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Judgment
The appellant â€" Union of India has filed this intra-Court appeal, aggrieved by the order of learned Single Judge dated 13.03.2017 allowing
W.P.No.101533/2013 filed by the Bidar Sahakara Sakkare Karkhane Limited (BSSKL), Hallikhed, Humnabad taluk, Bidar district. Date of order:
23.03.2018 WA 200282/2018 Union of India and another Vs M/s Bidar Sahakara Sakkare Karkhane Ltd.
The learned Single Judge while allowing the writ petition held that the petitioner was entitled to grant of Export Subsidy under the provisions of
Sugar Development Fund Act, 1982 as amended by Notification dated 21.06.2002, which allowed a subsidy to the domestic manufacturers of sugar to
the extent of internal transport and freight charges borne by such sugar factories.
The learned Assistant Solicitor General of India Mr. S.S.Aspalli, appearing for the appellant â€" Union of India submitted that the impugned
communication Annexure-A dated 09.04.2013 denying such export subsidy to BSSKL was justified as the respondent-BSSKL had sold such sugar to
the exporter M/s. Bannari Amman Sugars Limited (BASL) who had imported the raw sugar under the Advance Licence scheme and therefore under
SDF Rule 20, such Export Subsidy was not admissible to the Respondent and Date of order: 23.03.2018 WA 200282/2018 Union of India and another
Vs M/s Bidar Sahakara Sakkare Karkhane Ltd. therefore the claim of export subsidy was rightly rejected by the Government of India in the present
case.
The learned ASGI has further submitted that the import and export of sugar after the value addition under the Advance Licence scheme was under
entirely different scheme of Foreign Trade Policy 2015-2020 produced as Annexure-E, whereas the purpose of giving export subsidy under SDF Rule
20 was to clear off the excess stocks of excess sugar manufactured by the domestic manufacturers of sugar and to reduce their burden and cost of
manufacturing, the said Export Subsidy in question to the extent of defraying their internal transport charges was announced by the Central
Government under the said Scheme vide Gazette Notification dated 21.06.2002.
He urged that since the respondent-BSSKL had made the claim of the export subsidy in respect of the export made of sugar manufactured by it
through Date of order: 23.03.2018 WA 200282/2018 Union of India and another Vs M/s Bidar Sahakara Sakkare Karkhane Ltd. exporter M/s.
Bannari Amman Sugars Limited (BASL), the Respondent was not entitled to such export subsidy under clause SDF Rule 20 of the said Gazette
Notification.
On the other hand, learned counsel for the respondent-BSSKL Mr. H.N.Shashidhara submitted before us that the Advance Licence for import of
raw sugar in the present case was not issued to the respondent-BSSKL, but in favour of the exporter M/s. Bannari Amman Sugar Limited (BASL)
and the respondent-BSSKL had only produced the sugar from the sugar cane grown in the reserved area in Karnataka and after manufacturing the
said sugar in its sugar factory, had exported the same through M/s. Bannari Amman Sugars Limited (BASL) under the directions of the Government
of India itself vide Annexure-C Order dated 23.03.2004, whereby the respondent-BSSKL was directed to deliver and dispatch 8500 Metric Tons of
Date of order: 23.03.2018 WA 200282/2018 Union of India and another Vs M/s Bidar Sahakara Sakkare Karkhane Ltd. sugar for the year 2003-2004
(October 2003 to September 2004) for the purpose of export to M/s. Bannari Amman Sugars Limited (BASL), Coimbatore.
He further urged that the export subsidy scheme in question does not make any exclusion of the manufacturer and supplier of sugar, if such sugar
sold by the manufacturer is finally exported through entities like M/s. Bannari Amman Sugars Limited (BASL) who, in discharge of their export
obligation, under the Advance Licence, under which they imported raw sugar and therefore the rejection of the export subsidy claim of the
respondent-BSSKL in the present case was unjustified and based on wholly untenable reasons assigned by the appellant â€" Union of India.
He further submitted that Clause-7 of the said Notification dated 21.06.2002 clearly stipulated that reimbursement of extent of internal transport and
Date of order: 23.03.2018 WA 200282/2018 Union of India and another Vs M/s Bidar Sahakara Sakkare Karkhane Ltd. freight charges shall be
restricted to the extent of such expenditure incurred for the distance from sugar factory to nearest loading railhead and at the transport rates as
specified in the Sugar (Price Determination for Production) Order of the relevant sugar season and for the distance from loading railhead nearest to
the sugar factory to the railhead nearest to the port, the railway freight by the shortest route and such transport charges for the distance from railhead
nearest to the port to the point of loading at port, the transport rate as specified in the Sugar (Price Determination for Production) Order of the
relevant sugar season.
The learned counsel therefore urged that the claim of export subsidy of the respondent has to be computed as per said rules specified in the said
Gazette Notification and in the absence of any specified exclusion of sale of sugar in the course of export through the exporters like M/s. Bannari
Amman Sugars Date of order: 23.03.2018 WA 200282/2018 Union of India and another Vs M/s Bidar Sahakara Sakkare Karkhane Ltd. Limited
(BASL), the appellant â€" Union of India could not have rejected the claim of the respondent in the present case.
Drawing the attention of the Court towards the Memorandum of Understanding between the respondent â€" BSSKL and the exporter M/s.
Bannari Amman Sugars Limited (BASL), the learned counsel for the respondent urged before the Court that Annexure-D dated 22.03.2004, the sugar
in question was to be supplied by BSSKL to BASL at the rate of Rs.10,100/-per metric ton F.O.R. ANY INDIAN PORT. Clause-9 of the said
Memorandum of Understanding further stipulated that the Internal Transport, Ocean Freight, Handling and Marketing Subsidies by the Government of
Karnataka/Government of India were to go to the account of BSSKL whereas DEPB/DBK/DFRC benefit to the account of BASL. The said
Memorandum of Understanding (MOU) further stipulated that M/s. Date of order: 23.03.2018 WA 200282/2018 Union of India and another Vs M/s
Bidar Sahakara Sakkare Karkhane Ltd. Bannari Amman Sugars Limited (BASL) shall file requisite Bond, ARE-I Forms etc. before the custom
authorities in proof of export of the contracted quantity.
The learned counsel for the respondent therefore submitted that the respondent itself has not exported the sugar in question directly in discharge of
any export obligation under the Advance Licence, but has supplied the sugar to M/s. Bannari Amman Sugars Limited (BASL), who, in turn, have
exported it, in discharge of their export obligations and therefore the SDF Rule 20 for export subsidy cannot adversely affect the case of the
Respondent, as contended by the learned counsel for the Union of India.
We have heard the learned counsels at length and perused the record. We find that the contentions raised by learned ASGI for Union of India are
not tenable and the present appeal filed by the Date of order: 23.03.2018 WA 200282/2018 Union of India and another Vs M/s Bidar Sahakara
Sakkare Karkhane Ltd. Union of India deserves to be dismissed. The reasons are as follows.
The Export Subsidy Scheme in question under the Gazette Notification dated 21.06.2002 including clause 20 in Chapter-IX of the said Gazette
Notification, is quoted below for ready reference:
 “NOTIFICATION New Delhi, the 21st June, 2002 G.S.R. 443(E).-In exercise of the powers conferred by Section 9 of the Sugar Development
Fund Act, 1982 (4 of 1982), the Central Government hereby makes the following rules further to amend the Sugar Development Fund Rules, 1983,
namely :-
(1) These rules may be called the Sugar Development Fund (Amendment) Rules, 2002
(2) They shall come into force on the date of their publication in the Official Gazette. Date of order: 23.03.2018 WA 200282/2018 Union of India and
another Vs M/s Bidar Sahakara Sakkare Karkhane Ltd.
In the Sugar Development Fund Rules, 1983 (hereinafter referred to as the said rules), after CHAPTER-VIII relating to Buffer Stock, the following
CHAPTER-IX shall be inserted, namely:-
“CHAPTER-IX Defraying Expenditure on Internal Transport and Freight Charges to the sugar factories on export shipments of sugar.
(1) The Central Government may having regard to the stock of sugar held by the sugar factories, prospects of sugar production and requirement of
sugar for consumption in the country, domestic and international prices of sugar and such other factors as may be considered necessary, and after
consultation with the Committee, decide from time to time, to defray expenditure on internal transport and freight charges to sugar factories on export
shipments of Date of order: 23.03.2018 WA 200282/2018 Union of India and another Vs M/s Bidar Sahakara Sakkare Karkhane Ltd. domestically
manufactured sugar with a view to promoting its export for such period as it deems proper.
(2) Subject to the decision of the Central Government under sub-rule (1), the expenditure on internal transport and freight charges on export shipment
shall be defrayed from the Fund.
(3) Any sugar factory which after obtaining release order issued under clause 5 of the Sugar (Control) Order, 1966, has transported its manufactured
sugar for export shipments, and the same has been exported either by the sugar factory or through an exporter, shall be eligible to apply for
reimbursement of expenditure incurred on the internal transport and freight charges on such export shipments of sugar. Date of order: 23.03.2018 WA
200282/2018 Union of India and another Vs M/s Bidar Sahakara Sakkare Karkhane Ltd. Explanation I. Where a sugar factory has delivered the
export consignment of sugar ex-factory to an exporter and the exporter has, after complying with the legal requirements exported the sugar, it shall be
construed to be an export of sugar by that sugar factory through an exporter and that sugar factory shall be eligible for reimbursement of expenditure
incurred on internal transport and freight charges on such export shipments of sugar, provided that the agreement entered into by the sugar factory
with the exporter of sugar stipulates that the expenditure on internal transport and freight charges shall be borne by that sugar factory. Explanation II.
Where a sugar factory has exported sugar Date of order: 23.03.2018 WA 200282/2018 Union of India and another Vs M/s Bidar Sahakara Sakkare
Karkhane Ltd. through an exporter, the customs attested Export Promotion (EP) copy of the Shipping Bill shall indicate the name of the exporter as
well as that of the sugar factory. Explanation III. An exporter means a person who holds an Importer-Exporter Code number allotted to him by the
Director General of Foreign Trade of the Central Government.
(4) A sugar factory eligible under sub-rule (3) shall prefer a claim for reimbursement of expenditure incurred on the internal transport and freight
charges on export shipments of sugar in Form VI within thirty days of the issue of Bank Certificate of Export and Realisation as given in Appendix 22
of the Handbook of Procedur (Vol.I) for the period 1st April, 2002 â€" 31st March 2007 issued by the Date of order: 23.03.2018 WA 200282/2018
Union of India and another Vs M/s Bidar Sahakara Sakkare Karkhane Ltd. Central Government in the Ministry of Commerce and Industry,
Department of Commerce. Provided that if a sugar factory fails to prefer the claim within the thirty days, such sugar factory may submit the claim in
another thirty days but there shall be late cut at the rate of 10% on the entitlement and no claim shall be entertained after expiry of sixty days from the
issue of the said Bank Certificate.
(5) The claim referred to in sub-rule (4) shall be accompanied by the following documents failing which the claim, in the absence of valid reason, shall
to be disallowed:
(a) a certified copy of the release order issued under clause 5 of the Sugar (Control) Order, 1966; Date of order: 23.03.2018 WA 200282/2018 Union
of India and another Vs M/s Bidar Sahakara Sakkare Karkhane Ltd.
(b) a certified copy of the contract entered into by the sugar factory with the exporter where the sugar factory itself is not the exporter;
(c) a certified copy of the Application made for Removal of Excisable Goods (FORM A.R.E. 1) certifying that the consignment of sugar has been
shipped of;
(d) a certified copy of customs attested Export Promotion (EP) copy of the Shipping Bill;
(e) a certified copy of the Bank Certificate of Export and Realization as given in Appendix 22 of the Handbook of Procedure (Vol.I) for the period 1st
April, 2002 â€" 31st March 2007 issued by the Central Government in the Date of order: 23.03.2018 WA 200282/2018 Union of India and another Vs
M/s Bidar Sahakara Sakkare Karkhane Ltd. Ministry of commerce and Industry, Department of Commerce;
(f) a certified copy of the distance Certificate issued under in sub-rule (8) regarding the distance between the sugar factory and the loading railhead;
(g) a certified copy of the railway freight receipt from lading railhead to railhead nearest to the port;
(h) a certified copy of the certificate of railway freight chargeable as specified in sub-rule (9);
(i) a certified copy of the certificate issued by the port authorities certifying the distance between the railway station nearest to the port and Date of
order: 23.03.2018 WA 200282/2018 Union of India and another Vs M/s Bidar Sahakara Sakkare Karkhane Ltd. loading point at the port as specified
in sub-rule (10);
(j) a certified copy of the receipt and challan of the road transporter indicating the vehicle number and quantity transported where the sugar factory
has transported the export consignment of sugar by road.
(6) A sugar factory shall be free to transport export consignment of sugar either by rail or road or both but the reimbursement of expenditure shall be
restricted in the manner prescribed in sub-rule (7).
(7) The reimbursement of expenditure on internal transport and freight shall be restricted as under:
(i) for the distance from sugar factory to the nearest lading Date of order: 23.03.2018 WA 200282/2018 Union of India and another Vs M/s Bidar
Sahakara Sakkare Karkhane Ltd. railhead, the transportation rate as specified in the Sugar (Price Determination for Production) Order of the relevant
sugar season;
(ii) for the distance from loading railhead nearest to the sugar factory to the railhead nearest to the port, the railway freight by the shortest route;
(iii) for the distance from railhead nearest to the port to the point of loading at port, the transportation rate as specified in the Sugar (Price
Determination for Production) Order of the relevant sugar season;
(iv) where a sugar factory has preferred to transport export consignments of sugar by road instead of railway, the Date of order: 23.03.2018 WA
200282/2018 Union of India and another Vs M/s Bidar Sahakara Sakkare Karkhane Ltd. claim for reimbursement of expenditure on internal transport
and freight charges shall be restricted to the total of transportation charges and railway freight charges as specified in (i) to (iii) above or the actual
transportation charges by road incurred by the sugar factory, whichever is less. Explanation â€" The restriction imposed in the Sugar (Price
Determination for Production) Order of any relevant sugar season, as regards the transportation charges, shall not apply for the purpose of this sub-
rule and the sugar factory shall get reimbursement for the full distance between the sugar factory and the nearest railhead.
(8) A sugar factory claiming reimbursement of expenditure in respect of sub-rule 7(i) above shall produce a distance certificate from the District
Collector or Date of order: 23.03.2018 WA 200282/2018 Union of India and another Vs M/s Bidar Sahakara Sakkare Karkhane Ltd. any officer
authorized by him in this behalf, of the District where the sugar factory is situated, as a proof of distance between the sugar factory and the nearest
loading railhead.
(9) A sugar factory claiming reimbursement of expenditure in respect of sub-rule 7(ii) above shall produce a certificate from the concerned Railway
authorities specifying the railway freight chargeable from the railhead nearest to the sugar factory to the railhead nearest to the port by the shortest
route for the quantity of sugar transported.
(10)A sugar factory claiming reimbursement of expenditure in respect of 7(iii) above shall produce a distance certificate from the concerned Port
authorities specifying the distance between railhead nearest to the port and the point of loading at the port.
(11)The reimbursement claim of the sugar factory shall be settled within forty-five Date of order: 23.03.2018 WA 200282/2018 Union of India and
another Vs M/s Bidar Sahakara Sakkare Karkhane Ltd. days of the receipt of the complete documents from the sugar factory, unless the Central
Government has in writing communicated to the sugar factory within that period to furnish any requisite document.
(12)In a case where it is found at any time that a sugar factory has willfully suppressed the facts or concealed some material information or furnished
false information or forged documents, then,-
(a) the reimbursement claim of that sugar factory shall be rejected,
 (b) its future claim shall not be entertained, and
 (c) if the claim has already been settled, the sugar factory shall be liable to refund the amount along with such interest as the Committee may
decide.†Date of order: 23.03.2018 WA 200282/2018 Union of India and another Vs M/s Bidar Sahakara Sakkare Karkhane Ltd.
From a bare reading of the said Gazette Notification announcing the said export subsidy scheme, we do not find any exclusion of the
manufacturers and sellers of sugars, like respondent-BSSKL, merely because their sale of sugar is to an exporter like BASL, who has exported such
sugar out of India. On the contrary, such export of sugar by domestic manufacturers through other Exporters is clearly covered by the said Scheme
and the very purpose of this scheme is to encourage such exports and to reduce the cost burden, to defray the internal transport charges out of such
export subsidy. The respondent, like BSSKL squarely falls within the scope of words of “domestically manufactured sugar with a view to
promoting its export for such period as it deems proper†under Clause-20 quoted above.
The purpose of giving such export subsidy may be to clear off the stocks of sugars held by sugar Date of order: 23.03.2018 WA 200282/2018
Union of India and another Vs M/s Bidar Sahakara Sakkare Karkhane Ltd. factories in view of the excess production during the particular period as
argued by learned ASGI and to reduce the cost burden of such manufacturers, the export subsidy to the extent of internal transport and freight
charges to the sugar factories on export shipment of sugar was announced by the Central Government.
Clause 20(3) of the said Gazette Notification requires any sugar factory after obtaining release order issued under clause 5 of the Sugar (Control)
Order, 1966, which has transported its manufactured sugar for export shipments, and the same has been exported either by the sugar factory or
through an exporter. Explanation I of Clause-20(3) clearly envisages this. The said clause clearly supports the case of the respondent-BSSKL, as
admittedly the respondent-BSSKL has transported its manufactured sugar to be exported through an exporter like BASL. Date of order: 23.03.2018
WA 200282/2018 Union of India and another Vs M/s Bidar Sahakara Sakkare Karkhane Ltd.
There is nothing on record to indicate that the internal freight charges paid by the respondent have been borne or actually paid by the exporter
M/s. Bannari Amman Sugars Limited (BASL). On the contrary, the terms of the contract and Memorandum of Understanding between BSSKL and
BASL clearly establish the facts otherwise, namely, that the respondent-BSSKL has borne the internal freight and transport charges incurred to put
the goods to the railhead or port of the exporter, Bannari Amman Sugars Limited (BASL).
The reason assigned by the Government of India in the impugned order Annexure-A dated 09.04.2013 for denying the said export subsidy is that
the export of entire quantity of 8130 MTs sugar was made under Advance License and the export of sugar made under Advance License is not
admissible for grant of export subsidy under SDF Rule 20, is not at all a Date of order: 23.03.2018 WA 200282/2018 Union of India and another Vs
M/s Bidar Sahakara Sakkare Karkhane Ltd. tenable reason borne out from the relevant clause SDF 20 or any other clause of the Notification quoted
above.
The said Scheme does not make any such distinction or discrimination in the matter. On the contrary, on a wholesome reading of the said Scheme
of export subsidy, it is clear that the export subsidy is intended to be given to the sellers like the respondent, who are exporting the sugar through other
exporters, like Bannari Amman Sugars Limited (BASL) in the present case. Moreover, the respondent-BSSKL in the present case was under
compulsion to supply the said quantity of sugar to BASL under the directions of the Central Government itself vide order Annexure-C dated
23.03.2004, which clearly stipulated that 8500 MTs of sugar has to be supplied by the respondent-BSSKL to M/s. Bannari Amman Sugars Limited
(BASL), Coimbatore for the purpose of export. Date of order: 23.03.2018 WA 200282/2018 Union of India and another Vs M/s Bidar Sahakara
Sakkare Karkhane Ltd.
Therefore, on the one hand, the Central Government cannot compel a person to sell the sugar to an exporter and on the other hand, deny the
export subsidy to it, which is clearly envisaged in the export subsidy scheme itself and there is no such exclusion in the same as is sought to be made
out in the impugned order Annexure-A dated 09.04.2013.
We also do not find any force in the contention raised by the learned Assistant Solicitor General for the appellant-Union of India that since the said
export subsidy was denied to other such suppliers of sugar also for the purpose of export and therefore, such rejection in the case of the respondent is
also justified.
The learned Single Judge in para 3 of the order under appeal clearly noticed that vide Annexure-Q, the said export subsidy was granted to one
Date of order: 23.03.2018 WA 200282/2018 Union of India and another Vs M/s Bidar Sahakara Sakkare Karkhane Ltd. M/s. Mahatma Gandhi
Sahakara Sakkare Kharkhane Ltd., Bhalki and therefore, the appellant-Union of India could not discriminate the case of the BSSKL.
The learned Assistant Solicitor General during the course of arguments submitted before us that even the export subsidy granted to the said
manufacturer M/s. Mahatma Gandhi Sahakara Sakkare Kharkhane Ltd., Bhalki was cancelled and recalled. We do not find any justification for the
same, but since the recall of the subsidy from Mahatma Gandhi Sahakara Sakkare Kharkhane Ltd., Bhalki is not under challenge before us nor any
such documents are placed before us, we are not inclined to take it as any justification for denying the claim of the Respondent â€" sugar factory. We
are of the clear opinion that the rejection of export subsidy in the case of the said party M/s. Mahatma Gandhi Sahakara Sakkare Kharkhane Ltd.,
Bhalki Date of order: 23.03.2018 WA 200282/2018 Union of India and another Vs M/s Bidar Sahakara Sakkare Karkhane Ltd. cannot furnish any
valid ground for rejection of the case of the respondent-BSSKL for such export subsidy.
In view of the aforesaid reasons, the present appeal filed by the Union of India is liable to be dismissed and the same is accordingly dismissed. No
costs. We direct the appellant-Union of India to comply with the directions of learned Single Judge and compute and release the said Export Subsidy
to the Respondent within a period of two months.
In view of dismissal of the appeal, I.A. Nos.2/2018 and 3/2018 stand disposed of.