2002 (11) TMI 110 - HC - Customs

Summary

Issues Involved:

1. Whether DTA sale is part of the licence and before suspending the licence, the procedure prescribed has to be followed?
2. Whether there could be a suspension of DTA Sales on the facts of the case?
3. Whether the order of suspension of DTA sales is liable to be quashed as arbitrary and violative of the rules or regulations contained in the EXIM policy?
4. To what relief, if any?

Issue-wise Detailed Analysis:

1. Whether DTA sale is part of the licence and before suspending the licence, the procedure prescribed has to be followed?

The court examined the Export-Import Policy (EXIM Policy) and the Foreign Trade (Development and Regulation) Act, 1992, along with the Rules framed thereunder. It was determined that the DTA sales form part of the licence granted to the Export Oriented Unit (EOU). The licence is a comprehensive document that includes the right to import goods without duty, export goods, and effect DTA sales. The court held that the DTA sale is indeed part of the licence, and any suspension of this privilege must follow the procedure prescribed under Section 9 of the Act, which mandates giving a reasonable opportunity of being heard to the licence holder.

2. Whether there could be a suspension of DTA Sales on the facts of the case?

The court noted that the suspension of DTA sales was based on allegations of unauthorized removal and local sale of imported raw materials by the EOU, which were meant for manufacturing export goods. The Central Excise Department reported serious violations, including inflated export documents to cover up the diversion of raw materials. However, the court emphasized that even if there were grounds for suspension, the procedure under Section 9(4) of the Act, which includes providing a reasonable opportunity of being heard, must be followed. Since this procedure was not adhered to, the suspension was deemed improper.

3. Whether the order of suspension of DTA sales is liable to be quashed as arbitrary and violative of the rules or regulations contained in the EXIM policy?

The court found that the suspension order was arbitrary and violative of the statutory provisions and rules under the EXIM policy. The suspension was issued without following the due process as mandated by the Act, specifically without giving the petitioner a reasonable opportunity to present their case. The court highlighted that the DTA sale is a significant privilege earned by the EOU through its export performance and cannot be suspended without adhering to the statutory requirements.

4. To what relief, if any?

The court concluded that the suspension of the DTA sales was not in conformity with the statutory provisions and thus liable to be quashed. The writ petition was allowed, and the impugned proceedings were quashed. However, the court granted liberty to the respondents to pass fresh orders in accordance with the provisions of the Act and the Rules framed thereunder, ensuring that the due process is followed.

Conclusion:

The High Court of Judicature at Madras quashed the suspension of DTA sales of the petitioner, an Export Oriented Unit, on the grounds that the suspension was arbitrary and violative of the statutory provisions. The court emphasized the necessity of following the due process, including providing a reasonable opportunity of being heard, before suspending any part of the licence. The respondents were given the liberty to issue fresh orders in compliance with the statutory requirements.