{"id":228451,"date":"2011-04-19T00:00:00","date_gmt":"2011-04-18T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/diamond-vs-union-on-19-april-2011"},"modified":"2017-05-04T12:06:17","modified_gmt":"2017-05-04T06:36:17","slug":"diamond-vs-union-on-19-april-2011","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/diamond-vs-union-on-19-april-2011","title":{"rendered":"Diamond vs Union on 19 April, 2011"},"content":{"rendered":"<div class=\"docsource_main\">Gujarat High Court<\/div>\n<div class=\"doc_title\">Diamond vs Union on 19 April, 2011<\/div>\n<div class=\"doc_author\">Author: Harsha Devani,&amp;Nbsp;Mr.Justice R.M.Chhaya,&amp;Nbsp;<\/div>\n<pre>   Gujarat High Court Case Information System \n\n  \n  \n    \n\n \n \n    \t      \n         \n\t    \n\t\t   Print\n\t\t\t\t          \n\n  \n\n\n\t \n\t IN THE HIGH COURT OF GUJARAT AT AHMEDABAD\n\t \n\t \n\t \n\t \n\t \n\t \n\t \n\t \n\t \n\t\n\n\n \n\n\n\t \n\nSCA\/4571\/2011\t 19\/ 19\tORDER \n \n \n\n\t\n\n \n\nIN\nTHE HIGH COURT OF GUJARAT AT AHMEDABAD\n \n\n \n\n\n \n\nSPECIAL\nCIVIL APPLICATION No.4571 of 2011\n \n\n===================================================\n \n\nDIAMOND\n&amp; GEM DEVELOPMENT CORPN. &amp; 1-Petitioner(s)\n \n\nVersus\n \n\nUNION\nOF INDIA - THROUGH SECRETARY &amp; 4 - Respondent(s)\n \n\n=================================================== \nAppearance\n: \nMR\nMIHIR H JOSHI, SENIOR COUNSEL, with MR\nABHISHEK M MEHTA for Petitioner(s) : 1 - 2. \nMR PS CHAMPANERI for\nRespondent(s) : 1-3, \nMR RJ OZA for Respondent(s) : 4, \nMR\nVIRENDRA M GOHIL for Respondent(s) :\n5, \n===================================================\n \n\t  \n\t \n\t  \n\t\t \n\t\t\t \n\nCORAM\n\t\t\t:\n\t\t\t\n\t\t\t\n\t\t\n\t\t \n\t\t\t \n\nHONOURABLE\n\t\t\tMS.JUSTICE HARSHA DEVANI\n\t\t\n\t\n\t \n\t\t \n\t\t\t \n\n \n\n\t\t\t\n\t\t\n\t\t \n\t\t\t \n\n            and\n\t\t\n\t\n\t \n\t\t \n\t\t\t \n\n \n\n\t\t\t\n\t\t\n\t\t \n\t\t\t \n\nHONOURABLE\n\t\t\tMR.JUSTICE R.M.CHHAYA\n\t\t\n\t\n\n \n\n\nDate\n: 19\/04\/2011 \n\n \n\n\n ORAL\nORDER<\/pre>\n<p>(Per<br \/>\n: HONOURABLE MS.JUSTICE HARSHA DEVANI)<\/p>\n<p>Being<br \/>\n\taggrieved by the order dated 31st<br \/>\n\tMarch, 2011 passed the respondent No.2-Development Commissioner<br \/>\n\treviewing the appointment of the petitioner No.1 company as<br \/>\n\tcustodian under section 45 of the Customs Act, 1962 and appointing<br \/>\n\tthe respondent No.5-M\/s.MMTC Limited, Mumbai as custodian for the<br \/>\n\tSurat Special Economic Zone, the petitioner has filed the present<br \/>\n\tpetition.\n<\/p>\n<p>The<br \/>\n\tpetitioner No.1, a company, (hereinafter referred to as the<br \/>\n\tpetitioner company) is engaged in the business\/activity of<br \/>\n\tdevelopment of industrial parks and special economic zones. The<br \/>\n\tpetitioner company is also appointed as &#8220;Custodian&#8221;<br \/>\n\tunder the provisions of the Customs Act, amongst others, for Surat<br \/>\n\tEconomic Zone situated at Surat.\n<\/p>\n<p>Assailing<br \/>\n\tthe impugned order Mr.Mihir Joshi, learned Senior Advocate appearing<br \/>\n\ton behalf of the petitioner submitted that the impugned order dated<br \/>\n\t31.03.2011 is in colourable exercise of power and authority not<br \/>\n\tvested with the respondent No.2 Development Commissioner and amounts<br \/>\n\tto usurping the authority under section 45 of the Customs Act by<br \/>\n\tappointing a custodian under the guise of reviewing the appointment<br \/>\n\tof the petitioner company made by the Commissioner of Customs,<br \/>\n\tGujarat vide Notification No.2\/95 (CCP) dated 20.10.1995 followed by<br \/>\n\tCustoms Notification No.14\/1998 dated 18.06.1998. It was submitted<br \/>\n\tthat the petitioner was appointed as a custodian in the year<br \/>\n\t1995\/1998 by the aforesaid notifications issued by the Commissioner<br \/>\n\tof Customs in exercise of powers under sub-section (1) of section 45<br \/>\n\tof the Customs Act and had continued to remain custodian since the<br \/>\n\tlast fifteen years. That all of a sudden, the respondent No.2<br \/>\n\tDevelopment Commissioner has decided to review the appointment of<br \/>\n\tthe petitioner company and in its place appoint the respondent No.5<br \/>\n\tas custodian. Referring to the public notice inviting proposals to<br \/>\n\twork as custodian, it was pointed out that the respondent No.2 has<br \/>\n\tplaced reliance on the Circular No.128\/95-Customs dated 14.12.1995<br \/>\n\tissued by the CBEC, for the purpose of reviewing the appointment of<br \/>\n\tthe petitioner as custodian. The attention of the court was drawn to<br \/>\n\tthe standard set of guidelines for appointment of custodians of<br \/>\n\tEPZs\/ICDs\/CFSs\/ as contained in the said Circular No.128\/95-CUS and<br \/>\n\tmore particularly to the clause 17 of the Annexure thereto, which<br \/>\n\tsays that the duration of the appointment shall initially remain for<br \/>\n\tfive years and subject to the satisfaction of the Commissioner of<br \/>\n\tCustoms. Commissioner of Customs shall have the right to terminate<br \/>\n\tthe appointment at any time after assigning specific reasons and<br \/>\n\tafter giving an opportunity to the custodian to explain his case;<br \/>\n\tand that the appointment shall be reviewed every five years<br \/>\n\tthereafter.\n<\/p>\n<p>\tInviting attention to the notification appointing the petitioner as<br \/>\n\ta custodian, it was pointed out that the appointment of the<br \/>\n\tpetitioner as custodian was not for a limited period. According to<br \/>\n\tthe learned counsel, the scheme indicates that the appointment was<br \/>\n\tto continue indefinitely subject to periodic review every five years<br \/>\n\tas laid down in the guidelines. In view of clause 17 of the<br \/>\n\tguidelines the termination could be for valid reasons and after<br \/>\n\tgiving opportunity of hearing to the custodian. It was submitted<br \/>\n\tthat in the present case no notice as regards review had been issued<br \/>\n\tby the respondent No.2 prior to terminating the custodianship of the<br \/>\n\tpetitioner nor was the petitioner called upon to tender any<br \/>\n\texplanation. It was submitted that in fact there was no order of<br \/>\n\ttermination, but only an order appointing M\/s.MMTC Ltd. as<br \/>\n\tcustodian. Moreover, the impugned order does not disclose any reason<br \/>\n\twhatsoever for reviewing the custodianship of the petitioner company<br \/>\n\tnor does it disclose any reasons whatsoever for appointing the<br \/>\n\trespondent No.5 in place of the petitioner company. It was pointed<br \/>\n\tout that over and above appointing M\/s. MMTC Ltd. as custodian the<br \/>\n\trespondent No.2 has also proceeded to appoint transporters for<br \/>\n\ttransporting the precious goods on behalf of the custodian, who, in<br \/>\n\tterms of the public notice were required to be appointed by the<br \/>\n\tcustodian. It was urged that there is no reason or justification for<br \/>\n\ttermination, which, even otherwise, is in breach of the principles<br \/>\n\tof natural justice and that there is no statutory basis for bringing<br \/>\n\tan end to the term of the petitioner as custodian. It was contended<br \/>\n\tthat the scheme indicates adverse review as a ground for<br \/>\n\ttermination; however, no such reason has been stated in the present<br \/>\n\tcase.\n<\/p>\n<p>Inviting<br \/>\n\tattention to the provisions of section 45 of the Customs Act, it was<br \/>\n\tsubmitted that under the said provision it is the Commissioner of<br \/>\n\tCustoms who has been vested with the power to appoint a custodian<br \/>\n\tand that the respondent No.2 does not have the authority or<br \/>\n\tjurisdiction to appoint a custodian. It was submitted the impugned<br \/>\n\torder indicates that the same has been passed in exercise of powers<br \/>\n\tunder section 12 of the Special Economic Zones Act, 2005<br \/>\n\t(hereinafter referred to as &#8220;the SEZ Act&#8221;). Referring<br \/>\n\tto, sub-section (2) of section 12 of the Act, it was submitted that<br \/>\n\tany power of the Development Commissioner to act under the<br \/>\n\tprovisions of section 45 of the Customs Act can be traced to clause\n<\/p>\n<p>\t(e) of the said sub-section, which provides for discharge of such<br \/>\n\tother functions as may be assigned to the Development Commissioner<br \/>\n\tby the Central Government under the SEZ Act or any other law for the<br \/>\n\ttime being in force. It was submitted that there is nothing in\u00a0the<br \/>\n\timpugned order to show that the Central Government has in fact<br \/>\n\tassigned to the Development Commissioner the functions under the<br \/>\n\tCustoms Act and more particularly under section 45 thereof, hence,<br \/>\n\tthe impugned order passed by the Development Commissioner is in<br \/>\n\texcess of the authority vested in him and without any jurisdiction.<br \/>\n\tIt was accordingly urged that the petitioner has a strong prima<br \/>\n\tfacie case justifying the grant of interim relief. It was further<br \/>\n\tsubmitted that the petitioner company has been holding the<br \/>\n\tcustodianship of the Surat Special Economic Zone since the last<br \/>\n\tfifteen years and has never violated any of the provisions of the<br \/>\n\tnotification appointing the petitioner company as custodian and has<br \/>\n\talso followed the guidelines scrupulously and diligently without<br \/>\n\tthere being any complaints against the petitioner. It was submitted<br \/>\n\tthat the petitioner is also the developer of Surat Special Economic<br \/>\n\tZone and has the required\/requisite infrastructure behind it. The<br \/>\n\tpetitioner company has also been handling enormous quantity of cargo<br \/>\n\trunning into billions of US dollars and has developed the SEZ by<br \/>\n\tmaking enormous investments over the years and as such the balance<br \/>\n\tof convenience also leans heavily in favour of the petitioner<br \/>\n\tentitling the petitioner to the grant of interim relief. It was,<br \/>\n\taccordingly, urged that the petition be admitted and the interim<br \/>\n\trelief as prayed for be granted.\n<\/p>\n<p>The<br \/>\n\tpetition is vehemently opposed by Mr.P.S. Champaneri, learned<br \/>\n\tAdditional Solicitor General appearing on behalf of respondents<br \/>\n\tNo.1, 2 and 3. The learned counsel submitted that by virtue of the<br \/>\n\tprovisions of sub-section (1) of section 53(1) of the SEZ Act, a<br \/>\n\tspecial economic zone, on and from the appointed day, is deemed to<br \/>\n\tbe a territory outside the customs\u00a0territory of India for<br \/>\n\tthe purposes of<br \/>\n\tundertaking authorized operations. Sub-section (2) of section 53 of<br \/>\n\tthe SEZ Act provides that the Central Government may notify a<br \/>\n\tSpecial Economic Zone as a deemed port\/airport\/land station, etc.<br \/>\n\tunder section 7 of the Customs Act. It was submitted that these<br \/>\n\tprovisions have been made in order to facilitate regular import and<br \/>\n\texport activities from a special economic zone as it is deemed to be<br \/>\n\ta territory outside the customs territory of India. That similar<br \/>\n\tprovisions have been made in sub-rule (11) of rule 11 of the Special<br \/>\n\tEconomic Zones Rules, 2006 (hereinafter referred to as &#8220;the<br \/>\n\tSEZ Rules&#8221;) which lays down that the Special Economic Zone<br \/>\n\tshall be deemed to be a port, airport, inland container depot, land<br \/>\n\tcustoms station under section 7 of the Customs Act in accordance<br \/>\n\twith the provisions<br \/>\n\tof section 53, from the date notified in this behalf. It was further<br \/>\n\tsubmitted by the learned counsel that the SEZ Rules provide that the<br \/>\n\tSpecified Officer may designate any area or areas in the Special<br \/>\n\tEconomic Zone as<br \/>\n\tan area for loading and unloading of import and export cargo and<br \/>\n\tthat as per rule 2(1)(zd) of the SEZ Rules, Specified Officer, in<br \/>\n\trelation to a Special Economic Zone means a Joint or Deputy or<br \/>\n\tAssistant Commissioner, for the time being in force posted in the<br \/>\n\tSpecial Economic Zone. Thus, it is amply clear that for<br \/>\n\tthe purpose of<br \/>\n\tregular customs work in a special economic zone, there is a separate<br \/>\n\tset-up of officers who are posted in the special economic zone on<br \/>\n\tdeputation basis and are under the administrative control of the<br \/>\n\tDevelopment Commissioner, in-charge of the Zone by virtue of<br \/>\n\tsections 11 and 12 of the SEZ Act read with rule 20 of the SEZ<br \/>\n\tRules. According to the learned counsel, in view\u00a0of the said<br \/>\n\tprovisions, the customs authority having jurisdiction over the<br \/>\n\tdomestic tariff area (outside the Special Economic Zone) have no<br \/>\n\tadministrative control and jurisdiction over the area falling under<br \/>\n\ta special economic zone declared by the Central Government under<br \/>\n\tsection 4 of the SEZ Act.\n<\/p>\n<p>The<br \/>\n\tnext submission advanced by the learned counsel for the respondent<br \/>\n\tNo.2 was that the appointment of a custodian in a special economic<br \/>\n\tzone is purely in relation to handling of the import-export cargo<br \/>\n\tfrom port\/airport to Zone and vice-a-versa, as well as its storage<br \/>\n\tin the designated area (the customs area) as specified by the<br \/>\n\tSpecified Officer of the special economic zone. Therefore, all<br \/>\n\tmatters pertaining to special economic zone are to be dealt with by<br \/>\n\tthe Development Commissioner in-charge of the zone being the<br \/>\n\tadministrative head of the Zone. It was submitted that the<br \/>\n\tappointment of the respondent No.5 as custodian by the respondent<br \/>\n\tNo.2 Development Commissioner is in accordance with law.\n<\/p>\n<p>Inviting<br \/>\n\tattention to the changes brought in the Customs Act by introducing<br \/>\n\tthe provisions of Chapter-XA in the Customs Act dealing exclusively<br \/>\n\twith the special economic zones to contend that by virtue of the<br \/>\n\tprovisions of section 76A thereof, the special economic zone came to<br \/>\n\tbe treated as a different territory outside the purview of the<br \/>\n\tCustoms Act. Placing emphasis on the provisions of section 76B it<br \/>\n\twas submitted that by virtue of the said provision, the provisions<br \/>\n\tof Chapter XA had an overriding effect over the other provisions of<br \/>\n\tthe Customs Act and that in case of any conflict the provisions of<br \/>\n\tChapter XA would prevail and as such on and from the year 2002 the<br \/>\n\tprovisions of Chapter XA prevailed over the provisions of the<br \/>\n\tCustoms Act. The learned counsel further submitted that under the<br \/>\n\tprovisions of section 76C, the Central Government was empowered to<br \/>\n\tmake rules specifying the requirements relating to goods or class of<br \/>\n\tgoods admissible to a special economic zone, the nature of<br \/>\n\toperations to which such goods or class of goods may be subjected<br \/>\n\tand the conditions to be fulfilled and the procedure in this regard.<br \/>\n\tIt was contended that the expression &#8220;admissible&#8221; also<br \/>\n\tmeans custody and that by virtue of the said provision, the<br \/>\n\tprovisions of section 45 of the Act were no longer applicable to the<br \/>\n\tspecial economic zone. The learned counsel next submitted that the<br \/>\n\tprovisions of Chapter XA (containing sections 76A to 76N) came to be<br \/>\n\tomitted by Act 22 of 2007 and came to be replaced by the SEZ Act.<br \/>\n\tAccording to the learned counsel, a special economic zone is a<br \/>\n\tfloating sovereign placed under the authority of the Development<br \/>\n\tCommissioner under section 12 of the SEZ Act which was treated as<br \/>\n\tbeing outside the customs territory of India and as such, the same<br \/>\n\twas not governed by the provisions of the Customs Act. Insofar as<br \/>\n\tthe powers of the Development Commissioner to appoint a custodian<br \/>\n\tare concerned, the learned Counsel placed reliance on the provisions<br \/>\n\tof section 12 of the Act to submit that under the said provision,<br \/>\n\tthe Development Commissioner was duly empowered to appoint even a<br \/>\n\tcustodian as the administrative control and supervision of the<br \/>\n\tofficers appointed under sub-section (2) of section 11 (including<br \/>\n\tthe officers deputed to such special economic zone) was vested in<br \/>\n\thim.\n<\/p>\n<p>The<br \/>\n\tnext submission advanced by Mr.Champaneri was that rule 2(1)(h) of<br \/>\n\tthe Rules defines &#8220;custodian&#8221; to mean any person<br \/>\n\treferred to in section 45 of the Customs Act and that after the<br \/>\n\tenactment of Special Economic Zone Act, 2005 and the Special<br \/>\n\tEconomic Zone Rules, 2006 an instruction No.6\/2006 dated 03.08.2006<br \/>\n\twas issued by the Ministry of Commerce &amp; Industry Department of<br \/>\n\tCommerce, Government of India, to the effect that all the activities<br \/>\n\trelating to Special Economic Zones shall be guided by the provisions<br \/>\n\tcontained the Act and the Rules and as such the action of the<br \/>\n\trespondent No.2 Development Commissioner was within the bounds of<br \/>\n\this authority.\n<\/p>\n<p>Strong<br \/>\n\temphasis was laid on the fact that the respondent No.2 had as early<br \/>\n\tas on 6th<br \/>\n\tJanuary, 2011 informed the petitioner that he had decided to review<br \/>\n\tthe appointment of the petitioner as custodian and had directed the<br \/>\n\tpetitioner to issue a public notice, inviting fresh proposals from<br \/>\n\tinterest eligible parties to work as a custodian for Diamonds, Gems,<br \/>\n\tJewellery, Precious and Semi-precious stones etc. in the Surat,<br \/>\n\tSpecial Economic Zone, pursuant to which the petitioner had got such<br \/>\n\tpublic notice published. The petitioner had himself submitted an<br \/>\n\tapplication<br \/>\n\tpursuant to the said application<br \/>\n\tand as such it had acquiesced with the action of the respondent<br \/>\n\tNo.2. It was submitted that the petitioner having taken part in the<br \/>\n\tprocess of appointment of custodian is now estopped from challenging<br \/>\n\tthe same. It was urged that the conduct of the petitioner subsequent<br \/>\n\tto passing of the impugned order also requires to be deprecated<br \/>\n\tinasmuch as despite the fact that the petitioner was directed to<br \/>\n\tmake necessary arrangements for handing over the strong room to the<br \/>\n\trespondent No.5 M\/s. MMTC Ltd. with effect from 15.04.2011, the<br \/>\n\tpetitioner had resisted the same. It was submitted that despite the<br \/>\n\tfact that the petitioner was fully aware that in the eventuality of<br \/>\n\tnon handing over the strong room at Surat SEZ, the export-import<br \/>\n\tactivities of the precious cargo may get paralyzed resulting in<br \/>\n\tirreparable loss to the industries in the Zone and also to the<br \/>\n\tnation, the petitioner had failed to hand over the same to the<br \/>\n\trespondent No.5. It was submitted that the conduct of the<br \/>\n\tpetitioner, therefore, dis-entitles the petitioner from the grant of<br \/>\n\tany of the reliefs prayed for in the<br \/>\n\tpetition.\n<\/p>\n<p>Another<br \/>\n\tsubmission advanced by Mr.Champaneri was that the respondent No.2<br \/>\n\thad put the petitioner to notice as early as on 06.01.2011 that its<br \/>\n\tcustodianship was being reviewed and that fresh proposals for<br \/>\n\tappointment of custodians were being invited, hence, the petitioner<br \/>\n\tat the relevant point of time could have challenged the same if it<br \/>\n\tso deemed fit. However, the petitioner, instead of challenging the<br \/>\n\tsaid action at the relevant point of time, has acquiesced with the<br \/>\n\tsame by issuing the public notice as directed by the respondent No.2<br \/>\n\tand also taking part in the process of appointment of custodian.<br \/>\n\tThat it was only after the respondent No.5 was appointed as<br \/>\n\tcustodian, that the petitioner has approached this Court challenging<br \/>\n\tthe impugned order, in the circumstances, the petition is also<br \/>\n\tbarred by delay, laches and acquiescence and as such deserves to be<br \/>\n\tdismissed on this ground alone.\n<\/p>\n<p>On<br \/>\n\tbehalf of M\/s. MMTC Ltd., Mr.C.Z.Sankhla, learned advocate submitted<br \/>\n\tthat pursuant to passing of the impugned order, the respondent No.5<br \/>\n\thas taken charge as custodian.\n<\/p>\n<p>In<br \/>\n\trejoinder, Mr. Joshi, for the petitioner submitted that the<br \/>\n\tinterpretation of section 53(1) of the Act, as put forth by the<br \/>\n\tlearned counsel for the respondent is not a correct interpretation.<br \/>\n\tReliance was placed on the decision of a Division Bench of this High<br \/>\n\tCourt in the case of Union of India Vs. Oswal Agricomm Private<br \/>\n\tLimited and others, rendered on 06.07.2010 in Letters Patent Appeal<br \/>\n\tNo.256 of 2010 and cognate matters, wherein the Court had held thus:\n<\/p>\n<p>&#8220;34.\tBut Section 53<br \/>\nbeing limited to that extent of &#8216;authorized officer&#8217;, who was earlier<br \/>\nempowered to perform certain jobs under Chapter XA, the power of the<br \/>\nCustoms authorities under the Customs Act, including the power to<br \/>\nconfiscate and impose penalty under Sections 111 to 114, as<br \/>\nenumerated in Chapter XIV of the Customs Act, is not taken away.\n<\/p>\n<p>35.\tThus, we hold that the<br \/>\ncompetent authorities under the Customs Act are still empowered to<br \/>\nconfiscate any goods under Sections 111 and 112 and impose penalty<br \/>\nunder Sections 113 and 114, in appropriate case, even with regard to<br \/>\nthe units situated within the Special Economic Zone. The competent<br \/>\nauthorities are also empowered to take penal action under any other<br \/>\nCentral Act, if such violation is found to have been committed by any<br \/>\nor other unit of SEZ including the writ petitioners, with regard to<br \/>\nwhich no notification has been issued either under sub-section (1) or<br \/>\nsub-section (2) of Section 21 or sub-section (1) or sub-section (2)<br \/>\nof Section 22 of the SEZ Act, 2005.&#8221;\n<\/p>\n<p>It was<br \/>\nsubmitted that the said decision squarely covers the issue involved<br \/>\nin the<br \/>\npresent<br \/>\ncase, viz., the powers of the customs authority under the Customs Act<br \/>\nare not taken away even in respect of special economic zones and as<br \/>\nsuch the power of the Commissioner of Customs to appoint a custodian<br \/>\nunder section 45 of the Act would prevail even after the coming into<br \/>\nthe force of the SEZ Act. It was further submitted that rule 2(1)(h)<br \/>\nof the Rules refers to &#8220;custodian&#8221; to mean any person<br \/>\nreferred to in section 45 of the Customs Act, hence, even under the<br \/>\nSEZ Act and the SEZ Rules reference to custodian means a custodian<br \/>\nwho is appointed under section 45 of the Customs Act. In the<br \/>\ncircumstances, the Development Commissioner has no powers under<br \/>\nsection 12 of the SEZ Act to appoint a custodian.\n<\/p>\n<p>Having<br \/>\n\theard learned Counsel for the respective parties the court is of the<br \/>\n\topinion that the matter requires consideration. Hence, RULE<br \/>\n\treturnable on 20.06.2011.\n<\/p>\n<p>\tIn the meanwhile, the parties shall complete all pleadings on or<br \/>\n\tbefore 15.06.2011.\n<\/p>\n<p>On<br \/>\n\tthe question of grant of interim<br \/>\n\trelief,<br \/>\n\ta perusal of the provisions of section 45 of the Customs Act, under<br \/>\n\twhich the petitioner was appointed as custodian the above referred<br \/>\n\tvide notifications issued in 1995\/1998 show that the said provision<br \/>\n\tempowers the Commissioner of Customs to approve of such person in<br \/>\n\twhose custody all imported goods unloaded in a customs area shall<br \/>\n\tremain until they are cleared for home consumption or are warehoused<br \/>\n\tor are transshipped in accordance with provisions of Chapter-VIII of<br \/>\n\tthe Act. &#8220;Customs area&#8221; has been defined under section<br \/>\n\t2(11) of the Customs Act to mean the area of a customs station and<br \/>\n\tincludes any area in which imported goods or export goods are<br \/>\n\tordinarily kept before clearance by Customs Authorities. Customs<br \/>\n\tarea is defined under section 2(11) of the Customs Act to mean the<br \/>\n\tarea of a customs station and includes any area in which imported or<br \/>\n\texport goods are ordinarily kept before clearance by Customs<br \/>\n\tauthorities. The proviso to rule 28 of the SEZ Rules speaks of<br \/>\n\ttransfer of high value imported goods through the airport to the<br \/>\n\tcustodian who shall transfer the same to a designated Customs Area<br \/>\n\tlocated inside the Processing Area designated by the Specified<br \/>\n\tOfficer for further delivery to the unit or developer. Thus, the SEZ<br \/>\n\tRules also envisage a customs area even within the processing area.<br \/>\n\tOn behalf the respondent No.2 it is sought to be canvassed that in<br \/>\n\tview of the provisions of sub-section (1) of  section 53 of the SEZ<br \/>\n\tAct, the special economic zone is deemed to be a territory outside<br \/>\n\tthe customs territory of India and as such falls outside the<br \/>\n\tjurisdiction of the customs department. However,<br \/>\n\tthe said contention fails to take care of what follows thereafter,<br \/>\n\tviz., &#8220;for the purposes of undertaking authorised operations&#8221;.<br \/>\n\tThus the words outside the customs territory of India cannot be<br \/>\n\tdivorced from the words &#8220;for the purposes of undertaking<br \/>\n\tauthorised operations&#8221; and not for all purposes. As<br \/>\n\tto what are the authorized operations is laid down under section<br \/>\n\t2(c) of the Act to mean operations\u00a0which may be authorized<br \/>\n\tunder sub-section (2) of section 4 and sub-section (9) of section\n<\/p>\n<p>\t15. Sub-section (2) of section 4 provides that after the appointed<br \/>\n\tday, the Board may, authorise the Developer to undertake in a<br \/>\n\tspecial economic zone, such operations which the Central Government<br \/>\n\tmay authorize. Thus, sub-section (2) relates to such operations<br \/>\n\twhich the Central Government may authorize the developer to<br \/>\n\tundertake in a Special Economic Zone.\n<\/p>\n<p>Sub-section<br \/>\n(9) of section 15 of the Act provides that the Development<br \/>\nCommissioner may, after approval of the proposal referred to in<br \/>\nsub-section (3), grant a letter of approval to the person concerned<br \/>\nto set up a Unit and undertake such operations which the Development<br \/>\nCommissioner may authorise and every such operation so authorised<br \/>\nshall be mentioned in the letter of approval. Thus, sub-section (9)<br \/>\nof section 15 pertains to granting approval for setting up of a unit<br \/>\nundertaking such operation as may be authorised by the Development<br \/>\nCommissioner. Sub-section (1) of section 53 of the Act is therefore,<br \/>\nrequired to be read in the light of the expression &#8220;authorised<br \/>\noperations&#8221;. On a plain reading of section 53(1) of the Act, it<br \/>\nappears what is contemplated under the said provision is that the<br \/>\narea of a special economic zone is deemed to be a territory outside<br \/>\nthe customs territory of India for<br \/>\nthe purposes of<br \/>\nundertaking the &#8220;authorised operations&#8221; as contemplated<br \/>\nin section 4(2) and 15(9) of the Act. The said provision however,<br \/>\ndoes not take the special economic zone out of the purview of the<br \/>\nprovisions of the Customs Act, except in respect of the authorized<br \/>\noperations. This position is made clear by the decision of the<br \/>\nDivision Bench of this Court referred to hereinabove, on which<br \/>\nreliance has been placed on behalf of the petitioner, which clearly<br \/>\nlays down that Special Economic Zone is deemed to be a territory<br \/>\noutside the Customs area only for<br \/>\nthe purposes of<br \/>\nundertaking the authorized operations which means that the Customs<br \/>\nAuthorities, who were empowered under section 76G (repealed since<br \/>\n11.05.2007), had no power to authorise any developer to undertake any<br \/>\noperation in the special economic zone nor had the power to approve<br \/>\nany proposal for setting up any unit within the special economic<br \/>\nzone. However, section 53 being limited to the extent of &#8220;authorized<br \/>\nofficer&#8221;, who was earlier empowered to perform certain jobs<br \/>\nunder Chapter XA and power of the Customs authorities under the<br \/>\nCustoms Act, including the power to confiscate and impose penalty<br \/>\nunder Sections 111 to 114, as enumerated in Chapter-XIV of the<br \/>\nCustoms Act, is not taken away.\n<\/p>\n<p>In the<br \/>\nlight of the clear provisions of section 53(1) of the SEZ Act as well<br \/>\nas in the light of the ratio laid down in the aforesaid decision,<br \/>\nreliance placed upon sub-section (1) of section 53 of the SEZ Act by<br \/>\nthe respondent No.2 appears to be misplaced as the same does not in<br \/>\nany manner curtail the power of the Commissioner of Customs to<br \/>\nappoint a custodian under section 45 of the Act in respect of a<br \/>\nspecial economic zone.\n<\/p>\n<p>A<br \/>\n\tperusal of the provisions of the SEZ Act shows that the same does<br \/>\n\tnot contain any express provision for appointment of custodian. The<br \/>\n\tpower to appoint a custodian can be traced only to section 45 of the<br \/>\n\tCustoms Act, which expressly confers the power of appointment of<br \/>\n\tcustodian on the Commissioner of Customs alone. The case of the<br \/>\n\trespondent No.2 Development Commissioner is that he has exercised<br \/>\n\tpowers under section 12 of the Act. In this regard it may be<br \/>\n\tnecessary to refer to the provisions of section 12 of the Act which<br \/>\n\tread thus:\n<\/p>\n<p>&#8220;12. Functions of<br \/>\nDevelopment Commissioner.&#8211;(1)<br \/>\nEvery Development Commissioner shall take all steps in order to<br \/>\ndischarge his functions under this Act to ensure speedy development<br \/>\nof the Special Economic Zone and promotion of exports therefrom.\n<\/p>\n<p>(2) Without prejudice to the<br \/>\ngenerality of the foregoing provisions, the Development Commissioner<br \/>\nshall&#8211;\n<\/p>\n<p>\t(a)\tguide<br \/>\nthe entrepreneurs for setting up of Units in the Special Economic<br \/>\nZone;\n<\/p>\n<p>\t(b)\tensure<br \/>\nand take suitable steps for effective promotion of exports from the<br \/>\nSpecial Economic Zone;\n<\/p>\n<p>\t(c)\tensure<br \/>\nproper co-ordination with the Central Government or State Government<br \/>\nDepartments concerned or agencies with respect to, or for the<br \/>\npurposes, of clauses (a)<br \/>\nand (b);\n<\/p>\n<p>\t(d)\tmonitor<br \/>\nthe performance of the Developer and the Units in a Special Economic<br \/>\nZone;\n<\/p>\n<p>\t(e)\tdischarge<br \/>\nsuch other functions as may be assigned to him by the Central<br \/>\nGovernment under this Act or any other law for the time being in<br \/>\nforce; and<\/p>\n<p>\t(f)\tdischarge<br \/>\nsuch other functions as may be delegated to him by the Board.\n<\/p>\n<p>(3) Every Development<br \/>\nCommissioner shall be overall in charge of the Special Economic Zone<br \/>\nand shall exercise administrative control and supervision over the<br \/>\nofficers and employees appointed under sub-section (2) of Section 11<br \/>\n(including the officials deputed to such Special Economic Zone) to<br \/>\ndischarge any of the functions under this Act.\n<\/p>\n<p>(4) Without prejudice to the<br \/>\nprovisions of sub-sections (1) to (3), every Development Commissioner<br \/>\nshall discharge such functions and exercise such powers as may be<br \/>\ndelegated to him by a general or special order by the Central<br \/>\nGovernment or the State Government concerned, as the case may be.\n<\/p>\n<p>(5) Every Development<br \/>\nCommissioner may call for such information from a Developer or Unit<br \/>\nfrom time to time as may be necessary to monitor the performance of<br \/>\nthe Developer or the Unit, as the case may be.\n<\/p>\n<p>(6) The Development<br \/>\nCommissioner may delegate any or all of his powers or functions to<br \/>\nany of the officers employed under him.&#8221;\n<\/p>\n<p>On<br \/>\n\ta plain reading of sub-section (1) of section 12 of the Act, it<br \/>\n\tappears that the Development Commissioner is required to generally<br \/>\n\tdischarge functions for ensuring speedy development of the Special<br \/>\n\tEconomic Zone and promotion of exports therefrom and in particular<br \/>\n\tthe functions enumerated in section 12(2) of the Act. Clause (e) of<br \/>\n\tsub-section (2), which is relevant for the present purpose, empowers<br \/>\n\tthe Development Commissioner to discharge such other functions as<br \/>\n\tmay be assigned to him by the Central Government under the Act or<br \/>\n\tany other law for the time being in force. Thus, the Development<br \/>\n\tCommissioner may exercise powers under section 45 of the Act if such<br \/>\n\tfunctions have been specifically assigned to him by the Central<br \/>\n\tGovernment as contemplated under clause (e) of sub-section (2) of<br \/>\n\tsection 12 of the SEZ Act.  However, in the<br \/>\n\tpresent\u00a0case,<br \/>\n\tthat is not the position, inasmuch as no such assignment of powers<br \/>\n\thas been pointed out on behalf of the respondent No.2 nor it is the<br \/>\n\tcase of the respondent No.2 that he has exercised such powers. As<br \/>\n\tregards Instruction No.6 dated 3rd<br \/>\n\tAugust, 2006 of the Government of India, Ministry of Commerce and<br \/>\n\tIndustries, Department of Commerce which finds reference in the<br \/>\n\taffidavit-in-reply filed on behalf of the respondent No.2, a perusal<br \/>\n\tof a copy thereof (which has been placed on record by the learned<br \/>\n\tadvocate for the petitioner) shows that the same has no relevance to<br \/>\n\tthe facts of the present case. The main plank of the submissions<br \/>\n\tadvanced by the learned Counsel for the respondent No.2-Development<br \/>\n\tCommissioner is that the Development Commissioner is vested with all<br \/>\n\tadministrative powers in respect of the special economic zone and as<br \/>\n\tsuch under the provisions of section 12 of the Act he is duly<br \/>\n\tempowered to appoint a custodian.\n<\/p>\n<p>Another<br \/>\n\tsignificant aspect of the matter is that rule 2(1)(h) of the SEZ<br \/>\n\tRules defines &#8220;custodian&#8221; to be a custodian referred to<br \/>\n\tin section 45 of the Customs Act, 1962. Hence, any reference to<br \/>\n\tcustodian under the Rules would mean a custodian referred to in<br \/>\n\tsection 45 of the Customs Act. It has been argued on behalf of the<br \/>\n\trespondent No.2 that the words used in the said rule are &#8220;person<br \/>\n\treferred to in section 45 of the Customs Act&#8221;, which is not<br \/>\n\tsame as the person appointed under the Customs Act. The said<br \/>\n\tcontention is fallacious inasmuch as even if one goes by the express<br \/>\n\tlanguage of rule 2(1)(h) of the SEZ Rules, which speaks of the<br \/>\n\tcustodian as being the person referred to in section 45 of the<br \/>\n\tCustoms Act, the custodian would be the person referred to in<br \/>\n\tsection 45 of the Customs Act, meaning thereby the person approved<br \/>\n\tby the Commissioner of Customs. Thus, for all intents and purposes a<br \/>\n\tcustodian under the provisions of the SEZ Act and the SEZ Rules is a<br \/>\n\tcustodian as envisaged under section 45 of the Customs Act. Once<br \/>\n\tthat is the position, any person appointed as a custodian otherwise<br \/>\n\tthan under the provisions of section 45 of the Customs Act would not<br \/>\n\tbe a custodian within the meaning of rule 2 (1)(h) of the Rules so<br \/>\n\tas to be competent to discharge the duties of a custodian in the<br \/>\n\tspecial economic zone.\n<\/p>\n<p> In<br \/>\n\tlight of the aforesaid discussion, the court is of the prima facie<br \/>\n\tview that section 12 of the SEZ Act does not empower the Development<br \/>\n\tCommissioner to appoint a custodian under section 45 of the Customs<br \/>\n\tAct, inasmuch as the powers under the Customs Act  are required to<br \/>\n\tbe expressly assigned to the Development Commissioner under clause\n<\/p>\n<p>\t(e) of sub-section (2) of section 12 of the Act. The power under<br \/>\n\tsection 45 of the Customs Act is specifically conferred on the<br \/>\n\tCommissioner of Customs, who is the only authority in whom the power<br \/>\n\tof appointing a custodian under sub-section (1) thereof is vested.<br \/>\n\tThus, the action of the respondent No.2 in appointing the respondent<br \/>\n\tNo.5 M\/s MMTC Ltd. as custodian in place of the petitioner prima<br \/>\n\tfacie appears to be without jurisdiction and authority of law. The<br \/>\n\tappointment of custodian by the respondent No.2 having been made<br \/>\n\tunder section 12 of the SEZ Act, the person so appointed would not<br \/>\n\tbe a custodian as contemplated under rule 2(1)(h) of the SEZ Rules<br \/>\n\tso as to be competent to discharge functions of a custodian under<br \/>\n\tthe said Rules. From the facts as appearing from the record, the<br \/>\n\tpetitioner is the developer of the special economic zone and has<br \/>\n\talso established necessary infrastructure for discharging the<br \/>\n\tfunctions of the custodian. The petitioner has been acting as a<br \/>\n\tcustodian with effect from the time of its appointment vide<br \/>\n\tnotifications issued in 1995\/1998 till 15.04.2011 and nothing has<br \/>\n\tbeen brought on record by the respondents to indicate any breach of<br \/>\n\tthe provisions of its appointment or that any complaint of<br \/>\n\twhatsoever nature has been made against the petitioner. The<br \/>\n\tpetitioner has been appointed as custodian by the Commissioner of<br \/>\n\tCustoms in exercise of powers under section 45(1) of the Customs<br \/>\n\tAct, which are duly vested in him. Whereas the impugned order has<br \/>\n\tbeen passed by the respondent No.2 in exercise of powers under<br \/>\n\tsection 12 of the SEZ Act, which prima facie does not confer any<br \/>\n\tsuch power on the Development Commissioner. Moreover, the petitioner<br \/>\n\tcompany&#8217;s custodianship has been terminated without assigning<br \/>\n\tany reasons whatsoever, without issuing any notice for review,<br \/>\n\twithout calling for an explanation from the petitioner, and without<br \/>\n\taffording any opportunity of hearing to the petitioner in complete<br \/>\n\tviolation of the principles of natural justice. In the<br \/>\n\tcircumstances, the balance of convenience weighs heavily in favour<br \/>\n\tof the petitioner company.  Moreover, non-grant of interim relief<br \/>\n\twould cause irreparable injury to the petitioner. On behalf of the<br \/>\n\trespondent No.2 it has been contended that the petition is barred by<br \/>\n\tdelay, laches and acquiescence. Insofar as delay and laches are<br \/>\n\tconcerned, it is true that the petitioner did not file the petition<br \/>\n\tat the earliest point of time when it was asked to issue public<br \/>\n\tnotice. However, the facts on record indicate that the petitioner<br \/>\n\twas duly pursuing the matter with the respondent No.2 and even after<br \/>\n\tthe impugned order was passed the petitioner had made a<br \/>\n\trepresentation to the respondent No.2 to reconsider his decision.<br \/>\n\tThe petitioner company has, thereafter, before the date on which the<br \/>\n\timpugned order was to take effect, approached this Court by way of<br \/>\n\tthe present petition. Hence the contention that the petition is<br \/>\n\tbarred by delay and laches is prima facie not substantiated. Insofar<br \/>\n\tas the question of acquiescence on the part of the petitioner<br \/>\n\tcompany is concerned, the petitioner company has emphatically denied<br \/>\n\tthe said contention. Moreover, it is a well-settled position of law<br \/>\n\tthat acquiescence or waiver would not vest in an authority a power<br \/>\n\twhich is otherwise not vested in it. In the circumstances, in view<br \/>\n\tof the findings recorded hereinabove, the said contention also does<br \/>\n\tnot merit acceptance.\n<\/p>\n<p>In<br \/>\n\tthe light of the aforesaid discussion, the petitioner has made out a<br \/>\n\tstrong prima facie case, the balance of convenience also leans<br \/>\n\theavily in favour of the petitioner and non grant of interim relief<br \/>\n\tas prayed for would cause irreparable injury to the petitioner.<br \/>\n\tMoreover, the Court has also prima facie found the appointment of<br \/>\n\tthe respondent No.5 M\/s MMTC Ltd to be without any authority and<br \/>\n\tjurisdiction. The Court is accordingly of the view that the<br \/>\n\tpetitioner is entitled to interim<br \/>\n\trelief<br \/>\n\tprayed for in the<br \/>\n\tpetition.\n<\/p>\n<p>\tHence, by way of interim<br \/>\n\trelief,<br \/>\n\tthe execution, operation and implementation of impugned order dated<br \/>\n\t31.03.2011 (at Annexure-A) is hereby stayed till the final disposal<br \/>\n\tof the<br \/>\n\tpresent petition.\n<\/p>\n<p>At<br \/>\n\tthis stage Mr. P.S. Champaneri, learned Assistant Solicitor General<br \/>\n\thas requested that this order be stayed for a period of three weeks<br \/>\n\tfrom today so as to enable the respondents to avail of remedy before<br \/>\n\tthe higher forum. In the facts and circumstances of the case, the<br \/>\n\trequest is turned down. Direct service is permitted.\n<\/p>\n<p>Sd\/-\n<\/p>\n<p>           Sd\/-\n<\/p>\n<p>[H.N.\n<\/p>\n<pre>DEVANI, J]     [R.M. CHHAYA, J]\n \n\n\n \n\n\n \n\n\nBhavesh*\n\n    \n\n \n\t   \n      \n      \n\t    \n\t\t   \u00a0\u00a0\u00a0\n\t   \n      \n\t  \t    \n\t\t   Top\n\t   \n      \n\n\n<\/pre>\n","protected":false},"excerpt":{"rendered":"<p>Gujarat High Court Diamond vs Union on 19 April, 2011 Author: Harsha Devani,&amp;Nbsp;Mr.Justice R.M.Chhaya,&amp;Nbsp; Gujarat High Court Case Information System Print IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SCA\/4571\/2011 19\/ 19 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No.4571 of 2011 =================================================== DIAMOND &amp; GEM DEVELOPMENT CORPN. &amp; 1-Petitioner(s) [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[16,8],"tags":[],"class_list":["post-228451","post","type-post","status-publish","format-standard","hentry","category-gujarat-high-court","category-high-court"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Diamond vs Union on 19 April, 2011 - Free Judgements of Supreme Court &amp; 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