Punjab-Haryana High Court
M/S Pace International & Others vs Union Of India & Others on 10 October, 2012
Author: G.S.Sandhawalia
Bench: Ajay Kumar Mittal, G.S.Sandhawalia
CWP No.10076 of 2012 1
IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH
C WP N o. 1 0 0 7 6 o f 2 0 1 2
Da t e of d e ci s i o n : 1 0. 1 0 . 2 0 1 2
M/s Pace International & others ....Petitioners
Versus
Union of India & others ....Respondents
CORAM : HON'BLE MR.JUSTICE AJAY KUMAR MITTAL
HON'BLE MR.JUSTICE G.S.SANDHAWALIA
Present: Mr.Jagmohan Bansal, Advocate, for the petitioners,
Mr.Karminder Singh Walia, Advocate, for the respondents.
*****
G.S.Sandhawalia J.
1. The present writ petition has been filed by the petitioners challenging the action of the respondents to delete the names of the petitioners from the Denied Entity List (for short, the 'DEL') and for recalling the order dated 02.02.2011 (Annexure P-3) passed by the respondents whereby the said orders have been passed without issuing show cause notice to the petitioners.
2. The pleaded case of the petitioners is that they are engaged in manufacture and export of textile articles at Amritsar and carrying out export activities there. As per para No.2.12 of the Foreign Trade Policy declared under Foreign Trade Development & Regulations Act, 1992, no export or import could be made without Import Export (IEC) number which is granted by the regional licensing authority. The detail of the goods exported by the petitioner were given in the writ petition and they had claimed benefit under various Export Incentive Schemes (EIS) including CWP No.10076 of 2012 2 Advance Authorization, Target Plus, DEPB, Drawback etc. The respondents had issued recognition certificates known as Export House Certificate on the basis of minimum prescribed exports. The Director General of the licensing authority, as per Rule 7 of the Foreign Trade (Regulation) Rules, 1993 (for brevity, the 'Rules') may refuse for reasons to be recorded, grant or renew the license in case of contravention of any law related to Customs or Foreign Exchange. Respondent No.2 had issued circular from F.No.18/24/HQ/99-2000/ECA - II dated 31.12.2003 by which the licensing authority may place a firm in DEL after issuing a speaking order. The petitioners, in May, 2011, came to know that the names of their firms have been put in DEL and the Internet site printout was attached as Annexure P-3. The petitioners had, vide a letter dated 16.05.2011, requested the respondents to supply copy of order dated 02.02.2011 passed by them vide which they had put the name of the petitioners in DEL and a subsequent request was made on 29.06.2011 but no response was received from the respondents. Information was sought under the Right to Information Act, 2005 (for short, 'RTA') and the petitioners were asked to deposit copying fee for supplying information under the said Act vide letter dated 16.11.2011 which was also deposited. Thereafter, request was again made on 22.11.2011 and 30.12.2011 but no information was supplied. Accordingly, the writ petition came to be filed on the ground that the names of the petitioners have been put in the DEL without issuing any notice and without granting any opportunity of personal hearing and the order dated 02.02.2011 was also not supplied.
3. Written statement was filed by the respondents today which was taken on record, wherein they took the plea that the petitioners had not availed the alternative remedy of filing an appeal and there was no violation of CWP No.10076 of 2012 3 legal rights of the petitioners. It was admitted that the guidelines were maintained for entering the name in DEL vide circular F.No.18/24/HQ/99- 2000/ECA-II dated 31.12.2003. It was pleaded that the Chief Commissioner of Customs (Preventive), New Delhi, in its letter dated 21.01.2011, addressed to the Director General of Foreign Trade had informed that they had detected a case of large scale misuse of DEPB/Drawback/Focus Product Scheme in respect of export of hand knotted/tufted carpets/floor coverings by resorting to mis-declaration of description of the goods as well as large scale over-valuation of the goods by the 12 firms including the petitioners- firms. As per the investigation, the value of the export goods was declared as `700/- to `800/- per sq.ft., whereas market value of the goods were in the range of `20/- to `85/- per sq.ft. The petitioners found mention in the list of firms which were virtually operated by one Rajinder Arora who was the proprietor of M/s Kay Vee Spinning Mills, Amritsar. Accordingly, it was pleaded that during the last 1 ½ years, the 8 firms had exported goods of a total value of approximately `300 crores and availed undue export benefits exceeding `32 crores. The said proprietor was a habitual offender and a case was registered by DRI in 2004 against him and other persons. The modus operandi adopted by the petitioners was that goods were declared as woollen hand knotted/hand tufted carpets/floor coverings whereas on testing of the goods seized, some of the goods were found to be machine- made instead of being hand-made as declared in the shipping bills. There goods were also found having lessor drawback entitlement and not entitled for the benefits of DEPB and Focus schemes. Thus, enquiry regarding violation of Foreign Trade (Development and Regulation) Act, 1992 was to be initiated against them including cancellation of the IEC code numbers as a preventive step to safeguard the interest of the Government to stop the further misuse of export CWP No.10076 of 2012 4 schemes by the petitioner-firms. After placing the firms in the DEL list and for taking further action, the concerned regional office of the DGFT had been requested that the petitioners-firms be uploaded on their website. The petitioners- firms had an opportunity to file an appeal but they failed to do so. The petitioners had been informed vide letter dated 09.08.2012.
4. Counsel for the petitioners submitted that the orders were passed by posting them on the website and the petitioners had neither been issued show cause notice as required under the instructions nor any reason had been mentioned against which an appeal could be filed.
5. Counsel for the respondents, on the other hand, stressed that an appeal could have been filed as the orders have been passed on 02.02.2011.
6. After hearing the submissions of the counsel for the parties and perusing the pleading, in our opinion, the writ petition has merit. Admittedly, the said orders dated 02.02.2011 had been posted on the website of the Director General of the Foreign Trade wherein petitioners have been put in DEL on the ground of the misuse of the DEPB/Drawback/Focus Product Scheme as per the order of the DGFT. The said order containing reasons have not been appended in the written statement filed by the respondents. The petitioners had been representing for the supply of the copy of the order and the same was not supplied and, accordingly, letter dated 09.08.2012, has been issued after 1 ½ years and that also after the filing of the writ petition. The respondents then informed them that the request made under the Act could not be processed as prosecution proceedings were pending and Section 8 (i) (h) of the RTA was attracted. A perusal of the instructions dated 31.12.2003 which pertain to the guidelines issued by respondent No.2 to maintain the entity list goes on to CWP No.10076 of 2012 5 show that before any such action is taken, a speaking order has to be passed and the aggrieved person would have a right to be heard. Relevant part of the guidelines are reproduced as under:
"F.No.18/24//HQ/99-2000/ECA II Directorate General of Foreign Trade Ministry of Commerce & Industry Udyog Bhavan New Delhi, Enforcement Division To All Port Offices Date: December 31, 2003 Sub: GUIDELINES FOR MAINTAINING THE DENIED ENTITIES LIST (DEL) xxxx xxxxx xxxxx xxxxx
2. Instances have come to notice when external agencies such as DRI, CBI, ED etc request for information in connection with some investigations or sometimes recommend licensing authorities to withhold further licensing facilities to the firms under investigation. In such cases if routine information has been called for the same should be provided. If recommendations to suspend/cancel licenses are also contained in the communication then the information supplied should be adequately examined from the point of view denial of benefits under the Rules/Act. If evidence is found to be insufficient, agencies may be informed that more evidence will be needed before denial of the benefits can be pronounced under the Rules/Act and will mention the reasons why the licensing authority thinks that there is no sufficient evidence to invoke the rules relating to the refusal of license. If external agencies have supplied evidence to the satisfaction of the licensing authority, he shall place the firm in the DEL after issuing a speaking order against the erring firm without disclosing the source of information in the denial order.
3. Sub-rule 7(1) (c) of the Rules deals with cases of fraud and mis-declaration. Whenever it comes to the notice of the licensing authority that a license has been obtained by fraud, forgery, mis-declaration etc., the firm shall be immediately placed in the DEL by issuing an order an licensing authority shall also suspend the IE Code of the firm. The head of the office will thereafter enquire into the case and submit the report within 15 days to the Headquarters to indicate if connivance of any officials was found in perpetrating the fraud. Simultaneously CWP No.10076 of 2012 6 complaint under the Indian Penal Code for fraud/forgery will be lodged with the local police. In cases where head of the office was a party to the decision to grant the license, the file shall immediately be sent to Headquarters.
B. Suspension, cancellation of a license The procedure and policy leading to suspension and cancellation of licenses shall be governed by Section g of the Act read with Rule 9 (suspension) and Rule 10 (cancellation) of the Rules.
C. Right to be heard before passing an order The powers related to refusal, suspension or cancellation of licenses will also require as is the case while exercising any executive authority under the statute, strict adherence to the principle of natural justice. Implying thereby that licensing authority will refuse, suspend or cancel any license after giving the holder of license a reasonable opportunity of being heard and thereafter by passing a reasoned order to be recorded in writing."
7. Admittedly, the abovesaid procedure has not been followed in the present case and the petitioners' valuable right has been seriously affected. The principle of audi alteram partem has thus been violated. A Division Bench of the Bombay High Court in similar circumstances in Hira Exports Vs. Union of India 2008 )227) E.L.T. 196 (Bombay) made the following observations while taking into consideration the circular dated 31.12.2003:
"4. Revenue relies on the said para for their action. A reading of para 2 would indicate that exercise in such cases has to commence when external agencies such as DRI recommends to the licensing authorities to withheld the licence facilities to the firms under investigation. There are two aspects of the matter. If there is recommendation to suspend/cancel the licences then it is for the authority invoking its jurisdiction to examine the information supplied and consider whether there is adequate material to deny the benefit under the Rules/Act. It is only then in such cases can the authority invoke its power under the rules. The other aspect of the matter is that the external agencies must have supplied the evidence to the satisfaction of the licensing authority. The competent authority then shall place the firm in the DEL after issuing a speaking order against the erring CWP No.10076 of 2012 7 firm without disclosing the source of information.
5. From a reading of the said provision name of the present petitioner could have been entered into the 'Denied Entities List' only after complying with the said procedure. According to the revenue itself there is no final order yet. What has been done is as a temporary measure. A consideration of para 2 would indicate that there is a power to suspend i.e. compliance with the regulatory requirements. There must be material before the authority before it can proceed to pass an order.
6. In the instant case, from the affidavit filed on behalf of revenue there is nothing to show that there was any material except the bear communication received by the respondents from the DRI. The requirement of para 2 of the Circular dated 31 st December, 2003 was not satisfied before the action was taken. In the light of that, the inclusion of the name of the petitioner in the 'Denied Entities List' was without authority of law and the order has to be set aside on this count alone.
7. The effect of the petitioner's name being entered in the "Denied Entitles List" results in civil consequences. The Circular itself in para 3 (c) contains- a provision that the authority would strictly adhere to the principles of natural justice. In other words, this would require giving an opportunity to the parties likely to be effected before passing the order. In the instant case, this was not complied with.
8. We further make it clear that if the respondents have otherwise power, it is always open to exercise the jurisdiction after applying the parameters as set out in para 2 of the Circular dated 31st December, 2003.
Rule is made absolute in terms of prayer clause (a). No order as to costs."
8. Accordingly, the writ petition is allowed and the order dated 02.02.2011 passed against the petitioners is quashed. The respondents shall be at liberty to issue a show cause notice to the petitioners within one month from the date of receipt of a certified copy of this order and thereafter, pass a speaking order, in accordance with law. It is, however, made clear that the petitioners shall not avail any duty drawback over the period of one month during the pendency of proceedings before the respondents.
CWP No.10076 of 2012 8
(G.S.Sandhawalia)
JUDGE
10.10.2012 (Ajay Kumar Mittal)
sailesh JUDGE