Non-Submission Of “Bill Of Export” Can't Be Treated As Non-Discharge Of Export Obligation, If Supply To SEZ Unit Is Proved: Bombay High Court

The Bombay High Court has held that if the party is able to show proof of supply to the Special Economic Zone (SEZ) Unit, then non-submission of the “Bill of Export” cannot be treated as non-discharge of proof of export obligation (EO).

The bench of Justice K. R. Shriram and Justice Jitendra Jain has observed that failure to produce a copy of the assessed bill of export in respect of the supplies made to SEZ would not necessarily result in holding that there was a failure to discharge the export obligation where one is able to establish supplies made to SEZ by the production of copies of ARE-1.

The petitioner/assessee is in the business of manufacturing, refining, and exporting non-ferrous metal alloys from its units situated in Dadra-Nagar Haveli, Silvassa. The petitioner had received purchase orders from Ideal Fasteners (India) Pvt. Ltd., located in SEZ, for the manufacture and supply of zinc alloy ingots (Zamak-5.

The petitioner obtained an advance authorization (AA) for the purpose of duty-free import of goods stated therein to be used in the export of final products Zinc Alloy Ingots Zamak-5 to its customers located in the SEZ.

The petitioner was permitted to import goods of CIF value against which an export obligation of FOB value was under the AA. According to the petitioner, and admittedly so, the supply of goods to units located in the SEZ is deemed export and treated as a valid discharge of the export obligation for the purpose of the Advance Authorization (AA) in terms of Foreign Trade Policy (FTP).

The final products of Petitioner were exported or supplied to its customer within the SEZ, but due to an inadvertent error while supplying the goods, neither Petitioner nor the buyers on behalf of Petitioner prepared and filed the “Bills of Export” corresponding to the said supplies made by Petitioner under the said licences.

Other than the Bill of Export, Petitioner had supplied all other documents, including the application in ARE-1, duly assessed by the proper officer having jurisdiction over the factory of Petitioner and the authorised officer having jurisdiction over the units located in SEZ. As the export obligation period expired, the petitioner sought an extension to the Additional Director General of Foreign Trade, which was granted, and the licence validity date was amended from June 24th, 2017 to December 23rd, 2017.

The request of the petitioner was not accepted, and after a few personal hearings and a few deficiency letters, the petitioner received the order by way of the minutes of the meetings dated June 21, 2022, and June 26, 2023. By the minutes, the Committee decided to reject the petitioner's request to condone the procedural lapse in not preparing the “Bill of Exports” and to consider AA in lieu of the “Bill of Exports” towards the fulfilment of the EO against AA.

The petitioner has challenged the legality and validity of decisions taken by the Policy Relaxation Committee (PRC) in its meeting rejecting the petitioner's the petitioner's request by holding that the “Bill of Export” is a mandatory document in terms of Foreign Trade Policy (FTP) for discharge of the Export Obligation (EO) of Advance Authorisation (AA), even in the case of supplies to the Special Economic Zone Unit (SEZ).

The Petitioner contended that the action on part of department in not accepting the supplies made by Petitioner to units located in the SEZ in discharge of EO against AA issued to Petitioner solely on the ground of non-submission of “Bills of Export”, notwithstanding other evidence on record substantiating Petitioner's claim of export, is bad in law.

The court, while disposing of the petition, directed the petitioner to submit the documents within two weeks. It will be examined by the department, and if the documents are in order, the Export Obligation Discharge Certificate (EODC) shall be issued within four weeks of the submission of the documents. If respondents have any queries, they shall give a personal hearing, and notice shall be communicated at least 3 working days in advance.

Counsel For Petitioner: Prakash Shah

Counsel For Respondent: Saket R. Ketkar

Case Title: Phoenix Industries Limited Versus UOI

Case No.: Writ Petition No.15057 Of 2023

Click Here To Read The Order