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Duty Scrips Granted Scrupulously By Designated Officer, Not To Be Rejected Subsequently

The Hon’ble Madras High Court has upheld that duty scrips issued by the DGFT are deemed to be valid and directs the DC to re-validate the duty scrips and extend the duration of expired scrips, along with Telegraphic Release Advice (TRA). A detailed synopsis of the case is provided below.


Facts and issues of the case

  1. Jindal drugs Pvt Ltd. (JDPL, the petitioner) is an exporter of menthol and natural essential oils, exports the goods to buyer (UTEXAM) in Ireland, and supply the consignment is to DHL Logistics, which is a Free Trade Warehousing Zone (FTWZ).
     
  2. The petitioner, wishing to avail the benefit under the Merchandise Exports from India Scheme (MEIS) scheme, has made an application to Additional DGFT (ADGFT) and was issued three scrips 1, 2 and 3.
     
  3. JDPL made a request to the Deputy Commissioner of Custom (DC) for the registration of such scrips issued by ADGFT. The original scrips and all required details were submitted. DC was requested to issue a Telegraphic Release Advise (TRA).
     
  4. When JDPL pursued the officer regarding the registration of scrips, the officer returned the scrips without registrations on the basis that supplies made by assesse, a Domestic Tariff Area (DTA) to a unit in the FTWZ (or SEZ) which was paid for by the SEZ unit, contended that such export are ineligible for Duty Credit scrip under MEIS.

Grounds of Appeal

  1. JDPL avers that all the scrips have been scrupulously issued by the ADGFT. Thus the rejection of the application for registration by DC is not just contrary to law but amounts to review of the original order passed, for which there is no provision under either the policy or any regulation.
     
  2. The scrips have not been cancelled at any time till their expiry or even thereafter and hence Dy. Commissioner of customs has no authority to have rejected registration and Telegraphic release advise(TRA).
     
  3. The exports made were not within the prohibited categories as enumerated under MEIS Scheme as supply has been made by the petitioner to FTWZ for onward shipment at the request of the buyer (UTEXAM) to a location of its choice. Thus, DHL logistics, (FTWZ) merely offers a facility to the petitioner to warehouse its consignments that are to be exported which are decided by UTEXAM, which is the ultimate purchaser, who has paid the petitioner in USD for the consignment. The role of DHL in this transaction is that of a warehouse and nothing more.

Observation of the Court

  1. Court observed that the export documents have been properly executed by the assesse by Comparing the purchase order, Tax invoices, Statements of Bank Realisation Certificate, the shipping bill details filed along with the application under MEIS Scheme.
     
  2. Court also observed that the procedure set out for issuance of scrips is deemed to have been susceptibly adhered to by the Addl. DGFT. The scrips should be issued only after due scrutiny and, upon the slightest suspicion that the claim may be unacceptable, the Officer has to call for physical documents.
     
  3. HC noted that that DHL logistics, the FTWZ, merely offers a facility to avoid circuitous and to warehouse its consignments that are to be exported. It is not covered under the specific categories of transactions/entities that would be ineligible for the benefits of MEIS.

Verdict of the Court

  1. Going through all the facts and arguments, the Hon’ble HC set-aside order of Deputy Commissioner of Customs (DC) of rejecting request for registration of duty credit scrips issued by Addl. DGFT (ADGFT).
     
  2. HC ordered ADGFT to re-validate duty credit scrips and extend the duration of some scrip expired during pendency of litigation.
     
  3. Also, directs DC to issue TRA with additional direction to complete the whole procedure

Impact on the Industry: It can be manifestly conceded that any officer in charge can’t nix any pre-approved document issued by any designated authority. The Supplier is transporting the goods on the direction of the buyer through a facilitator, therefore the facilitator can’t be treated as a buyer. However, these matters are peculiarly provided under GST regime qua “bill to ship to” model.

 

1 TS-336-HC (KER)-2021-GST

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