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TMI Blog2016 (6) TMI 815X X X X Extracts X X X X X X X X Extracts X X X X ..... irmities as discussed hereinabove, therefore, cannot be sustained. Having regard to the period which has elapsed since the issuance of the show-cause notices, the business of the petitioners has come to a standstill and hence, at this stage, the petitioners are not interested in obtaining advance licences and hence, the petitioners have not pressed the petitions qua considering their applications for licences. It is, however, clarified that as and when the petitioners apply for advance licences, the respondent authorities shall consider the same in accordance with law and on merits. - For the foregoing reasons, the petitions succeed and are accordingly allowed. - Decided in favor of petitioners. - Special Civil Application No.10589 of 2015 With Special Civil Application No.10590 of 2015 To Special Civil Application No.10592 of 2015 - - - Dated:- 2-3-2016 - MS. HARSHA DEVANI AND MR. G.R.UDHWANI, JJ MR PARESH M DAVE, ADVOCATE with MR PARITOSH GUPTA, ADVOCATE for the Petitioner(s) No.1 - 2 MR DEVANG VYAS, ADVOCATE for the Respondent(s) No.2 MS MAITHILI D MEHTA, STANDING COUNSEL for the Respondent(s) No.2 NOTICE SERVED BY DS for the Respondent(s) No.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een 100% EOUs, etc. to establish that the instructions and/or report received by the respondent from DRI, Ahmedabad were not reliable and no proceedings against the petitioners were maintainable only on the basis of such reports/instructions. By a Defaulter Order No.01/AM2007 dated 30th May, 2006, the respondent herein held that it was evident that the petitioners had diverted duty free imported raw material into the domestic market thereby violating actual user condition mentioned in the advance licence. Accordingly, the petitioners were declared as defaulters and were also refused issuance of further licences under rule 7(1)(a)(c) of the Foreign Trade (Regulation) Rules. It appears that pursuant to the Defaulter Order, the petitioner firm/partners/Directors had filed separate replies to the respondent explaining how the Defaulter Order was unjustified and why no further action should be taken against them. It appears that subsequently, no further action was taken by the respondent as regards penalty, etc. However, since licences were being denied to the petitioner firm, the petitioners approached this court by way of a writ petition being Special Civil Application No.1569/2007 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1 is directed to take a final decision on the applications of the petitioners for being granted EODC. In the facts of the case, it is provided that if respondent No.1 is prima facie not inclined to grant such certificate, he shall briefly indicate his tentative reasons thereof, communicate the same to the petitioners permitting them to make representations thereupon. Subject to the petitioners cooperating with expeditious disposal of such an issue, the respondent No.1 shall take a final decision within three months from the date of receipt of a copy of this order. 24. To avoid any possibility of failure of communication, it is provided that the petitioners shall personally or through their representatives appear before respondent No.1 on 8th November, 2012 between 11.00 a.m. to 12.00 p.m. his preliminary date is fixed only for convenience and it will be open for the respondent No.1 to re-schedule this date for any future hearings. It appears that despite the direction of the court to decide the matters within a period of three months from the date of receipt of a copy of the order, a further show-cause notice dated 26th June, 2013 came to be issued by the Joint DGFT, S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse to the petitioners, the same should be supplied to the petitioners permitting them to make their representation thereon. Inviting attention to the order passed by the Joint DGFT, Surat, it was pointed out that he has placed reliance upon certain details and reports about the investigation; however, no such material was provided to the petitioners. It was submitted that, therefore, there is a complete violation of the principles of natural justice. Referring to the impugned order, it was pointed out that the appellate authority has also placed reliance upon various materials which have not been provided to the petitioners, and therefore, the impugned order also suffers from the vice of breach of principles of natural justice apart from the fact that the order to the extent it imposes fiscal penalty is without authority of law, inasmuch as, no proposal for such penalty was ever made nor were the petitioners put to notice in that regard. Referring to the above order passed by this court, it was pointed out that the court has observed that the investigation made by the DRI may be a starting point; however, the respondents were required to decide the proceedings independently. That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 1st October, 2003 and had not effected any export as per their records and was defunct since 2004 and has not submitted any periodical reports. It was submitted that the investigation done by the DRI, Ahmedabad, confirmed in the report that the petitioner and other firms had sold off raw materials imported against all advance licences without utilising such raw material in compliance with the conditions of advance licences and, therefore, the DGFT, Surat office was not in a position to issue any advance licence/authorization because of violation of terms and conditions of licences. Besides, the Directorate of Revenue Intelligence also made it clear that the petitioners do not have any facilities for manufacturing the goods and in fact, the very existence of the factory of the petitioners and other firms is doubtful. Referring to the impugned order, it was pointed out that the concerned authority has found various irregularities and that the firms to which the petitioners are reported to have made supplies are defunct and not in existence. It was submitted that the petitioners were duly furnished with the show-cause notice issued by the DRI and, therefore, were aware of the materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion) Act, 1992 and, therefore, decided not to issue any licences/authorizations and EODCs to the firm. 7. From the above order, it is evident that in effect and substance, the second respondent has placed reliance upon the contents of the show-cause notice issued by the DRI and accepting the same to be gospel truth, has based its conclusions thereon. On a reading of the order in its entirety, it is clear that the same does not discuss the nature of the irregularities committed by the petitioner, nor does it spell out as to what was the nature of the misuse of the scheme detected by the office of the second respondent upon verification through its own sources. 8. In appeal, the first respondent Additional Director General of Foreign Trade has, in view of the fact that the letters granting personal hearing to the party in three of their cases were received back undelivered from postal authorities with remarks Address moved , found that the same creates doubt as to whether the appellants therein were in existence at the given address or not. After referring to the submissions made on behalf of the petitioners, the first respondent has recorded her findings from paragraph 18 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y have not violated the actual user condition and terms and conditions attached to advance authorizations. The final findings are recorded in paragraphs 29 to 31 of the order which read thus:- 29. Based on the above, I find that opportunity has been given and has been availed of by the party for hearing before the Jt. DGFT, Surat subsequent to the order of High Court of Gujarat at Ahmedabad dated 05.02.2010. Also due investigation have been carried out independently by Jt. DGFT, Surat on whether the Resultant product which was to be manufactured out of imported material was actually supplied to the 100% EOU unit of M/s. Khan Garments, Andhra Pradesh and M/s. Raja Textiles, Hyderabad. I find that after due investigation carried out by JDG, Surat, by way of calling detailed report from the concerned authorities it is seen that the resultant product has not been supplied to 100% Export Oriented Units contrary to what was claimed by the appellant. The appellant has also not been able to prove either before the Jt. DGFT, Surat or before this Authority that they have not misused the imported duty free goods and has not violated the Actual User conditions of the Advance licences defe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners to make their representation thereon. Nonetheless, the aforesaid directions appear to have been totally ignored by the respondents herein while passing the impugned orders, inasmuch as, both the respondents have placed reliance upon the investigation carried out by the DGFT through its own sources, which has not been furnished to the petitioners. Evidently therefore, the impugned orders suffer from the breach of principles of natural justice. 10. Moreover, by the impugned order, a fiscal penalty of ₹ 25 crores has been imposed upon the petitioner firm under section 11(2) of the Foreign Trade (Development and Regulation) Act. From the record of the case as referred to hereinabove, it is evident that at no point of time were the petitioners put to any notice as regards any proposal to impose any penalty upon them. Under the circumstances, the order of penalty, which has been imposed without issuing any notice to the petitioners in respect thereof, clearly suffers from the vice of breach of the principles of natural justice. 11. Another aspect of the matter is that the respondents in the impugned orders have placed reliance upon the investigation carried out by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorities constituted under the Foreign Trade (Development and Regulation) Act, 1992 and are not governed by the directions of the Central Excise or the Customs authorities. Therefore, the respondent authorities are not justified in acting as per the dictates of the DRI, Ahmedabad instead of carrying out independent inquiry on its own and acting in terms thereof. When the respondents decide the applications of the petitioners, they are expected to consider the same independently without in any manner being swayed by any instructions issued by the DRI. It is evident, therefore, that the impugned orders have not been passed independently but appear to have been passed under the dictates of the DRI whereby the DRI authorities have directed the authorities not to grant the EODC applications made by the petitioners. The impugned orders, which suffer from various legal infirmities as discussed hereinabove, therefore, cannot be sustained. 13. Having regard to the period which has elapsed since the issuance of the show-cause notices, the business of the petitioners has come to a standstill and hence, at this stage, the petitioners are not interested in obtaining advance licences and hen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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