TaxTMI 
TaxTMI 
2010 (5) TMI 416
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....r Exports (hereinafter referred to as the "petitioners" for short which shall mean and include all the petitioners herein) - 2. The petition by M/s. Minar Exports filed under Article 226 of the Constitution of India, is directed against the order-in-appeal dated 16th November, 2005 (Exh.H) passed by the respondent No. 2- Enforcement Appellate Committee and the order in original dated 13th June, 2005 (Exh.F) passed by the respondent No. 1-Enforcement Committee to the extent it directs payment of compensation, penalties with further direction to deposit amounts mentioned therein more particularly as set out in para X(a) to (c) extracted in para 4 appearing hereinafter. both these orders are passed by the authorities constituted under the the Yarn, Fabrics and Made-ups Export Entitlement (Quota) Policy for 2000-2004 framed by the Government of India, Ministry of Textiles, New Delhi ("Quota Policy, 2000-04" for short). Factual Backdrop: 3. The factual backdrop leading to these petitions lie in committing alleged breach of Quota Policy, 2000-04 by the petitioners arising in the following factual circumstances. The WTO agreement on Textiles and Clothing (ATC) laid down annual quantita....
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....ccording to the respondents, the petitioners by forging various export documents, used the quota allotted to them in Group-I to actually export goods falling under Group-II in the open market to the other exporters from time to time. As a result, the petitioners, according to the respondents, made huge monitory gains for themselves but were not able to make full use of their own quota under Group-I which was allotted to them and thereby deprived the country of the foreign exchange that the country would have earned on the export of quotas allotted under Group-I. Moreover, according to the respondents, the actions of the petitioners in forging Group-I quotas to export Group-II quotas resulted in the complete quota for total exports from India under Group-II being used up well before the year end resulting in an embargo being imposed by the authorities. With the result, all subsequent exports of Group-II textiles to the USA were prevented. The other law abiding exporters, who had been allotted quotas under Group-TI, were thus could not export and suffered great loss as they were unable to fulfil their export contracts. In this game, according to the respondents, not only the country ....
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....etitioners and that no reasonable explanation for these serious discrepancies was offered by them. 11. The respondent No. 1 not satisfied with the stand taken by the petitioners held that the petitioners had not only forged the visas but also submitted forged Entry Summary Sheets. This was done to support their contention that the items exported were under Group-I. That proof of shipment in the form of bank attested invoices and BRCs were also found to be forged attracting penal provisions. 12. On the basis of the above findings, the respondent No. 1 pass an order dated 13th June, 2005 whereunder the petitioners were, inter alia, debarred from making any export for the period of three years from 23rd November, 2004 to 22nd November, 2007 and petitioners were called upon to pay compensation, penalty and make good loss specified in the said Order. 13. The petitioners, not satisfied with the order-in-original preferred appeals and stay applications before the appellate authority - the respondent No. 2. The appeals were heard and decided vide order dated 16th November, 2005; wherein the orders-in-original were upheld. 14. Being aggrieved by the aforesaid orders, the petitioners hav....
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....e guilty exporter from availing of benefits and participating in the export entitlement schemes specified under the said policy as such any penalty imposed under the Quota Policy can at the most relate to the period during which the Quota Policy operated or was in existence and not beyond the period of the quota regime. That the impugned orders in so far as they debar the petitioners from exporting textile products for three years were beyond the period of quota regime constitutes an unjust restriction on the petitioners' right to trade guaranteed under Article 19(1)(g) and right, to livelihood guaranteed under Article 21 of the Constitution as such bad and ought to be set aside. 19. Mr. Venkateswaran sought to canvass that the Quota Policy was a self-contained and self-structured policy, para-17 of which dealt with quota mal practices by exporters. The types of malpractices, the authorities to deal with the same, their powers, punishment and the other procedure were well defined in the said Quota Policy. He submits that the respondent No. 2 failed and neglected to inform the petitioners the order passed in appeal for an inordinately long period of time which has caused irreparabl....
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.... thus, submits that none of the notifications relied upon by the learned counsel for the petitioners state that the officers mentioned therein were the only persons, who could function as authorities under the Act. 22. Mr. Khambatta, in support of the impugned orders borrowed sup port from the notification dated 12th November, 1999 which was valid till 31st December, 2004 issued by the Government of India, Ministry of Textile under the EXIM Policy issued under Section 5 of the Foreign Trade (Development & Regulation) Act, 1999 ["Foreign Trade (D & R) Act" for short]. He placed reliance on clause 17 of the said notification which, inter alia; provided that the respondent No. 1 - Enforcement Committee had the authority to deal with all cases involving fraudulent activities, misrepresentation of facts, falsification of documents, forgery etc. According to him, the expression "deal with" is of the widest amplitude and must be understood to vest power in the respondent No. 1 to impose any punishment or pass any order as may be necessary for giving effect to the Quota Policy. In support of his submission he placed reliance on the judgments of the Apex Court in the case of Delhi Administ....
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....authorized to take all such measures as were necessary to punish, penalise for breach and secure compliance with the provisions thereof. Being so authorized to deal with quota malpractices and violations of the Quota Policy, it is logical to infer that respondent No.1 must be deemed to have power/authority to take all necessary steps to ensure that the non-compliant party, being the petitioners herein, are suitably punished for the gross malpractice and fraud committed by him and to pass necessary directions to levy penalties etc. 26. Mr. Khambatta, without prejudice to the above submission and in the alternative, went on to submit that notification dated 12th November, 1999 was valid till 31st December, 2004. However, Ministry of Textile vide notification dated 9th November, 2004 continued the operation of certain provisions of the Quota Policy for further period. Thus, though the notification initially was up to 31st December, 2004, it was further extended to 31st December, 2007 and from time to time it has been extended and is still holding the field. In this view of the matter, Mr. Khambatta submitted that the notification dated 12th November, 1999 itself conferred power and a....
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....ided under clause-II of the Quota Policy, as and by way of security for ensuring that the exporters complied with the terms and conditions of the Quota Policy and properly utilised the quotas alloted to them. As such, the exporters were required to produce and submit to the Quota Administrating Authority, documents like BRCs as and by way of roof of exports made and foreign exchange recovered by virtue thereof. Upon submission of the said BRCs, the respondent No. 3 was to release the bank guarantees which had been furnished by the concerned export According to him, the petitioners have obtained quotas for export of good under Group-I and Group-II, by submitting Earnest Money Deposit/Bank Guarantees as per the Quota Policy. How ever, the petitioners had forged various documents and thereby exported Group II goods under the quota allotted to them for Group-I goods. This was clearly done to circumvent the difficulty in obtaining further Group-I quotas, which were in high demand at the relevant time and were hard to come by. Upon completion of the exports, the petitioners submitted 55 BRCs to respondent No. 3 and, in turn, the respondent No. 3 bona fidely relying upon the same released....
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...., 2005. The said decisions having been taken after carrying out a detailed review of the facts and law applicable to the matter, if need to be upheld. 33. After having heard the parties at length, on being asked by this Court, all the petitioners barring M/s. Minar Exports (petitioner in Writ Petition No. 952/2006) have produced bank guarantees, which they had furnished by way of bond in favour of the Cotton Textile Export Promotion Council. Clause 7(iii) thereof reads as under: "7. AND WHEREAS accordingly the obligors are executing this bond in the sum as mentioned therein for the purpose and on the terms and conditions hereinafter mentioned. i. That the Obligors shall obtain a valid stay from the 1st Appellate Committee within 45 days of dispatch of the TEXPROCIL Forfeiture Order. ii. That the obligor(s) and/or their legal representative/successors and assigns agree to ensure that the compensation shall become payable to Texprocil on Order as and when issued by 1st Appellate Committee. iii. AND NOW IT IS HEREBY FURTHER AGREED, DECLARED AND CONVENATED by the Surety in favour of Texprocil that if the Obligor shall commit a breach in the observance and performance of the terms ....
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....Trade (D & R) Act, Mr. Venkateswaran submits that under Section 13 thereof any penalty may be imposed only by the Director General or, subject to such limit as may be specified by such other officer as the Central Government may, by notification in the Official Gazette, authorize in this behalf. According to him, the only notification dated 20th January, 1999 is authorizing any authority to adjudicate and impose none of the said authorities has imposed punishment on any of the petitioners. He, thus, submits that the reliance placed by the Revenue on the pro vision of Foreign Trade (D & R) Act is misplaced. He further submits that the bank guarantees on which reliance is being placed have already been discharged. The said bank guarantees are not in force as on date as such reliance placed thereon is also misplaced. 37. At this juncture, it is relevant to note that in Writ Petition No.952/2006 filed at the instance of M/s. Minar Exports and another, no proforma of the bank guarantee is produced by either of the parties to the petition. However, the petitioners therein have filed an affidavit stating therein that the wordings of bank guarantee furnished on behalf of M/s. Minar Export....
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....(Quota) Policy 2003-2004 issued by the Cotton Textiles Export Promotion Council. This Show Cause Notice is issued without prejudice to any further action that may be taken against the party concerned or its Proprietor/Directors/Partners under law and regulation in force." The reading of the aforesaid clauses would go to show that the power sought to be invoked for taking action against the petitioners was as detailed in para-17 of the notification dated 12th November, 1999, contents of which read as under: "17. PROCEDURE TO DEAL QUOTA WITH MALPRACTICES BY EXPORTERS (i) The Committees called the Enforcement Committees are constituted with the following composition ……… (ii) ……. (iii) The Enforcement Committees will deal with cases involving the use of any one of the following. In connection with obtaining, extending, utilizing or proving the utilization of quotas: (a) Any fraudulent activity (b) Any misrepresentation of facts (c) Any falsification of documents or forgery (d) Submission of post-dated cheques for extension of entitlements which are dishonoured on presentation to his bank. (iv) The Enforcement Committees will also deal with cases relating to export....
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....rom the open market, for a total quantity of 7.57 Million Square Meters Equivalent (Msne) shipped unauthorizedly during the period January-October 2004, arrived at on the basis of an average premium rate of Rs. 7.50 per sq.mtr prevailing in the market for obtaining quotas under Group II Made-up items. Further, the Committee imposes a penalty of Rs. 1.42 Crores (Rupees One crore forty-two lakhs only) arrived at the rate of 25% of the above amount, thus totaling an amount of Rs. 7.10 Crores (Rupees Seven crores ten lakhs only). The above penalty shall be paid by the exporter within 30 days from the issue of this order. (c) Directs the exporter to deposit an amount of Rs. 3,05,22,214/' (Rupees Three crores five lakhs twenty-two thousand two hundred and fourteen only) in commensurate with the amount of the EMD for which fraudulent Proof of shipments were submitted, along with a penalty amount of Rs. 76,30,553/- (Rupees Seventy-six lakhs thirty thousand five hundred and fifty-three only) arrived at the rate of 25% of the EMD amount, before taking recourse to any appeal procedures, thus totaling to an amount of Rs. 3,81,52,767/- (Rupees Three crores eighty-one lakhs fifty-two thousand s....
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....tices were issued. No material is to be found in the show cause notices issued to the petitioners in this be half. For the first time, reliance was being placed on the said notification in the order-in-original and during the course of hearing of the petitions to justify the impugned order so far as it demands compensation and imposes penalty and directs the petitioners to deposit the amount commensurate with the amount of the EMD. 44. Having said so, it is necessary to mention that an assistance is also sought to be borrowed from the provisions of the Foreign Trade (R & D) Act, 1992. None of the provisions thereof were invoked at any time by the Revenue. 45. Apart from the above, a support is also sought to be borrowed from the clauses of the bank guarantee, the relevant part of which has already been reproduced in para-33 (supra) to justify the recovery of compensation from the petitioners vide impugned orders. It is, no doubt, true that the submissions advanced by learned Additional Solicitor General is attractive and cannot be brushed aside lightly. The submission has some strength but no seeds of the submissions advanced or powers sought to be invoked or clauses of various n....