Several exporters have approached the Delhi High Court (HC) with a plea to quash a 2017 notification of the Directorate of Revenue Intelligence (DRI), through which the agency had taken out some of the services that were counted towards fulfilling of export obligations.
The HC has agreed to hear them and has issued notices to the government, the DRI, the GST (goods and services tax) Council, and the Central Board of Indirect Taxes and Customs (CBIC). The case will be next heard on November 4.
The court has given the liberty to the petitioners to move an application for early hearing if there is any coercive action from the DRI during the pendency of the case, said Abhishek A Rastogi, partner at law firm Khaitan & Co and advocate for the petitioners.
In their plea, the exporters have claimed that through the October 2017 notification, the DRI arbitrarily removed the services that were deemed as exports under annexure 5 (D) of the Foreign Trade Policy. They said these exports were also counted towards discharge of export obligation under the Export Promotion Capital Goods (EPCG) Scheme. The new license norms said that export of only physical goods would be allowed and it was applicable retrospectively.
“If the benefits were promised in public interest then curtailment of such benefits midway will have to be justified,” said Rastogi. The exporters had applied for the licenses with an understanding that the services would be allowed to be a part of export obligations, he said.
In the pre-GST era, exporters could use the EPCG Scheme to import capital goods without payment of any Customs duty such as Basic Customs Duty (BCD), Special Additional Duty (SAD), and Countervailing Duty (CVD). These exemptions were valid if they exported services that were at least six times of the duty saved. In 2017, however, the government curtailed upfront duty exemption available on import of capital goods against the EPCG Scheme to allow only BCD, SAD and CVD. “The imposed restriction appears to be an afterthought,” the exporters said in their plea.