Delhi High Court
Lok-Beta Pharmaceutical India ... vs Union Of India And Ors. on 23 May, 2019
$~48
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 3198/2018
LOK-BETA PHARMACEUTICAL INDIA PVT.
LTD. ..... Petitioner
Through: Ms Anjali J. Manish and Ms
Nidhi Saini, Advocates.
versus
UNION OF INDIA AND ORS. ..... Respondents
Through: Mr Kirtiman Singh, CGSC with
Mr Prateek Dhanda, Mr Waize
Ali Noor and Ms Shruti Dutt,
Advocates.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
ORDER
% 23.05.2019
VIBHU BAKHRU, J
1. The petitioner has filed the present petition, inter alia, impugning
the decision of respondent no.3 (Policy Relaxation Committee -
hereafter 'PRC') taken in its meeting held on 08.08.2017 in Case No.4.
By the said decision, the PRC has rejected the petitioner's request for
reconsidering its earlier decision rendered on 19.07.2016. The
petitioner is, essentially, aggrieved by the decision of the PRC to not
extend the export obligation period in respect of Advance Authorization
bearing no. 0310696315 dated 28.05.2012.
2. The petitioner is a merchant exporter, inter alia, engaged in
purchase and sale of pharmaceutical products. The petitioner states that
it had entered into an agreement with a Russian Company for supply of
a drug named Cycloserine USP, which is used to prevent/treat drug
resistant Tuberculosis. It is stated that the said Russian Company
intended to supply the said drugs to the Russian Government pursuant
to a tender invited by the Russian Government.
3. The petitioner applied for an Advance Authorization for
importing the bulk drugs for the purposes of supplying the same to the
Russian Company after repackaging the drug in question for retail trade
and exporting the same to the Russian Company. Pursuant to the
petitioner's application, it was issued an Advance Authorisation
No.0310696315 dated 28.05.2012. In terms of the Advance
Authorization, the petitioner was entitled to import the specified inputs
for exporting the drug, "Cycloserine Capsule USP 250 Mg". The
petitioner claims that it utilised the said Advance Authorization for
importing 694.79 Kgs of Cycloserine USP against two Bills of Entry
bearing No. 7099833 dated 13.06.2012 and 7165657 dated 20.06.2012
4. According to the petitioner, it exported 681.173 kgs (2724690
Nos.) of Cycloserine Capsule USP 250 Mg of FOB value of
₹9,56,80,677/- against the Advance Authorization in question. The said
exports were made in nine tranches. A tabular statement indicating the
details of the exports against the Advance Authorization in question is
set out below:-
"Export Details
Sr.N S.B.No. Date Export Descriptions of export FOB value As
o. Qty. Gr. item pre S/B in Rs.
Wt. in kg.
1 1424997 23.08.12 191.250 Cycloserine Caps. US 26491689.78
250 mg.
2 1420538 23.08.12 61.20 Cycloserine Caps. US 8668733.43
250 mg.
3 1450760 24.08.12 191.270 Cycloserine Caps. US 26494051.89
250 mg.
4 2603598 15.11.12 99.450 Cycloserine Caps. US 12490003.50
250 mg.
5 4001533 15.02.13 24.255 Cycloserine Caps. US 2980297.33
250 mg.
6 7194918 29.08.13 25.500 Cycloserine Caps. US 3049086.75
250 mg.
7 5571138 17.10.14 85.680 Cycloserine Caps. US 12979443.49
250 mg.
8 5571144 17.10.14 1.275 Cycloserine Caps. US 191005.23
250 mg.
9 9943834 02.06.15 14.94 Cycloserine Caps. US 2336365.60
250 mg.
694.79 95680677.00
5. The petitioner claims that payments against all the aforesaid
consignments have been realised.
6. On 02.09.2015, the petitioner sent a letter to the Licensing
Authority requesting for issuance of the Export Obligation/Discharge
Certificate (EODC) as, according to the petitioner, it had fulfilled its
export obligation both in respect of quantity as well as value. In
response to the aforesaid request, the Licensing Authority issued
deficiency letter dated 08.09.2015 informing the petitioner that the
shipping bill no.7194918 dated 29.08.2013; shipping bill no.5571138
dated 17.10.2014; shipping bill no.5571144 dated 17.10.2014; and
shipping bill no.9943834 dated 02.06.2015 were beyond the export
obligation period of twelve months, which expired on 12.06.2013.
7. In view of the above, by a letter dated 03.06.2016, the petitioner
approached the PRC for extension of the export obligation period.
Thereafter, on 20.01.2017, the petitioner received a letter from the
Licensing Authority, inter alia, stating that its application was deficient
for various reasons including that three export shipments were made
beyond the period of eighteen months and, therefore, the petitioner was
required to pay duty and interest for excess import of 271.230 kgs of
Cycloserine. It was further stated therein that a total of 172.330 kgs of
Cycloserine USP drug were lying unutilised with the petitioner and,
therefore, in terms of the Policy Circular no.18 dated 30.10.2007, the
same were required to be destroyed and the petitioner was required to
furnish the Destruction Certificate.
8. The petitioner responded to the said letter on 24.03.2017. Whilst,
the petitioner paid the compensation fee as demanded, it submitted that
the calculation of the unutilised product was erroneous as the entire
quantity imported had been utilised for performing the export
obligations and, in the circumstances, the said products could no longer
be destroyed.
9. In the meantime, the PRC in its meeting held on 19.07.2016,
considered the petitioner's request and extended the export obligation
period for a period from twelve months to eighteen months against the
import of each consignment. Accordingly, the export obligation period
was extended upto 30.06.2014 in respect of the first consignment
imported on 13.06.2012 and upto 31.06.2014 for second consignment
imported on 20.06.2012. The said extension was subject to a payment
of composition fee at the rate of 0.5% of the FOB value. The relevant
extract of the minutes of the meeting of the PRC, held on 19.07.2016,
is set out below:-
"The Committee noted that the Authorization No.
0310696315 dt. 28.05.2012 was issued with conditions
stipulated under PC-9 dated 30.06.2003, which allows
12 months period for EG fulfillment from import of each
consignment. The imports were made on 13.06.2012 &
20.06.2012. Accordingly, initial obligation period was
upto 31.12.2013 & 31.12.2013, respectively. The
applicant has fulfilled 81.66% export obligation during
the initial obligation period and remaining 17.60%
thereafter. Taking all these facts into account, the
Committee decided the following:
I. Export obligation period be extended from 12
months to 18 months against import of each
consignments i.e. upto 30.06.2014 & 31.06.2014
respectively.
II. This is only for accounting and regularization of
exports already effected.
III. This is subject to a payment of composition fee
@ 0.5% on FOB value of export made after initial
obligation period.
IV. RA shall check that 50% exports against each
consignment were made within initial export
obligation period. If not, composition fee will be
charged @ 0.5% per month on unfulfilled FOB.
V. The minimum value addition of 15% as
prescribed under Para 4.09 of FTP (2015-2020)
shall be maintained.
VI. Shortfall, if any, shall be regularised in terms of
Para 4.49 of HBP read with PC-18 dated
30.10.2007."
10. Thereafter, on 27.03.2017, the petitioner filed another application
before the PRC seeking review of the decision dated 19.07.2016 and
further, seeking extension of the export obligation period in respect of
the three export shipments that were made beyond the export obligation
period as extended by PRC (that is beyond the period of 18 months from
the first import).
11. The petitioner's application was considered by the PRC at a
meeting held on 08.08.2017 and the same was rejected. The said
decision is impugned by the petitioner in the present petition.
12. Ms Anjali, learned counsel appearing for the petitioner submitted
that the petitioner had performed its obligation and, therefore, denial of
the petitioner's request to extend the export obligation period was
erroneous. She earnestly contended that the petitioner had faced
genuine hardships on account of the policy change by the Russian
Government and the same ought to have been considered by the PRC.
She referred to paragraph 2.5 of the Foreign Trade Policy (FTP) and
submitted that the DGFT was empowered to grant relaxation in cases
of genuine hardships and, therefore, the petitioner's case ought to have
been considered favourably.
13. The learned counsel further submitted that the PRC failed to
appreciate that the drugs in question were imported from a registered
source and, therefore, in terms of the Policy Circular no. 12 dated
27.06.2005, the normal conditions for export were applicable. She
submitted that in terms of the licence and the FTP, the export obligation
period was not twelve months as assumed by the respondents but thirty
six months. Lastly, she submitted that the PRC, in the case of Mylan
Laboratories Ltd., Hyderabad: Case No.41, decided on 04.05.2016,
had extended the export obligation period from eighteen months to
thirty six months and therefore, the petitioner's case should also have
been considered favourably.
14. She also referred to the decision of the Supreme Court in
Macquarie Bank Limited v. Shilpi Cable Technologies Ltd.: 2018 (2)
SCC 674 and, on the strength of the said decision, contended that the
export obligation period was merely a procedural matter and such
matters were required to be considered to meet the ends of justice. She
submitted that that since the petitioner had discharged its export
obligation, the PRC's decision to ignore the exports made beyond the
export obligation period was arbitrary and unreasonable.
15. I have heard the learned counsel for the parties.
16. The contention that the petitioner had imported the drug in
question from a registered source and, therefore, the export obligation
period was thirty six months and not twelve months, cannot be accepted.
First of all, no such contention has been canvassed before the Licensing
Authority or before the PRC and no such contention has been raised by
the petitioner in the writ petition as well. This Court is, thus, of the
view that this contention is an afterthought and must be rejected
outrightly. The petitioner has all along proceeded on the basis that the
export obligation was twelve months from the date of import and had
approached the PRC for extension of the said period. Thus, it would
not be open for the petitioner to now contend that the export obligation
period was thirty six months.
17. Secondly, even if it is accepted that the petitioner had imported
the products from a registered source (which, in this case, it had not), it
cannot be accepted that the export obligation period was 36 months and
not twelve months. In terms of policy circular no.12 dated 27.06.2005,
it was clarified that if the imports are from registered sources,
conditions governing normal advance licences are applicable. In these
cases, it included validity period and normal export obligation period.
Paragraph 2 of the said circular is relevant and is set out below:-
"2) In case where Advance Licence holders are
exporting the goods which are manufactured from the raw
materials procured from local sources, then they are not
allowed to import from unregistered sources. In case
exporters intend to procure the material either from
registered sources or from local sources through ARC and
Invalidation then the exemption facility given on the
Advance Licences for importing from unregistered sources
may be withdrawn and shall be modified to import from
registered sources only. Once the imports are from
registered sources, conditions governing normal Advance
Licences are applicable in these cases which include
normal validity period and normal EG period.
18. In view of the above, the petitioner is correct that in the event, it
is accepted that if the products are exported from a registered source,
normal provisions with regard to the export obligation period would
apply. However, the contention that the said period is thirty six months
is incorrect. In terms of paragraph 4.22 of the Handbook of Procedures
for the year 2009-2010 (Volume-I), the export obligation period for
advance authorization issued with inputs as mentioned in Appendix -
30A would be for the period as stipulated against each entry, therein.
Paragraph 4.22 of the Handbook of Procedures is set out below:-
"Export 4.22 Fulfilment Period of EO
Obligation under an Advance
(EO) Period Authorisation shall
and its commence from
extension Authorisation issue date,
unless otherwise specified.
EO shall be fulfilled within 36
months except in case of
supplies to projects / turnkey
projects in India / abroad
under deemed exports
category, where EO must be
fulfilled during contracted
duration.
EO period for Advance
Authorizations issued with
input (s) as mentioned in
Appendix 30A shall be as per
the period stipulated against
each entry therein. Facility of
extension of EOP shall not be
allowed in case of Advance
Authorisation issued for these
inputs. RA shall make an
endorsement in Advance
Authorisation to this effect."
19. Appendix-30A of the said Handbook clearly specifies that the
export obligation period for drugs (with specific export order and pre
import condition) would be twelve months from the date of clearance
of each import consignment by the Customs Authorities. In view of the
above, even if it is accepted the petitioner had imported the drug in
question from a registered source, the export obligation period
applicable would be twelve months from the date of the consignments
imported by the petitioner.
20. In the present case, the import against the advance authorization
was made against two Bills of Entry dated 13.06.2012 and 20.06.2012.
Thus, the export obligation period expired on 12.06.2013 and
19.06.2013 respectively. During this period, the petitioner had exported
five consignments, last of which was exported on 15.02.2013. The PRC
had acceded to the petitioner's request and had extended the export
obligation period by further six months, which expired on
12.12.2013/19.12.2013. During the said extended period, the petitioner
had exported another consignment which was done on 29.08.2013.
However, the remaining three consignments were exported after a
significant delay; first two consignments were exported on 17.10.2014
and the last consignment was exported on 02.06.2015.
21. In terms of paragraph 2.5 of the FTP, DGFT is empowered to
grant relaxation as he deems fit and proper on the ground of genuine
hardship and adverse impact on trade in genuine if the extension, as
sought for by the petitioner, is not granted.
22. Although, the petitioner contends that its case is one of the
genuine hardships, there is no material on record which could persuade
the PRC to consider that the extension of export obligation period to
such an extent is warranted. The petitioner was fully aware while
accepting the advance authorization and importing the products that it
would require to perform the export obligation within a period of twelve
months. It is possible that the petitioner has faced commercial
difficulties, however, that would not be a ground to extend the export
obligation period from twelve months to three years (thirty six months).
23. It is also well settled that the relaxation of the policy is not a
matter of right. Sufficient discretion is granted to the DGFT to relax
any provision of the policy or procedure as it deems fit.
24. At this stage, it is relevant to refer to paragraph 2.5 of the Foreign
Trade Policy 2009-2014 (FTP). Clearly, the DGFT is required to
exercise its discretion keeping in view the guidelines which are implicit
in the paragraph 2.5 of the FTP and the same is set out below:
"2.5 Exemption from Policy/Procedure
DGFT may pass such orders or grant such
relaxation or relief, as he may deem fit and proper, on
grounds of genuine hardships and adverse impact on
trade. DGFT may, in public interest, exempt any person
or class or category of persons from any provision of
FTP or any procedure and may, while granting such
exemption, impose such conditions as he may deem fit.
Such request may be considered only after consulting
committees as under:
Sl.No. Description Committee
(i) Fixation/modification of Norms
product norms under all Committee
Schemes
(ii) Nexus with Capital Goods EPCG
(CG) and benefits under Committee
EPCG Schemes
(iii) All other issues Policy
Relaxation
Committee
(PRC)
25. It is apparent from the above, that the DGFT has a wide discretion
to grant any relief or relaxation as is clear from the use of the word "as
he may deem fit". However, such relief/relaxation can be granted in
cases of "genuine hardships" and "adverse impact on trade". Clearly,
normal risks and vagaries of commerce would not qualify as genuine
hardship. The applicant must establish a compelling case for such a
relaxation. An applicant taking an extended risk of importing against
Advance Authorization without a confirmed export order or an assured
export market, would find it difficult to justify his request for relaxation
of policy under paragraph 2.5 of the FTP. In order to invoke the powers
of relaxation, the applicant must establish that his cause of hardship is
on account of circumstances, which could not be reasonably anticipated
by a person engaged in the trade.
26. In the present case, this Court is unable to accept that the
decision of the PRC to deny extension of export obligation period is
perverse, arbitrary or falls foul of the guidelines as indicated in
paragraph 2.5 of the FTP.
27. The reliance placed by the petitioner in the case of Macquarie
Bank Limited (supra) is wholly misplaced. Fixing an export obligation
is not a matter of procedure but is a substantive condition for availing
duty-free imports against advance authorization. The stipulation to the
export obligation period cannot be considered as directory. It is a
condition stipulated for availing of the facility of advance authorization,
and such stipulation cannot be ignored merely because the petitioner
has exported the stipulated quantity of goods beyond the period as
specified.
28. The learned counsel appearing for the petitioner has referred to
the decision of the PRC in Mylan Laboratories Ltd., Hyderabad,
however, there is no indication that the said decision was rendered in
the context of export obligation relating to import of drugs from
unregistered sources. The minutes of the PRC meeting do not indicate
the factual matrix of that case. Further, there is also no averment to the
said effect in the writ petition.
29. In view of above, the petition is unmerited and is, accordingly,
dismissed.
VIBHU BAKHRU, J
MAY 23, 2019
MK
