2018 (5) TMI 1896 - HC - Customs

Extension of LoA of the petitioner-firm - continuation of operation of the factory - HELD THAT - It appears from the record that in similar case of other units engaged in the same line of business at Kandla SEZ and other SEZs, extension/renewal was granted, which was otherwise lying defunct and dormant, as per the say of the petitioner. This aspect requires closer scrutiny by the respondent-authority. It is undisputed that the case of the petitioners was not taken up despite there being a recommendation by the respondent no. 3, the petitioner from time to time addressed various letters and e-mails to the respondents no. 2 3 for taking up petitioner s case for renewal. Despite recommendation by the respondent no. 3 and though according to the petitioner, the case was similar to the case of other SEZ units, its unit was not granted renewal. Surprisingly, the respondent no. 2 during the said meeting held on 3rd July 2017 rejected the proposal of the petitioner without assigning any reasons. Admittedly, the petitioner was granted Letter of Permission LoP under the erstwhile Import-Export Policy dated 15th May 1996 for manufacturing of all types of plastic bags-Garbage collection/carry/shopping bags, etc., and subsequently, on a request having been made by the petitioner-unit, the said LoA was also amended/broad banded to include recycling activity of worn and used clothing on 27th September 2001, after conversion of the said Free Trade Zone FTZ into SEZ unit with effect from 1st November 2000 and thereafter, their five-year block period was recasted from 1st November 2000 to 31st October 2005. Rule 18 of the SEZ Rules, 2006 empowers the Board of Approval which is an inter-ministerial body constituted under section 8 of the SEZ Act to decide extension of validity of LoA granted to such units. The petitioner s case requires reconsideration by the authority particularly to examine the similarity with other existing units which according to the petitioners were granted renewal despite being non operational for extended period - Petition allowed by way of remand.

Summary

Issues Involved:

1. Rejection of the proposal for extension/renewal of the Letter of Approval (LoA).
2. Alleged violation of principles of natural justice.
3. Discrimination against the petitioners compared to other similarly situated units.
4. Legal eligibility and entitlement to continue business operations.
5. Examination of past performance and inactiveness of the petitioner’s unit.
6. Compliance with SEZ Act, 2005 and SEZ Rules, 2006.
7. Authority and discretion of the Board of Approval (BoA) in granting extensions.

Issue-wise Detailed Analysis:

1. Rejection of the Proposal for Extension/Renewal of the LoA:
The petitioners sought to quash the decision of the respondent no. 2 rejecting their proposal for extension/renewal of their LoA as recorded in the minutes of the meeting held on 3rd July 2017 and communicated via a letter dated 14th July 2017. The petitioners argued that the rejection was arbitrary and lacked proper reasoning.

2. Alleged Violation of Principles of Natural Justice:
The petitioners contended that the rejection of their extension request was made without granting a hearing or providing reasons, thus violating the principles of natural justice. They claimed this action was arbitrary and demonstrated non-application of mind.

3. Discrimination Against the Petitioners Compared to Other Similarly Situated Units:
The petitioners argued that other units within the Kandla SEZ and other SEZs engaged in similar business activities were granted extensions, while their unit was discriminated against without any valid rationale. They highlighted that this discrimination adversely affected their business operations and employment of workers.

4. Legal Eligibility and Entitlement to Continue Business Operations:
The petitioners asserted their legal eligibility and entitlement to continue their plastic reprocessing business, as had been permitted to other units. They emphasized that their unit had been operational since 1996 and had made significant investments in machinery and infrastructure.

5. Examination of Past Performance and Inactiveness of the Petitioner’s Unit:
The respondents argued that the petitioner's unit had been inactive for a substantial period during the past seven years of validity, which justified the rejection of their extension request. They pointed out that other units continued operations during this period, unlike the petitioners' unit.

6. Compliance with SEZ Act, 2005 and SEZ Rules, 2006:
The respondents highlighted that under Rule 18 of the SEZ Rules, 2006, setting up new units for recycling plastic waste and used clothing was barred. However, the Board of Approval (BoA) had the discretion to extend the validity of existing units' LoAs. They emphasized that the renewal of such units was not automatic and required careful consideration.

7. Authority and Discretion of the Board of Approval (BoA) in Granting Extensions:
The respondents argued that the BoA had the authority to decide on the extension of LoAs and that the rejection of the petitioners' proposal was within their discretion. They noted that the petitioners' unit had been inactive and that the import of plastic scrap was restricted, which influenced the decision.

Judgment:
The court observed that the petitioners' case required reconsideration, particularly in light of the fact that other similarly situated units were granted extensions despite being non-operational for extended periods. The court quashed and set aside the order passed by respondent no. 2 rejecting the proposal for extension/renewal and the covering letter dated 14th July 2017. The court directed the authorities to re-examine the petitioners' case and provide a fresh decision. If aggrieved by the new decision, the petitioners were granted the liberty to pursue legal remedies available under the law.