21 May 2121

Union of India and Director General of Foreign Trade cannot speak in multiple voices in different High Courts to suit their positions in the respective litigations - Bombay High Court

Case : Shah Nanji Nagsi Exports Pvt. Ltd v. Joint Directorate General of Foreign Trade & others. Writ Petition No. 4838 of 2016

Court : Bombay High Court

Bench : Justice Ujjal Bhuyan & Justice Milind N Jadhav

Decided on : 21 May 2121

Relevant Statutes

Section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992

Rule 7 of the Foreign Trade (Regulation) Rules, 1993

Section 15 of the Foreign Trade (Development and Regulation) Act, 1992

Section 108 of the Customs Act, 1962

Rule 13 of the Foreign Trade (Regulation) Rules, 1993

Brief Facts and Procedural History

1. Petitioner was engaged in the import of corn as directly as well as canalized through public sector undertakings.

2. The petitioner through respondent No.4 had applied before respondent No.1 and was granted two licences for import of maize (corn) under the tariff rate quota scheme, the licences being 0550001698 dated 31.12.2009 and 0550001804 dated 09.04.2010 subject to the 'actual user' condition and other usual conditions of import.

3. The 'actual user' condition as appearing in the two licences was challenged by the petitioner before the Honourable Bombay High Court in Writ Petition (L) No.2520 of 2013 besides demanding a refund of customs duty paid by the petitioner under protest. During the pendency of the writ petition, show cause notices dated 30.08.2013 was issued by respondent No.1 under section 13 of the Foreign Trade (Development and Regulation) Act, 1992 alleging breach of the 'actual user' condition in both the licences. Directorate of Revenue Intelligence also issued show-cause notice dated 04.09.2013 contending that petitioner was not entitled to benefit of customs notification No.21/2002 – Customs dated 01.03.2002 in view of breach of 'actual user' condition in the licences and thus demanding customs duty of Rs.3,05,70,953.00, besides calling upon the petitioner to show cause as to why the paid amount of Rs.2,96,80,536.00 should not be adjusted towards the demand.

4. Petitioner brought the above show-cause notices on record in the pending writ petition and those were also put to the challenge. By the order dated 20.11.2013, a Division Bench of the Honourable Bombay High Court disposed of Writ Petition (L) No.2520 of 2013. The Honourable Bombay High Court noted that all the show cause notices emanated from the alleged violation of the 'actual user' condition contained in the two licences. Therefore, The Honourable Bombay High Court was of the view that it would be in the fitness of things if the two notices dated 30.08.2013 with regard to the licences be first concluded on an expeditious basis and thereafter the notice dated 04.09.2013 issued by the Directorate of Revenue Intelligence be adjudicated, if necessary. The writ petition was disposed of with a direction to respondent No.1 to first adjudicate the show cause notices dated 30.08.2013 on all issues expeditiously after giving the petitioner an opportunity of personal hearing. It was clarified that depending upon the outcome of the said proceeding, the show cause notice dated 04.09.2013 issued by the Directorate of Revenue Intelligence would be adjudicated.

5. Respondent No.1 took the stand that it was beyond the purview of the adjudicating authority to adjudicate on the legality of the conditions imposed in the import licences and therefore, he refrained from deciding on the matter of the legality of the 'actual user' condition. However, after referring to the said condition and the provision of rule 13 of the Foreign Trade (Regulation) Rules, 1993, respondent No.1 held that petitioner had violated the ‘actual user’ condition of the licences thereby making it liable for action under section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992. Consequently, the penalty was imposed.

6. Hence, the petitioner filed the writ petition before the Honourable Bombay High Court, seeking a direction to respondent No.3 to delete the condition of ‘actual user’ in the said two licenses issued by respondent No.3 to respondent No.4 for importing maize (corn) for and on behalf of the petitioner. An alternative prayer was made by the petitioner to remand the matter back to respondent No.1 to adjudicate the matter afresh after quashing the said orders dated 14.02.2014, 24.07.2015 and 04.11.2015.

The Issue of the Case

Whether the 'actual user' condition was made non-mandatory under the procedure for import of all items under the tariff rate quota scheme?

The Observations of the Court

After considering the arguments of both the parties the Honourable Bombay High Court observed that:

1. As per the counter affidavit of Union of India and Director General of Foreign Trade before the Honourable Andhra Pradesh High Court in (M/s. Sriven Marketing Vs. Union of India) Writ Petition No.6349 of 2011, the stipulation of 'actual user' condition was already non-mandatory under the tariff rate quota scheme since the year 2003. The position was only clarified by public notice No.47/2009-2014 dated 18.05.2011.

2. The Honourable Bombay High Court observed that moot point was while before the Andhra Pradesh High Court, Union of India and Director General of Foreign Trade had taken the stand that the 'actual user' condition was nonmandatory since the year 2003 and that the said position was clarified by way of the public notice No.47/2009-2014 dated 18.05.2011, in the reply affidavit filed in the present case on behalf of the respondents by Shri. Varun Singh, Deputy Director-General of Foreign Trade, the stand took was that the 'actual user' condition has been made non-mandatory with effect from 18.05.2011 only and that the 'actual user' condition was valid till 18.05.2011. Thus, the stands taken by the respondents in the two proceedings before the two High Courts were contradictory. The Honourable Bombay High Court stated that Respondents more particularly, Union of India and Director General of Foreign Trade cannot speak in multiple voices in different High Courts to suit their positions in the respective litigations. Union of India and for that matter, Director General of Foreign Trade must speak in one voice.

2. Further, the Honourable Bombay High Court observes that when respondent No.1 adjudicated the show cause notices, it noted the proceedings before the Andhra Pradesh High Court but only stated that public notice No.47 dated 18.05.2011 indicated that the 'actual user' condition was made non-mandatory with effect from 18.05.2011. Either the stand taken by the Union of India and Director General of Foreign Trade before the Andhra Pradesh High Court was not brought to the notice of respondent No.1 or he had conveniently overlooked the stand so taken. Be that as it may, respondent No.1 took the stand that it was beyond the purview of the adjudicating authority to adjudicate on the legality of the conditions imposed in the import licences and therefore, he refrained from deciding on the matter of the legality of the 'actual user' condition. However, after referring to the said condition and the provision of rule 13 of the Foreign Trade (Regulation) Rules, 1993, respondent No.1 held that petitioner had violated the ‘actual user’ condition of the licences thereby making it liable for action under section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992. Consequently, the penalty was imposed.

3. The Honourable Bombay High Court Reverting back to the order dated 20.11.2013, found that the Honourable Bombay High Court had directed respondent No.1 to adjudicate the show cause notices dated 30.08.2013 on all issues after giving the petitioner an opportunity of personal hearing. 'All issues' would include the validity of the 'actual user' condition in the licences or whether such a condition was mandatory or non-mandatory. This was because it was noted that the show-cause notices had emanated from the ‘actual user’ condition which was impugned in the said writ petition. Validity of the ‘actual user’ condition or whether it was mandatory or not was the central issue. Refusal of respondent No.1 to adjudicate on this issue was not only violative of the directions of the Honourable Bombay High Court as contained in the order dated 20.11.2013 but also amounts to non-exercise of jurisdiction vested on him. As rightly pointed out by the Honourable Bombay High Court in the order dated 20.11.2013 the core issue was the insertion of 'actual user' condition in the two licences - whether such insertion was legally permissible or without entering into this aspect, whether such condition was directory or mandatory are issues which are required to be gone into by respondent No.1. Failure to do so had occasioned non-exercise of jurisdiction.

4. Thus, Honourable Bombay High Court through consideration of all relevant aspects, were of the view that the impugned order dated 14.02.2014 passed by respondent No.1 did not sustain in law and was set aside and quashed.

The Decision Held by the Court

The Honourable Bombay High Court held that:

1. The impugned orders dated 14.02.2014, 24.07.2015 and 04.11.2015 were set aside and quashed. The matter was remanded back to respondent No.1 for a fresh decision in accordance with law after giving due opportunity of hearing to the petitioner and having regard to the discussions made above.

2. Respondent No.1 was given a period of three months to decide the matter.

3. The writ petition was accordingly allowed to that extent and No order to costs was done.

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