2022 (1) TMI 25 - HC - Customs

Recovery of excess due credit issued from Status Holder Incentive Scrip (SHIS) Scheme - It is contended that once the benefits of the Scheme are utilised, then the Authorities have no power to cancel or impose recovery - application of time limitation - HELD THAT - The contemplation of limitation is to ensure that the actions must be initiated within a reasonable period of time at all circumstances and prolonged initiation would cause prejudice to the parties. Further limitation is essential to avoid excess exercise of powers and also to minimise unnecessary administrative delay. However, the point of limitation is to be considered by adopting a purposive interpretation of the Statutes and such interpretation must be not only constructive but must ensure the purpose and objects sought to be achieved under the particular Act or Rules. The law expects the offenders/delinquents are prosecuted under law - Limitations contemplated in Statutes are directory on many occasions. Thus, several factual aspects are also to be considered for the purpose of deciding the case on the ground of limitation. Therefore, the Courts cannot adopt an arithmetic procedure of comparing the dates and to quash the orders on the ground of limitation. When it is not a final order, this Court is of an opinion that the Authorities must adjudicate the issues on merits. When the point of adjudication comes, then it is to be placed before the Competent Authorities for effective adjudication and to take a final decision by conducting an enquiry and by affording opportunities to the parties concerned. In view of the fact that the order impugned is passed merely based on the audit objection without conducting any adjudication, this Court is not inclined to made any finding with reference to the merits as well as the other grounds raised with reference to the facts and circumstances of the case. All such facts and circumstances on merits are to be adjudicated based on the original documents, audit objections and other evidences made available by the parties - the order impugned though stated as the recovery order, it is the demand requesting the petitioners to repay the entire duty credit amount availed from the SHIS Scheme. In the order it has been stated that the petitioners are requested to repay their entire due credits availed. Therefore, such a requisition order is to be treated as a demand alone and cannot be construed as final recovery order. The Authority, who issued the demand notice, shall conduct an enquiry by affording an opportunity to the petitioners and decide the issues on merits and in accordance with law, including the legal grounds and the point of limitations raised by the parties. After passing final order by the Original Authority, namely, Additional Director General of Foreign Trade, if at all the petitioners are further aggrieved, then they are at liberty to prefer an appeal to the Director General of Foreign Trade, who is an Appellate Authority for adjudication of the issues. Only after exhausting the line of statutory remedies contemplated, the petitioners have to approach the Court of Law, if any grievance thereafter exist, but not otherwise. The writ petitions stand disposed of.

Summary

Issues Involved:
1. Recovery of excess due credit issued from Status Holder Incentive Scrip (SHIS) Scheme.
2. Jurisdiction and limitation period for issuing recovery orders.
3. Validity of audit objections and their interpretation.
4. Requirement of adjudication before issuing recovery orders.
5. Availability of alternate remedies and the role of High Court under Article 226.

Detailed Analysis:

1. Recovery of Excess Due Credit Issued from SHIS Scheme:
The writ petitions challenge the recovery of excess due credit issued under the SHIS Scheme. The petitioners, being Export Oriented Units (EOUs), had availed certain benefits under this scheme. The impugned order demanded the repayment of the entire duty credit availed by the petitioners based on audit objections.

2. Jurisdiction and Limitation Period for Issuing Recovery Orders:
The petitioners contended that the impugned order was passed beyond the prescribed limitation period of two years, making it liable to be set aside. They argued that the authorities lacked jurisdiction to issue the order after the limitation period had expired. The court emphasized that the point of limitation is complex and requires consideration of various factors, including the date of cause, conduct of the audit, and other relevant aspects. The court noted that limitations prescribed in statutes are often directory rather than mandatory, depending on the circumstances.

3. Validity of Audit Objections and Their Interpretation:
The audit objections raised by the CAG Audit (CRA – Customs Revenue Audit) highlighted that EOUs were in an advantageous position compared to other Status Holder Exporters who were denied SHIS benefits if they availed zero duty EPCG. The audit pointed out that EOUs enjoyed duty-free import/procurement benefits, which was not extended to other exporters. The court recognized the importance of examining the audit objections and the impugned order in detail to adjudicate the disputed issues.

4. Requirement of Adjudication Before Issuing Recovery Orders:
The court noted that the impugned order was issued based on audit objections without any adjudication on merits. The court emphasized the necessity of adjudication by competent authorities before issuing recovery orders. The court stated that demand notices or recovery notices should be treated akin to show cause notices, requiring an opportunity for the affected parties to present their objections and explanations.

5. Availability of Alternate Remedies and the Role of High Court Under Article 226:
The court highlighted that the power of judicial review under Article 226 is to ensure that the decision-making process by competent authorities is in accordance with statutory provisions, not to adjudicate the merits of the decision itself. The court stressed the importance of exhausting alternate remedies provided under the law before approaching the High Court. The court directed the petitioners to submit their objections and documents to the Additional Director General of Foreign Trade, who would conduct an enquiry and decide the issues on merits. If the petitioners were aggrieved by the final order, they could appeal to the Director General of Foreign Trade.

Conclusion:
The court disposed of the writ petitions with directions for the competent authority to conduct an enquiry by affording an opportunity to the petitioners and to decide the issues on merits within a specified timeframe. The court emphasized the need for adjudication by the original authority and the exhaustion of statutory remedies before seeking judicial intervention. The court did not make any findings on the merits of the case, leaving it to the competent authorities to adjudicate based on original documents, audit objections, and other evidence.