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SCA/10724/2009 2/ 22 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 10724 of 2009
For
Approval and Signature:
HONOURABLE
MR.JUSTICE K.A.PUJ
HONOURABLE
MR.JUSTICE RAJESH H.SHUKLA
=========================================================
1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To be
referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
=========================================================
MESSRS
SHREE BALAJI YARN TRADERS PVT LTD & 1 - Petitioner(s)
Versus
GOVERNMENT
OF INDIA, THROUGH SECRETARY & 2 - Respondent(s)
=========================================================
Appearance
:
MR
PARESH M DAVE for
Petitioner(s) : 1 - 2.
MR PS CHAMPANERI for Respondent(s) : 1 -
3.
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE K.A.PUJ
and
HONOURABLE
MR.JUSTICE RAJESH H.SHUKLA
Date
: 18/02/2010
ORAL JUDGMENT
(Per
: HONOURABLE MR.JUSTICE K.A.PUJ)
Rule. Mr.P. S.
Champaneri, learned Assistant Solicitor General, waives service of
rule.
The
petitioners have filed this petition under Article-226 of the
Constitution of India praying for quashing and setting aside
order-in-appeal dated 25/28.5.2009 passed by the Additional Director
General of Foreign Trade (DGFT), New Delhi and order-in-original
dated 6.5.2008 passed by the Joint DGFT, Baroda with consequential
declaration and relief that no penalty was liable to be imposed on
the petitioners as regards Value Based Advance License
No.P/L/3499501 dated 6.1.1995. The petitioners have also prayed for
direction restraining the respondents from taking any action against
the petitioners including recovery of any amount as penalty, in
respect of exports made under Value Based Advance License
No.P/L/3499501 dated 6.1.1995.
This Court has issued
notice on 7.10.2009. Pursuant to the notice learned Assistant
Solicitor General Mr.P. S. Champaneri appeared and placed on record
the affidavit-in-reply filed by the Joint DGFT. Pursuant to the
order passed by this Court on 11.2.2010, letter dated 5.5.2006
issued by the Jt. DGFT on the petitioner was also produced on
record.
It is the case of the
petitioners that the petitioner Company has been dealing in textile
produces, and the business of the petitioner also involved import
and export of the textile goods. A Value Based Advance License was
granted to the petitioner company by the office of the Joint DGFT,
Baroda for allowing imports of materials valued at Rs.81,71,450/-
for exporting textile goods of value of Rs.1,92,07,640/- as export
obligation. The petitioners exported the specified textile products
of the required quantity as stipulated in the above license but the
value of exported goods was 86.64% of the goods required to be
exported under the above license, and thus, the export obligation
was fulfilled in terms of quantity but not in terms of value.
The Joint DGFT, Baroda
suggested to the petitioner vide letter dated 5.5.2006 to regularize
the above transaction by getting value based license converted into
quantity based license and by paying the duty with interest as
regards the shortfall in value of the exported goods. Since there
was no regularization of the above transaction, a show cause notice
proposing to impose fiscal penalty on the petitioner was issued. The
Joint DGFT, Baroda passed an order-in-original imposing fiscal
penalty of Rs.21,13,200/- on the petitioner company as well as the
Directors.
being aggrieved by the
said order the petitioners filed an Appeal with a stay application
before the Director General of Foreign Trade, New Delhi. During the
hearing of the case before the Additional DGFT on 17.3.2009, the
petitioners’ advocate indicated that the petitioners were ready and
willing to pay the amount of duty and interest for regularization of
the license. The Additional DGFT, therefore, adjourned the hearing
to 2.4.2009 so that the petitioners could make the payment in the
meanwhile and come for hearing with payment particulars.
The petitioners’
advocate, thereafter, sent a letter on 19.3.2009 to the Additional
DGFT informing him that the office of the Joint DGFT, Baroda was
approached immediately after the hearing for details of duty and
interest, but without any direction in writing from the Additional
DGFT, Baroda office was not giving any details to the petitioners.
The petitioners’ advocate sent a letter on 24.3.2009 to the
Additional DGFT requesting him to direct in writing to the Joint
DGFT, Baroda to quantify amounts of duty and interest and give
information to the petitioners for depositing the same, and also to
adjourn the hearing fixed on 2.4.2009. The petitioners’ advocate
sent another letter to the Additional DGFT on 2.4.2009 referring to
the above difficulty and requesting him to adjourn the hearing and
to intimate the new date for this case. There has been no response
at all from the office of the Joint DGFT, Baroda to any of the above
letters and also not to the personal visits and request made by the
petitioners’ representatives to the officers at Joint DGFT, Baroda
in this regard. The Additional DGFT, New Delhi passed an
order-in-appeal on 25/28.5.2009 dismissing the appeal for the reason
that no intimation regarding payment of duty and interest was
received from the petitioner company and hence original order was
not to be interfered with.
It is this order which is
under challenge in the present petition.
Mr. P. M. Dave, learned
advocate appearing for the petitioners, has submitted that the
petitioners have been ready and willing to pay the amount of duty
saved with interest for regularizing the case but the respondent
authorities have not informed the petitioners about the amounts
payable for this purpose despite several requests and applications
made by the petitioners in this regard and, therefore, the action of
dismissing petitioners’ appeal only on the ground that the required
amounts were not paid by the petitioners is unreasonable and
incorrect in the facts of this case. He has further submitted that
the petitioners have not been in a position to arrive at the figure
of duty saved and interest in this case because it has been the
petitioners’ submission that there has not been any saving of duty
by the petitioner company as regards the imports made under the
advance license and, therefore, it is incumbent upon the respondent
authorities to calculate the amount of duty saved in view of their
own understanding of the case and, therefore, the petitioners have
not been in a position to deposit any amount on their own in the
peculiar circumstances of this case.
Mr.Dave further submitted
that even otherwise, there is no liability of whatsoever nature on
the petitioners in law as regards imports and exports made qua the
advance license in question because the export obligation in terms
of quantity was totally fulfilled for this license and accordingly
no penalty could be imposed on the importer as provided under the
Exim Policy itself. He has, therefore, submitted that the action of
the respondent authorities in not considering the petitioners’ case
on merits on one hand and rejecting the entire case only on the
ground of the petitioners not having deposited the amount of duty
saved with interest though no details of such amounts are ever made
available to the petitioners notwithstanding the petitioners’
willingness to deposit the required amounts on the other hand, is
unreasonable, illegal and without jurisdiction in the facts of this
case.
Mr.Dave further submitted
that the respondents have no authority in law to have imposed any
fiscal penalty on the petitioners in the facts of this case because
of the peculiar fact that the value addition achieved by the
petitioner company for export of goods, when the value of the
imported materials was compared with the value of exported goods,
has been to the extent of 152.86% as against the specified
requirement of achieving value addition of 135% for the advance
license. Thus, there is not only positive value addition achieved by
the petitioner company while exporting the goods under this advance
license, but the value addition achieved has been much higher than
the specification prescribed under the Exim Policy.
Mr.Dave lastly submitted
that though the office of Jt. DGFT, Baroda had suggested to the
petitioner company for getting the advance license in question to
quantity based advance license so as to regularize the case, there
was no such obligation on the petitioner company to go for any such
regularization also in view of the provisions of para 7.28 of the
Hand Book of Procedure Volume 1- 1997-2002 whereunder it is
provided that no penalty shall be imposed if the export obligation
was fulfilled in terms of quantity but there was a shortfall in
terms of value when the license holder had achieved positive value
addition. The penalty is provided under the Exim Policy only when
there was a shortfall in terms of value addition achieved fell below
a minimum prescribed requirement for a license. In the facts of this
case, therefore, there was no liability of any penalty on the
petitioners’ part and, therefore, there was no need also to go for
any regularization by converting the value based advance license in
question into the quantity based advance license. He has, therefore,
submitted that the impugned order be quashed and set aside and the
petition be allowed accordingly.
Mr.P. S. Champaneri,
learned Assistant Solicitor General, on the other hand, has
supported the orders passed by the respondent authorities. Mr.
Champaneri further submitted that the petitioner company had failed
to submit export documents towards fulfillment of export obligation
and hence Demand Notice was issued to them on 4.1.1996 followed by
show cause notice on 17.7.1996 with opportunity of personal hearing
on 6.8.1996. Since there was no response from the petitioner
company to the show cause notice dated 17.7.1996, another show cause
notice was issued to the petitioner company on 24.6.1998. Vide
letter dated 30.7.1998, the petitioner has submitted photo copy of
export documents as an evidence of fulfillment of export obligation.
The respondents have asked for the original export documents vide
letter dated 30.11.1998 which were submitted on 10.9.1999. The
documents were examined and deficiency letter was issued to the
petitioner on 14.12.1999 which was replied on 6.2.2000. The
petitioner was again issued another deficiency letter on 12.5.2000,
pursuant to which the petitioner submitted documents on 30.5.2000
which were examined and deficiency letter was issued on 4.9.2000.
Since the petitioner has not complied with the deficiency pointed
out on 4.9.2000, show cause notice was issued on 7.1.2004with
opportunity of personal hearing on 22.1.2004 which was returned
undelivered with postal remarks left . Show cause notice under
Section-14 of Foreign Trade (Development & Regulation) Act, 1992
was issued to the Company and its Directors on 7.6.2005 with
personal hearing on 16.8.2005. The petitioner company was placed
under default on 4.2.2006. The respondents have directed the party
to get the excess import regularized by payment of custom duty and
interest vide letter dated 5.5.2006. Since there was no response
from the Company firm adjudication order dated 6.5.2008 was issued
to the Company and its Directors. Even in that adjudication order it
was clearly mentioned about the excess imports made by the
petitioners. This order was challenged by the petitioners in Appeal
before the Appellate Authority and the Appellate Authority had
granted opportunity of personal hearing on 16.12.2008, 27.1.2009,
17.3.2009 and 2.4.2009. The Appellate Authority has specifically
observed in the Appellate Order that the petitioners were directed
to pay custom duty and interest on the excess import made and they
did not appear for personal hearing on 2.4.2009. Ultimately the
Appeal was dismissed on 25.5.2009 on the ground that the petitioner
did not comply with the directions given during the personal
hearing.
Mr.Champaneri further
submitted that as per records available with the respondent No.3,
the petitioner had fulfilled export obligation to the tune of 86.64%
and earned US $527488.30. However, the petitioner was entitled to
import the raw material disperse dyes 12% of the FOB value
only but they imported more than their entitlement and hence
respondent No.3 had issued a letter to the petitioners on 5.5.2006
to regularize the excess import by paying custom duty and interest
in terms of Policy Circular No.28 dated 22.9.2000. Since this was
not done, the penalty was imposed and the order of the adjudicating
authority imposing the penalty was also confirmed by the Appellate
Authority.
Mr.Champaneri further
submitted that the advance licenses are issued with certain
conditions of exports and imports which are reckoned on case to case
basis. The advance license referred to in the present case is a
value based one and accordingly value terms in free foreign exchange
are main criteria. In the present case, the export obligation fixed
was US $ 608800 whereas the petitioners fulfilled only US $
527486.30 i.e. 86.64%. The realization of less amount in US $ cannot
be attributed with the fluctuation in exchange rate of Rupees.
Mr.Champaneri further
submitted that the advance license in question was issued to the
petitioner with a specific value addition to be achieved and not
with positive value addition a concept which was envisaged in
the Exim Policy after a long period after issue of the license to
the petitioner. He has further submitted that para-7.28 of the Hand
Book of procedures cannot be made applicable to the value based
advance license issued to the petitioner on 6.1.995. He has,
therefore, submitted that the contention of the petitioner that they
have achieved positive value addition and no penalty could be
imposed on the ground of shortfall in terms of value is not at all
correct and cannot stand in the eye of law. He has, therefore,
submitted that no interference of this Court is called for in the
orders passed by the respondent authorities and the petition be
dismissed with costs.
Having heard the learned
advocate Mr.Dave appearing for the petitioners and learned Assistant
Solicitor General appearing for the respondent authorities and
having gone through the impugned orders in light of the pleadings of
the parties contained in the memo of petition as well as
affidavit-in-reply, the Court is of the view that once having given
an option to the petitioners to regularize the transaction in
question by getting value based license converted into quantity
based license and by paying the duty with interest as regards the
shortfall in value of the exported goods and not giving calculation
of figures for payment of custom duty and interest, despite repeated
requests by the petitioner, would not make the petitioners liable
for penalty. It is true that there are some lapses on the part of
the petitioners. However, before the Appellate Authority a specific
plea was raised by the petitioners’ advocate that the petitioner was
willing to pay duty alongwith interest thereon and for that purpose
time was granted to produce the original receipt of payment of duty
plus interest. During the period between 17.3.2009 to 2.4.2009 the
petitioners wrote two letters on 19.3.2009 as well as on 24.3.2009.
The petitioners have not received any reply to these letters, hence
the petitioners had asked for time on 2.4.2009 and requested the
Additional DGFT to direct the Joint DGFT at Vadodara to inform the
petitioners about the exact amount to be paid for the purpose of
regularizing the transaction. The petitioners have also reiterated
in the said letter that the petitioners were ready to pay the duty
and interest to regularize the transaction. Instead of acceding to
the request made in this letter or adjourning the hearing, the
Appellate Authority has straightway passed order on 25/28.5.2009
dismissing the Appeal of the petitioners by observing that the
petitioners failed to produce the evidence of payment of duty saved
plus interest. We are of the view that the order of the Appellate
Authority is in violation of the principle of natural justice and
contrary to law.
The stand of the
respondent authorities is that the petitioners were informed by
letter dated 5.5.2006 to get the excess import regularized by
payment of duty and interest. First of all, this letter was not
produced alongwith the affidavit-in-reply and on direction by the
Court to produce the said letter, the same was produced
subsequently. On perusal of the said letter it is found that no
figure is mentioned in the said letter. It is simply stated that the
petitioner should do needful as per the Policy Circular No.28 dated
22.9.2000. This is to be viewed in light of the specific stand taken
by the petitioners that the export obligations have been fully made
by the petitioner company in terms of quantity thereby fulfilling
the export obligation. However, in view of fluctuation in the
exchange rate between the US Dollar and Indian Rupee, the CIF value
of the imported inputs have gone up whereas the FOB value of the
goods exported by the petitioner Company had gone down thereby
resulting in an impression that the petitioner company had not
fulfilled the export obligations; though the entire export
obligation in terms of quantities stood fulfilled. The details of
imports as well as exports in terms of quantities are duly reflected
in the petitioners’ DEEC Book. We are not examining this issue as
to whether the stand taken by the petitioner is correct or
otherwise. However, for the purpose of deciding the question of levy
of penalty this would have certainly a bearing on the issue and
hence while quashing the impugned orders of levy of penalty and/or
confirmation thereof by the Appellate Authority we direct the
respondent authorities to inform the petitioners within one month
from the date of receipt of the writ of this Court or from the date
of receipt of certified copy of this order, whichever is earlier,
about the exact amount of custom duty with interest to be paid by
the petitioners for regularization of transaction in question and on
receipt of such communication by the petitioners from the respondent
authorities, within one month there from the petitioners shall pay
the said amount subject to their right to challenge the correctness
thereof before the appropriate forum. Despite such intimation if the
petitioners fail to pay such amount it is open for the respondent
authorities to proceed further in accordance with law.
Subject to the aforesaid
directions and observations this petition is accordingly allowed.
Rule is made absolute without any order as to costs.
(K. A. PUJ, J.) (RAJESH
H. SHUKLA, J.)
kks
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