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M/s. Sri Amman Chemicals Versus The Chief Controller of Explosives, Petroleum & Explosives Safety Organisation, The Joint Controller of Explosives, Petroleum & Explosives Safety Organisation, The Commissioner of Customs, The Deputy Commissioner of Customs (SIIB)

2016 (10) TMI 564 - MADRAS HIGH COURT

Import of Ammonium Nitrate - restoration of licence in Form P-3 under the Explosive Act, 1884, (Act) - licence to possess for sale of Ammonium Nitrate from a store house exceeding 30MT or in tanks as per Ammonium Nitrate Rules 2012 - licence issued on 03.12.2014, to remain valid till 31.03.2019 - opportunity of being heard - whether invocation of power under Section 6E read with Rule 42(5)(i), of the Rules to revoke the licence without affording the opportunity of hearing to petitioner justified .....

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licence granted to the petitioner requires to be placed under suspension as an interim measure and the reasons for exercising the power of interim suspension is vivid on a reading of the impugned order. Therefore, the petitioner is not correct in contending that the Licencing Authority has not recorded his opinion, while exercising the power of the interim suspension. In terms of proviso in Rule 42(5), the respondent has granted an opportunity to the petitioner to show cause as to why the Licen .....

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powers granted by the Chief Controller. By virtue of the said chart, it is seen that the Joint Chief Controller has been delegated with the power for interim suspension and issuance of the show cause notice. - Whether the order of rejection of the petitioner's application for issuance of licence in Form P-5, for import of Ammonium Nitrate is just and proper.? - Held that: - the use of Ammonium Nitrate having been regulated, the petitioner cannot, as a matter of right, claim that except for t .....

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jected their application. The restriction imposed is a reasonable restriction in the light of the fact, separate Rules were framed for regulation of the use of Ammonium Nitrate, which has been specifically brought within the definition of an explosive substance. In such circumstances, this Court is not inclined to interfere with the impugned order. - Detention of consignment by the customs - purchase order placed on 06.05.2015 i.e., much prior to the petitioner's application for grant of lic .....

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e unless the importer had a licence in Form P-5, import was impermissible. Thus, the petitioner having not been granted a licence in Form P-5, cannot claim that the impugned consignment should be released to the petitioner. If this is done, it would tantamount to issuing a direction to the authorities to disobey the rules, which cannot be done. - Petition dismissed - competent authority directed to consider the petitioner's reply dated 01.06.2016, to the show cause notice, dated 20.05.2016, .....

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ium Nitrate Rules, 2015, (Rules), framed under the Explosive Act, 1884, (Act). The petitioner applied for grant of licence in Form P-5 for import licence of Ammonium Nitrate, which was a pre-requisite for import, though the said product was freely importable and not a restricted item. The petitioner's application for import licence, was rejected by order dated 19.08.2015, on the ground that issue of licence in Form P-5, is considered only in favour of Ammonium Nitrate users, in the interest .....

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cancelled. This order of suspension as an interim measure, is challenged in W.P.No.20827 of 2016. 2. The learned Senior counsel appearing for the petitioner advanced submissions, firstly, on the correctness of the order dated 20.05.2016 and thereafter, made submissions on the correctness of the order dated 19.08.2015, rejecting the application of the petitioner for issue of licence in Form P-5. Therefore, this Court proceeds to consider the Writ Petitions in the said order. 3. The petitioner is .....

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the petitioner had been importing the product through various Ports in southern India. 4. After the introduction of the 2012 Rules, namely, Ammonium Nitrate Rules, 2012, the petitioner applied for a licence after complying with the required formalities and the petitioner was granted the licence dated 03.12.2014, valid upto 31.03.2019. As import of the said product required a licence from the competent authority in Form P-5, the petitioner submitted an application on 05.08.2015. However, the sam .....

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e the Additional Chief Metropolitan Magistrate (EO1) Court, Egmore, Chennai, praying for a certification of the correctness of the inventory, which was seized under Mahazar dated 12.11.2015, after taking photographs and drawing of the representative samples by making a visit to the bonded warehouse so as to enable the department to dispose of the seized goods as provided under law. Even prior to the filing of the petition by the Customs Authorities, the first respondent by communication, dated 1 .....

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ntation dated 29.04.2016 to the Deputy Commissioner of Customs, (SIIB), wherein among other things, they stated that the representation may be considered and it may be ordered either for storage of the goods at the petitioner's licenced premises or in the alternate to grant provisional release of the goods subject to requisite conditions that may be imposed under Section 110A of the Customs Act, pending adjudication. Subsequently, the petitioner submitted a representation to the Assistant Co .....

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called upon the petitioner to show cause as to why his licence should not be cancelled. The petitioner has submitted his reply dated 01.06.2016 to the second respondent. 5. Mr.Vijay Narayan, learned Senior counsel assisted by Mr.N.Viswanathan, learned counsel appearing for the petitioner, submitted that the order of suspension has been passed by the second respondent, who has no jurisdiction to either suspend or revoke the licence, as the Licencing Authority, in terms of Schedule I, appended to .....

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not have been invoked. It is reiterated that the second respondent, not being the Licencing Authority, an order passed for interim suspension is without jurisdiction and furthermore, Rule 42(5), provides for suspension as an interim measure without an opportunity of hearing only when there exists a violation of the provisions of the Act or Rules or any conditions of licence and when such violation, in the opinion of the Licencing Authority, is likely to cause imminent danger to the public and i .....

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oods by auction to other licensees holding licence in Form P-3 in exclusion of the petitioner, is violative of Section 110A read with Section 125 of the Customs Act which provides for the petitioner being entitled to redeem the goods on reasonable conditions and the goods not being prohibited goods, the petitioner has vested right to seek for redemption under Section 125 of the Customs Act. It is further submitted that though the petitioner submitted their explanation to the show cause notice as .....

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ng grave prejudice to the petitioner. The reason assigned in the impugned order that licence could be considered only in favour of Ammonium Nitrate users, is contrary to the statutory provisions and violates the petitioner's fundamental right guaranteed. 8. Referring to Rule 5 of the Rules, deals with the pre-requisite for grant to licence and stated that no licence shall be granted unless all the relevant provisions laid down under the Rules and all conditions contained in the licence forms .....

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suance of licence to other than actual users, is contrary to the provisions of the Act. It is further submitted that the petitioner had a valid licence in Form P-3 for storage and sale of Ammonium Nitrate from 2014, and carrying on business all these years and earlier also, the petitioner has effected imports of the product from other countries and while so, to reject the petitioner's licence on grounds not contemplated under the Rules or under the Act is illegal and the reason assigned is h .....

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in terms of Section 125 of the Customs Act, on 29.04.2016 and 19.05.2016. Such request was not considered and subsequently the licence in Form P-3 was suspended as an interim measure. Thus, it is submitted that the action initiated by the respondents 1 and 2, is clearly with an intention to deny the petitioner the right to the imported goods, thereby affecting his right to trade. In support of the contention that the petitioner's right to secure a licence cannot be negatived by any policy d .....

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t Petition challenging the order of rejection of licence in Form P-5 is an appealable order and without exhausting the appeal remedy, the petitioner is not entitled to approach this Court. With regard to the jurisdiction of the second respondent to suspend the licence, reference was made to Section 17A, which deals with power to delegate and the authority namely, the first respondent is entitled to delegate his powers to the second respondent. Further, by referring to Schedule I under Rule 28 of .....

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suance of show cause notice. At this juncture, the learned Senior counsel appearing for the petitioner objected to the said document stating that it is only a tabulated statement and it cannot be taken as an authorisation. Referring to the order of interim suspension and the reasons contained therein, it is submitted that the subjective satisfaction of the second respondent is evident from the reasons stated therein and the product namely, the Ammonium Nitrate having been declared as an explosiv .....

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ted for disposal of the consignment, it is submitted that prolonged storage of the consignment is not only fraught with public safety, but also poses a security threat and therefore, the first respondent requested the third respondent to initiate necessary action with an advice to store the detained consignment in an isolated place under guard, away from naked flame or any substance of flammable nature liable to spontaneous ignition. Thus, the policy decision having been taken in the interest of .....

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on 03.12.2014, to remain valid till 31.03.2019. The licenced premises is situated in Aravakurichi Taluk, Karur District. The licence was granted subject to the provisions of the Act and the Ammonium Nitrate Rules 2012. The licence was liable to be suspended or revoked for any violation of provisions of the Act or Rules or the conditions of licence or if it is found that the licenced premises does not conform to the description shown in the plan annexed to the licence. By the impugned order, dat .....

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e holder of the licence shall be given an opportunity of being heard. It is further submitted that the respondent by invoking sub-rule (5) of Rule 42, the opportunity of being heard may not be given to the licencee, if the licence is suspended as an interim measure for violation of any provisions of the Act and such power could have been invoked only if in the opinion of the Licencing Authority, such violation is likely to cause imminent danger to public and from the impugned order, it is clear .....

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ections and suggestions on the draft of the Ammonium Nitrate Rules, 2011 and after the expiry of the 45 days from the date on which, the notification was made available to the public, the Government of India in exercise of the powers conferred under Sections (5) and (7) of the Act enacted the Ammonium Nitrate Rules, 2012. By this Rule, the Government sought to regulate manufacturing, conversion, import, export, stevedoring, bagging, transport, possession, sale and use of Ammonium Nitrate, these .....

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Section 6E gives power for the Licencing Authority to vary the conditions of licence. Sub-section (2) empowers the Licencing Authority to vary all conditions of licence on application of the holder except such of them as have been prescribed. Sub-section (3) empowers the Licencing Authority to suspend a licence for such period as it things fit or revoke the licence under the circumstances set out in clauses (a) to (c), under the said sub-rule. Sub-section (4) empowers the Licencing Authority to .....

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s where a Court convicts holder of a licence of an offence under the Act or the Rules, the Licencing Authority may also suspend or revoke a licence. On such conviction being set aside on appeal or revision, the suspension or revocation shall become void; Sub-section (7) gives power to the Appellate Court or to the High Court to exercise the power under sub-section (6), exercising its power of revision. The Central Government may also suspend or revoke the licence or direct the Licencing Authorit .....

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entral Government; shall not be imported into India by sea except through the ports, which are duly approved for this purpose by the Government of India; Ammonium Nitrate imported into India by sea shall not be stored in the port. Chapter VII of the Rules deal with grant or refusal of approval, licence, amendment, transfer and renewal. 18. Under the said Chapter, Rule 42, deals with suspension and revocation or cancellation of licence. Sub-rule (1) of Rule 42, deals with the circumstances under .....

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under the said sub-rule. The said Rule reads as follows:- 42. Suspension and revocation or cancellation of licence:-(1) Every licence granted under these rules shall:- (a)stand cancelled, if the licence holder is convicted and sentenced under any criminal offences or ordered to execute under Chapter VIII of the Code of Criminal Procedure, 1973 (2 of 1974), a bond for keeping peace for good behaviour, (b) stand cancelled, if the No Objection Certificate is cancelled by the District Authority or .....

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ct from the date specified therein. (3) An order of suspension or revocation of a licence shall be deemed to have been served if sent by post to the address of the licence holder entered in the licence. (4) The suspension of a licence shall not debar the holder of the licence from applying for the renewal. (5).Notwithstanding anything contained in sub-rule (1), an opportunity of being heard may not be given to the holder of the licence before his licence is suspended or cancelled in cases:- (i) .....

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ancelled by the Central Government, in the public interest or in the interest of the security of the State, such opportunity should not be given. 19. Thus, as per the scheme of the Rule, there is a clear distinction drawn to the power exercised by the competent authority while exercising the powers under Rule 42(1) and 42(5). Thus, the power under Rule 42(1) is a power granted to the competent authority to suspend or cancel a licence and before doing so, the licencee shall be given an opportunit .....

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licence as an interim measure for the violation of any of the provisions of the Act or the Rules or any conditions contained in such licence. While doing so, the Licencing Authority is required to form an opinion that such violation is likely to cause imminent danger to the public. The proviso provides that if the Licencing Authority is to confirm such order of suspension, he is required to give the holder of the licence an opportunity of being heard. It is submitted that in the impugned order, .....

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ommissioner of Customs informing that the petitioner has received 696MT of Ammonium Nitrate at Chennai Port and 500MT to Visakapattinam Port without a valid licence in Form P-5 and further imported 740MT of Ammonium Nitrate from Korea at Chennai Port. It has been alleged that the petitioner had supplied Ammonium Nitrate to a firm in Bangalore which did not possess any licence in Form P-3. Further, it is alleged that the petitioner sold 92MT of Ammonium Nitrate to M/s.Tamil Nadu Cement Corporatio .....

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tioner is being suspended as an interim measure. 22. On a careful reading of the impugned order, it is evidently clear that the respondent on receipt of the information from the Principal Commissioner of Customs, Chennai, has taken note of the materials placed before it and it appears on further investigation on selected buyers (as stated in the counter affidavit), mentioned that the entire quantity of Ammonium Nitrate was used in Mines and Quarries for blasting operations and not used for agric .....

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im suspension. If ultimately, the allegations are established, it is a serious matter especially when, Ammonium Nitrate has been declared as a explosive substance for which the Ammonium Nitrate Rules were framed and came into force on 11.07.2012. That apart, in terms of proviso in Rule 42(5), the respondent has granted an opportunity to the petitioner to show cause as to why the Licence should not be cancelled. Therefore, the impugned order cannot be stated to be devoid of reasons nor it can be .....

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icenses for specific purposes may be granted by the authorities specified in schedule I. The petitioner was issued a licence in Form P-3 and in terms of the serial No.3(b) in Schedule I, the Licencing Authority is the Chief Controller or Controller authorised by the Chief Controller. 25. The learned Additional Solicitor General of India is right in contending that in terms of Section 17A, the Central Government may, by notification, direct that any power or function, which may be exercised or pe .....

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ed that there is no notification placed before this Court issued by the Central Government to show that such power has been delegated. It may not be necessary to go into the aspect as to whether the Joint Chief Controller, who issued the impugned order was a delegate pursuant to the delegation of power being granted under Section 17A, since in terms of Rule 28, read with Schedule I, the Licencing Authority for issuing a licence in Form P-3 is the Chief Controller or Controller authorised by the .....

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delegating the power to the respondent. I am not inclined to accept the said stand in the light of the fact that the said chart/document has been attested by the Chief Controller. Thus, I am inclined to accept the same as valid proof to show that the Joint Chief Controller of the Explosives, who had passed the order of interim suspension, was entitled to exercise the powers to suspend a licence in Form P-3 as an interim measure and to issue show cause notice. The document having been attested b .....

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ow cause notice with regard to proposal to cancel the petitioner's licence on 01.06.2016, till date no orders have been passed, would show that the authorities are biased against the petitioner. 29. On the allegations made by the petitioner, there can be no inference of bias and in the absence of any specific allegation and without naming those individuals, such vague averments cannot be taken to infer bias and therefore, such contention stands rejected. However, this Court may consider to i .....

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ily fail. 31. The next issue is as to whether the order of rejection of the petitioner's application for issuance of licence in Form P-5, for import of Ammonium Nitrate is just and proper. The contention raised by the petitioner is that Rule 6 of the Rules, deals with 'general restrictions' and the 'restriction on import or export' is in terms of sub-rule (4) of Rule 6, which reads as follows:- Rule 6(4):- Restriction on import or export:- (a) No person shall import or export .....

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ssioner of Customs; (d) The Ammonium Nitrate imported into India by sea shall not be stored in the port. 32. It is argued that the restrictions on import or export of Ammonium Nitrate, can be only under the circumstances stated in clauses (a) to (d) in sub-rule (4) of Rule 6, and the reason assigned in the impugned order stating that application for licence in Form P-5 will be considered only in favour of Ammonium Nitrate users is not one of the restrictions, as contemplated under the Rules and .....

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34. This Court can take judicial notice of the fact from various news reports that the presence of Ammonium Nitrate in the bombs, which exploded in various parts of the country, raised a debate on the availability of the substance, primarily who used to make explosives and fertilisers. The report reveals that though the Government enacted the Rules to regulate the sale of Ammonium Nitrate, it was still easily available and is being used by terror groups to make bombs and a report of the Intelli .....

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hey have found that Ammonium Nitrate has been used in every blast case in the recent past and although the police have arrested several persons they have not been able to trace the origin of the chemical in even a single case. It is further reported that the Police say that large quantity of Ammonium Nitrate has gone missing, since the past four years (2013) and at an average, there has been no account for nearly 16000Ts of Ammonium Nitrate in the past four years (2013). It is further reported t .....

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f the substance:- Q. What makes Ammonium Nitrate so explosive? A. Ammonium Nitrate is not an explosive by itself. However, it is one of the ingredients used for manufacture of explosives. It is classified as an oxidizer (5.1) as per UN classification for Dangerous Goods. Other ingredients like fuel, etc., have to be added to make it an explosive. For such explosive mixtures to explode, initiators like detonators are required. Q. Why is it necessary to regulate the use of ammonium nitrate? A. Amm .....

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es Industry. 36. Thus, the use of Ammonium Nitrate having been regulated, the petitioner cannot, as a matter of right, claim that except for the circumstances set out in Rule 6(4), there can be no restriction on import or export of Ammonium Nitrate, and it cannot be a ground to interfere with the impugned order, as the Rule 6 only postulates general restrictions. Thus, while rejecting the application submitted by the petitioner for grant of licence in Form P-5, bearing in mind the interest of th .....

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d order. 38. The learned Additional Solicitor General submitted that as against the impugned order refusing to grant licence, the petitioner has an alternate remedy of preferring an appeal before the Appellate Authority. The reason for rejection of the licence for import is on the ground that the same will be considered only for Ammonium Nitrate users and such decision has been taken in the interest of National Security. The bonafides of the reason assigned in the impugned order, as being in the .....

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of the country, such appeal itself would be a futile exercise. Thus, this Court upholds the reason assigned for rejection of the petitioner's application for issue of licence in form P-5 for import of Ammonium Nitrate as being just and proper and the reason cited in the order, is neither arbitrary nor whimsical, but a reasonable restriction. 39. It was contended by the learned Senior counsel for the petitioner that sequence of events would show that the respondents were acting in a biased ma .....

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of the Act and the Ammonium Nitrate Rules are required to take a decision, which will sub-serve National interest and there is no illegality or arbitrariness in the decision making process or in the impugned decision themselves. 40. The decision of the Hon'ble Supreme Court in the case of Thirumuruga Kirupananda Variyar (supra), was a case, where the Hon'ble Supreme Court tested the correctness of the decision of the State Government withholding the issuance of essentiality certificate .....

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dings rendered by the Hon'ble Supreme Court could at best be construed as a finding with particular reference to the fact in issue and cannot be taken to be a laying down a general principle nor could it be applied to the facts of the present case, where the correctness of orders passed under the Explosive Act and the Rules are being tested. 41. An argument was advanced that the petitioner had been earlier importing large quantities of Ammonium Nitrate and he has been a trader and carrying o .....

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Further, it has to be pointed out that the denial of right of the petitioner to redeem the goods under Section 125 of the Customs Act does not flow from the relief sought for in these Writ Petitions. In other words, unless and until the petitioner succeeds in obtaining a licence in Form P-5 and succeeds in setting aside the order of interim suspension of the licence under Form P-3, the question of petitioner being entitled to redeem the goods would not arise. Therefore, the interim prayer cannot .....

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