IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 15.10.2008 CORAM THE HONOURABLE MR. JUSTICE V. DHANAPALAN W.P.Nos.20955, 20957 and 20958 of 2008 and M.P.Nos.1 of 2008 M/s.Sri Lakshmi Prasanna Agencies, Represented by its Manager Mr.B.Srinivasan, Vigneshwara Aptt.Flat No.7, 3rd Floor, No.9, Periyar Road, T.Nagar, Chennai-600 017 ... Petitioner in all the above writ petitions vs. 1.The Deputy Commissioner of Customs, EDI Exports, Custom House, No.60, Rajaji Salai, Chennai-600 001. 2.The Joint Director General of Foreign Trade, 4th Floor, Shastri Bhavan Annexe, 26, Haddows Road, Chennai-600 006. 3.Foreign Trade Development Officer, Office of the Zonal Joint Director General of Foreign Trade, 4th & 5th Floor, Shastri Bhavan Annexe,., 26, Haddows Road, Chennai-600 006 ... Respondents in all the above writ petitions Writ Petitions filed under Article 226 of the Constitution of India praying for the issuance of a writ of Certiorari by calling for the records of the third respondent Nos.04/21/073/111/AM-06/314, 04/21/073/00029/AM-07/299 and 04/21/073/00028/AM-07/299 culminating in the issue of the direction dated 25.7.2008 in W.P.No.20955/2008 and 21.7.2008 in W.P.Nos.20957 and 20958/2008 from file Nos.04/21/073/111/AM-06/314, 04/21/073/00029/AM-07/299 and 04/21/073/00028/AM-07/299 and quash the same. For Petitioner : Mr.Murugappan For Respondents: Ms.Bhuvaneswari, Central Government Standing Counsel O R D E R
Writ petitions have been filed seeking to quash the impugned Proceedings of the third respondent dated 25.7.2008(W.P.No.20955/2008) and 21.7.2008(W.P.20957 and 20958/2008).
2. According to the petitioner, they are the firm engaged in export of various commodities including ground nuts, chillies, etc to various countries. The Government of India through the Ministry of Commerce has formulated a Scheme called Vishesh Krishi and Gram Udyog Yojana Scheme (in short “VKGUY Scheme” under its Foreign Trade Policy for the period 2004-2009. The objective of the Scheme as per the Policy is to promote export of Fruits, Vegetables, Flowers, Minor Forest produce, Dairy, Poultry and their value added products, and Gram Udyog products by incentivising exporters of such products. In respect of these products, the exporter is entitled for a duty credit scrip equivalent to 5% of the FOB value of exports. It is their further case that the above duty credit scrip can be used for import of any inputs or goods which are otherwise, permitted to be imported without any restrictions under the above Foreign Trade Policy. Accordingly, the petitioner firm intended to avail the export incentive available in respect of export of various agricultural produce, including ground nut. The petitioner company exported several consignments of ground nuts, chillies, etc through the Port of Chennai and these consignments were permitted by the first respondent for export. At the time of filing of the documents for permitting export, in respect of ground nut, the petitioner firm inadvertently indicated the Harmonised System (HS) classification under Heading 1202. The ground nut exported by the petitioner firm in terms of the above shipping documents were processed ground nuts in the sense these were removed from their shells and segregated by using equipment on the basis of their size and then packed in gunny bags according to counts. Such ground nuts which are otherwise processed in the manner above fall appropriately under Chapter 20 of the HS Code and are eligible for benefit of the above Scheme as per Appendix 37 A referred to above. Under such circumstances, the petitioner firm made representation to the first respondent requesting for amendment of the shipping documents with regard to the classification indicated. It is further submitted that the first respondent permitted such amendments and issued no objection certificates for carrying out these changes. On the basis of these permissions which were granted after due verification of the documents, the petitioner firm approached the second respondent for issue of duty credit scrips in terms of VKGUY Scheme. Pursuant to that, the third respondent has issued Duty Credit Scrip bearing Nos.0410080846 dated 28.4.2006 in W.P.No.20955/2008, 0420081869 and 0410080868 dated 2.6.2006 in W.P.No.20957 and 20958/2008. The above credit scrips have been utilised by the petitioner and sold to various purchasers, who in turn have used them for import of goods as permitted in the Foreign Trade Policy. While that being the position, the third respondent issued communications dated 25.7.2008 in W.P.20955/2008 and a further communication dated 21.7.2008 in W.Ps.20957 and 20958/2008 which are impugned in these petitions and contended that on the basis of the alleged audit scrutiny, export of ground nut kernels initially classified under Chapter 12 and then subsequently modified to Chapter 20 will not be eligible for the benefit under VKGUY Scheme. It was alleged that Chapter 20 covers value added products only. As a result, the third respondent directed surrender of the licence issued to the petitioner company, if it is already utilized, to pay customs duty equivalent to Rs.21,12,901/-(W.P.20955/2008), Rs.4,87,427/-(W.P.20957/2008) and Rs.2,57,911/- (W.P.20958/2008), respectively, together with interest at 15% per annum within seven days, failing which, it was intimated
that action will be initiated against the petitioner under Foreign Trade (Development & Regulation) Act 1992. Aggrieved by the above action of the said respondent, the petitioner has challenged the communication dated 25.7.2008 and 21.7.2008.
3. Heard Mr.S.Murugappan, learned counsel for the petitioner and Mrs.S.Bhuvaneswari, learned Central Government Standing counsel for the respondents.
4. Learned counsel for the petitioner contended that under the scheme and Foreign Trade Policy, the petitioner has utilised the credit scrip completely and there is no violation of any of the terms of the scheme under Credit Scrips facilities. He further contended that without following the procedure contemplated under Section 9 of the Foreign Trade (Development & Regulation) Act, the impugned communication is issued and hence it suffers from legal infirmity. He also contended that Rule 10 of Foreign Trade (Development & Regulation) Rules 1993 was not followed by the third respondent before issuing the impugned order. Therefore, it is clear that the impugned orders violate the mandatory provision.
5. The main contention of the learned Central Government Standing Counsel for the respondents is that Chapter 20 covers only value added products and the product under question will not qualify for the benefit under the VKGUY Scheme. Chapter 20 include nuts, fruits, etc., which are otherwise processed under Heading 20.08. In the present case, the ground nut kernels have been removed from their shells, segregated by using equipment on the basis of their size. It is not a case of export of raw ground nuts in shell form and its export in the condition it is taken from the soil. It has been subjected to processing and then exported. Section 9 of the Foreign Trade(Development & Regulation Act) 1992 and sub section 4 of the Act provides that any action like suspension and cancellation of licences may be taken. It is further stated that the Director General or the officer authorised under sub-section (2) may, subject to such conditions as may be prescribed, for good and sufficient reasons, to be recorded in writing, suspend or cancel any licence granted under this Act. Provided that no such suspension or cancellation shall be made except after giving the holder of the licence a reasonable opportunity of being heard. Learned Central Government Standing Counsel appearing for the respondents, on instructions, has submitted that the scheme as well as the policy of the Government has been issued and the terms of the scheme has also been formulated and the petitioner has to follow the procedure in using the credit scrips. However, the learned counsel for the petitioner has submitted that before proceeding with the action against the petitioner, the respondents could have followed the procedure contemplated under Section 9(4) of the Foreign Trade (Development and Regulation) Act 1992.
6. I have given a careful consideration to the submissions made by the learned counsel on either side.
7. It is seen that the petitioner has availed the facilities as per the VKGUY Scheme and Duty Credit Scrips bearing No.0410080846 dated 28.4.2006 in W.P.20955/2008; No.0410081869 and 0410081868 dated 2.6.2006 in W.P.20957 and 20958/2008. The petitioner has sold the credit scrips to various purchasers, who in turn have used them for import of goods as permitted in the Foreign Trade Policy and the impugned communications have been issued based on the audit scrutiny. It is also seen that the respondents have proceeded in issuing the communication without following the provisions under Sub-Section 4 of Section 9 of the Foreign Trade (Development & Regulation) Act 1992, which specifically provides that such suspension or cancellation can be made only after giving the holder of the licence a reasonable opportunity of being heard. Further, Rule 10 the Foreign Trade Rules, has to be followed. It appears that the above provisions have not been followed by the respondents and without doing so, the third respondent has issued the impugned communications. which are against the principles of natural justice.
8. In the light of the above discussion, the impugned proceedings of the third respondent dated 25.7.2008, 21.7.2008 cannot be sustained and accordingly, they are set aside and the matter is remitted back to the third respondent to follow the provisions under Section 9(4) of the Foreign Trade (Development and Regulation)Act, 1992 and also to follow Rule 10 of the Foreign Trade Rules 1993 and proceed further in accordance with law after giving opportunity to the petitioners of being heard and also the personal hearing of the parties concerned.
The writ petitions are allowed with the above direction and observation. No costs. Consequently, connected M.Ps are closed.
nvsri
To :
1.The Deputy Commissioner of Customs,
EDI Exports,
Custom House, No.60, Rajaji Salai,
Chennai-600 001.
2.The Joint Director General of Foreign Trade,
4th Floor, Shastri Bhavan Annexe,
26, Haddows Road,
Chennai-600 006.
3.The Foreign Trade Development Officer,
Office of the Zonal Joint Director
General of Foreign Trade,
4th & 5th Floor,
Shastri Bhavan Annexe,.,
26, Haddows Road,
Chennai 600 006
[ PRV / 16159 ]