2018 (8) TMI 188 - HC - Customs

Jurisdiction - power of the Development Commissioner appointed under Section 11 of the Special Economic Zones Act, 2005 to pass an order imposing penalty under Section 11 (2) of the F.T. Act - Penalty - submission of the petitioner being that the alleged violation did not have any concern with or violate the F.T. Act or the SEZ Act - Section 21 of the SEZ Act read with the F.T. Act. Held that - The self certification/declaration, the procedure for issue of GSP certification for units in the SEZ, was adopted and implemented for providing conducive environment to avoid and curtail loss of time so as to not delay exports on account of compliances and formalities. The procedure was based on faith and trust. It required honesty and probity on the part of the declarants. Act and omissions of the petitioner must be judged on the said parameters. 57. Thus, the impugned order rightly holds that in case of SEZ units, the Development Commissioner did not carry out actual verification exercise and the petitioner had self certified that biodiesel to be exported was eligible for the GSP certification as goods of Indian origin. The petitioner had earned undue profit , at the risk and peril of the country s reputation. Wrong and fraudulent certification could have affected our credibility and sanctity of GSP certification issued and stamped by Indian authorities. It could have resulted in withdrawal of benefits under the GSP scheme. Consequences and impact were far-reaching and immense - The Appellate Authority has rightly observed that the petitioner cannot wash away its responsibility and failure to furnish correct information and declaration on the origin of goods. Petitioner had made false declaration to procure wrong GSP certification. They were beneficiaries of the wrong declaration, which had jeo-pardised and harmed the country s prestige and reputation - Penalty was justified. Petition dismissed - decided against petitioner.

Summary

Issues Involved:
1. Jurisdiction of the Development Commissioner under Section 11 of the SEZ Act to impose penalties under Section 11(2) of the F.T. Act.
2. Validity of the penalty imposed on the petitioner under Section 11 of the F.T. Act.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Development Commissioner:
The petitioner contested the jurisdiction of the Development Commissioner appointed under Section 11 of the SEZ Act to impose penalties under Section 11(2) of the F.T. Act. The court examined Section 11 of the F.T. Act, which outlines the penalties for contravention of export or import regulations. Section 13 of the F.T. Act empowers the Director-General or other officers authorized by the Central Government to impose penalties or adjudge confiscations.

The court referred to Notification No. SO 194(E) dated 6th March 2000, which appointed Development Commissioners as Adjudicating Officers under Section 11 of the F.T. Act for SEZ units. This notification was reinforced by Notification No. 102 (RE-2008) 2004-09 dated 17th April 2009, specifying that Development Commissioners have unlimited authority to act as Adjudicating Authorities for SEZ units.

The petitioner argued that Gazette Notification No. S.O. 76(E) dated 13th January 2010 and S.O. 77(E) dated 13th January 2010, issued under the SEZ Act, designated acts or omissions under the F.T. Act as offences for the SEZ Act, thus limiting the Development Commissioner’s role to enforcement rather than adjudication. However, the court found no conflict between the SEZ Act and the F.T. Act, stating that the Development Commissioners' authority under the F.T. Act was not negated by these notifications. The court concluded that the Development Commissioner had the jurisdiction to impose penalties under Section 11 of the F.T. Act.

2. Validity of the Penalty Imposed:
The petitioner challenged the imposition of penalties, arguing that the alleged violations did not contravene the F.T. Act or the SEZ Act. The court examined the procedures for issuing Generalised System of Preferences Certificates of Indian Origin (GSP Certificates) and the petitioner’s compliance with these procedures.

The petitioner had self-certified the origin of biodiesel exported to Switzerland, claiming it was of Indian origin. However, investigations revealed that a significant portion of the biodiesel was of American origin, exceeding the permissible blending proportion for GSP certification. The court noted that the petitioner’s false declarations led to the issuance of incorrect GSP Certificates, allowing the export of American biodiesel under Indian origin certification to avoid anti-dumping duties.

The Development Commissioner had imposed penalties based on the undue profit earned by the petitioner through fraudulent certification. The Appellate Authority upheld the findings but reduced the penalty from ?66.30 crores to ?22.60 crores, waiving personal penalties on the petitioner’s directors. The court agreed with the Appellate Authority’s decision, emphasizing the severe consequences of the petitioner’s actions on India’s trade relations and credibility.

The court concluded that the penalties imposed were justified, given the petitioner’s fraudulent actions and the potential harm to the country’s reputation. The writ petition was dismissed, and the respondents were entitled to costs as per the Delhi High Court Rules.