The Director General of Foreign Trade (DGFT) has approved a clarification (Policy circular No.18 dated January 10, 2002) that import of goods of Indian origin under the export promotion schemes is not permissible except in terms of conditions laid down in customs notification 94/96 dated 16.12.1996.
Similarly, the circular clarifies that export of goods of foreign origin under the export promotion schemes will not be permitted, unless the goods have been manufactured or re-processed or on which any operation has been carried out in India. These restrictions shall not be applicable where no benefits are being claimed by the exporter in terms of para 11.7 and 11.8 of the Exim Policy, says the circular.
Apparently, the DGFT apprehends that goods exported from India by availing export benefits find their way back into the country, sometimes at concessional or nil rates of duties. Similarly, imported goods are exported in the same condition by availing some export benefits. According to the DGFT, this is a kind of misuse of the export promotion schemes that results in revenue loss and so, has to be stopped.
The circular raises some important points. First, the DGFT is trying to amend the Exim Policy through a circular ie, do something beyond his powers. In the case of JB Impex Vs Commissioner of Customs [2001 (134) ELT 210 (T-M)], the policy circular No. 32 dated 17.09.99 clarifying that 'dry garlic' containing more than 10 per cent moisture content will not be allowed freely, came up for scrutiny.
The Tribunal held that the DGFT can only advice on policy formulation and implement the policy but not invoke the powers to issue clarifications to amend the Exim Policy. The Tribunal held that only the Centre has powers to change the policy and that the DGFT, much less an officer below his rank, cannot raise himself to the position of the Centre. This judgment can very well be applied in the case of policy circular No. 18 of 10th January 2002 also.
Secondly, there is no way that the Customs can legally enforce the circular. Re-import of goods is allowed under the savings clause and re-export of imported goods is allowed under the Exim Policy. As far as the customs duty is concerned, the importer or exporter has a right to choose what exemption notification he wants to avail. So long as he fulfills the conditions stipulated in the notification, he is entitled to the exemption.
Customs and Licensing authorities operate in distinct and different fields [Kanhaiya Exports 2001 (133) ELT 280 (Cal.)]; So, the Customs cannot legally restrain any exporter or importer from availing the benefit of any exemption notification on the basis of DGFT Policy Circular, so long as the goods are freely exportable or importable, except in accordance with the conditions of the notification.
Thirdly, there is no way to restrain re-import or re-export of goods after repacking or re-labeling. Misuse can continue.
Finally, the goods are first exported and then re-imported under export promotion schemes because deemed exports are not treated on par with physical exports. Also, the re-export of imported goods earn DEPB, which is a scheme based on the concept of deemed imported inputs. The policy makers need to take a deeper look into these schemes to prevent misuse rather than try to take ad-hoc decisions.
