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TMI Blog2018 (6) TMI 206X X X X Extracts X X X X X X X X Extracts X X X X ..... order stood confirmed by the Advisory Board in terms of a Report dated 16th March, 2018 and the said decision was communicated to the Detenue by a Memorandum dated 21st March, 2018 issued by the Deputy Secretary, COFEPOSA stating that his representation dated 24th January, 2018 had been rejected. This Memorandum was served on the Detenue in the Tihar Jail on 23rd March, 2018. On an oral prayer, the Court has permitted the Petitioner to challenge the said memorandum dated 21st March 2018 in these proceedings. Background 3. The background to the present petition is that the Director General of Foreign Trade ('DGFT'), Ministry of Commerce issues licenses to exporters in various schemes as an incentive to them for making exports and increasing quantum of the same. The licenses are also called 'scripts' and carry a monetary value. They can be utilized for payment of import duty or for the import of any item which is in the Open General List ('OGL') i.e. freely importable. These scripts are a tradable commodity by themselves. The scripts have to be registered by exporters with the Customs Department on the Electronic Data Interface ('EDI'). 4. The procedure that is envisaged is that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... athror, who claimed to have his own business of sale and purchase of scripts. Mr. Pathror was carrying on business through various firms such as M/s. Mahi Impex, M/s. HMR International, M/s. Mahi International and M/s, Rudraksh International. It is stated that the Detenue bonafide purchased scripts/licenses from the various firms of Mr. Pathror against payments. 9. According to the Petitioner, in September 2015, the Detenue came to know about the alleged fraud involving the scripts and the consequent initiation of enquiry proceedings by the customs officials regarding hacking of the customs system and passwords of the officers of the Customs Department. The Detenue, as a G-Card holder of M/s. Kirti Cargo, was informed by the customs officials about the fraudulent use and tampering of some of the scripts. He was advised by them to deposit some ad hoc duty which would be refunded after completion of enquiry. 10. The Petitioner claims that as advised by the custom officials, he deposited an ad hoc duty of Rs. 1.25 crores on 16th September 2015. On 18th October 2015, he further deposited Rs. 79,04,500/-; and in November, 2015, Rs. 55,00,000/-. Thus, in aggregate, a total sum of Rs. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, voluntarily sent another statement under Section 108 of the Act again on 16th July 2016. 15. It is stated that on 21st July, 2016 another summons were sent to the Detenue through counsel by the Customs Department requesting for relevant documents. According to the Detenue, the Department had already seized all the documents from his residence and office which had been sealed by them. A copy of the letter dated 3rd August, 2016 addressed by the Inspector of Customs to the Superintendent of Customs ('SIIB') forwarding the Detenue's statement under Section 108 of the Act was received by the Detenue. The complaint filed by the Customs Department with the Economic Offences Wing ('EOW') led to the registration of FIR No.151 dated 19th September, 2016 with the Cyber Crime Cell ('CCC'), EOW, Delhi Police. 16. On 15th November 2017, the statement of the Detenue was recorded by the Department where he again explained the whole process. Thereafter on 16th November 2017, the Detenue was arrested. Inter alia the grounds of his arrest were that investigation in respect of 33 importers who had used fraudulent licences had concluded. Thirty three show cause notices ('SCNs') involving a custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd begun their investigation. Further, it was not the case of the SIIB that the Detenue had committed any prejudicial activity after 15th September, 2015 till the date of his arrest on 15th November, 2015. Also, the Department had not produced any proof of service of summons upon the Detenue to substantiate the plea that he was avoiding summons. The fact that he had paid Rs. 2.59 crores under protest on the oral demand of the Customs officials was not taken into account while passing the detention order. However, the Advisory Board by Memorandum dated 21st March, 2018 rejected the representation and by an order dated 23rd March, 2018 confirmed the detention of the Detenue for a period of one year. 23. Notice in this petition was issued on 1st May, 2018. By an order dated 4th May, 2018 the detention order dated 2nd January 2018, which had inadvertently been left out from being enclosed with the petition, was taken on record by the Court. Reply of the Respondents 24. A counter affidavit has been filed on behalf of the Respondent Nos. 1 and 2 and a separate one by the Respondent No.3. Inter alia, it is pointed out that Mr Ramesh Chadha, proprietor of M/s Kirti Cargo in his voluntar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s Kirti Cargo for alleged misutilization of scripts was revoked. It is contended that the amendment in the license particulars cannot be done by any outsider since the EDI System is password protected and the user ID and passwords are known to the customs officers alone. Further scripts are entered into the EDI System only after authorization code is entered by the Superintendent In- Charge and is also verified by the Deputy Commissioner/Joint Commissioner. In other words, the scripts are secured by a two-layer verification under the secret password which was allotted to the Superintendent and on every 15 days the password is changed. Grounds of detention 28. In the grounds of detention, the allegation against the Detenue is that he was engaged in utilizing the tampered, fictitious, non-existent licenses/scripts by hatching a scheme with Mr Vinod Kumar Pathror. He was alleged to have fraudulently entered wrong details in the Customs EDI System after illegally gaining access to the system. There were three types of fraud alleged to have been committed by the Detenue: (a) Registering a higher value of the goods or the duty in the EDI System than what is given in the scripts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: '55.2In this regard, I observe that ICD TKD Export Commissionerate, New Delhi, the concerned Customs formation, is working under EDI system. As per procedure of registration of script/ license in EDI system, genuineness of scrip can be ascertained while it is registered in EDI system and once it has been registered in EDI system and duty has been debited with the said scrip, there may not be any reason to doubt about the genuineness of the said scrip. I, further find that ICD, TKD Export, New Delhi being an EDI Port, details of registered scripts are available in EDI system and debit of duty has to be made on the EDI system only, which appear to be verifiable on the system directly. As genuineness of scrip could have been ascertained at the time of registration of script in EDI system I, further, observe that in present case, as per preliminary investigation, done till now, the said CB has not been found involved in trading of CB license. I, therefore, observe that the omission/contravention, if any, on the part of CB in such a scenario does not prima facie appear to be grave enough to continue suspension of their CB license." 32. The said order further noted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of each case. No hard and fast rule can be precisely formulated that would be applicable under all circumstances and no exhaustive guidelines can be laid down in that behalf. It follows that the test of proximity is not a rigid or mechanical test by merely counting number of months between the offending acts and the order of detention. However, when there is undue and long delay between the prejudicial activities and the passing of detention order, the Court has to scrutinise whether the detaining authority has satisfactorily examined such a delay and afforded a tenable and reasonable explanation as to why such a delay has occasioned, when called upon to answer and further the Court has to investigate whether the causal connection has been broken in the circumstances of each case." Relevant factors not taken into account 36. There are certain factors that have not been taken into account by the Detaining Authority. The first is about the payment of Rs. 2.59 crores, made by the Detenue under protest in September, 2015 itself. While the Detenue states that the payment was made by him, it is the case of the Respondents that the payment was made by M/s Kirti Cargo. However, given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich in turn referred to the decision of the Supreme Court in Khurjibhai Dhanjibhai v. State of Gujarat (1985) 1 SCALE 136. 40. The non-considering of vital facts which have a bearing on whether the Detenue should continue to be detained would vitiate the entire detention order. Reference may be made to the decision in Ashadevi wife of Gopal Ghermal v. K. Shivraj, Addl. Chief Secretary to the Govt. of Gujarat (1979) 1 SCC 222 where it was observed as under: 'If material or vital facts, which would influence the mind of the detaining authority one way or the other on the question whether or not to make the detention order, are not placed before or are not considered by the detaining authority it would vitiate its subjective satisfaction rendering the detention order illegal. The detaining authority must exercise due care and caution and act fairly and justly in exercising the power of detention and if taking into account matters extraneous to the scope and purpose of the statute vitiates the subjective satisfaction and renders the detention order invalid then failure to take into consideration the most material or vital facts likely to influence the mind of the authority one way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be changed every 15 days / fortnightly." No likelihood of continued violations 44. The alleged propensity of the Detenue to continue to commit any such fraudulent acts is also not convincing in view of the order of the Commissioner of Customs (Preventive) which acknowledges how difficult it is for any individual to simply hack into the EDI System. Moreover, it is not disputed that the scripts in question are valid only for a period of 18 months. No details have been given in the grounds of detention as to which of the scripts will continue to remain valid beyond 2nd January, 2018 which would warrant the continued detention of the Detenue. 45. The Court repeatedly asked the learned counsel for the Respondents to demonstrate before it in what manner the Detenue would, if the detention order was quashed, be in a position to undertake any of the alleged harmful or prejudicial activities mentioned. The learned counsel for the Respondents was unable to do so. Since no past antecedents of the Detenue have been pointed in the grounds of detention, there was no material to support the conclusion that the Detenue possesses the propensity or potentiality to indulge in smuggling activities ..... X X X X Extracts X X X X X X X X Extracts X X X X
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