(Prayer: Petition filed under Article 226 of the Constitution of India praying for the issuance of writ of Certiorarified Mandamus, calling for the records of the Second respondent culminating in the impugned communication dated 20.05.2005 issued from file F.No.25/04/DEPB/CRA AUDIT/2002-03 and quash the same and direct the 1st and 2nd respondent to confirm and extend DEPB credit to the goods “Field Coil & Frame Assembly”.)
1. Heard Mr.S.Murugappan, learned counsel for the petitioner, Mr.J.Madanagpal, learned SCGSC for R1 and R2/DGFT and JDGFT and Mr.T.Pramod Kumar Chopda, SSC for R3/Commissioner of Customs.
2. The petitioner is a company engaged in the manufacture and export of electrical equipment. One of the items manufactured is a Field Coil l/Frame & Shied Coil Assembly. This item is part of larger equipment known as a cranking motor.
3. The petitioner availed of the Duty Entitlement Pass Book (DEPB) Scheme, an export incentive. The scheme provided that the notional customs duty element in respect of the parts required to be imported for manufacture, as well as the export of goods be taken into account and reckoned as a percentage of the value of goods exported. Credit is given for this percentage upon export.
4. A notification was also issued prescribing the rates of duty credit in respect of the specific items exported. In the present case, the rate is stipulated, at serial no.268, as being 14% for a ‘Field Coil for Starter Motor’. The export in the present case was occasioned as planned and the customs documents reveal the description as a ‘Field Coil for Starter Motor’. This is not in dispute.
5. Post export, there appears to have been an objection raised by the Audit Department of the Director General of Foreign Trade to the effect that the benefit of the export scheme has been availed on certain parts of the cranking motors that are not so eligible. Vide communication dated 08.10.2003, R1 called upon the petitioner to either justify the export benefit or to pay the amount of duty availed, according to the respondents, erroneously.
6. The petitioner responded stating that the sub-assemblies supplied by it to the foreign customer, one M/s Delco Remy, Hungary is a Field Coil Assembly known as F&F Assembly, which is a part of a cranking motor. The petitioner justified its claim stating that the coil itself, which is made up of copper is necessarily required to be housed in a frame for reasons of proper functional usage. After an exchange of communication, where the petitioner was called upon to supply copies of the relevant supporting documents as well as a description of the goods exported which was duly complied with, the impugned order dated 20.05.2005 came to be passed, rejecting the submissions of the petitioner and calling upon it to remit the DEPB benefit availed along with 15% interest within 30 days from receipt of the letter.
7. This was followed by communication dated 21.05.2005 from the petitioner to the respondent pointing out that the decision has been taken in violation of the principles of natural justice. The request for a hearing was forwarded to the DGFT by the Foreign Trade Development Officer, upon consideration of which, the respondents afforded a hearing to the petitioner. By letter dated 17.08.2005, the conclusion of DEPB committee was communicated to the petitioner rejecting its case as follows:
GOVERNMENT OF INDIA
MINISTRY OF COMMERCE & INDUSTRY
DIRECTORATE GENERAL OF FOREIGN TRADE
DES.I SECTION, ROOM No.404, 4TH FLOOR, UDYOG BHAWAN
No.01/80/162/621/AM-05/DES-I/90 Dated 17/8/2005
M/s.Remy Electricals India Ltd.
Subject: Audit of DEPB files of Jt.DGFT, Pondicherry
Please refer to your letter dated 21.5.2005 forwarded by Jt.DGFT, Pondicherry vide their letter dated 1.7.2005 on the subject mentioned above. I am to communicate that the matter was considered by ALC-II Committee in its Meeting No.17/06 held on 26.7.2005 vide (Case No.E-18). The decision of the said meeting of the said DEPB Committee is reproduced below:-
“The case regarding audit objections of DEPB files of Jt.DGFT, Pondicherry was considered by the ALC-II as per the Agenda. The representative of the firm (M/s.Delco Remy Electricals India, Ltd., Hyderabad) Shri P.S.Sastry, Vice President (finance) & Company Secretary & Shri Asis K.Bhaumik, director appeared before the committee for personal hearing. They explained the case to the Committee. The Committee also went through the corresponding SION at Sl.No.c-1026 of DEPB Entry No.268 of Engg. Group and found that their export product of which sample was displayed before the Committee would not be covered under the said DEPB Entry. The representative of the firm asked to keep the decision of DEPB Committee in abeyance but that was not acceded to being audit objection case. The Committee, after hearing him and deliberating upon the case, decided to maintain the earlier decision f the ALC.”
2. The above decision of the said Committee is self-explanatory and clarificatory.
FOREIGN TRADE DEVELOPMENT OFFICER
FOR DIRECTOR GENERAL OF FOREING TRADE
8. The audit objection on the basis of which the action had been initiated is extracted below:
...The reading of the description in the relevant Shipping Bills indicates that the goods consisting of parts of cranking motor and Frame Assembly were exported along with above specified goods ‘Field Coil to Starter Motor’. Since, the rate under the said DEPB S.Nos. was available only to specified goods ‘Field Coil to Starter Motor’, adopting the rate to other goods viz.”Parts of Cranking Motor Field Coil for Starter Motor Frame and Field Assembly” was not correct.
9. The case of audit is that the description in the invoice was ‘parts of cranking motors field coil for starter motor frame and field assembly’ which is different from the description of the product under the Foreign trade policy, being ‘Field Coil to Starter Motor’. The objection of the respondent, based on audit objection, is thus that the benefit of DEPB was availed on ineligible goods. This objection appears to be based upon the description contained in the shipping documents only. However, the product catalogue and other documents that were on record, indicate clearly that the Field Coil that has been exported has been housed in a case, in line with safety as well as functional requirements. I
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t certainly could not have been the intention of the authorities that the benefit be extended only to an assembly comprising an exposed copper coil. The diagram of the part exported makes it clear to me that the assembly exported was intended to consist of the coil encased in a suitable cover for practical and safety purposes. The relevant entry reads ‘Field Coil for Starter Motor’, and in my considered view, should necessarily include the casing as being a functional safety requirement. 10. In my view, the Field coil encased in a suitable compartment, is the product contemplated under the Policy, eligible to the benefit under DEPB scheme. In the light of the discussion as aforesaid, this writ petition is allowed. No costs.