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SCA/6308/1986 18/ 18 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No.6308 of 1986
For
Approval and Signature:
HONOURABLE
MR.JUSTICE D.A.MEHTA
HONOURABLE
MS.JUSTICE H.N.DEVANI
===================================================
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 ?
===================================================
SIMAC
ELECTRICALS PVT LTD. & 1 - Petitioner(s)
Versus
UNION
OF INDIA & 2 - Respondent(s)
===================================================
Appearance
:
MR VIJAY NAIR for MS
ANUJA S NANAVATI for the Petitioners None
for Respondent(s) : 1 - 2.
MR RJ OZA for Respondent(s) :
3,
===================================================
CORAM
:
HONOURABLE
MR.JUSTICE D.A.MEHTA
and
HONOURABLE
MS.JUSTICE H.N.DEVANI
Date
: 06/05/2010
ORAL
JUDGMENT
(Per
: HONOURABLE MR.JUSTICE D.A.MEHTA)
The
petitioner, a Private Limited Company, states that it is a 100%
export oriented unit manufacturing flat knitting machines. The
petition when originally filed was limited to the following prayers:
15. In
the premises aforesaid, the petitioners, therefore, most humbly and
respectfully pray that:
Your
Lordships be pleased to issue a writ of mandamus or any other
appropriate writ, order or direction, directing the respondents to
forthwith open the seal of the factory premises of the petitioners
and to allow the petitioners to start and continue their
manufacturing activities without let or hindrance and allow export
of the goods manufactured and direct the respondents to allow the
clearance of the goods as per the Bills of Entry submitted before
the respondent No.3.
Pending
the hearing and final disposal of the present petition, Your
Lordships be pleased to order the respondents to remove the seals of
the factory premises of the petitioners forthwith and to pass the
Bills of Entry and to allow the petitioners to start and continue
their manufacturing activities and allow the clearance and export of
the finish goods manufactured out of the consignments in question.
Ad-interim
ex-parte relief in terms of prayer (B) above may kindly be treated.
Any
other and further relief as the nature and circumstances of the case
may require, also be granted.
Thereafter
vide amendments made on various dates following additional prayers
were made:
(a-1) that
this Hon’ble Court be pleased to issued a Writ of Certiorari or a
Writ in the nature of Certiorari or any other appropriate writ order
or direction under Article 226 of the Constitution of India, calling
for the records and proceedings pertaining to the passing of the
impugned order dated 7th
May 1987 Annexure M-3 hereto and after examining the validity,
legality and propriety thereof, be pleased to quash and set aside
the same;
(b-1) that
pending the hearing and final disposal of the petition, this Hon’ble
Court be pleased to stay the operation, impugned order dated 7th
May 1987 Annexure M-3 hereto on such terms and conditions as this
Hon’ble Court may deem fit to impose;
(c-1) for
ad interim relief in terms of the prayer (b-1) above;
(a-2) That
this Hon’ble Court be pleased to issue a writ of certiorari or a
writ in the nature of certiorari or any other appropriate writ order
or direction quashing and setting aside the impugned order dated
14th December, 1987 at Annexure M-8 .
(b-2) That
pending the hearing and final disposal of the present petition this
Hon’ble Court will be pleased to stay the operation, implementation
and enforcement of the impugned order dated 14th
December, 1987 at Annexure M-8 .
(c-2) For
ad-interim relief in terms of prayer (b-2) above.
(a-3) In
the alternative to the foregoing prayers your Lordships will be
pleased to permit the petitioners to file their claim for duty
drawback in respect of the goods exported by them to USSR pursuant
to the orders of this Hon’ble Court and direct the respondents to
allow the same without taking into consideration the delay in
lodging the claim for drawback by the petitioners and till such
claim is allowed, direct the respondents not to recover the amount
of Customs duty levied upon the
petitioners by order dt.14th/16th December 1987 passed by Deputy
Collector of Customs, Kandla.
In
so far as the original prayers are concerned, it is an accepted
position that as the petitioner was permitted under orders of the
Court to export the goods after manufacture, the said prayers do not
survive and no orders are required to be made.
It
is the say of the petitioner that on 21.01.1986 the petitioner
received a proposed order for 12,000 knitting machines from a
Russian buyer at specified price and delivery schedule. Accordingly,
as per the say of the petitioner, the petitioner placed order for
importing certain machines/spare-parts with a Japanese concern. On
28.01.1986 the petitioner made an application to respondent No.2
authority, the Development Commissioner, Kandla Free Trade Zone,
seeking allotment of a shed and registration on the basis of the
project report and a copy of the proposed order of the Russian
buyer.
On
18.04.1986 a letter of approval was issued by Ministry of Commerce
for setting up a new industrial unit in Kandla Free Trade Zone
subject to the following three conditions:
Entire
production shall be exported, of which at least 50% will be to
G.C.A. countries.
Minimum
value addition without inputs will be 47% in first year, 53% in
second year, 62% in third year, 71% in fourth year and 81% in fifth
year of production. If the value of both imported and indigenous
outputs are taken into account, a minimum value addition would be
32% in first year going upto 52% in the 5th year.
Clearance
should be obtained from the Gujarat Water and Pollution Control
board.
The
petitioner was asked to confirm written acceptance of the conditions
and in fact the petitioner did so vide communication dated
02.05.1986.
Before
the petitioner was granted registration by respondent No.2
authority, the petitioner was called upon to confirm as to whether
the petitioner would be in a position to comply with the
conditions stipulated in the letter of approval in light of
the past history of a sister concern of the petitioner. The
petitioner having replied in the affirmative registration was
granted. The registration was granted on 07.10.1986 and immediately
on the next day, namely, 08.10.1986 the petitioner approached
respondent No.2 authority seeking reduction in the stipulated
minimum value addition as per Condition No.2 of letter of approval
dated 18.04.1986.
Subsequent
thereto respondent No.2 sealed the factory premises of the
petitioner and the petitioner approached this Court. Suffice it to
state that the petitioner had entered into correspondence with
various authorities and also approached this Court by way of
different proceedings at different stages. Ultimately, at the end of
the entire exercise admittedly the petitioner could not achieve the
minimum value addition even though the petitioner was permitted to
export manufactured goods under directions of this Court. As a
consequence respondent No.2 made an order on 07/08.05.1987
(Annexure-M3) levying a penalty of Rs.25,00,000/- for mis-utilizing
the imported components and violating provisions of Section
4-I(1)(a) of the Imports and Exports (Control) Act, 1947.
This
was followed by an order made by respondent No.3 authority on
14/16.12.1987 under the provisions of the Customs Act, 1962. A
demand of Rs.3,14,84,373.10 was confirmed by the said order. Both
the orders made by respondent No.2 authority and respondent No.3
authority respectively are under challenge.
Learned
advocate for the petitioners assailed the impugned orders
principally on the ground that as per the Export Import (EXIM)
policy applicable at the relevant point of time there was no
compulsion to achieve value addition and such a condition could not
have been incorporated in a letter of approval; that even if such a
condition had been incorporated in the letter of approval, the
petitioner could not be bound by the same as while granting approval
the authority cannot impose a condition contrary to the policy.
Alternatively, it was submitted that the policy cannot be treated as
a statute and in absence of any statutory provision providing for
such a contingency no such condition could be imposed upon the
petitioner, and hence, the petitioner was not legally obliged to
fulfill such a condition. A further alternative contention was that
the authorities failed to consider the circumstances in which the
petitioner was put by virtue of sudden fluctuation in the import
rate making it impossible to achieve the limit specified in the
condition and, therefore, the petitioner could not have been called
upon to achieve what was not possible. Lastly, it was contended that
the proceedings had been initiated even before the period of one
year was over as stipulated in the condition and, therefore, also
the respondent authorities could not have either levied the penalty
or confirmed the demand in hands of the petitioner. In support of
the submission made, attention was invited to Appendix 15 (Chapter
XX) and Paragraph No.4 thereof as appearing in the EXIM Policy at
the relevant point of time as well as Customs Notification
No.77-Cus. dated 17.04.1980 to submit that the notification nowhere
provided for value addition and in absence of such direct
provision, any condition imposed in a letter of approval cannot be
insisted upon. In support of the submission, reliance was placed on
judgment in case of Choksi Tube Company Limited Vs. Union of
India, 1998 (97) E.L.T. 404 (S.C.) to submit that in that case
similarly situated persons were not called upon to either pay
penalty or demand despite similar default and hence, the impugned
orders were required to be quashed and set aside as persons whose
cases were similar were not called upon to either pay duty or
penalty. Judgment in case of Baliga Exports (P) Limited Vs. Addl.
Chief Controller of Imports & Exports, 2001 (129) E.L.T. 321
(Kar.) rendered by Karnataka High Court was pressed into service in
support of the submission that till the permitted period was not
over no action could have been initiated as stated in Paragraph
Nos.13 and 14 of the said judgment.
Paragraph
No.4 of the EXIM Policy prevalent at the relevant point of time
reads as under:
4. A
copy of the Open General Licence is given in this Appendix. The
importers are advised to regulate their imports under the Open
General Licence in such a way that they adhere to the value added
criterion on the basis of which their project was approved. The
development Commissioner of the Zone shall examine
that the value added criterion is being observed.
A
plain reading of the said paragraph of the EXIM Policy makes it
clear that the importers have been advised to ensure that the
imports are so regulated under the Open General Licence that the
importers ultimately are in a position to adhere to the value added
criterion on the basis of which the project is approved. The
Development Commissioner of the respective zone is obliged to
examine that the value added criterion is being observed. Therefore,
the contention that the policy only envisages a directory or
advisory achievement of the value addition stipulated by the letter
of approval cannot be accepted. The paragraph in question has been
couched in clear and unambiguous language. An importer has been
called upon to regulate the imports to ensure that the importer
complies with the value addition criterion. Therefore, submission
that the policy document does not oblige an importer/exporter to
fulfill the condition of value addition does not merit acceptance.
In
so far as Customs Notification No.77-Cus. dated 17.04.1980 is
concerned, Condition No.4 which appears immediately after preamble
reads as under:
(4) the
importer agrees to execute a bond in such form and for such sum as
has been prescribed by the Development Commissioner of the Zone
binding himself to fulfill the export obligations, and to fulfill,
inter alia the conditions stipulated in this notification.
The
said condition stipulates that an importer agrees to execute a bond
in the prescribed form and for such sum specified by the Development
Commissioner so as to bind the importer to fulfill the export
obligation and fulfill other conditions stipulated in the
notification. Thus, on a plain reading it emerges that once an
importer has executed a bond in the prescribed form for a prescribed
sum he is under a legal obligation to fulfill the export obligation.
When one talks of fulfillment of an export obligation it goes
without saying that the same would also include the aspect of value
addition in so far as the exports are concerned. In the facts of the
present case it is an accepted position that the petitioner did
execute such a bond. The petitioner was, therefore, duty bound to
fulfill the export obligation, including achieving the stipulated
limit of value addition. In the circumstances, it is not possible to
state that the letter of approval has gone beyond either the policy
document or the customs notification.
In
so far as the submission that the petitioner was called upon to pay
the demand and penalty was levied even before the stipulated period
of one year was over, suffice it to state that the petitioner was
not in a position to comply with the stipulated limit of value
addition even if the authorities had granted further time to the
petitioner as the facts on record reveal. As per the letter of
approval the petitioner was required to attain minimum value
addition to the tune of 47% in the first year without taking into
account indigenous inputs. Letter of approval is dated 18.08.1986.
The period of one year, namely, the first year for achieving 47%
value addition would expire on 17.06.1987. The petitioner imported
two consignments of components for flat knitting machines having
total CIF value of Rs.2.30 crores and filed bills of entry dated
07.10.1986 and 11.11.1986 seeking benefit of exemption under Customs
Notification No.77-Cus. dated 17.04.1980. However, the petitioner
manufactured and exported only 4,000 pieces of flat knitting
machines by March 1987 as against 12,000 knitting machines which
were required to be exported latest by 17.06.1987. Admittedly, for
exporting 4,000 pieces of flat knitting machines the petitioner had
exhausted the entire imported components, the petitioner had not
imported any further components, and was not in a position to import
any further components so as to manufacture shortfall of 8,000 flat
knitting machines between March, 1987 and 17.06.1987.
In
the circumstances, as noted by the authority, against stipulated
value addition of 47% the petitioner had been able to achieve only
21.3% value addition (at one place stated to be 17.15% / 16.26%).
The shortfall was thus to the extent of more than 50% of the
stipulated limit as the petitioner was not in a position to complete
manufacture and achieve export of almost 26% within the period of
remaining three months. Hence, even if the authorities had initiated
action after 17.06.1987 the result would not have changed and,
therefore, merely because the authorities have taken action within
the period of one year no prejudice has been caused to the
petitioner in the facts of the case, and in fact no prejudice is
shown to have been actually caused to the petitioner.
In
so far as the plea based on the Apex Court decision in the case of
Choksi Tube Company Limited (supra) is concerned, suffice it
to state that the principle of unjust discrimination cannot be
converted into a principle of negative discrimination and assuming
that some other person appears to have violated law that would not
entitle the petitioner to violate the law.
In
the circumstances, the petitioner cannot succeed on any of the
grounds pleaded and urged at the time of hearing. In relation to the
prayer clause 15(a-3), suffice it to state that respondent No.3
authority has already recorded that it will be open to the
petitioner to make a claim for duty drawback and, therefore, the
said prayer cannot be granted. The petitioner has, in the first
instance, to make an application in accordance with law and only
after the petitioner is in a position to show that the petitioner is
entitled to, the authority would be in a position to consider such a
claim.
Hence,
none of the prayers made in the petition, even after various
amendments, can be granted. The petition is accordingly rejected.
RULE discharged. There shall be no order as to costs.
At
this stage, learned advocate for the petitioners seeks stay of
operation of this judgment for a period of four weeks. Considering
the facts on record and the fact that the orders impugned were made
in 1987, the request is rejected.
Sd/-
[D. A.
MEHTA, J]
Sd/-
[
H.N.DEVANI, J]
***
Bhavesh*
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