2016 (10) TMI 564 - HC - Customs

Import of Ammonium Nitrate - restoration of licence in Form P-3 under the Explosive Act 1884 (Act) - licence to possess for sale of Ammonium Nitrate from a store house exceeding 30MT or in tanks as per Ammonium Nitrate Rules 2012 - licence issued on 03.12.2014 to remain valid till 31.03.2019 - opportunity of being heard - whether invocation of power under Section 6E read with Rule 42(5)(i) of the Rules to revoke the licence without affording the opportunity of hearing to petitioner justified? - Held that - it is evidently clear that the respondent on receipt of the information from the Principal Commissioner of Customs Chennai has taken note of the materials placed before it and it appears on further investigation on selected buyers mentioned that the entire quantity of Ammonium Nitrate was used in Mines and Quarries for blasting operations and not used for agricultural purposes. The respondent taking into consideration the information received by it has formed an opinion that licence granted to the petitioner requires to be placed under suspension as an interim measure and the reasons for exercising the power of interim suspension is vivid on a reading of the impugned order. Therefore the petitioner is not correct in contending that the Licencing Authority has not recorded his opinion while exercising the power of the interim suspension. In terms of proviso in Rule 42(5) the respondent has granted an opportunity to the petitioner to show cause as to why the Licence should not be cancelled. Therefore the impugned order cannot be stated to be devoid of reasons nor it can be stated that the competent authority did not form an opinion before passing the order of interim suspension. Lack of jurisdiction - power of authority for interim suspension - the Joint Chief Controller of Explosives South Circle - Held that - The learned Additional Solicitor General produced before this Court a chart attested by the Chief Controller to show the delegation of powers granted by the Chief Controller. By virtue of the said chart it is seen that the Joint Chief Controller has been delegated with the power for interim suspension and issuance of the show cause notice. Whether the order of rejection of the petitioner s application for issuance of licence in Form P-5 for import of Ammonium Nitrate is just and proper.? - Held that - the use of Ammonium Nitrate having been regulated the petitioner cannot as a matter of right claim that except for the circumstances set out in Rule 6(4) there can be no restriction on import or export of Ammonium Nitrate and it cannot be a ground to interfere with the impugned order as the Rule 6 only postulates general restrictions. Thus while rejecting the application submitted by the petitioner for grant of licence in Form P-5 bearing in mind the interest of the National Security thought fit to restrict issuance of licence in favour of the Ammonium Nitrate users and the petitioner being a trader rejected their application. The restriction imposed is a reasonable restriction in the light of the fact separate Rules were framed for regulation of the use of Ammonium Nitrate which has been specifically brought within the definition of an explosive substance. In such circumstances this Court is not inclined to interfere with the impugned order. Detention of consignment by the customs - purchase order placed on 06.05.2015 i.e. much prior to the petitioner s application for grant of licence in Form P-5 for import of Ammonium Nitrate and therefore when it became a necessity to obtain a licence the petitioner had applied for the same and thus the detention of consignment justified? - Held that - The date of purchase order is of no relevance while considering as to whether the petitioner is entitled to import the impugned goods what would be relevant is the law which prevails on the date when the bill of entry is filed and on such date though the goods were freely importable unless the importer had a licence in Form P-5 import was impermissible. Thus the petitioner having not been granted a licence in Form P-5 cannot claim that the impugned consignment should be released to the petitioner. If this is done it would tantamount to issuing a direction to the authorities to disobey the rules which cannot be done. Petition dismissed - competent authority directed to consider the petitioner s reply dated 01.06.2016 to the show cause notice dated 20.05.2016 afford an opportunity of personal hearing to the petitioner and pass orders on merits and in accordance with law within a period of 30 days.

Summary

Issues Involved:
1. Correctness of the order dated 20.05.2016 suspending the petitioner's licence in Form P-3.
2. Correctness of the order dated 19.08.2015 rejecting the petitioner's application for a licence in Form P-5 for the import of Ammonium Nitrate.
3. Jurisdiction of the second respondent to suspend or revoke the licence.
4. Compliance with the principles of natural justice in suspending the licence.
5. Legality of the reasons for rejecting the application for a licence in Form P-5.
6. Petitioner's right to redeem the imported goods under Section 125 of the Customs Act.

Detailed Analysis:

Issue 1: Correctness of the Order Dated 20.05.2016
The petitioner’s licence in Form P-3 was suspended as an interim measure due to alleged violations reported by the Customs Authorities. The petitioner argued that the suspension was illegal as it was done without jurisdiction and without affording an opportunity to be heard, violating principles of natural justice. The court found that the second respondent had jurisdiction to suspend the licence as an interim measure under Rule 42(5)(i) of the Ammonium Nitrate Rules, 2012, and had formed an opinion based on the information received from the Customs Authorities. The court held that the suspension was made in a proper manner, and the Licensing Authority had exercised the power in the manner stipulated under Rule 42(5)(i).

Issue 2: Correctness of the Order Dated 19.08.2015
The petitioner’s application for a licence in Form P-5 for the import of Ammonium Nitrate was rejected on the grounds that licences are considered only for Ammonium Nitrate users in the interest of National Security. The petitioner argued that this reason was not one of the restrictions mentioned in Rule 6(4) of the Ammonium Nitrate Rules, 2012. The court held that the restriction was reasonable and in the interest of National Security, and the decision to reject the application was neither arbitrary nor whimsical but a reasonable restriction.

Issue 3: Jurisdiction of the Second Respondent
The petitioner contended that the second respondent, Joint Chief Controller of Explosives, South Circle, did not have the jurisdiction to suspend the licence. The court found that the second respondent was authorised by the Chief Controller to exercise the power of interim suspension and issuance of the show cause notice, as evidenced by a chart attested by the Chief Controller. Therefore, the order did not suffer from a lack of jurisdiction.

Issue 4: Compliance with Principles of Natural Justice
The petitioner argued that the suspension of the licence without affording an opportunity to be heard was in violation of the principles of natural justice. The court noted that under Rule 42(5)(i), an opportunity of being heard may not be given before suspension if the violation is likely to cause imminent danger to the public. The court found that the Licensing Authority had recorded its opinion and provided the petitioner an opportunity to show cause why the licence should not be cancelled, thus complying with the principles of natural justice.

Issue 5: Legality of the Reasons for Rejecting the Application for Licence in Form P-5
The petitioner argued that the reasons for rejecting the application for a licence in Form P-5 were not contemplated under the Rules. The court held that the restriction imposed was a reasonable restriction in the interest of National Security, and the decision to reject the application was justified.

Issue 6: Petitioner's Right to Redeem the Imported Goods
The petitioner claimed the right to redeem the imported goods under Section 125 of the Customs Act. The court held that unless the petitioner succeeded in obtaining a licence in Form P-5 and setting aside the interim suspension of the licence in Form P-3, the question of redemption would not arise. Therefore, the interim prayer could not be acceded to.

Conclusion:
The court dismissed the writ petitions, upholding the suspension of the petitioner’s licence in Form P-3 and the rejection of the application for a licence in Form P-5. The court directed the competent authority to consider the petitioner’s reply to the show cause notice, afford an opportunity of personal hearing, and pass orders on merits within 30 days. The interim order was vacated, and the respondents were directed to dispose of the cargo in accordance with law.