Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (10) TMI 817 - GUJARAT HIGH COURT

2016 (10) TMI 817 - GUJARAT HIGH COURT - 2016 (340) E.L.T. 465 (Guj.) - Imposition of Fiscal; penalty - SEZ - achieving of minimum value addition which was a part of the condition contained under the letter of permission - doctrine of proportionality - revised value addition formula - the Indian Latex was more expensive as compared to international latex - h respect to clubbing of a period of first block of five years with second block of five years - Held that: - The only point which has impres .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

inflicting penalty. - The only fault appears to be of the petitioner-unit is that it has not met with the condition of letter of permission and has failed to achieve the target and as such authorities ought to have considered well recognized doctrine of proportionality which passing impugned orders.. - Order set aside - matter remanded back for reconsideration - Decided in favor of petitioner. - Special Civil Application No. 5346 of 2016 - Dated:- 19-8-2016 - AKIL KURESHI AND A.J. SHASTR .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ting aside the impugned order dated 21.10.2015 as illegal being not maintainable, unfair, discriminatory, perverse, absurd, harsh, barred by law as well as barred by time; B. Your Lordships may hold that without disposing of the pending option exercised and representations made by the petitioner seeking revision of value addition percentage and condensation of shortfall through a speaking order, respondents cannot adjudicate the show cause notice abruptly; C. Your Lordships may hold that once re .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ing admission, hearing and final disposal of this petition, your Lordships be pleased to stay the recovery and/or any other adverse proceedings that may be initiated by Respondents in terms of the impugned order dated 26.10.2015. F. An ex parte ad interim relief in terms of para (E) above may be granted. G. Such other and further reliefs as deemed just and expedient in the facts and circumstances of the case be granted. 2. Case of the petitioner is that the petitioner-company has set up an Expor .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rted exports in the month of March 1992. The letter of permission was issued to the petitioner with a condition to fulfill minimum value addition at the rate of 45.93%. The petitioner, during the course of time, made the exports to the tune of ₹ 13.95 crores for the first five years, (review as of 31.03.1996) the value addition achieved by the petitioner was to the extent of only 19.62% as against the condition of achieving 45.93%. Resultantly, there was a shortfall of 26.31% in the block .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the units were requested to exercise an option within three months from the date of issue either to continue under the old formula or changeover to the revised value addition formula w.e.f. 1993-94. 3. It is the case of the department that despite the said circular having been issued, the petitioner-company did not make any proposal for revised value addition within prescribed time limit. However, case of the petitioner is that on 17.02.1994, the request was already submitted to the authority bu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ined under the letter of permission. 5. Feeling aggrieved by the said order of penalty, the appellant filed an appeal before the appellate authority on 01.04.2014. The appellate authority has granted an opportunity of hearing. The case was put up before the appellate authority by the petitioner by pointing out various circumstances, under which, the value addition could not be achieved by the petitioner. It was inter alia contended that when the petitioner went into commercial production, in ini .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tioner unit could not meet with the standard of value addition fixed. It was also submitted that the Indian Latex was more expensive than the international latex and therefore the market scenario was not permitting the petitioner to achieve the target which was stipulated in letter of permission. In the year 1997, the company became a sick unit and the case was registered before BIFR being Case No. 176 of 1997 which has dragged the unit in severe financial constraints. It was also contended that .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

confirmed the order of Development Commissioner dated 12.02.2014 and the appeal presented by the petitioner was rejected vide order dated 21.10.2015 and justified the penalty which came to be issued. It is in the background of these circumstances, the petitioner has approached this Court by filing present petition by invoking extra ordinary jurisdiction of this Court under Articles 226 and 227 of the Constitution. 6. Learned counsel Mr. S.S.Ayer appearing on behalf of learned advocate Mr. Dhaval .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nalty to be imposed upon. Learned counsel further submitted that to invoke the provision of penalty, there must be first of all, a mensrea of the petitioner-company be established and looking to the entire record, nowhere the petitioner's mensrea is reflected or even alleged. Therefore, in the absence of this condition precedent, no order of penalty can be passed by the authority. It was also submitted that the alleged violation or non-fulfillment of the terms of letter of permission is rela .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ioner that there is a detailed explanation submitted on representing the case and the authority has not dealt with such submissions which have been made. Therefore, the orders passed by the authorities are not only suffers from the vice of non-application of mind but are based upon an irregular exercise of power. It was also brought to the notice of the Court that the authorities have not considered the entire period of ten years for which the unit was allowed to set up. If the authority could h .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mbay); (ii) In case of DKM Cassette P. Ltd. vs. Union of India reported in 2010 (260) ELT 404 (Delhi); (iii) In case of Disco Garments Pvt. Ltd. vs Union of India reported in 2011 (273) ELT 198 (Guj); (iv) In case of Suryovonics Ltd. vs. Ministry of Commerce reported in 2010 (254) ELT 73 (AP); (v) In case of Neeldhara Weaving Factory vs. DGFT, New Delhi reported in 2007 (210) ELT 658 (P & H); (vi) In case of Dewan Tyres Ltd. vs. Union of India reported in 2014 (307) ELT 496 (Allahabad); 7. R .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nflicting penalty upon the petitioner-unit. Several circumstances and factors to arrive at a penalty quantum ought to have been considered and though the same have been put to the notice of the authorities, none of the factors have been dealt with and extreme penalty came to be inflicted upon to a unit which was facing a severe financial crunch. It was also submitted by the counsel for the petitioner that sub section (2) of Section 11 of the Foreign Trade (Development and Regulation) Act, 1992 i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

yed for, in the petition. 9. To oppose the petition, learned advocate Ms Trusha Patel appearing on behalf of respondent No.1-authority has contended that the orders passed by the authorities below are just and proper and are passed in exercise of discretion vested in law and also passed after granting full opportunity to the petitioner and therefore prayed to the Court not to exercise discretion in favour of the petitioner. Learned counsel has contended that the petitioner-unit was from the begi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mission, the natural consequence is to impose penalty. Therefore, the authorities below have rightly exercised their discretion based upon such circumstance. It was also submitted by the learned counsel that in addition to the terms of letter of permission, an undertaking was also specifically filed by the very petitioner-unit. The petitioner unit undertook the entire letter of permission along with the attached condition and to observe those conditions and fulfill the same, a specific undertaki .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

as given to the petitioner unit-either to continue with the old formula or to changeover the revised value addition formula. But it is the petitioner-unit which did not exercise such option and therefore, counsel submitted that no grievance can be allowed to be raised by the petitioner in that circumstance. The counsel further submitted that each block period has to be considered separately and therefore, when the petitioner-unit has not observed the condition of letter of permission in the init .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

riod with initial block period of five years. Counsel further submitted that a detailed order came to be passed by the original authority while passing an order-inoriginal dated 12.02.2014 wherein, a specific finding came to be arrived at on each of the issues and the authority which passed an order has arrived at a finding that petitioner-unit has failed to achieve the value addition, as prescribed under letter of permission dated 25.08.1988. It was also brought to the notice by the counsel for .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tioner-unit to achieve the requisite target which was a part of the condition of letter of permission and therefore, the authority has rightly imposed the quantum of penalty. On the contrary it is submitted that the balance is strike upon by the authority to arrive at a penalty which is reflected in the order-inoriginal and therefore submitted that no interference be made in extraordinary jurisdiction of this Court. 11. Having heard learned counsel appearing for the respective sides, following f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s also brought to the notice and reflecting from record that in the year 1997 and around, the company became sick unit and came under the purview of BIFR and even the case was registered being Case No. 176 of 1997. (iii) It is also reflected from the record that when pursuant to the circular dated 08.09.1993 the petitioner has made an attempt to exercise option and the request letter dated 17.02.1994 appears to have received by the authorities on 07.03.1994 as is appearing from page 67 of petiti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is also appearing from the record that during the course of personal hearing, the entire circumstance is put-forth before the authority and has requested to take a reasonable view. (vi) The main material aspect which is emerging from the record is that the appellate authority, while dealing with an order-in-original has practically paid no attention to the quantum of penalty whether penalty is imposed upon by the original authority is reasonable, just and proper or not. There appears to be a com .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

1) No export or import shall be made by any person except in accordance with the provisions of this Act, the rules and orders made thereunder and the foreign trade policy for the time being in force. (2) Where any person makes or abets or attempts to make any export or import in contravention of any provision of this Act or any rules or orders made thereunder or the foreign trade policy, he shall be liable to a penalty of not less than then thousand rupees and not more than five times the value .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y of not less than ten thousand rupees or more than five times the value of the goods or services or technology in respect of which such declaration, statement or document had been submitted, whichever is more. (4) Where any person, on a notice to him by the adjudicating Authority, admits any contravention, the Adjudicating Authority may, in such class or classes of cases and in such manner as may be prescribed, determine, by way of settlement, an amount to be paid by that person. (5) A penalty .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

trol of such officer of customs, as if the said amount is payable under the Customs Act, 1962 (52 of 1962); or (c) the Director-General may require the Assistant Commissioner of Customs or Deputy Commissioner of Customs or any other officer of Customs to recover the amount so payable by detaining or selling any goods (including the goods connected with services or technology) belonging to such person which are under the control of the Assistant Commissioner of Customs or Deputy Commissioner of C .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lector on receipt of such certificate shall proceed to recover from such person the amount specified thereunder as if it were an arrear of land revenue; or (ii) the Director-General or any officer authorised by him (including an officer of Customs who shall then exercise his powers under the Customs Act, 1962 (52 of 1962) and in accordance with the rules made in this behalf, detain any movable or immovable property belonging to or under the control of such person, and detain the same until the a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e terms of any bond or other instrument executed under this Act or any rules made thereunder provide that any amount due under such instrument may be recovered in the manner laid down in sub-section (5), the amount may, without prejudice to any other mode of recovery, be recovered in accordance with the provisions of that sub-section. (7) Without prejudice to the provisions contained in this section, the Importer-Exporter Code Number of any person who fails to pay any penalty imposed under this .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

liable to confiscation by the Adjudicating Authority. (9) The goods (including the goods connected with services or technology) or the conveyance confiscated under sub-section (8) may be released by the Adjudicating Authority, in such manner and subject to such conditions as may be prescribed, on payment by the person concerned of the redemption charges equivalent to the market value of the goods or conveyance, as the case may be.] 13.The relevant clause of the aforesaid statutory provision is s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Section 11 and therefore, looking to this provision what is to be considered is whether discretion exercised by the authority is just and proper? To deal with the aforesaid aspect of penalty, the circumstances stated here-in-above appears to have been not gone into by the authorities in the right spirit. It appears from the record that there is no deliberate attempt on part of the petitioner-unit to flout the terms of the letter of permission. On the contrary, situation prevailing in the market .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t ultimately, while exercising the discretion qua Section 11(2) on the issue of penalty authority, appears to have no proper justification. If we look at the observation of the authority who pass an order-in-original on the contrary there is categorical finding as contained in para 27 which is based upon the material on record as well as representation of the petitioner unit. The authority has specifically come to the conclusion thus I am of the view that a lenient view may be taken while imposi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

years appears to be impermissible in view of the fact that there is a specific provision contained under the letter of permission wherein in separate block period of initial five years and second block of five years, target, as stipulated, is to be achieved. Therefore, when petitioner is a signatory to such letter of permission, it is not open on part of the petitioner to contend the clubbing of the said period. So far as another contention with regard to mensrea being missing on the part of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

not it is of no significance. The fact remains that the criteria fixed under letter of permission has not been able to be fulfilled by the petitioner. Insofar as the question of delay aspect is concerned, the same is not to be considered so as to set side the entire action. The only point which has impress the court is that while inflicting penalty, the well recognized doctrine of proportionality is not being considered by the authorities below. More particularly, the second appellate authority .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ionality of the penalty in any manner. The appellate authority has arrived at a conclusion in para 5 of the order reflected on page 25 of the petition compilation practically has not taken up the issue nor even dealt with the issue of proportionality of penalty which is the center of controversy of present proceedings. Therefore, there appears to be complete non-application of mind on the part of the authorities below to exercise discretion as invested in Section 11(2) of the Act. Additional fea .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nized doctrine of proportionality which passing impugned orders.. 16. In view of the above position prevailing on record if the authorities which are cited by the counsel for the petitioner are taken into consideration, the same would assist the Court to arrive at a just decision to deal with the same. First authority which has been cited is in case of Hanil Era Textiles Limited vs. Union of India(supra). 17. In the context of this learned counsel further relied upon the decision delivered by th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he letter of approval nor there is any allegation against the petitioner-Company that the goods manufactured out of the goods so imported have been diverted elsewhere. It is also an admitted position that neither the show cause notice nor the orders impugned in the present petition mention, which clause of section 4-I of the Act 1947 is attracted and as aforesaid the only ground for initiation of action under section 4-I of the Act 1947 is non-fulfillment of export obligation. 25. In view of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ition to the tune of 40% as per the conditions of the letter of approval would not fall under any of the clauses of section 4-I of the Act 1947. It is also worthwhile to note that there are no other allegations whatsoever as regards breach of any conditions of grant of approval, except what is stated in clause 3 of the impugned show cause notice and even the appellate authority, taking into consideration the genuine problems of the petitioners, has been pleased to reduce the fiscal penalty from .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

petitioners are not liable to pay penalty. It is however, made clear that it would be open for the respondent authorities to take any other action for non-fulfillment of export obligation and nonachieving of value addition as per letter of approval against the petitioners under any other Acts, Rules and Regulations in force. 18. In another decision relied upon by the counsel for the petitioner is in case of Suryovonics Ltd. vs. Ministry of Commerce (supra) wherein also the Court was dealing with .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the case. It cannot be said as an open and shut case of clear violation of the petitioner. There are ample reasons which had to led to present imbroglio. The respondents are well within the knowledge of these circumstances, and they themselves, did act on the application of the petitioner for debonding and allowing domestic sale and authorities without the knowledge of the authorities, used or misdirected the materials. Unless an act of violation is directly attributable to the person, penal li .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s from the date of default and while dealing with said circumstances, the Punjab and Haryana High Court has considered various decisions of the Supreme Court and has observed like this: (9) The petitioner having committed the default way back in 1988-89 in not fulfilling his export obligation in toto, the authorities could initiate penalty proceedings against the petitioner only within a reasonable time. It is not in dispute that a show cause notice for levy of penalty was issued for the first t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and ors. vs. Rajkumar Brijender Singh and others, AIR 2004 SC 3218 referring to Section 20 of the HP Ceiling on Land Holdings Act, 1973, conferring suo motu power on Financial Commissioner, interpreting the words at any time , it was held that such power had to be exercised within reasonable time. The relevant observations are:- 6. It is true that sub section(3) provides that such a power may be exercised at any time but this expression does not mean there would be no time limit or it is in infi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in exercise of his suo motu power, well it could be open for the State to submit that the facts and circumstances were such that it would be within reasonable time but as we have already noted the order of the Collector which has been interfered with has passed in January 1976. The learned counsel for the appellant was not able to point out such other special facts and circumstances by the reason of which it could be said that exercise of suo motu p0wer after 15 years of the order interfered wit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cordingly, we do not find any justification for levy of penalty after 14 years of default. The contention of the counsel for the revenue to the effect that the petitioner having committed default cannot be permitted to raise these technical pleas is to be noticed and rejected, being without any merit. 20. Even in another case of Dewan Tyres Ltd vs. Union of India reported in 2014 (307) ELT 496, the Allahabad High Court had analyzed all the provisions relevant to the issue in question has also de .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and circumstances also to be dealt with in the aforesaid line. The relevant paragraphs of the said decision are 36 onwards. But since the issue is not debatable, the same are not quoted hereinafter. 21. Therefore, in the background of that case, the action of penalty was dealt with and set aside. 22. Now in the background of aforesaid fact reverting back to the facts of the case on hand as said earlier, it is quite visible that the original authority has not kept in mind the concept of proporti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version