IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated 15.2.2011 CORAM THE HONOURABLE MR.JUSTICE R.SUDHAKAR Writ Petition No.34796 of 2007 and M.P.Nos.1 and 2 of 2007 M/s.Arunsaran Textiles Pvt. Ltd., 655/3, Avanashi Road, Vanjipalayam, Tirupur-641 663, Coimbatore District, represented by its M.D. M.Palanisamy. ... Petitioner -Vs.- 1.Director General of Foreign Trade, Ministry of Commerce and Industry, Department of Commerce, Udyog Bhawan, New Delhi 110 001. 2.The Joint Director General of Foreign Trade, 1544, India Life Building (Annexe), 1st Floor, Trichy Road, Coimbatore-641 018. 3.The Tahsildar, Avinashi Taluk, Coimbatore District. ... Respondents Writ Petition is filed under Article 226 of the Constitution of India praying to issue a Writ of Certiorarifed Mandamus to call for records in and connected with Na.Ka.4049/07/Aa.2 dated 11.10.07, issued by the third respondent, quash the same and further direct the second respondent to issue the copy of the order imposing penalty against the petitioner company, so as to enable them to prefer an appeal against the said ex parte order, and consequently hold that the said order on being served on the petitioner company shall be the date of service of the order. For petitioner : Mr.B.Satish Sundar For respondents : Mr.A.S.Vijayaraghavan, Senior Central Government Standing Counsel for R1 and R2 Mr.L.S.M.Hasan Fizal, Government Advocate, For 3. ----- O R D E R
Writ Petition is filed praying to issue a Writ of Certiorarifed Mandamus to call for records in and connected with Na.Ka.4049/07/Aa.2 dated 11.10.07, issued by the third respondent, quash the same and further direct the second respondent to issue the copy of the order imposing penalty against the petitioner company, so as to enable them to prefer an appeal against the said ex parte order, and consequently hold that the said order on being served on the petitioner company shall be the date of service of the order.
2. Petitioner was granted Export Promotion Capital Goods Licence (in short EPCG Licence) on 13.8.1998. Based on the licence, petitioner is entitled to import capital goods on concessional rate of duty. Petitioner has to export goods for certain value in compliance of EPCG Licence within a particular period. Based on the EPCG Licence, petitioner imported shuttleless looms on 5.11.1998 for certain value. On 1.10.2004, petitioner submits statement of exports done by him to the second respondent, the Joint Director General of Foreign Trade. On 22.2.2005 the second respondent Joint Director General of Foreign Trade called upon the petitioner to submit records to show fulfillment of export obligation. On 2.3.2005, petitioner submitted certain documents. On 23.3.2005, the second respondent sought for copies of shipping bills to show proof of export. On 27.5.2005, the period of export obligation was extended. Petitioner makes further requests for extension of time by subsequent correspondence. All those facts are not in dispute.
3. On 31.7.2006, the second respondent issued demand-cum-show cause notice in terms of Section 14 of the Foreign Trade (Development and Regulation) Act, 1992 for action under Section 11(2) of the Act stating that the petitioner did not fulfill the export obligation under EPCG Licence. The said demand-cum-show cause notice dated 31.7.2006 in File No.32/31/20/80/AM 99 has fixed the date of hearing as 23.8.2006. It is the case of the respondents 1 and 2 that the said demand-cum-show cause notice was sent on 2.8.2006 by ordinary post along with 38 other covers. Petitioner did not appear for the hearing and failed to submit a reply. As a result, the second respondent Joint Director of Foreign Trade, Coimbatore, passed an order in File No.32/31/20/80/AM 99 dated 11.9.2006 whereby he held that the petitioner has violated the conditions of the EPCG Licence. He held that the petitioner is liable for penalty under Section 11(2) of Chapter IV of the Foreign Trade (Development and Regulation) Act, 1992. Consequently, a penalty of Rs.2,97,64,385/- was imposed. This order, according to the petitioner, was not served on him. Whereas the respondents 1 and 2 state that this order was despatched on 14.9.2006 along with 41 others under ordinary postal covers.
4. Thereafter, for the purpose of recovery of the penalty as above, a communication was sent and delivered to the District Collector for recovery under the provisions of the Revenue Recovery Act. The above said communication dated 28.2.2007 was sent to the District Collector, Coimbatore and the Chief Secretary, Chennai on 8.3.2007 by ordinary post. Based on the Penalty Order and communication issued by the second respondent to the District Collector, the Tahsildar, the third respondent initiated recovery proceedings on 11.10.2007 for recovery of the penalty amount and called upon the petitioner to pay the amount within 15 days from the date of the proceedings.
5. Petitioner’s counsel states that the recovery order issued by the third respondent Tahsildar, was served in person. Challenging the recovery proceedings of the third respondent, the present writ petition has been filed stating that the order of the second respondent has not been communicated to the petitioner in the manner known to law. Therefore, the recovery proceeding of the third respondent is bad. It is also pleaded that the copy of the order passed by the second respondent should be furnished to the petitioner so as to prefer an appeal against the said order in accordance with law.
6. Learned counsel for the petitioner submits that under the provisions of the Foreign Trade (Development and Regulation) Act, 1992 (hereinafter called “the Act”), Section 14 provides that opportunity should be given by notice in writing, stating the grounds on which it is proposed to impose penalty or confiscate such goods or the like. Section 14 of the Foreign Trade (Development and Regulation) Act, 1992 reads as follows:-
“14. Giving of opportunity to the owner of the goods, etc. – No order imposing a penalty or of adjudication of confiscation shall be made unless the owner of the goods or conveyance, or other person concerned, has been given a notice in writing:-
(a) informing him of the grounds on which it is proposed to impose a penalty or to confiscate such goods or conveyance; and
(b) to make a representation in writing within such reasonable time as may be specified in the notice against the imposition of penalty or confiscation mentioned therein, and, if he so desires, of being heard in the matter.”
Petitioner should also be given reasonable time to give a reply and shall be heard in the matter at request. Besides, Section 14 of the Act, there is no provision under the said Act, showing the manner in which the service of notice on the person concerned should be made.
7. Learned counsel for the petitioner referred to the provisions of Section 153 of the Customs Act, 1962 and Section 37-C of the Central Excise Act, 1944 which provides for service of notice by Registered Post with acknowledgment due. In the absence of specific provision in the Foreign Trade (Development and Regulation) Act, 1992, counsel for the petitioner pleaded that one should fall upon Section 27 of the General Clauses Act, 1897 which provides the manner in which the service should be effected. Section 27 of the General Clauses Act, 1897 reads as follows:-
“27. Meaning of service by post:- Where any Central Act or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, whether the expression “serve” or either of the expressions “give” or “send” or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, pre-paying and posting by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.”
Hence, the second respondent should have followed the procedure prescribed in Section 27 of the General Clauses Act. The failure to do so vitiates the order imposing penalty as it is violation of principles of natural justice. The consequent proceedings are also bad.
8. Since the order of the second respondent, which resulted in passing of the impugned recovery proceedings by the third respondent Tahsildar, was not communicated, as per law, the petitioner had no knowledge of the proceedings of the second respondent and thereby his valuable rights has been affected. Non-service of the original order of adjudication, imposing penalty ex parte, is good enough reason to set aside the impugned proceedings of the third respondent Tahsildar, as the order adverse to the petitioner has been passed by the second respondent without proper service as contemplated by law. The order for recovery is causing great prejudice due to infraction of law as above.
9. Thiru A.S.Vijayaraghavan, learned Senior Central Government Standing Counsel appearing for the respondents 1 and 2 submitted that since the Foreign Trade (Development and Regulation) Act or the Rules does not provide any particular mode of service, the department has been following the practice of despatch by ordinary post and the records have been produced to show that the demand-cum-show cause notice and the adjudication order passed by the second respondent have been despatched on the dates which have already been referred to above. Even the revenue authorities are despatching the covers by ordinary post. Therefore, the petitioner cannot take the plea that the original order imposing penalty was not served.
10. In the present case, what is sought to be recovered by the third respondent from the petitioner is the penalty levied by the second respondent for non-compliance of the export obligation. The provision which relates to imposition of penalty for violation of the Foreign Trade (Development and Regulation) Act, 1992, should ensure that the party is given proper notice before passing the order imposing penalty. The provision of the Foreign Trade (Development and Regulation) Act, 1992 clearly states that an opportunity should be given to the person concerned including personal hearing, if requested, before the authority adjudicates the matter. In the present case, though the respondents 1 and 2 tried to explain the service of notice through ordinary post, the fact remains that the proof of actual service on the petitioner has not been established. Service in one case cannot be assumed to be service in another case.
11. On a perusal of the provisions of the Customs Act, 1962 and the Central Excise Act, 1944, extracted above, it is clear that the notice should be sent by registered post. The proceedings initiated under the Foreign Trade (Development and Regulations) Act, 1992 in this case is based on import of certain goods by taking the benefit of partial duty exemption and for contravention of the export obligation, the penalty is imposed after adjudication. Therefore, the penal proceeding requires proper notice.
12. In the absence of particular mode of service in the Foreign Trade (Development and Regulation) Act, 1992, one has to necessarily fall back on the provisions of the General Clauses Act. The Central Excise Act, 1944 and the Customs Act, 1962 are separate, independent provisions and are self contained. In a case of this nature, when the Foreign Trade (Development and Regulation) Act, 1992 does not provide for any particular mode of service, then, Section 27 of the General Clauses Act, 1897 will come into operation. Section 27 of the General Clauses Act definition includes various modes of service like, “serve”, “give” or send” or any other expression to mean service by registered post.
13. Under the Foreign Trade (Development and Regulation) Act, 1992 Section 14 prescribes notice in writing to be given to the person concerned. The reading of Section 27 of the General Clauses Act, 1897 and the Foreign Trade (Development and Regulation) Act, 1992, it is clear that the notice in the normal circumstances should have been sent by Registered Post in order to avoid the plea of non-service and consequent plea of violation of principles of natural justice.
14. It is now clarified by the learned counsel appearing for the respondents 1 and 2 that the Foreign Trade Development authorities are resorting to sending all communications as aforesaid only by Registered Post. In the petitioner’s case there is a clear violation of principles of natural justice and the order imposing penalty has been passed without hearing the petitioner on merits.
15. Since the order of the third respondent is based on a communication by the second respondent whose order has not been served on the petitioner so far in the manner prescribed by law, it will be deemed to be non service of the original order. There is no order in the eye of the law insofar as petitioner is concerned. The third respondent’s proceeding to recover the penalty amount from the petitioner will, therefore, be arbitrary and prejudicial to the petitioner only on account of violation of principles of natural justice.
16. Along with the counter-affidavit and the documents filed, the second respondent has enclosed a copy of the order passed by the second respondent to the counsel for the petitioner and that should be taken as valid communication as on today and the petitioner is entitled to pursue the appeal remedy in accordance with the provisions of the Act and is entitled to challenge the penalty imposed.
17. Petitioner’s counsel pleads that the plea of limitation would stand against the petitioner, if an appeal is to be filed considering the date of order passed by the second respondent which has not been communicated so far. This Court has earlier held that the order of the second respondent has not been communicated in the manner known to law. It is only at the time of filing the counter-affidavit along with the documents, the order of the second respondent dated 11.9.2006 was enclosed. Therefore, the petitioner has now taken the stand that he will pursue the appeal remedy against the order of the second respondent based on the order that is to be passed by this Court.
18. In such view of the matter, the petitioner on receipt of a copy of this order is permitted to file an appeal within the prescribed time limit. The period during which the matter was pending before this Court shall be eschewed for the purpose of limitation. If after receipt of the copy of this order, petitioner does not pursue the appeal remedy, within the time limit prescribed and gets necessary orders, the third respondent will be entitled to proceed for recovery of penalty amount. Subject to time limit specified, if the appeal is filed and necessary orders, interim or final are obtained, the third respondent shall refrain from recovery of the penalty amount. If the petitioner deliberately avoids filing of the appeal and if no orders is passed in its favour, then the third respondent is entitled to proceed with the recovery proceedings.
19. In view of the huge amount levied as penalty, the second respondent shall ensure that the matter is diligently pursued by the petitioner. If the petitioner does not get appropriate remedial orders from the appellate authority, then the third respondent should follow up the recovery proceedings without undue delay.
20. The Writ Petition is ordered as above. No costs. Consequently, connected miscellaneous petitions are closed.
ts
To
1.Director General of Foreign Trade,
Ministry of Commerce and Industry,
Department of Commerce,
Udyog Bhawan,
New Delhi 110 001.
2.The Joint Director General of Foreign Trade,
1544, India Life Building (Annexe),
1st Floor, Trichy Road,
Coimbatore-641 018.
3.The Tahsildar,
Avinashi Taluk,
Coimbatore District