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2008 DIGILAW 1414 (PNJ)

Alfa International v. Union Of India

2008-08-20

HEMANT GUPTA, RAJESH BINDAL

body2008
Judgment Hemant Gupta, J. 1. The challenge in the present writ petition is to the order dated 10-1-2008, Annexure P-13, passed by the Director General of Foreign Trade setting aside the order dated 4-5-2006 passed by the Additional Director General of Foreign Trade whereby it was ordered to recover the Duty Entitlement Passbook Scheme (for short DEPB) benefit along with interest; suspension of licence for a period of six months; and imposing penalty equivalent to 50% of the Free On Board (for short FOB) value of export. 2. The facts leading to the said order are that the petitioner exported goods through Dry Port, Ludhiana. The said goods were exported under Duty Entitlement Pass Book Scheme. The said Scheme is used for importing goods without payment of custom duty. The objective of the Scheme is to neutralise the incidence of Customs duty on the import content of the export product. The neutralisation shall be provided by way of grant of duty credit against the export product. 3. The Scheme was part of Export and Import Policy for the period 1st April, 1997 to 31st March 2002 as contained in Chapter VII thereof. Under paragraph 7.25 of the Scheme, an exporter is eligible to claim credit as specified percentage of FOB value of exports made in freely convertible currency. By virtue of Notification No. 34 of 1997/Customs, dated 7-4-1997 published by the Central Government in exercise of powers conferred by sub- section (1) of Section 25 of the Customs Act, 1962, the Central Government has exempted goods imported into India in terms of Duty Entitlement Pass Book by the Licensing Authority in pursuance of paragraph 7.25 read with paragraph 7.29 of the Export and Import Policy. 4. The petitioner on the basis of export documents filed an application for issue of DEPB before Joint Director General of Foreign Trade, Ludhiana, and was granted DEPB @ 22% showing description of goods exported as Timing Shaft. On 21-5-2001, a show cause notice was issued alleging that the petitioner had wrongly availed DEPB and the same was liable to be cancelled ab initio as it was alleged that the petitioner had exported Crankshaft for high speed Compressor entitling DEPB @ 14%. After considering the reply filed, DEPBs were cancelled vide order dated 17-9-2001. An appeal was filed against the said order before the Additional Director General of Foreign Trade. After considering the reply filed, DEPBs were cancelled vide order dated 17-9-2001. An appeal was filed against the said order before the Additional Director General of Foreign Trade. The impugned order was set aside and the case was remanded to the Adjudicating Authority. After remand, the Adjudicating Authority passed an orcier dated 20-7-2004, Annexure P-6, finding that the export of Crank Shaft is specifically covered under Serial No. 289 of DEPB Rate List which provides for 14% duty credit as against 22% obtained by the petitioner by describing goods exempted as Timing Shaft. The Adjudicating Authority not only cancelled DEPBs but also passed an order to recover the amount of Rs. 34,29,998/- equivalent to total DEPB credit of four scrips. 5. Against the said order, an appeal was filed. The Additional Director General of Foreign Trade found vide order dated 4-5-2006 that there is no dispute about the exports which have duly been certified by the Customs and against these exports foreign exchange has also been realized, which makes the exporter entitled for EXIM benefits. Therefore, the order passed by the Adjudicating Authority was set aside and impugned DEPBs were restored at lower rate i.e. @ 14%. 6. A notice was issued under Section 16(b) of the Foreign Trade (Development and Regulation) Act, 1992 (hereinafter to be referred as  the Act) to the petitioner to show cause as to why the order passed by the Additional Director General of Foreign Trade on 4-5-2006 be not set aside. The petitioner submitted detailed reply and after considering the reply, impugned order dated 10-8-2007 as mentioned above has been passed. 7. It may be noticed that after the initial adjudicating order was passed by the Adjudicating Authority cancelling four DEPBs on 17-9-2001, an order dated 14-6-2002 imposing penalty, Annexure P-4, was passed against the petitioner. It is not disputed that appeal against the said order is pending before the Additional Director General of Foreign Trade. 8. Learned counsel for the petitioner has vehemently argued that the order passed by the Adjudicating Authority is that of cancellation of licence under Section 9(4) of the Act and that revisional jurisdiction could be exercised only in respect of an order imposing a penalty or redemption charges or adjudicating confiscation, therefore, the order of cancellation of a licence cannot be made subject matter of revisional jurisdiction. The learned counsel further argued that revisional jurisdiction could not have been exercised under Section 16 of the Act as the order sought to be revised was passed by the Appellate Authority, whereas revisional jurisdiction could be exercised only in respect of an order passed by the Adjudicating Authority. It is further contended that, in any case, no order imposing penalty could be passed against the petitioner by the Revisional Authority when appeal against the order dated 14-6-2002 imposing penalty is pending. Thus, it is contended that the order passed by the Revisional Authority is wholly unjustified, illegal and, therefore, liable to be set aside. 9. Before we proceed further, certain provisions of the Act are required to be reproduced :- The Foreign Trade (Development and Regulation) Act, 1992 9. Issue, suspension and cancellation of licence :- (1) to (3) xx xx xx (4) 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. (5) An appeal against an order refusing to grant, or renew or suspending or cancelling a licence shall lie in like manner as an appeal against an order would lie under section 15. 11. Contravention of provisions of this Act, rules, orders and export and import policy :- (1) No export or import shall be made by any person except in accordance with the provisions of this Act, the rules and orders made thereunder and the export and import policy for the time being in force. (2) to (4) xx xx xx (5) Where any contravention of any provision of this Act or any rules or orders made thereunder or the export and import policy has been, is being, or is attempted to be, made, the goods together with any package, covering or receptacle and any conveyance shall, subject to such requirements and conditions as may be prescribed, be liable to confiscation by the Adjudicating Authority. (6) The goods or the conveyance confiscated under sub-section (5) may be released by the Adjudicating Authority, in such manner and subject to such conditions as may be prescribed, on payment by the person concerned of the redemption charges equivalent to the market value of the goods or conveyance, as the case may be 13. Adjudicating Authority :- Any penalty may be imposed or any confiscation may be adjudged under this Act by the Director General or, subject to such limits as may be specified, by such other officer as the Central Government may, by notification in the Official Gazette, authorise in this behalf. 16. Revision :- The Central Government, in the case of any decision or order, not being a decision or order made in an appeal, made by the Director General, or the Director General in the case of any decision or order made by any officer subordinate to him, may on its or his own motion or otherwise, call for and examine the records of any proceeding in which a decision or an order imposing a penalty or redemption charges or adjudicating confiscation has been made and against which no appeal has been preferred, for the purpose of satisfying itself or himself, as the case may be, as to the correctness, legality or propriety or such decision or order and make such orders thereon as may be deemed fit : Provided that no decision or order shall be varied under this section so as to prejudicially affect any person unless such person - (a) has, within a period of two years from the date of such decision or order, received a notice to show cause why such decision or order shall not be varied, and (b) has been given a reasonable opportunity of making representation and, if he so desires, of being heard in his defence. 10 Under Section 16 of the Act, Director General of Foreign Trade has been empowered to call for and examine the records of any proceedings in the case of any decision or order made by any officer subordinate to him, may on its or his own motion or otherwise. Such jurisdiction is in respect of any proceedings in which a decision or an order imposing a penalty or redemption charges or adjudicating confiscation has been made. Such jurisdiction is in respect of any proceedings in which a decision or an order imposing a penalty or redemption charges or adjudicating confiscation has been made. In the present case, the initial order passed by the Adjudicating Authority was to the effect that the petitioner had obtained DEPBs on the basis of forged shipping bills to which the petitioner was not entitled to, therefore, such DEPBs were cancelled, in appeal, learned Appellate Authority has passed an order of restoring DEPBs at the rate of 14% as against 22% claimed by the petitioner. Now it needs to be examined whether the order passed by the learned Appellate Authority is in respect of redemption charges or adjudicating confiscation so as to entitle the Director General of Foreign Trade to exercise the revisional jurisdiction. 11. Section 11(1) of the Act clearly stipulates that no export or import shall be made by any person except in accordance with the provisions of the Act, the rules and orders made thereunder and the export and import policy for the time being in force. The petitioner is alleged to have violated the export and import policy for the year 1997- 2002 and, thus, the petitioner violates the mandate of Section 11(1) of the Act. Sub-sections (2), (3) and (4) of Section 11 of the Act deals with imposition of penalty which is not relevant at this stage. The relevant provisions applicable are sub-sections (5) and (6) of Section 11 of the Act. Sub-section (5) of Section 11 of the Act contemplates confiscation of the goods in respect of which contravention of export and import policy is being made subject to such requirements and conditions, as may be prescribed. Any condition as contemplated under sub- section (5) has not been brought to our notice. Therefore, the contravention of export and import policy will lead to confiscation of DEPBs by the Adjudicating Authority. Once the confiscation of DEPB is provided, the order adjudicating confiscation would be revisable. 12. The other argument that the Director General of Foreign Trade could not revise the order passed in appeal is again not tenable. Undisputedly, Additional Director General of Foreign Trade, who has passed the order-in-appeal, is subordinate to the Director General. The revisional jurisdiction has been exercised after the decision of the appeal. 12. The other argument that the Director General of Foreign Trade could not revise the order passed in appeal is again not tenable. Undisputedly, Additional Director General of Foreign Trade, who has passed the order-in-appeal, is subordinate to the Director General. The revisional jurisdiction has been exercised after the decision of the appeal. The bar under Section 16 of the Act to exercise the revisional jurisdiction is only when no appeal has been preferred. It does not include the appeal which has been decided. The language of the section is indicative of the fact that revisional jurisdiction cannot be exercised when the appeal is pending. Once the appeal is decided then in terms of first part of Section 16 of the Act, the Director General could call for and examine the records of any proceedings in respect of any decision or order made by any officer subordinate to him. Since the appeal stood already decided, the Director General was competent to exercise the revisional jurisdiction. 13. However, we find merit in the argument raised by learned counsel for the petitioner that penalty could not be imposed by the Revisional Authority as the appeal against the order imposing penalty vide order dated 14-6-2002 is pending before Additional Director of Foreign Trade. The pendency of appeal is not disputed. Therefore, in terms of Section 16 of the Act, the order against which an appeal has been preferred cannot be interfered with in exercise of revisional jurisdiction. Therefore, we set aside the order dated 10-1-2008, Annexure P-13, to the extent it imposes penalty. But we give liberty to the Additional Director General of Foreign Trade to decide the appeal against the order dated 14-6-2002, Annexure P-4, in accordance with law. It shall be open to the petitioner to take recourse to his remedy against the order, Annexure P-13, passed by the Director General of Foreign Trade in exercise of its revisional jurisdiction, in accordance with law. 14. With the aforesaid modification in the order Annexure P-13, writ petition stands disposed of.