TaxTMI 
TaxTMI 
2014 (9) TMI 144
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....e Bills of Entry Nos. 2293960, 2294164, 2315553, 2311881 and 2314171 against the Duty Free Import Authorization; (C) Your Lordships may be pleased to issue appropriate writ, order or direction inter alia holding that the goods imported by the petitioner narrated herein above, is included in the list notified by SION and therefore, does not call for any further clarification; (CC) This Hon'ble Court may be pleased to issue a writ of certiorari or any other appropriate writ, order or direction to quash and set aside the impugned order-in-original No. KDL/851/AC VII/PS/2011, dated 12-5-2011 passed by the Assistant Commissioner of Customs (GR.VII), Customs House, Kandla. (CD) xxxxx (D) Your Lordships may be pleased to issue a writ or mandamus or any other appropriate writ, order or direction inter alia directing the respondents, their agents and servants not to cause any interference in the free movement/utilization of the goods of the petitioner;" 1.1 So far as Special Civil Application No. 3031 of 2011 is concerned, the same is also filed by the same petitioner being aggrieved by the action of the respondents, seeking following reliefs :- "8....
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....ner was requested to furnish his submissions in writing so that any submission does not go unnoticed. Learned Senior Advocate for the petitioner was also requested to see that the submissions made by him during the course of arguments, by learned Senior Advocate for respondent Nos. 2 to 4 and learned Advocate for respondent No. 1 are included in the written submissions. The written submissions were submitted and the same are considered by this Court. 2. The present writ petitions raise a common legal issue as to whether Betel Nut - Industrial Grade (the said goods) imported by the petitioner are permissible for import under the Duty Free Import Authorization (DFIA) Scheme under the Foreign Trade Policy (FTP) read with the Standard Input Output Norms (SION) thereunder, and are entitled to exemption under Customs Notification No. 40/2006, dated 1-5-2006 (the said Notification). In Special Civil Application No. 204/2011, the petitioner has further questioned the legality and validity of the seizure of 708 M.T. of the said goods vide Panchnama dated 29-12-2010 and has also challenged the Order-in-Original dated 12-5-2011 passed by the authority pending these proceedings, finall....
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.... such a clarification from the D.G.F.T. Bombay, vide its letter dated 22-11-2010 at the time of assessment of 05 Bills of Entry and provisionally assessed the said Bills of Entry pending receipt of clarification and also called upon the petitioner to seek an amendment of the licenses so as to get specifically (by name) included the said goods. 3.2 After the provisional assessment of 05 Bills of Entry, the petitioner took delivery of the goods which were then transported from the Customs Freight Station (CFS) to the godown of the transporter at Aslali. On 10-12-2010, the Assistant Director, DRI, Gandhidham asked the Customs House Agent (CHA) of the petitioner to bring back the goods to the CFS, Gandhidham. By letter dated 13-12-2010, the petitioner submitted a detailed representation contending that he could not be asked to bring back the goods after provisional clearance by the Department as in any case, the final assessment of the Bills of Entry is yet to be done which should be undertaken by the Department. On 29-12-2010, the DRI seized the consignment of the said goods covered under the five Bills of Entry, referred to above, on the ground that the same were liable for c....
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....sent proceedings (SCA No. 204/2011) as specifically mentioned in the appeal memo, the petitioner filed a statutory appeal against the said order before the appellate authority. 3.5 In so far as the remaining 16 Bills of Entry in respect of 2238 MT of Betel Nut/Areca Nut is concerned, after notice was issued in the first writ petition on 13-1-2011, the said goods covered under the 16 Bills of Entry pending assessment by the proper Officer, were seized vide Panchnama dated 7-2-2011. The petitioner, therefore, filed second writ petition being Special Civil Application No. 3031/2011, challenging the legality and validity of the seizure of the said goods and for a direction to the authorities to pass assessment orders in respect of these 16 Bills of Entry covering the seized goods, by accepting the DFIA and by granting the exemption under the said Notification. 3.6 The Court issued notice in the second petition on 14-3-2011 which was served on the respondent No. 5 on 16-3-2011. It is a matter of fact, which is brought on record during the course of submissions, that on the next day i.e. on 17-3-2011, the authorities on their own, transferred these 16 Bills of Entry from ....
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....as further recorded that upon receipt of the so-called (purported) assessment orders, the petitioner would take steps for making necessary amendment in the petition [2011 (270) E.L.T. 356 (Guj.)]. It is the case of the petitioner that no assessment order is served upon the petitioner in respect of the 16 Bills of Entry till date. 3.8 The Department challenged the aforesaid order of this Court in Special Leave Petition (Civil) No. 11700/2011 before the Hon'ble Supreme Court and by interim order dated 12-5-2011, after considering the readiness and willingness of the petitioner to deposit the entire amount of duty assessable on the goods under protest and without prejudice to its rights and contentions, the Court directed that the goods covered under the 16 Bills of Entry would be released. Accordingly, subject consignment was cleared on the payment of duty under protest, as aforestated. Thereafter the Hon'ble Supreme Court finally disposed of the S.L.P. by its order dated 24-11-2011 with a request to this Court to take up Special Civil Application No. 3031/2011 and take a final decision thereon as expeditiously as possible. It was further agreed that the petitioner would not ....
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....t allowed under SION and obtaining DFIA fraudulently by misrepresentation, a show cause notice was issued by D.G.F.T. on the said firm on 4-3-2011, which is produced in these proceedings. The record indicates that said firm then sought a clarification from D.G.F.T. vide its letter dated 17-8-2011 on the issue whether other tanning agents including Areca Nut, though not specifically named at item 12(b) and 12(c) of G-7 in SION were permissible for import under DFIA. D.G.F.T. placed this issue before the Norms Committee on 20-10-2011 which, after considering the technical aspects of the matter, concluded (at page 204) that the inputs under Sr. No. 12 of SION G-7 contained 'tannins' and hence were capable of use in the tanning process, and that the use of the words 'such as' mentioned therein was merely to indicate that there could be several items that could fall in the SION and under that entry the inputs allowed clearance should be capable of being used for the purpose mentioned in each subject category. Based on the aforesaid decision of the Norms Committee, the D.G.F.T. vide its communication dated 20-11-2012 clarified that "as regards whether Areca Nut is covered under Sr. No. 1....
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....e a misrepresentation of the goods being covered under the DFIA at the time of seeking clearance of the goods, is unsustainable in law. The petitioner submits that it had claimed exemption from payment of duty on the basis that the said goods were covered under the DFIA. The goods were correctly described as Betel Nut - Industrial Grade in the Bills of Entry and the claim for exemption was made on the basis that the same were covered under the item 'vegetable tanning agent' permitted for import under the DFIA, which was also submitted. A mere claim for exemption does not amount to misrepresentation and there is no misdescription of goods by the petitioner. The petitioner relied upon a judgment of the Hon'ble Supreme Court in the matter of Northern Plastic Ltd. v. Collector of Customs & Central Excise, reported in 1998 (101) E.L.T. 549 (S.C.), wherein the Hon'ble Apex Court has held that laying claim to some exemption whether admissible or not, is a matter of belief of assessee and does not amount to misdeclaration. (emphasis supplied). 4.4 Learned Senior Advocate for the petitioner, therefore, submitted that the proper officer could not have held a valid or rational reason ....
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....he following grounds : a. That the impugned orders have been passed in breach of principles of natural justice and no notice has been issued to the petitioner before assessing the bills of entry by denying the exemption claimed by the petitioner under the DFIA Scheme. The petitioner relied upon the following judgments. A judgment of this Court dated 4-7-2000 in Special Civil Application No. 167/2000; Special Civil Application No. 1616/2000 and a judgment of the Hon'ble Apex Court in the matter of Kothari Filaments & Anr. v. Commissioner of Customs (Port), Kolkata & Ors., reported in (2009) Vol. II SCC page 192 = 2009 (233) E.L.T. 289 (S.C.) = 2009 (13) S.T.R. 225 (S.C.) for the proposition that, 'assessment orders cannot be passed in violation of principles of natural justice'. (emphasis supplied). b. That the purported assessment orders are not in bona fide exercise of powers by the respondent authorities, but done at the back of the petitioner, pending the present proceedings, without disclosing these facts before the Hon'ble Court, and with a view to render the petition pending before this Hon'ble Court infructuou....
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....notification could only be granted if the goods imported were specifically included in the list of inputs permissible under the DFIA and SION, and since Areca nut/Betel nut was admittedly not included, the petitioner was not entitled to the benefit under the exemption notification. The respondents relied upon a judgment of the Hon'ble Apex Court in the matter of Novopan India Ltd. v. Collector of C. Ex. And Customs, Hyderabad, reported in 1994 (73) E.L.T. 769 in support of the proposition that, 'exemption notifications must be strictly construed and in case of ambiguity whether the assessee falls within its terms or not, benefit of doubt must go in favour of the State'. 5.1 So far as 'legality of the seizure of goods' learned Senior Advocate for respondent Nos. 2 to 4 contended that the same is justified, inter alia, on the following grounds : i. That the petitioner intentionally made a false claim that the imported goods were covered under DFIA and were therefore entitled to exemption from duty under the aforesaid notification, though this claim was untenable, which rendered th....
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.... the petitioner had an alternative adequate remedy available to it under law by way of statutory appeal under Section 128 of the Customs Act, 1962, and in fact had availed of the same and the relief of quashing the subject Order-in-Original ought not to be granted to the petitioner. The respondents relied upon a judgment of the Hon'ble Apex Court in the matter of Assistant Collector of Central Excise, West Bengal v. Dunlop India Ltd. & Ors, reported in 1985 (19) E.L.T. 22 (S.C.) and also on a judgment of the Hon'ble Apex Court in the matter of Union of India v. Guwahati Carbon Ltd., reported in 2012 (278) E.L.T. 26 (S.C.), for the proposition that, 'once a law provides for remedies of appeals, it is a complete code to seek redress and in such circumstances, a petition would not be maintainable irrespective of the vast powers of the High Court under Article 226 of the Constitution of India'. 5.3 On the issue of legality and validity of the purported assessment orders made by the authorities of the 16 Bills of Entry on 23-3-2011 and 24-3-2011 by denying the benefit of the exemption to the petitioner was concerned, the respondents contended that the challenge to the same must ....
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....ttee have expressly clarified that various other goods including Areca nut would fall under the SION though not being specifically enumerated thereunder - pages 202 to 204 of SCA No. 204/2011. iv. That the DFIAs are admittedly endorsed to be transferable under Paragraph 4.2.6 of the FTP and there is no Actual User condition imposed by the Licensing Authority. In fact, the Notes to the SION - page 42 of SCA No. 204/2011 specifically stipulate that, 'only import of supplementary Vegetable Tanning Agents is subject to Actual User condition'. (emphasis supplied). v. That the clarification of the D.G.F.T. dated 26-4-2013 - pages 343 and 344 of SCA No. 204/2011 has to be read in conjunction with Public Notice No. 112 as stipulated therein. Public Notice No. 112, dated 15-5-2012 seeks to amend the 'General Notes for Leather' and 'Leather goods of the SION' by inserting additional Notes. The Public Notice in fact confirms that Betel Nut technically falls under the generic description given in the SION G-7, though not mentioned specifically. Thereafter additional conditions are incorporated in the General Notes, imposing a conditio....
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....ng condition of 'actual use' being implied was also considered and not accepted since it was not a condition stipulated in the licence. The aforesaid judgment of the CEGAT was challenged before the Hon'ble Apex Court and the Hon'ble Apex Court dismissed the Civil Appeal on 27-2-1996 [1997 (94) E.L.T. A129 (S.C.)] and the order of the Tribunal merged in the order of the Hon'ble Apex Court since the Hon'ble Apex Court exercised its appellate jurisdiction and the dismissal was not at the stage of grant of special leave and the same is, therefore a binding precedent. 7.1 Learned Senior Advocate Mr. Joshi for the petitioner submitted that the contentions of the respondents justifying the seizure are untenable for the following reasons : i. The petitioner is neither guilty of misrepresentation or misdescription as stated above and in any case making a claim for exemption does not amount to misrepresentation as contended by the respondents. ii. That there is absolutely no misdescription which has been pointed out by the respondents and in fact, this contention is raised only in the argument and does not form p....
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....ng to the same. iii. That the contention that the petitioner ought to know which clarification was being relied upon since it was produced in the writ petition is misconceived since the petitioner was not even aware that any clarification had been sought for from D.G.F.T., Kanpur and in fact record clearly indicates that the petitioner and the respondent authorities were awaiting clarification sought for by the respondents from D.G.F.T., Bombay, which, even according to the Assistant Commissioner, had not been received till the time of passing the subject order. In any case, the letter of the FTO Kanpur cannot be considered to be a clarification on the issue, least of all, by the D.G.F.T. iv. That contention of alternative remedy overlooks the fact that the impugned order is clearly in breach of principles of natural justice, which constitutes an exception to the self-imposed limitation regarding availability of alternative remedy, and in any case the same has been passed pending the present proceeding where the principal legal issue is being considered and departmental adjudication would necessarily abide by the decision on mer....
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.... opportunity of hearing. Moreover if the respondents proposed to deny the benefits of the exemption claimed by the petitioner it was incumbent on the authorities to give a specific opportunity of hearing on this issue to the petitioner and pass a reasoned order, which has admittedly not been done in this case. v. The contention that the petitioner had an alternative efficacious remedy by way of an appeal, but has not availed of the same within time, is misconceived and not bona fide. In the first place the purported orders of assessment are without hearing and without reasons and, therefore, illegal and the same can be challenged in a writ petition, inasmuch as it is well settled that failure to observe principles of natural justice is an exception to the self-imposed rule of alternative remedy. Secondly, the orders are illegal even on merits as the same ignore the provisions of the FTP, SION and seek to go beyond the DFIA, which is impermissible under law as stated above. Thirdly, the conduct of the respondents indicates a deliberate attempt to bring about a situation whereby the petitioner would be rendered remediless. As stated above, on service ....
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....t is the respondent authorities who have engineered a situation for the purpose of rendering the petitioner remediless and they cannot be permitted to take advantage of their own wrong. The respondents cannot be permitted to contend on one hand that the petition deserves to be dismissed since it has become infructuous because assessment orders have been passed and submit in the same breath that the assessment orders cannot now be challenged by the petitioner since the appeal had not been preferred in time. As stated above, such action is unfair, inequitable and illegal. 7.4 Learned Senior Advocate Mr. Joshi for the petitioner emphatically submitted that the petitioner is entitled to the relief of setting aside the decision of the respondent authorities of denying the benefits of the exemption claimed by the petitioner for the reasons stated above. In any case the orders have been passed pending the present proceedings where a pure legal issue is being considered and departmental adjudication would necessarily abide by the decision on merits in the present case and no useful purpose would be served by relegating the petitioner to the alternative remedy. 8. Learned Se....
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....orders be passed granting benefit of the exemption claimed by the petitioner under Customs Notification No. 40/2006 for the reasons stated above. 11. Since the amount of duty has been deposited pending the proceedings under protest, the consequential orders of refund may also be kindly passed in favour of the petitioner. The Bank Guarantee submitted by the petitioner pursuant to the interim orders of this Hon'ble Court, if the same has not been encashed, would stand discharged and if the same has been encashed, then the amount realized may abide by the direction of the consequential relief of refund. 12. Heard learned Senior Advocate Mr. Mihir Joshi, with learned Advocate Mr. Amar Mithani for the petitioners; learned Senior Advocate Mr. R.J. Oza for respondent Nos. 2 to 4 and learned Advocate Mr. Hriday Buch, for respondent No. 1. 13. In view of the reasons set out herein above, the petitions are allowed. (i) The assessments are quashed and the respondents authorities are directed to pass consequential orders of assessment on revalidation of licences including the orders of refund. (ii) The respondents ar....
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....inst the products specified as output prepared by the Government is known as "SION" [Standard Inputs Outputs Norms], the authority that looks after the scheme is "D.G.F.T." [Directorate General of Foreign Trade]. 17. It is not clear from the record that actually when the petitioner had exported finished leather. However, it is not in dispute between the parties that the petitioner has duly earned DFIA licence by fulfilling the export obligation. The petitioner has said to have imported 3006.88 M.T. areca nuts/betel nuts. These were imported through 21 bills known as Bill of Entry ["B/E" for short] in 163 containers. It all started when the petitioner had submitted 5 B/Es for clearance of 708 M.T. areca nuts. These B/Es were submitted between 29-10-2010 and 9-11-2010 before Kandla Customs Authority. It appears that before the Customs Authority, the petitioner had undertaken to produce amended Authorisation, i.e. amended DFIA Licence. Upon such undertaking given by the petitioner, Customs Authority, Kandla, after verifying the papers submitted by the petitioner, cleared the goods on execution of PD Bonds by the petitioner. 18. At this stage, Directorate of Revenue Int....
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....e. It does not lie in the mouth of the authority that it has complied with the principles of natural justice when the authority called upon the party to remain present on 10-5-2011, wherein notice was served on the party on 6-5-2011 and when the party prays for time on 10-5-2011, the authority proceeded to pass final assessment order on 12-5-2011. The compliance of the principles of natural justice consists of "hearing" - one of the basic ingredients - the other side or at least giving of sufficient opportunity of hearing to the party. Intimating to the party the date of hearing that by itself cannot be said to be in compliance of the principles of natural justice. It is step towards compliance of natural justice. Intimation of date of hearing to the party affected is initial part of compliance of principles of natural justice as the "hearing" is inevitable aspect of natural justice. Intimation is not "hearing". Scope of 'hearing' must not be so constricted or pressed that it obliterates the distinction between 'absence of hearing' and 'hearing'. As to the first ground, in the circumstances of the present case, it cannot be said that the petitioner's prayer for time was intended to....
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.... clarification from D.G.F.T., Mumbai. Since no such clarification is received from D.G.F.T., Mumbai and also by you, you are hereby directed to submit the fresh PD Bonds, extend validity in all cases for further period of six months or till the outcome of DRI investigation." 27. Technically, asking the party to submit fresh PD Bonds for a period of six months on one hand and proceeding to seize the goods on the other hand may not perhaps be faulted with, however, burden lies on the authority to explain rationale to rush into seizure/confiscation of the goods in such circumstances, the reason is the 'proper officer' cannot proceed to seize the goods under Section 110 of the Act unless he has reason to believe. The authority would exercise drastic powers to seize the goods only in case wherein it has reason to believe that the goods is liable to be confiscated. The powers to seize and the powers to confiscate are quite drastic powers. Little elaboration would show apparent inconsistency in the conduct of the respondent, from which it can be said that formation of belief for seizure by the respondent is vitiated. Initially, on the basis of bonds submitted by the petitioner, th....
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....t, 1992 empowers the Central Government to appoint D.G.F.T. Section 6(2) reads thus : "Section 6(2) : Director General shall advise the Central Government in the formulation of the (Foreign Trade Policy) and shall be responsible for carrying out that policy." Thus, on the one hand the Central Government has clothed the D.G.F.T. with the powers to advise to itself (to Central Government) for formulating the policy and on the other hand, D.G.F.T. is held responsible for carrying out the said policy. Further, paragraph 2.3 of the Policy of 2009-2014, provides for "interpretation of policy". It reads as under :- "2.3 : Interpretation of Policy. (a) : The decision of D.G.F.T. shall be final and binding on all matters relating to interpretation of Policy, or provision in HBP v1, HBP v2 or classification of any item for import/export policy in the ITC (HS). (b) : A Policy Interpretation Committee (PIC) may be constituted to aid and advise D.G.F.T." 30. The Entry in issue herein is Entry No. 12 in G-7 in SION. Broadly and roughly it can be said that Entry No. 12 contains name of different items that has 'tannin' content. As Areca nut does not specifically occurs in t....
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....suant to the said clarification, the Authority had concluded that the matter is closed. 34. The respondent has tried to distinguish the above order passed in the case of Raghu Export Pvt. Ltd., by urging that Raghu Export is engaged in the business of manufacturing and export, while the present petitioner is engaged in trading only. Therefore, the above-referred order passed in the case of Raghu Export Pvt. Ltd., cannot help the petitioner. Such a distinction sought to be made by the respondent is not found in the order passed in the case of Raghu Export Pvt. Ltd., in the sense that it does not say that the benefit of duty free import is available to Raghu Export Pvt. Ltd. Because it is the manufacturer. On the other hand, the above quoted clarification in that case made by D.G.F.T. is amply clear and it does not place rider of any nature, limiting the operation of its opinion. It concludes the controversy. 35. In the last, before concluding I may refer clarification dated 26-4-2013. It was heavily relied on by the respondent. The said clarification affirmed public notice dated 15-5-2012 and has withdrawn the clarification issued earlier i.e. on 22-11-2012. 36.&e....
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....ort of Areca nut (i.e. Betel nut) as an input would be permitted only when it is by an actual user, or by anybody (including the actual user) if it is specifically mentioned in the SION of the export product." 39. Further, it was not pointed out specifically by the respondent that how this clarification of 2013, minus confusion created by clarification of 2012 can apply retrospectively to the import that has already taken place. In respect of the imports that were made after issuance of public notice dated 15-5-2012 also the authority felt that there was need for clarification and that it issued clarification dated 22-11-2012. However, as per the say of the authority, clarification dated 22-11-2012 has created confusion. Hence, it considered it to be proper to withdraw the said clarification and it issued fresh clarification dated 26-4-2013. In this situation, the respondent can hardly contend with any force on the aspect of 'retrospective application of clarification dated 26-4-2013'. Further still, in a sense it is not a question of retrospective operation. Pending the petition, the authority examines, re-examines and re-examines the issue and clarifies, withdraws and aga....