2016 (6) TMI 815 - HC - Customs

Court invalidates penalty on petitioner firm, citing lack of notice and violation of natural justice. Orders remanded for fresh consideration.

The court found the penalty imposed on the petitioner firm to be illegal and without jurisdiction, as it was done without issuing any notice, violating ... Denial of issuing Advance Licence as per the FTP - allegation of violation of actual user condition in respect of earlier licenses - petitioners were informed that their request for advance licence could not be considered in view of the letter of the DRI and that the petitioners should take up the matter with the concerned DRI, Ahmedabad Held that:- 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. 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. Issues Involved:1. Legality and jurisdiction of the penalty imposed on the petitioner firm.2. Violation of court directions and principles of natural justice.3. Reliance on materials and investigations not furnished to the petitioners.4. Independent decision-making by respondent authorities versus acting under DRI's dictates.5. Contradictory reports from Central Excise authorities.Detailed Analysis:1. Legality and Jurisdiction of the Penalty:The petitioners argued that the penalty imposed on them was illegal and without jurisdiction as they were not notified about any proposal for such a penalty. The court found that the penalty of Rs. 25 crores imposed under section 11(2) of the Foreign Trade (Development and Regulation) Act was done without issuing any notice to the petitioners regarding the penalty, thus violating the principles of natural justice. Consequently, the court held that the order imposing the penalty was without authority of law.2. Violation of Court Directions and Principles of Natural Justice:The petitioners contended that the respondents violated specific court directions by not deciding the matter within the stipulated time and by not providing the adverse material to the petitioners. The court noted that despite its clear directions in the order dated 1st November 2012, the respondents failed to supply the adverse material to the petitioners, thus breaching the principles of natural justice. The court emphasized that the respondents must independently decide the proceedings and provide any adverse material to the petitioners for their representation.3. Reliance on Materials and Investigations Not Furnished to the Petitioners:The court observed that the respondents heavily relied on investigations and reports from the DRI and other authorities without furnishing these materials to the petitioners. This reliance on undisclosed materials constituted a breach of natural justice. The court highlighted that the impugned orders referred to investigations and reports that were not provided to the petitioners, thus invalidating the orders.4. Independent Decision-Making by Respondent Authorities Versus Acting Under DRI's Dictates:The court found that the respondents did not act independently but rather followed the dictates of the DRI. The respondents were expected to conduct an independent inquiry and make decisions based on their findings. The court criticized the respondents for relying on DRI instructions instead of carrying out their independent assessment, thereby failing to act as autonomous authorities under the Foreign Trade (Development and Regulation) Act.5. Contradictory Reports from Central Excise Authorities:The court noted the contradictory reports from different Central Excise authorities regarding the petitioners' compliance with the advance license conditions. While the Central Excise authorities at Surat confirmed the supplies made by the petitioners, the authorities at Patancheru reported irregularities. The court found that the respondents selectively relied on the adverse reports without justifying why the favorable reports were disregarded, thus demonstrating a lack of fair play.Conclusion:The court allowed the petitions, quashing the impugned orders dated 16th February 2015 and 14th August 2013. The matters were remanded to the second respondent for fresh consideration in accordance with the law. The court directed that any adverse material should be furnished to the petitioners, allowing them to respond before concluding the proceedings within three months. The rule was made absolute with no order as to costs.