidavit gave details of the modus operandi used by the exporters to inflate their exports to claim the benefit of the DFCE Scheme.

The Supreme found that both these firms had misused the provisions of the Scheme. For such reason, the Court set aside the direction of the Bombay High Court that granted relief to the petitioner under the said Scheme.

Held

The Petitioner should not try to re-agitate eligibility in the form of a new petition. As the SC judgment makes them ineligible for the same. And, merely because the Respondents have granted some relief to M/s Adani Export Ltd or have not made any recoveries from it, it cannot entitle the petitioner, by itself, to claim benefit under the DFCE Scheme.

Thus, The petition stands dismissed. 


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