Government of India MINISTRY OF COMMERCE & INDUSTRY OFFICE OF THE JOINT DIRECTOR GENERAL OF FOREIGN TRADE 6TH FLOOR, RESHAM BHAWAN, LAL DARWAJA, SURAT-395003 E-mail : [email protected] File No.9/229/AM-14/ECA Date:- 21.5.2014 ORDER IN ORIGINAL Any person/party aggrieved by this order, may under Section 15 of the Foreign Trade/(Development & Regulation) Act, 1992, as amended, file an appeal against the same to the appropriate authority viz. the Addl. Director General of Foreign Trade, office of the Additional DGFT, Nishta Bhavan, 48, New Marine Lines, Mumbai-400 020. Appeal shall be filed within 45 days from the date of receipt of this order and shall bear a Court fee stamp as per Court Stamp fee Act. Appeal must be accompanied by a copy of this order in original duly affixed court fee stamp thereon with all documents of evidence in the form of Annexure to the appeal relied upon in support of the appeal under intimation to this office. 2 Any person/party desirous of filing an appeal against this order shall deposit the amount along with the appeal to the Appellate Authority failing which the appeal is liable to be rejected for non-compliance of the provisions of Section 15 of the Foreign Trade (Development & Regulation) Act, 1992 as amended. 3 M/s. Kosas Exports Limited, 204 Jay Durga Industrial Estate, B/h Arihant Complex, Udhna Pandesara Road, Surat 394210 was issued following seven Duty Credit Scrips under Focus Product Scheme of Chapter-3 of Foreign Trade Policy 2009-14 from the office of Joint Director General of Foreign Trade, Surat, in respect of export products claimed to be Technical Textile Products. S.N FPS FPS date File Number Duty o. Number Credit value in ( Rs.) 1 52100333 07/01/201 522108700363AM 1,804,796. 32 1 11 00 2 52100333 07/01/201 522108700366AM 33 1 11 954,053.00 3 52100333 07/01/201 522108700369AM 35 1 11 984,722.00 4 52100333 10/01/201 522108700367AM 1,019,265. 62 1 11 00 5 52100333 10/01/201 522108700381AM 1,300,999. 65 1 11 00 6 52100340 08/02/201 522108700601AM 00 1 11 839,930.00 7 52100340 10/02/201 522108700602AM 59 1 11 765,226.00 4 A Show Cause Notice of even number dated 16.12.2013 was issued by this office to M/s. Kosas Exports Limited, 204 Jay Durga Industrial Estate, B/h Arihant Complex, Udhna Pandesara Road, Surat 394210 having IEC No. 5204005820, under Section 10 of the Foreign Trade (Development & Regulations) Act, 1992 as amended. Vide the said notice, the noticee firm was asked to show cause as to why the impugned Duty Credit Scrips issued under Focus Product Scheme mentioned as Para 3 above should not be cancelled ab- initio as per Section 9 and 11 of FT (D&R) Act. 1992, as amended read with Rule 10 of Foreign Trade (Regulations) Rules, 1993. By this notice, the noticee firm was granted the opportunity of Personal Hearing on 15.1.2014, before the undersigned. 5 The cause of the notice arose as it was brought to the notice of this office that M/s Kosas Exports Limited, 204 Jay Durga Industrial Estate, B/h Arihant Complex, Udhna Pandesara Road, Surat 394210 had revealed voluntarily to DRI, Ahmedabad that they had exported textile fabrics which were other than “Technical Textiles” and thus ineligible for benefits under Focus Product Scheme. It was therefore, found prima facie that the noticee firm has availed benefits under Focus Product Scheme by mis-declaring the export products as “Technical Textiles” whereas the goods actually exported were not classifiable as ‘Technical Textiles’. 6 On behalf of the noticee firm, Shri S. Suriyanarayanan, Advocate and Solicitor, Surat/Gujarat vide letter dt. 13.1.2014 requested adjournment of the personal hearing fixed on 15.1.2014 to any other date on the ground that he was unable to appear for the personal hearing on that day. The personal hearing was accordingly re-scheduled to 17.4.2014 vide this office letter of even number dt. 31.3.2014. 7 Shri. Suriyanarayanan, Advocate and Solicitor, appeared before me for personal hearing on the 29.04.2014 on behalf of the noticee firm and handed over letter of authority to represent the case on behalf of noticee firm. He had, in the meantime, vide letter dt. 13.1.2014 submitted a written reply wherein he had denied all the allegations levelled in the Show Cause Notice. He prayed for quashing of Show Cause Notice by making following submissions:- (i ) Since DRI authorities have no locus standi in regard to description and classification of goods for FPS, the SCN issued at the instance of DRI is required to be dropped in limine. (ii) The Department of Revenue, Ministry of Finance in its circular dt. 03.06.1997 had clarified tht “the role of Customs authorities in the matter of DEPB was confined to verification of correctness of exporters declaration regarding description, quantity and FOB value of the export product. It was for the licensing authority to ensure that the credit was permitted at the correct rate as notified by the DGFT”. He further submitted that the word “description” occurring in the referred circular did not extend to adjudication on description or classification and that in case there is any doubt regarding description or classification at the time of verification, the matter has to be reffered to DGFT. He further submitted tht the “Customs authority are not entitled to adjudicate over description and classification of the goods even in case of Focus Product Scheme in the same manner as in case of DEPB”. ( iii) The firm has further submitted that the FPS benefits for goods exported with CTH 5407were being granted by other DGFT offices in Ahmedabad, Ludhiana, Delhi, Mumbai etc. But Surat office was not issuing FPS for the reasons not known but on their pursuing the matter with necessary details, this office started granting FPS benefits from November 2010 for the eligible exporters including their Company. It is further stated by them that the products exported by their company as per details given in shipping bills are “dyed and/or printed fabrics made from 100% polyester filament yarn/texturised yarn with or without embroidery and/or with or without metallised yarn”. These exported goods were classified under tariff heading 5407 and cleared by customs/excise departments subsequently. The representative argued the export classification of Textile Products for grant of incentives like FPS is determined by DGFT as per Foreign Trade Policy, Handbook of Procedures and Appendices as well as per Customs tariff heading. None of legislations actually define the expression “Technical Textiles”. It was further submitted that all exported goods falling under ITC(HS)Code-5407 were classified as “TECHNICAL TEXTILES PRODUCTS” under Serial No. 33 of Appendix-37D of FTP during the material period. No. individual items under ITC(HS) Code-5407 were omitted from classification of “Technical Textiles” during material period. It is the office of DGFT which classified all the exported goods of ITC(HS) Code-5407 as “Technical Textile Products” under S.No.33 of Table-4 of Appendix37D. The software of DGFT for exporters filing the applications for FPS scrips under Chapter 3 contained only one description of “technical textile” for all goods exported under ITC 5407. It is also contended by the firm that once all goods falling under ITC(HS) Code-5407 were included as “technical textiles” in the Appendix-37 -D during material period for grant of FPS, DGFT cannot turn around and change the classification retrospectively based on views of extraneous authorities like DRI, who in any case have no jurisdiction in such matters. They further mentioned that goods falling under CTH 5407 can be used for technical purpose. They further argued that the end use as “Technical Textiles” is not prescribed in FPS policy. Exporters also cannot insist to know end use of foreign buyers at the time of exports as no foreign buyer will give their trade/use details to Indian exporters. After Surat DGFT granted the FPS scrips, DRI pressurised exporters including them under threat of arrest, etc and solicited statements under coersion that exported goods are not “technical textiles”. Therefore, statements by exporters before DRI cannot be considered as their voluntary statement to DRI. It is also stated that DRI is not an authoritative body to decide about the user. In this regard they have stated that after their forced statement given by them before DRI, they approached the Hon’ble High Court of Gujarat challenging the unlawful action of extracting the amount equivalent to the FPS benefits without application of mind that they had not violated Customs tariff act or any relevant act concerning the subject that the DRI and the Customs authorities had resorted to such action. The Hon’ble High Court of Gujarat admitted their petition and finally ordered the DRI and the Customs to return the amount, they had obtained from them stating very clearly in the order that the Petitioners had not violated the customs laws nor evaded any amount of duties etc or taken any ineligible benefits. It is further informed that the DRI had no option but had to return the said amounts to them without pursuing this matter further. Therefore, there was no issue left with the DRI or Customs as far as this matter is concerned. At the same time, DGFT, New Delhi had issued a policy circular No. 42 dt. 21.10.2011 clarifying that all the export products made till 31.03.2011 under common ITC(HS) Code-5407 were eligible for FPS benefits.