9911796707
TMI Blog2014 (9) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... aring to the party affected is initial part of compliance of principles of natural justice as the “hearing” is inevitable aspect of natural justice. Intimation is not “hearing”. - order passed on 12-5-2011 is vitiated, as it is passed without complying with the principles of natural justice. - Decided in favor of assessee. Validity of panchnama-cum-seizure order - Held that:- The seizure order dated 29-12-2010 is also bad and illegal. It is the panchnama-cum-seizure order. Such composite order is unheard off. - Technically, asking the party to submit fresh PD Bonds for a period of six months on one hand and proceeding to seize the goods on the other hand may not perhaps be faulted with, however, burden lies on the authority to explain rationale to rush into seizure/confiscation of the goods in such circumstances, the reason is the ‘proper officer’ cannot proceed to seize the goods under Section 110 of the Act unless he has reason to believe. - Unexplained inconsistent conduct makes dent on the belief. It would shake the basis and vitiate the seizure. We had a privilege to have a brief journey into the world of ‘Areca nut/betel nut’. Parties have produced some material in su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder or direction inter alia directing the respondents, their agents and servants not to cause any interference in the free movement/utilization of the goods of the petitioner; 1.1 So far as Special Civil Application No. 3031 of 2011 is concerned, the same is also filed by the same petitioner being aggrieved by the action of the respondents, seeking following reliefs :- 8.(B) Your Lordships may be pleased to issue a writ of mandamus or any other appropriate writ, order or direction to quash and set aside the seizure of the subject goods being 2238 M.T. being affected vide Panchnama and the seizure memo, both dated 7-2-2011 by the office of the respondent No. 2, through the respondent No. 3 (Annexure A ) and; (C) Your Lordships may be pleased to issue a writ of mandamus or any other appropriate writ, order or direction inter alia directing the respondents more particularly respondent Nos. 4 and 5 to pass assessment order in respect of Bills of Entry, which are referred to herein above in paragraph No. 3.13 by accepting the DFIA; (C-1) This Hon ble Court may be pleased to issue a writ of mandamus or any other appropriate writ, order or direction to quash and set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06, dated 1-5-2006 (the said Notification). In Special Civil Application No. 204/2011, the petitioner has further questioned the legality and validity of the seizure of 708 M.T. of the said goods vide Panchnama dated 29-12-2010 and has also challenged the Order-in-Original dated 12-5-2011 passed by the authority pending these proceedings, finally assessing five Bills of Entry filed in respect of 756 M.T. of the said goods including the seized quantity referred to above, confirming duty of ₹ 3,02,56,350/- by denying the benefit of exemption under the said Notification on the ground that the said goods are not permissible to be imported under the DFIA and consequently not entitled to exemption under the said Notification. In Special Civil Application No. 3031/2011, the petitioner has also challenged the legality and validity of the seizure of 2238 MT of the said goods vide Panchnama dated 7-2-2011 and has also questioned the assessment of 16 Bills of Entry filed by the petitioner in respect of the aforesaid quantity of the said goods purportedly undertaken by the authorities on 23/24-3-2011 pending the petition, by denying the benefit of exemption under the said Notification wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after provisional clearance by the Department as in any case, the final assessment of the Bills of Entry is yet to be done which should be undertaken by the Department. On 29-12-2010, the DRI seized the consignment of the said goods covered under the five Bills of Entry, referred to above, on the ground that the same were liable for confiscation since it had been confirmed after investigation that Areca Nut/Betel nut was not covered under the SION and had been illegally cleared without payment of duty. The Panchnama records that out of 756 MT of the said goods, 48 MT had already delivered, but the balance 708 MT is seized. 3.3 Aggrieved by the aforesaid action of the DRI, the petitioner filed the first writ petition being Special Civil Application No. 204/2011, seeking a declaration that the said goods were included in the SION and permissible for import under the DFIA under Item G-7 and prayed for quashing and setting aside the seizure of the said goods vide Panchnama dated 29-12-2010. After hearing the parties and after considering the reply of the DRI, this Court passed an order on 10-2-2011, issuing Rule and granting interim relief, suspending the seizure order subject to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3.6 The Court issued notice in the second petition on 14-3-2011 which was served on the respondent No. 5 on 16-3-2011. It is a matter of fact, which is brought on record during the course of submissions, that on the next day i.e. on 17-3-2011, the authorities on their own, transferred these 16 Bills of Entry from Group-7 to Group-1 which, as per the authorities, is the relevant group for considering the assessment of Bills of Entry (Group-1 is where exemption is not claimed or not available to the importer). Immediately thereafter the authorities entered into some correspondence with the CHA of the petitioner for the purpose of producing original documents. The respondents appeared in the second petition on 21-3-2011 and sought time which was granted up to 28-3-2011. While seeking an adjournment, the respondents did not disclose that they have already undertaken the process of assessment of the 16 Bills of Entry. This is despite the fact that the very issue is directly involved in the petition. On the contrary, an affidavit is filed on behalf of the respondents Nos. 2 and 3 on 24-3-2011, wherein it is contended in para 18 that vide letter dated 24-3-2011 of the Kandla Custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as aforestated. Thereafter the Hon ble Supreme Court finally disposed of the S.L.P. by its order dated 24-11-2011 with a request to this Court to take up Special Civil Application No. 3031/2011 and take a final decision thereon as expeditiously as possible. It was further agreed that the petitioner would not seek release of the subject licenses till the petition was disposed off and if the issue before the Hon ble Court was decided in favour of the petitioner, it would be open to him to seek revalidation of the licenses. The petitioner sought for amendment to bring the aforesaid subsequent facts on record and also to challenge the decision of the respondents to deny the benefit of exemption under the said notification. The amendment was granted by order dated 25-3-2013. 3.9 It is in the context of the aforesaid facts, the issues set out above, arise for consideration. 4. Learned Senior Advocate Mr. Joshi with learned Advocate Mr. Mithani for the petitioner submitted that Areca Nut/Betel Nut is a Vegetable Tanning Agent used in the manufacture of finished leather and is covered in the SION at item 12(b) and 12(c) of G-7 relating to leather goods. The petitioner relied upon Cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the inputs allowed clearance should be capable of being used for the purpose mentioned in each subject category. Based on the aforesaid decision of the Norms Committee, the D.G.F.T. vide its communication dated 20-11-2012 clarified that as regards whether Areca Nut is covered under Sr. No. 12 of the goods Group-7 in SION, it has confirmed that Areca Nut is covered , which clarification was extracted in communication dated 22-11-2012 addressed by the D.G.F.T. to M/s. Raghu Exports (page 212) pursuant to which the show cause notice issued against the said importer was dropped. (emphasis supplied). Learned Senior Advocate for the petitioner submitted that under Paragraph 2.3 of the FTP, the decision of the D.G.F.T. on interpretation of the Policy or Classification of any item is final and binding. In view of this, the entire inquiry made by the DRI relating to interpretation of the provisions of the FTP, SION and the licence is clearly without jurisdiction and authority of law. The petitioner relied upon a judgment of the Hon ble Supreme Court in the matter of Titan Medical Systems Pvt. Ltd. v. Collector of Customs, New Delhi, reported in 2003 (151) E.L.T. 254 (S.C.), wherein it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some exemption whether admissible or not, is a matter of belief of assessee and does not amount to misdeclaration. (emphasis supplied). 4.4 Learned Senior Advocate for the petitioner, therefore, submitted that the proper officer could not have held a valid or rational reason to believe that the goods were liable for confiscation at the time of effecting the seizure of the subject goods and the belief which was held at the relevant time was sham, illusory and no belief in the eye of law which would justify the seizure of goods. Therefore, the action of the seizure is wholly without jurisdiction and authority of law. 4.5 In so far as the issue regarding the legality and validity of the Order-in-Original dated 12-5-2011 is concerned, the petitioner submitted that the same deserves to be quashed and set aside for the following grounds : a. The impugned order is in breach of principles of natural justice since the petitioner was not afforded an opportunity of hearing nor was the petitioner supplied the copy of the clarification of D.G.F.T. relied upon by the respondents for the purpose of making final assessment of the Bills of Entry by denying the benefits of the exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts before the Hon ble Court, and with a view to render the petition pending before this Hon ble Court infructuous. c. That the lack of bona fides is further clear from the fact that copies of the assessment orders have deliberately not been served on the petitioner and an averment is made that, the petitioner should be deemed to be aware about the passing of the assessment orders in view of documents produced in the petition . This is done solely with a purpose to contend that, an appeal has become time barred , rendering the petitioner remediless. d. That in any case on merits there is no justification for denying the exemption under the said notification to the petitioner for the reasons which have been narrated above and therefore the purported orders of assessment are illegal. 5. Learned Senior Advocate Mr. R.J. Oza for respondent Nos. 2 to 4 strenuously submitted that the principal issue is, whether the subject goods are covered under FTP, SION and the DFIAs submitted by the petitioner for claiming exemption from the payment of duty under the said Notification . The learned Counsel invited the attention of the Court in detail to the provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the petitioner had indulged in misrepresentation and misdescription of goods at the stage of seeking clearance of the goods without payment of duty and therefore the goods were liable for confiscation, therefore the seizure was valid. iii. That the petitioner having itself undertaken to obtain an amendment in the DFIA and having got the goods provisionally released on this basis, upon failure of the petitioner to obtain such specific amendment, the subject goods became liable for confiscation under the Act and, therefore seizure was justified. iv. That the petitioner had an alternative remedy of seeking provisional release of goods u/s 110A of the Customs Act, 1962 and therefore the petition ought not to be entertained. 5.2 On the issue of validity of the Order-in-Original dated 12-5-2011 , the respondents contended that the challenge is misconceived and the prayer should be rejected on the following grounds : i. That the Assistant Commissioner has correctly held that the petitioner was not entitled to the benefit of the exemption under notification since the subject goods were not covered under the DFIA and SION. ii. That the order has not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons elaborated earlier. ii. That the CHA of the petitioner had been informed of the proceedings of assessment and had been called upon to submit the original documents and therefore it could not be contended that the petitioner was not heard before finalizing the assessment since the CHA represents the petitioner before the Customs Authorities. iii. That the petitioner was well aware that the assessment orders had been passed or in the alternative could have known with due diligence that the bills of entry had been assessed and, therefore, the petitioner cannot be heard to complain that the copies of the assessment orders were not served upon it. iv. That in any case the petitioner had an alternative efficacious remedy available to it for challenging the assessment orders and if such remedy had become time barred on account of inaction of the petitioner, the petitioner could not challenge the orders by seeking to amend the pending writ petition. For this proposition, the respondents relied upon the judgments of the Hon ble Apex Court, referred to above. 6. Learned Senior Advocate Mr. Joshi appearing for the petitioner made the following submissions in rejo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and after 15-5-2012, Areca/Betel Nut would be covered under the generic description in G-7 as expressly accepted in the Public Notice. (emphasis supplied). vi. That the above Public Notice read with Paragraph 1.5 of the FTP makes it clear that licences/authorizations issued under the FTP continues to be governed by the provisions under which they were issued. vii. That the contention that exemption ought to be denied irrespective of the above interpretation since the requirement of the said notification is that the goods imported must be specifically included in the List of Permissible Imports attached to DFIA, is misconceived and there is no such requirement stipulated in the said notification. The petitioner relied upon a judgment of this Court in the matter of Inter Continental (India) v. Union of India, reported in 2003 (154) E.L.T. 37 for the proposition that, the benefit of a notification cannot be curtailed by rewriting the notification by imposing additional conditions . Further, the item imported is a vegetable tanning agent and the DFIA permits import thereof. When SION stipulates inputs by their generic name, there is no question of curtailing the benefit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f goods in G7 of SION and the requirement of obtaining amendment in the DFIA is rendered redundant . In any case such non-production would not automatically disentitle the petitioner to claim the benefit of the exemption under the said notification and for this proposition, the petitioner relied on a judgment of the Hon ble Apex Court in the matter of Commissioner of Customs (Imports), Mumbai v. M/s. Tullow India Operations Ltd., reported in AIR 2006 SC 536 = 2005 (189) E.L.T. 401 (S.C.). iv. The contention of alternative remedy is also not valid since s. 110A cannot be considered as an alternative remedy for challenging the validity of the seizure and in any case, as by the interim orders, the Court suspended the seizures, there is no question of relegating the petitioner to the remedy of seeking provisional release of goods as contemplated u/s 110A of the Act. 7.2 Learned Senior Advocate Mr. Joshi for the petitioner submitted that so far as the contentions of the respondents against challenge to the validity of the Order-in-Original dated 12-5-2011 are concerned, the same do not deserve to be accepted for the following reasons : i. That Areca Nut is covered und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondents regarding the validity of the assessment orders dated 23/24-3-2011, submitted that the petitioner reiterates that impugned orders deserve to be quashed and set aside and the contentions of the respondents ought not to be accepted for the following reasons : i. That Areca Nut is covered under the generic description in SION and this stands established on a plain reading of the SION and the clarification of the D.G.F.T. and therefore on merits, the order which seeks to deny the claim, is not sustainable in law. ii. That the authorities have admittedly not given any opportunity of hearing to the petitioner and have passed orders on 23/24-3-2011. iii. That the purported assessment orders have not been served on the petitioners and if the respondents contend that the endorsement on the Bill of Entries, one of which was produced for the perusal of the Court, constitutes an order of assessment, the same does not contain any reason for denying the claim for exemption and deserves to be quashed on this ground alone. iv. That the chronology of events and the correspondence clearly indicates that the respondent authorities were more interested in creati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised the contention that the petition had become infructuous . The purported assessment orders were never served on the petitioner and a contention was raised that, the assessment was endorsed on the Bills of Entry . The petitioner stated that since the authority has proceeded to deny the benefit of the exemption claimed by the petitioner, it was incumbent on the authority to pass a reasoned order denying the claim, which was not done and a procedure was deliberately adopted so as to deny the petitioner an opportunity of challenging such orders. In any case, the copies of the assessment orders endorsed on the Bills of Entry were also not served on the petitioners and submitting one copy of the Bill of Entry for perusal of the Hon ble Court is not sufficient compliance of, the requirement of service upon the petitioners. vi. The contention that information was available to the petitioner from the correspondence that assessment orders had been passed, is no substitute for the, requirement of communicating the orders to the petitioner , as sought to be contended by the respondents. In any case, information that, orders have been passed would not enable the petitioner to ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce thereof, the exercise of powers of seizure under Section 110 of the said Act is without jurisdiction and illegal. 8.2 The assessment orders dated 12-5-2011 (Special Civil Application No. 204/2011) and 23/24-3-2011 (Special Civil Application No. 3031/2011) deserve to be quashed and set aside on merits since the petitioner is entitled to the exemption under Customs Notification No. 40/2006 for the reasons stated above and the impugned orders which deny such benefits to the petitioner are illegal on merits and for this reason it would not be necessary to remand the matter for fresh adjudication to the Proper Officer on account of breach of principles of natural justice, which is also established in the facts of the case. 9. Since pending the present proceeding, the petitioner has deposited the amount of duty demanded under protest, and the DFIAs submitted to the Customs Department lying with them under orders of the Hon ble Apex Court have expired in the meantime, a direction may kindly be given to the D.G.F.T. as contemplated in the order of the Hon ble Apex Court dated 24-11-2011 to revalidate the DFIAs within a specified time frame and for that purpose the Customs authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v) Once the revalidated licences are furnished to the respondents by the petitioner, the respondent authorities will act in accordance with law and in light of the discussion made in the judgment. 14. Rule is made absolute. No costs. 15. At this juncture, Mr. R.J. Oza, learned Senior Advocate for the respondents prayed for stay of this order. In light of reasons recorded herein above, as this Court is of the opinion that the D.R.I. has not acted within its bounds, more particularly, when an apprehension is expressed by D.R.I. that these goods are likely to be diverted for the human consumption, this Court finds no substance in the request and hence, it is rejected. [Per : R.D. Kothari, J. (concurring)]. - I respectfully agree with my learned brother. I may add few lines. 16. The petitioner has exported finished leather prepared from hide of cow/buffalo. The petitioner s firm claims to be in the business since 1933. A scheme called DFIA [Duty Free Import Authorisation] framed by the Government, which is aimed at allowing duty free inputs that are required for production of export products. In other words, under the scheme, duty free import of material is permissibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The case of the petitioner can be considered as under : 21. First about validity of final assessment order. It is not in dispute that the order of final assessment whereby the petitioner is called upon to pay duty of over ₹ 3 crores is passed without hearing the petitioner. The said order is passed on 12-5-2011. It is not in dispute that the authority has served a notice to the petitioner on 6-5-2011 whereby the petitioner was informed that hearing was kept on 10-5-2011. On 10-5-2011, the petitioner had asked for some documents from the said authority by applying for the same and had also prayed for time. The authority passed the impugned order of assessment on 12-5-2011, presumably no separate order is passed on the application dated 10-5-2011 of the petitioner. 22. The authority justifies their action by advancing two grounds, viz. one, prayer made by the petitioner for adjournment appears to be an attempt to delay the assessment, and secondly, by asking the petitioner to make representation, if any, on 10-5-2011, the authority has complied with the principles of natural justice. 23. Both the above grounds have no substance. Taking the second ground first, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mnibus order-cum-panchnama reads thus : Shri R.R. Rai informs us that the undersigned duly empowered to act under Section 110 of the Customs Act, 1962, has reason to believe that the above said Areca nut imported vide above said Bills of Entry valued as per copy of invoice produced by the importer before Customs House, Kandla, ₹ 280 Lacs and cleared duty free by misusing the DFIA License is liable for confiscation under the provisions of the Customs Act, 1962, do hereby seize the goods in 708 MT in total 8105 bags as stated above. The said goods are presently under the custody and stored in godown of M/s. Lalji Moolji Transport Co., Aslali, Ahmedabad, the importer M/s. Babooram Hari Chand are directed not to remove or otherwise deal with the goods described above except with written permission of the proper authority. 26. It is possible to raise doubt about the belief of the authority that Areca nut were liable to confiscation. The reason is this. Just four days prior, i.e. 24-12-2010, to the date of seizure, the authority had asked the petitioner to renew the period of PD Bonds for six months. The relevant part of that order reads as under : Following BE s have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er period of six months, the respondent cannot proceed to seize the goods. Seizure should precede by belief. Belief ought to have basis. Unexplained inconsistent conduct makes dent on the belief. It would shake the basis and vitiate the seizure. 28. The respondent s above referred inconsistent conduct on record apart, the case of the petitioner rests on more surer ground, therefore, the Court need not indulge into examining the other alleged deficiencies in respondent s case like the deficiencies in seizure order-cum-panchnama, etc. 29. The respondent contends that the issue involved is not whether Areca nut contains tennin agents or not, but whether Areca nut can be imported under subject DFIA licence (P.123 etc.). Let us examine the case of the petitioner on this line. DFIA scheme was introduced by the Government in its new policy declared as Foreign Trade Policy of 2009-2014. Therein DFIA scheme is stated at 4.2.1 to 4.2.7. As stated above, the fact of the petitioner holding DFIA licence is not in dispute. It is also not in dispute that the petitioner had acquired licence in lawful manner. In order to appreciate properly, two relevant materials on record, status of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has no bearing in law because of the reason that it has been issued without considering the facts. It prima facie appears that this clarification is arbitrary and non-speaking. The Directorate of Revenue Intelligence is taking up the matter with D.G.F.T. Therefore, sufficient time may kindly be given to DRI to seek proper documents etc. based on which the above clarification is issued. It is therefore, prayed that sufficient time may be granted in the interest of justice. (P.217). (emphasis supplied) 32. The say of the respondent on clarification issued by the D.G.F.T. does not require any comments. It speaks for itself. 33. From the other material produced on record at Annexure-A/1 (P.121), it would appear that the proceedings initiated against one Raghu Export Pvt. Ltd., precisely for the use of DFIA Licence for Areca nut, were later on closed by the authority. The copy of the order produced on record shows that in that case the Authority had referred the matter to D.G.F.T. for clarification and the clarification received by the authority from the D.G.F.T. is as under :- As regards whether Areca Nut is covered under Sr. No. 12 of the product group G-7 under SION, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d appear that clarification dated 22-11-2012/26-11-2012 is produced at page 142 in Special Civil Application No. 3031/2011. The relevant part of the said clarification reads thus :- As regards whether Areca Nut is covered under Sl. No. 12 of the product group G-7 under SION, it is confirmed that Areca Nut is covered. 37. Then, by clarification dated 26-4-2013, the respondent-authority withdraws the clarification dated 22-11-2012. In the clarification dated 26-4-2013, it is stated that Areca Nut can be considered under Serial No. 12 of product G.7 in SION provided it is imported by manufacturer under actual using condition and secondly, Areca nut cannot be imported under DFIA licence by endorsement of transferability. 38. It is not possible to accept the submission of the respondent based on clarification dated 26-4-2013. The reason is, said clarification, as observed above, approves and affirms public notice dated 15-5-2012. The contents of said public notice are referred above. In substance, this public notice is also a clarification. The said notice is prospective in its operation as it would appear from para 4 of that notice. 4. Effect of this Public Notice : ..... X X X X Extracts X X X X X X X X Extracts X X X X
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