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TMI Blog2018 (8) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Order dated 16th December, 2013 passed in the present Writ Petition crystallises the two issues that arise for consideration. First issue relates to the jurisdiction of the Development Commissioner appointed under Section 11 of the Special Economic Zones Act, 2005 ('SEZ Act' for short) to pass an order imposing penalty under Section 11 (2) of the F.T. Act. Second issue relates to imposition of penalty, the 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. 4. The petitioner consequent to letter of approval issued under Rule 19 of the Special Economic Zones Rules, 2006 ('SEZ Rules' for short) had established a unit for manufacturing biodiesel, blended biodiesel and glycerin in the Visakhapatnam, Special Economic Zone ('VSEZ' for short). 5. On 29th March, 2010, the petitioner made an application for issuance of two Generalised System of Preferences Certificates of Indian Origin ('GSP Certificate', for short) with the office of Development Commissioner, VSEZ, for export of Fatty Acid Methyl Easter (FAME), commonly known as biodiesel, to Switzerland. Application was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th March, 2010. Penalty of Rs. 66.30 crores under Section 11(2) of the F.T. Act, being the value of the American origin biodiesel, which was three times undue profit earned by the petitioner, was also imposed. Personal penalty of Rs. 3.30 crores under Section 11 (2) of F.T. Act was imposed on Mr. Motturi Srinivas Prasad, Chairman, Chief Executive Officer and Director of the petitioner. Penalty of Rs. 50 lakhs was imposed on Mr. S.V.H. Rao, Director and Chief Executive Officer of the Unit. Importer-Exporter Code of the petitioner was directed to be suspended for a period of 1 year from the date of the issue of the order or till the penalties were paid, whichever was later. 13. Aggrieved, the petitioner preferred an appeal before the Appellate Authority and also approached the High Court of Andhra Pradesh by filing a writ petition. The writ petition was subsequently withdrawn. The Appellate Authority vide order dated 14th February, 2012 upheld the order passed by the Development Commissioner, VSEZ. 14. The petitioner, thereupon, had filed Writ Petition (Civil) No.1022/2012 before the High Court of Delhi which was partly allowed with an order of remit to the Appellate Authority for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er VSEZ under challenge before it had not been set aside and the Adjudicating Authority had been asked to deliberate on the additional issues raised. 20. Petitioner had also filed Writ Petition (Civil) No. 2016/2012 challenging order dated 6th April, 2012 rejecting the bond submitted for export of biodiesel and direction to submit bank guarantee of Rs. 50 Crores and security bond covering the balance of Rs. 20 Crores by securitization of unencumbered assets. This writ petition was disposed of vide order dated 12th April, 2012 granting some relief by modifying impugned order dated 23rd March, 2012 in terms of directions given therein. The petitioner had filed application, C.M. No. 5366/2012 in Writ Petition (Civil) 2016/2012, which was disposed of vide order dated 2nd May, 2012 directing the respondents to treat the Importer-Exporter Code of the petitioner as valid for limited purpose of re-export of goods and subject to compliance of all the rules and regulations. 21. Alleging non compliance of the above order dated 12th April, 2012, the petitioner had filed a contempt petition in this High Court. However, the respondents approached the Supreme Court vide Special Leave Petition ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elf certification basis. BEZ Act, 2005 and SEZ Rules, 2006 do not provide any instruction to issue of GSP (Certificate of Country of Origin) by the SEZ Officials. The Development Commissioner is overall in charge of SEZ in terms of section 12(2)(3) of SEZ Act and has to discharge function under the SEZ Act in terms of Section12 of SEZ Act. However, in terms of Section l2 (4) of SEZ Act, Development Commissioner has also to discharge such functions and exercise such powers as may delegated to him by general or special order by the Central Government or State Government concerned, as the case may be. The Development commissioner has also been authorized to issue GSP Certificate of origin by the Central Government under Foreign Trade Policy as referred in Appendix 4 A of the hand book of procedures for "SEZ cargo". The Ministry of Commerce & Industry vide their letter No. C.8/3/2009-SEZ Dated 20.08.2009 (Instruction No.33) has directed the Development Commissioner to issue GSP Certificate on the same date. The entire SEZ framework is based on providing a conducive environment to the exporter to manage his business free from controls so that there is no time lost in meeting his export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also to the country. Such illegal activities can lead to withdrawal of the GSP benefit extended by EU to Indian exporters. Hence it definitely amounts to an activity that is gravely prejudicial to the trade relations of India with the European Union and constitutes an offence under Section 8(1) (b) of the Foreign Trade (Development and Regulation) Act, 1992. India is one of the major beneficiaries of the GSP and as per statistics released by the European Union (Memo/11/284 Brussels, 10 May 2011),The 2 GSP Certificates of Indian origin fraudulently obtained for export of 11999.876 MT and 13000.415 MT of Bio-diesel (FAME) under false cover of SEZ transaction and by falsely declaring that the goods fulfill the Origin requirements as specified in the GSP, Rule 14 of the Foreign Trade (Regulation) Rules, 1993 framed under the FTDR Act, 1992 provides that no person shall employ any corrupt or fraudulent practice for the purposes of obtaining any licence or importing or exporting any goods. This action on the part of the SEZ Unit being gravely prejudicial to the trade relations of India with the European Union, also constitutes an offence under Section 8 (1)(b) of the FTDR Act, 1992. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Where any person makes or abets or attempts to make any export or import in contravention of any provision of this Act or any rules or orders made thereunder or the export and import policy, he shall be liable to a penalty not exceeding one thousand rupees or five times the value of the goods in respect of which any contravention is made or attempted to be made, whichever is more. (3) Where any person, on a notice to him by the Adjudicating Authority, admits any contravention, the Adjudicating Authority may, in such class or classes of cases and in such manner as may be prescribed, determine, by way of settlement, an amount to be paid by that person. (4) A penalty imposed under this Act may, if it is not paid, be recovered as an arrear of land revenue and the Importer-exporter Code Number of the person concerned, may, on failure to pay the penalty by him, be suspended by the Adjudicating Authority till the penalty is paid. (5) Where any contravention of any provision of this Act or any rules or orders made thereunder or the export and import policy has been, is being, or is attempted to be, made, the goods together with any package, covering or receptacle and any conveyances s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf." The aforesaid section states that any penalty may be imposed or confiscation may be adjudged by the Director-General or subject to such limits as may be specified, by such other officer as the Central Government by a notification in the Official Gazette would authorise. 28. In terms of the power conferred under Section 13 of the F.T. Act, the Government of India had issued Notification No. SO 194 (E) dated 6th March, 2000 appointing Development Commissioners, Export Processing Zones as Adjudicating Officers under Section 11 without limit in respect of export oriented units and units in export processing zone under their jurisdiction. The notification states that the same has been issued for the purpose of exercising powers under Section 13 read with Section 11 of the F.T. Act and amends earlier Notification No.SO 1059(E) dated 31st December, 1993. 29. By Notification No. S.O. 193(E) also dated 6th March, 2000, Additional Secretary, Ministry of Commerce aided by two Joint Secretaries and a Director of that Ministry were bestowed with powers to function as Appellate Authority under clause (b) to sub-Section (1) of Section 15 of the F. T. Act against the orders passed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. 33. Referring to the Gazette Notifications No. S.O. 193(E) and 194(E) both dated 6th March, 2000 issued by Ministry of Commerce, Government of India, it was submitted by the petitioner that the said notifications were inconsequential and would not confer any right on the specified authorities, in view of the Section 23 of the SEZ Act. These notifications were issued prior to enforcement of the SEZ Act, w.e.f. 23rd June, 2005, and therefore would not be applicable. Reliance placed by the respondents on Notification No.102 (RE2008)2004-09 dated 17th April, 2009, for identical reason and ground would be fallacious and contrary to law. Section 23 of the SEZ Act would prevail and has primacy. 34. We would now like to refer to Sections 20, 21, 22 and 23 of the SEZ Act, which read as under:- "20. Agency to inspect- Notwithstanding anything contained in any other law for the time being in force, the Central Government may, by notification, specify any officer or agency to carry out surveys or inspections for securing of compliance with the provisions of any Central Act by a Developer or an entrepreneur, as the case may be, and such officer of agency shall submit verification and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which any suit of a civil nature in a Special Economic Zone had been filed before the commencement of this Act, shall continue to try such suit after such commencement: Provided further that the courts in which any trial of any notified offence is being conducted before the commencement of this Act, shall continue to conduct the trial of such offence after the commencement of this Act: Provided also that the courts competent to try any notified offence, before the commencement of this Act, shall conduct the trial in respect of such offence after the commencement of this Act until the courts have been designated under sub-section (1) and all such cases relating to such trials shall thereafter be transferred to such courts so designated which shall conduct the trial from the stage at which such cases were so transferred." 35. Section 20 empowers the Central Government to specify by way of Notification, any Officer or Agency to carry out surveys or inspections for securing compliance with the provisions of any Central Act by a Developer or an entrepreneur, as the case may be, and such officer or agency shall submit verification and compliance reports with respect to the time and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otified offence instituted before commencement of the Act, shall continue to be conducted after commencement of the Act. The third proviso states that the court competent to try any notified offence before the commencement of this Act shall conduct the trial in respect of such offence after commencement of the Act till courts have been designated under sub-section (1) and thereupon the proceedings shall be transferred to the courts so designated, which shall then conduct the trial from the stage at which the said trial was so transferred. 39. It is an accepted and admitted position that designated courts under Section 23 of the SEZ Act have not been notified in respect of the Visakhapatnam SEZ (VSEZ). Constitution of the special courts under Section 23 of the SEZ Act is optional and not mandatory. 40. We would record that Section 24 of the SEZ Act deals with appeals to the High Court from the designated court under sub-section (1) to Section 23. Section 25 of the SEZ Act deals with offences by the companies and liability of the person in charge of and responsible for conduct of business of the company and states that such person or company shall be deemed to be guilty of the offen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relate to the SEZ Act. The Notification SO Nos. 76(E) and 77(E) are empowering and bestow and authorise the Development Commissioners with additional powers and do not abridge and repudiate power and authority to adjudicate violations of Section 11 of the F.T. Act as Adjudicating Authority under Section 13 of the F.T. Act. 45. In the context, we would also refer to and examine Sections 49, 51 and 58 of the SEZ Act, which read as follows:- "49. Power to modify provisions of this Act or other enactments in relation to Special Economic Zones- (1) The Central Government may, by notification, direct that any of the provisions of this Act (other than sections 54 and 56) or any other Central Act or any rules or regulations made thereunder or any notification or order issued or direction given thereunder (other than the provisions relating to making of the rules or regulations) specified in the notification-- (a) shall not apply to a Special Economic Zone or a class of Special Economic Zones or all Special Economic Zones; or (b) shall apply to a Special Economic Zone or a class of Special Economic Zones or all Special Economic Zones only with such exceptions, modifications and adapt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 or any other Central Act, Rules, Regulations, notification, order or directions given other than the provisions relating to making of the rules and regulations, shall not apply or shall apply, subject to exceptions, modifications and adaptation. Sub-section 2 to Section 49 requires every such notifications to be laid in draft before each Houses of Parliament while it is in session or two or more successive sessions and on non-approval or modification of both the houses, the provision shall cease to operate or would be modified. It is not the case of the petitioner that any notification under Section 49 of the SEZ Act has been issued making the provisions of the F.T. Act inapplicable. In fact the argument predicated on Section 49 of the SEZ Act would not assist and help the petitioners, but support the case of the respondents that the provisions of the F.T. Act shall continue to apply and would be effective, notwithstanding, the fact that violations under the F.T. Act have been designated as notified offences under the SEZ Act. 47. Section 51 of the SEZ Act states that the provisions of the said Act shall have effect notwithstanding anything inconsistent contained in any other la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said Section, penalty imposed or confiscation made under the F.T. Act is in addition to and would not prevent imposition of any other punishment to which the said person is liable under any other law for the time being in force. Constitutional vires of Section 12 of the F.T. Act is not under challenge. Question of double jeopardy is not alleged. Penalty under provisions of the SEZ Act has not be imposed. We are, therefore, of the opinion that in the factual matrix of the present case, it cannot be said that the Development Commissioner and the Appellate Authority lacked jurisdiction to impose penalty under Section 11 read with Sections 13 and 15 of the F.T. Act, for vide Notification No. SO 76 (E) and SO No.77 (E) both dated 13th January, 2010, acts and omissions under the F.T. Act have been also declared and made designated offences for purpose of Section 21(1) of the SEZ Act and Development Commissioner has been authorized to act an Enforcement Officer under Section 21(2) of the SEZ Act. 50. For the detailed reasons given above, the first contention is rejected. Violation of Section 11 of the F.T. Act 51. Hand Book of Procedures (Volume-I) for the period 27th August, 2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Presently, 46 countries are members of GSTP and India has exchanged tariff concessions with 12 countries on a limited number of products. EIC is sole agency authorised to issue CoO under GSTP." Paragraph 2.21 of the Hand Book of Procedures (Volume-I) defines and expounds the term "Certificate of Origin" and states that it was a certificate to establish evidence of origin of goods imported in a country and was of two types, preferential and non-preferential. The difference in the two being whether the GSP issued would make the export eligible for tariff preference under the agreed arrangements/agreements. Clause (a) of Paragraph 2.21.1 states that GSP was a non-contractual instrument by which industrialized (developed) preferential countries unilaterally and based on non-reciprocity, had extended tariff concessions to developing countries. Paragraph had enlisted and referred to countries that had extended tariff preferences under their GSP Scheme. The countries listed included Switzerland. GSP Scheme of these countries had detailed and stated the sectors and the products and tariff lines under which benefits were available, including conditions and procedures governing benefits. Cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates were issued on basis of self certification by the export units located in the SEZs. GSP Certification for the SEZ units was processed and certified on self declaration. Respondents on the basis of the self declaration or certification given by the units located in the SEZ, would endorse and stamp the certificate. Reference was appropriately made to Rule 75 of the SEZ Rules which reads as under:- "75. Self Declaration - Unless otherwise specified in these rules all inward or outward movement of goods into or from the Zone by the Unit or Developer shall be based on self declaration made and no routine examination of these goods shall be made unless specific orders of the Development Commissioner or the Specified Officer are obtained". Reference was also made to Rule 46 1 (C) and Rule 27 (10) of the SEZ Rules, which read as under:- 46. Procedure for Export - (1) The procedure for export from Special Economic Zone through seaports or airports or Inland Container Depot or Container Freight Station or Land Customs Station or by Post or by Courier or by Personal Carriage, as the case may be, shall be as under:- (c) the goods. shall not be subjected to routine examination and (Let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s order dated 21st December, 2011, wherein he has dealt with said aspect in detail. 58. The Appellate Authority had also dealt with the said argument and observed as under:- "10. The Committee heard all the arguments and the documents submitted by both the parties. The main issue under consideration in the present case is whether the Unified Executive Instructions issued by EIC for issue of GSP certificates of origin will be applicable or the provisions of SEZ Act/Rules will apply. The Committee referred to a. communication, which was also shared with the Appellant, wherein the EIC has clarified that the Unified Executive instructions on issue of GSP certificates of origin are, internal instructions of EIC and have not been approved by the Government/Department of Commerce. This clarifies the position that these instructions will not be applicable to SEZs. Hence the action taken by the adjudicating authority under the SEZ Act/Rules and FR(D&R) Act are correct. GSP is an instrument through which countries extend tariff concessions. This is a major benefit for the exporters of the country which exports the product under GSP. Issue, of GSP certificate which is factually incorrect a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untry'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. Appellate Authority had also issued directions that the SEZ Division in the Department of Commerce should put proper system in place alognwith elaborate instructions on the precautions and procedures to be followed for GSP certification for SEZ units. 59. 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. Second contention is therefore, rejected. 60. In view of the aforesaid discussion, we do not find any merit in the present writ petition and the same is dismissed. Respondents would be also entitled to costs, as per the Delhi High Court Rules. X X X X Extracts X X X X X X X X Extracts X X X X
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