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TMI Blog2013 (8) TMI 274X X X X Extracts X X X X X X X X Extracts X X X X ..... the wilful intention of fraudulently getting the EMD released on the basis of forged documents - the Committee noted that none of the Bank realization certificates contained in the CD had been issued by the Bombay Mercantile Co-operative Bank while the entire set of bogus documents submitted for proving the utilization of quotas was shown as having been issued by that Bank - the finding of fabrication and/or fabrication of documents was confirmed and had attained finality. Whether the recommendations made by the Enforcement Committee to the Director-General of Foreign Trade was valid – Held that:- Suspension of the Importer-exporter Code Number of the assesse and the further recommendation that the companies in which certain specified persons were partners, proprietors or directors should not be issued an IE Code Number - This was a recommendation made by the Committee - In the event that the DGFT decides to take any action on the basis - he would had to follow due process of law before taking action and to hear the affected persons – Decided against assesse. - Writ Petition (L) No. 1663 of 2011 - - - Dated:- 4-10-2011 - Dr. D.Y. Chandrachud and A.A. Sayed, JJ. Shri Kuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity issued Visas which mentioned the quantity entitlement of textiles which an exporter was entitled to export. When goods were shipped for export at Indian ports, quota endorsements were to be made containing, inter alia, besides the name of the exporter, details of the category or group, the FOB value and the validity period of the shipment. These were to be stamped by Texprocil on the proforma invoices furnished by the exporters. An endorsement was also required to be made at the Port of Destination of the exported textile products in order to ensure that the exporting country abided by the quantitative restraints under the bilateral agreement entered into between the exporting and importing countries. Consequently once the quota level was attained, no further export was allowed from that country. Within the country quotas were distributed amongst exporters in order to maximize foreign exchange earnings. An exporter who obtained a quota but failed to export goods was required to compensate the exchequer for loss of foreign exchange. Texprocil tallied from time to time the statements received from the countries of destination to ensure that allotted quantities were exported. Bri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quantities which were certified by Texprocil and those cleared by the U.S. Authorities. These discrepancies related to the allotment of quotas made to the Petitioner. 5. By an order dated 23 November 2004 the Petitioner was temporarily debarred from making further exports pending investigation. Notices to show cause were issued to the Petitioner calling upon it to submit an explanation. During the course of the investigation, a letter was received on 20 December 2004 from the Bombay Mercantile Cooperative Bank alleging that there was a serious fraud and that the bank realization certificates upon which the Petitioner had obtained endorsements, had not been issued by the Bank. On 13 June 2005, an order was passed by the 1st Respondent by which the Petitioner was barred from making any further exports for a period of three years commencing from 23 November 2004. This order was confirmed in appeal on 16 November 2005. The Petitioner moved this Court together with seven other related concerns in an earlier set of seven petitions under Article 226 of the Constitution. 6. By a judgment dated 7 May 2010, a Division Bench of this Court noted that the Petitioner had not challenged the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f products falling in Category GR II textiles illegally exported amounting to Rs. 5.67 crores; and (iv) Penalty in the amount of Rs. 1.4 crores on (iii) above. The Petitioner was afforded an opportunity to file its reply to the supplementary notice and was allowed an opportunity of being heard. 8. The Enforcement Committee by its order dated 15 November 2010 confirmed the demand as made in the notice to show cause. The order of the Enforcement Committee has been confirmed in appeal by the Enforcement Appellate Committee on 25 April 2011. 9. Learned Counsel appearing on behalf of the Petitioner in assailing the findings which have been arrived at in the orders passed by the Enforcement Committee and the Appellate Committee submitted that (i) The Enforcement Committee is not vested with power to demand compensation or to impose a penalty for breach of the condition subject to which a quota entitlement was allowed to the Petitioner; (ii) Under Section 11 of the Foreign Trade (Development and Regulation) Act, 1992. The power to impose a penalty is vested with the Director General of Foreign Trade or to such officer to whom that power can be delegated by the Central Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequent notification issued by the Union Government on 9 November 2004 makes it clear that the provisions of the earlier notification relating to the procedure to deal with quota malpractices and in regard to the forfeiture of earnest money deposits has been saved. Similarly, he subsequent notification makes it clear that any such procedure or remedy may be instituted, continued or enforced and any penalty or consequent punishment imposed as if the earlier notification had been in force. Moreover, it has been clarified that the provisions of the Foreign Trade (Development and Regulation) Act, 1992 would continue to be applicable; (vi) In the present case, a finding of fact has been recorded that the exporter had indulged in serious malpractices involving fabrication of documents. In the earlier round of proceedings before this Court the debarment of the exporter was not contested and the facts on the basis of which the debarment was effected had not been questioned. In that view of the matter, the action which has been taken by the authorities falls within the purview of law and is intra vires. The rival submissions now fall for determination. 11. The Foreign Trade (Development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason to believe that such declaration, statement or document is false in any material particular. 12. On 12 November 1999 the Union Government in the Ministry of Textiles issued a notification for the allotment of entitlements between 2000 and 2004 in respect of exports of Yarn Fabrics and Made-ups items to the U.S., Canada and the European Union. The notification, inter alia, provided in Para 17 the procedure to deal with quota malpractices by exporters. Para 17(iii) stipulates as follows :- (iii) The Enforcement Committee will deal with cases involving the use of any one of the following, in connection with obtaining, extending, utilising or proving the utilisation 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. (emphasis supplied) Clause (v) of Para 17 provides that in cases where the Committee finds the exporter guilty of fraud or other irregularities, which are violative of any of the above provisions, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the above Notifications had been in force. (3) The provisions of Foreign Trade (Development and Regulation) Act, 1992 No. 22 of 1992 would continue to be applicable for the purposes of present notification. 14. The issue before the Court is as to whether the Enforcement Committee constituted under the notification dated 12 November 1999 had the jurisdiction and power to demand compensation and to levy a penalty. Clause (iii) of Para 17 of the notification empowers the Committee to deal with cases involving the use of (i) fraudulent activity (ii) misrepresentation of facts, (iii) falsification of documents or forgery and (iv) submission of post dated cheques for extension of entitlements which are dishonoured, in connection with obtaining, extending, utilising or proving the utilisation of quotas. The notification contains in its recital a statement that it was issued in pursuance of the provisions contained in the Exim Policy for 1997-2002. The statutory source of power for the issuance of the notification is traceable to sub-section (2) of Section 3 under which the Central Government is empowered to prohibit, restrict or regulate the import or export of goods in all cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th obtaining, extending, utilising or proving the utilisation of quotas. 15. This rationale is buttressed by the subsequent notification that was issued by the Union Government on 9 November 2004. The quota regime was to come to an end on 31 December 2004. Notwithstanding this, the Central Government considered it appropriate specifically in public interest and in the national interest to continue with the existing mechanism to deal with cases of non-performance or short performance of quota obligations. The notification dated 9 November 2004 specifically states that the provisions relating to the procedure to deal with quota malpractices by exporters; to the supervisory role of the Textile Commissioner and provisions relating to forfeiture of earnest money deposits, bank guarantees and post dated cheques shall not be affected. The notification stipulates that any such proceeding or remedy may be instituted, continued or enforced and any such penalty confiscation or punishment imposed or may be imposed or made as if the earlier notification had been in force. Moreover, the provisions of the Foreign Trade (Development and Regulation) Act, 1992 would continue to be applicable for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Petitioner was clearly placed on notice by the supplementary show cause notice dated 4 August 2010 of the case against it. During the course of the hearing, the Committee required the Petitioner to clarify whether it had availed of quota benefits and submitted proof of shipment documents along with bank realization certificates while seeking release of earnest money deposit and the Petitioner was required to clarify whether two sets of certificates were submitted in 2004 and on 30 September 2010. The Petitioner evidently had no explanation as is evident from the following extract from the order :- The Committee requested Shri U.K. Nambiar to clarify whether his Company had availed Quota benefits and submitted Proof of Shipment Documents along with BRC s while seeking release of EMD and was requested to clarify two sets of BRC s submitted in 2004 and the one submitted on September 30, 2010 and also whether he or his representative had signed all the documents. The question was put to him as his reply did not contain a word on it. He failed to clarify again. Thereafter, the said documents were shown to Shri Nambiar and he was asked to identify the signature and the signatory. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of premium adopted by the Enforcement Committee. As a result of the unlawful activity of the Petitioner, legitimate exporters who would have been entitled to export Group II products were deprived of the entitlement as a result of the exports carried out by the Petitioner on the basis of a fabricated quota entitlement. The Enforcement Committee while dealing with a case of such a serious wrong doing was entitled to direct the Petitioner to provide restitution in the public interest as a result of the consequences emanating from the wrongful act on the part of the Petitioner. The demand for compensation of Rs. 5.68 crores, therefore, in our view, falls within the ambit of the powers of the Committee when it deals with cases of wrong doing under Clause (iii) of Para 17. 19. The Committee has also directed the Petitioner to deposit an amount of Rs. 3.05 crores which represents the amount in respect of which the Petitioner submitted fraudulent proof of shipment towards fulfilment of the export obligation. It was on the basis of the submission of fraudulent documents that the Petitioner obtained a release of the earnest money deposit which was furnished to the Union Government. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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