Full Judgment Text
THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 14.10.2014
+ W.P.(C) 1788/2011
RASHMI JAIN ..... Petitioner
versus
ADDITIONAL DIRECTOR GENERAL OF
FOREIGN TRADE & ANR ..... Respondents
Advocates who appeared in this case:
For the Petitioner : Mr Piyush Kumar with Ms Shikha Sapra
For the Respondents : Mr Amit Mahajan with Mr Nitya Sharma
CORAM:-
HON’BLE MR JUSTICE VIBHU BAKHRU
JUDGMENT
VIBHU BAKHRU, J
1. The petitioner has filed the present petition impugning orders dated
09.02.2011 and 07.09.2006 passed by respondent nos. 1 and 2 respectively
(hereafter referred to as ‘impugned orders’). The petitioner is aggrieved by
the impugned order dated 07.09.2006 whereby a penalty for a sum of
` 2,50,000 was imposed upon M/s Balaji Impex (proprietary concern of
petitioner’s late husband). The appeal preferred by the petitioner’s late
husband against the impugned order dated 07.09.2006 was dismissed by the
impugned order dated 09.02.2011 passed by respondent no.1
2. Briefly stated, the relevant facts for considering the controversy
raised in the present petition are as under:
W.P.(C) 1788/2011 Page 1 of 10
2.1 The late husband of the petitioner was in the business of import of
metal scrap under the name M/s Balaji Impex (hereafter referred to as
“Balaji”). Sometime in October 2004, Balaji placed an order for supply of
Heavy Melting Scrap (HMS) from M/s Sun Metal Casting LLC, UAE.
Pursuant to the said order, 183.650 MTs of HMS was supplied on
25.10.2004, enclosed with an invoice dated 25.11.2004. The said
consignment was accompanied by a no-war material certificate issued by
M/s Sun Metal Casting LLC, UAE and a pre-shipment Inspection
Certificate dated 02.11.2004 issued by Moody International, Iran certifying
that the said consignment was free from arms, ammunition, mines, shells,
cartridges, radio-active contamination or any other explosive materials.
2.2 The said consignment was sold by Balaji to M/s S.G Steels Pvt. Ltd.,
Uttaranchal (herein after referred to as “SGS”) on high seas. The Bill of
entry for clearance of the HMS consignment was filed on 20.12.2004 and
after the customs authorities had examined the consignment, some used and
rusted empty cartridges/shells were found in some of the containers. The
entire goods/consignment was confiscated by the Commissioner of
Customs, Inland Container Depot, Tughlakabad, New Delhi and a penalty
was imposed on SGS.
2.3 Thereafter, separate show cause notices were issued on 31.03.2006 to
Balaji and SGS for imposing penalty on the ground that they had imported
prohibited war materials and violated the provision of Foreign Trade
(Development & Regulation) Act, 1992 and Foreign Trade (Regulation)
Rules, 1993.
W.P.(C) 1788/2011 Page 2 of 10
2.4 Pursuant to the aforesaid proceedings, respondent no.2 passed the
impugned order imposing a penalty of ` 2,50,000/- on Balaji. Similarly, a
penalty of 2,00,000/- was imposed on SGS. Aggrieved by the imposition
`
of the penalties, Balaji as well as SGS preferred appeals before the
Appellate Authority. By an order dated 11.01.2007, the appeal filed by SGS
was allowed by then Additional Director General of Foreign Trade and the
penalty imposed upon SGS was quashed. However, the appeal preferred by
Balaji remained pending.
2.5 While the appeal preferred by Balaji was pending, the petitioner’s
late husband (proprietor of Balaji) met with an accident and, subsequently,
expired on 18.01.2008.
2.6 During the pendency of the appeal, respondent no.2 initiated
proceedings for recovery of penalty from Balaji. Aggrieved by the same,
the petitioner filed a Writ Petition before the Allahabad High Court and by
an order dated 07.04.2010 the Court stayed the recovery proceeding
pending disposal of the appeal preferred by Balaji against the impugned
order dated 07.09.2006. By the impugned order dated 09.02.2011, the
appeal preferred against the impugned order dated 07.09.2006 was rejected.
3. It was contended by the petitioner that the orders passed by the
respondents are unreasonable, arbitrary and liable to be dismissed in limine
as the respondents failed to address the contentions raised by the petitioner.
It was further contended that the respondents have failed to acknowledge
that the consignment was accompanied by no war material and that the
goods/consignment was cleared by M/s Moody International, Iran. It was,
W.P.(C) 1788/2011 Page 3 of 10
thus, contended that the respondents have erred in holding that M/s Moody
International was not an authorised agency for issue of an Inspection
certificate.
4. Thereafter, the petitioner submitted that the conclusion of the
respondents and imposition of penalty on the petitioner, who was merely an
intermediary high sea seller, is erroneous and cannot be countenanced as
per the definition of ‘import’ under Foreign Trade (Development and
Regulation) Act, 1992 and term ‘importer’ under Foreign Trade
(Regulation) Rules, 1993 – the petitioner submitted that the importer, in the
present case, was M/s S.G. Steels Pvt. Ltd.
5. The petitioner also submitted that there was no evidence that the
petitioner had any knowledge regarding the presence of empty, used and
rusted shells in the consignment and hence there was no deliberate
disobedience of statutory provisions. Thus, it was submitted that the
imposition of penalty was illegal and violative of principles of natural
justice.
6. The petitioner also relied upon judgment in Tarak Nath Gayen and
Others v. Customs, Excise And Gold (Control) Appellate Tribunal and
Others : 1987 (31) E.L.T. 631 (Cal.) as well as in Hindustan Steel Ltd. v
State of Orissa : 1978 (2) E.L.T (J 159) (S.C) .
7. It was submitted by the respondents that after the receipt of report
from the JDG, ECA (HQ), show cause notices were issued for imposition
of penalty on Balaji and SGS for violation of Sections 8(b), 9(4) and 11(2)
of the Foreign Trade (Development & Regulation) Act, 1992 for the same
W.P.(C) 1788/2011 Page 4 of 10
cause of action. And, subsequently, fiscal penalty of ` 2,50,000 was
imposed on the Balaji after considering the submissions made on its behalf.
8. It was also submitted that the appeal preferred by the petitioner
against the appellate order could not be decided as the petitioner did not
enter appearance before the appellate authority (respondent no.1) on
various dates. It was further contended by the respondents that the
petitioner failed to show any evidence or documents that M/s Moody
International, Iran was accredited to inspect the goods and issue certificates.
The respondents, thus, contended that petitioner’s assumption that M/s
Moody International, Iran was an agency, which was authorised to issue an
inspection certificate for the consignment was erroneous. And therefore, the
inspection certificate issued by M/s Moody International was invalid and
could not be relied upon.
9. It was further contended that Balaji/petitioner could not seek parity
with the orders passed in the case of SGS, as the consignment in question
was procured by SGS from Balaji.
10. Balaji had sold the goods in question on high seas basis. Thus,
admittedly, the offending goods (HMS) were not imported by Balaji. The
term “import” is defined under clause (e) of Section 2 of the Foreign Trade
(Development and Regulation) Act, 1992 (hereinafter referred to as “FTDR
Act”) as under:-
“(e) “import” and “export” means,—
(I) in relation to goods, bringing into, or taking out of,
India any goods by land, sea or air;
W.P.(C) 1788/2011 Page 5 of 10
(II) in relation to services or technology,—
(i) supplying, services or technology—
(A) from the territory of another country into the
territory of India ;
(B) in the territory of another country to an Indian
service consumer;
(C) by a service supplier of another country,
through commercial presence in India ;
(D) by a service supplier of another country,
through presence of their natural persons in India
;
(ii) supplying, services or technology—
(A) from India into the territory of any other
country;
(B) in India to the service consumer of any other
country;
(C) by a service supplier of India , through
commercial presence in the territory of any other
country;
(D) by a service supplier of India , through
presence of Indian natural persons in the territory
of any other country:
Provided that “import” and “export” in relation to the
goods, services and technology regarding Special
Economic Zone or between two Special Economic Zones
shall be governed in accordance with the provisions
contained in the Special Economic Zones Act, 2005 (28 of
2005)”
11. The term ‘importer’ is defined under Rule 2(c) of the Foreign Trade
(Regulation) Rules, 1993 which reads as under:-
W.P.(C) 1788/2011 Page 6 of 10
“(c) “importer” or “exporter” means a person who imports
or exports goods and holds a valid Importer-exporter Code
Number granted under section 7”
12. By the impugned order dated 07.09.2006, a penalty of ` 2,50,000/-
was imposed on Balaji on the basis that it had imported the offending
goods. This is apparent from the contents of the said order, the relevant
extracts of which are quoted below:-
“7. Thus M/s Balaji Impex, D-108/4, Saket, Meerut-250004
the high Sea Seller (the noticee firm) has mis-declared the
description of the goods in the import documents for HMS
but have imported objectionable items of war materials and
sold to the final Indian importer in a clandestine manner
with an intention to smuggle the same into India which is
falling within the scope of the term "Ammunition" as defined
under Arms Act, 1959 and whereas the empty or discharged
cartridges of all Bores and Sizes fall under the Restricted
Category as per ITC (HS) Classification No. 72042110 and
72042910 & thus the importer have suppressed the actual
information and have brought restricted category items into
India alongwith the HM Scrap without any import licence.
The above consignment has been procured by the noticee
firm from foreign supplier supported by the pre-shipment
Inspection Certificate issued by an unauthorised agency M/s
Moody International Iran, and sold to the final Indian
importer, in contraventions of the provisions of FTDR Act.
xxxx xxxx xxxx xxxx xxxx
xxxx xxxx xxxx xxxx xxxx
A fiscal penalty of Rs.2,50,000/- (Two Lakhs Fifty
Thousand) only is imposed on the notice firm M/s Balaji
Impex for importing Heavy Melting Scrap consignment
mixed with objectionable war materials and sold to the final
Indian importer M/s S.G. Steels on High sea sale basis
W.P.(C) 1788/2011 Page 7 of 10
without any valid Pre-Shipment Inspection Certificate, in
contravention to the provisions of FTDR Act, 1992”
13. The impugned order dated 09.02.2011 also proceeded on the basis
that Balaji was the importer of the said goods. This is also clear from
paragraph 8 of the impugned order dated 09.02.2011 which reads as under:-
“I have gone through the facts of the case available on
record and the submissions made by the appellants. In this
case M/s Balaji Impex imported restricted items (war
material) in contravention of the Foreign Trade Policy. M/s
Moody International, Iran is not an authorized agency to
issue an Inspection Certificate for a consignment meant for
India. Hence, I found no reason to interfere with the
Adjudication Order passed by the Jt. DGFT, DGFT (HQ).”
14. The learned counsel appearing for the respondent supported the
impugned orders by contending that the penalty had been imposed on
Balaji on the basis that it had abetted import of goods in contravention of
the provisions of the FTDR Act.
15. In my view, this contention is liable to be rejected. This allegation
(of abetting) does not find mention in any of the impugned orders. The
impugned order dated 07.09.2006 specifically alleges that Balaji had
“ misdeclared the description of goods in the import documents for HMS but
have imported objectionable items of war materials and sold to the final
importer in a clandestine manner with an intention to smuggle the same
into India ”. Undisputedly, this allegation cannot be sustained. In the first
instance, Balaji had not imported any objectionable items into India.
Further, the intention to smuggle the said items cannot be ascribed to Balaji
W.P.(C) 1788/2011 Page 8 of 10
as Balaji was not the beneficiary of the import of the goods in question in
India.
16. Even, if one assumes that Balaji was charged with abetting import of
goods in contravention with the FTDR Act, it is obvious that Balaji alone
could not be penalized for the same. It is implicit in an allegation of
abetting an offence that another person is guilty of that offence which is
alleged to have been abetted. In this case, SGS would have been the
offender as well as a beneficiary of the import of goods into India.
However, SGS had succeeded in its appeal and the penalty of ` 2,00,000/-
imposed on SGS had been set aside by an order dated 11.01.2007. The
Appellate Authority had accepted the contention that there was no willful
concealment and/or importation of the offending war material by SGS. In
this view, where it has already been held that the person who imported the
goods in question is not guilty of any willful concealment/importation of
offending goods, the question of imposing a penalty on a high seas seller
for abetment of import in violation of the FTDR Act does not arise.
17. Balaji had purchased these goods on the strength of a certificate
issued by Moody International, Iran. Concededly, Moody International
(India) Pvt. Ltd. is an authorized agency listed in appendix 5 to the
handbook of procedures. The petitioners, thus, proceeded on the basis that
Moody International (Iran) which is an affiliate of Moody International
(India) Pvt. Ltd. would also be accredited for certification purposes. It is
also not in dispute that custom officers had not raised any objection with
respect to the pre-shipment inspection certificate. Thus, although the
respondents may be correct that the pre-shipment certificate was not from
W.P.(C) 1788/2011 Page 9 of 10
an accredited agency, Balaji’s assumption that M/s Moody International,
Iran was an accredited agency appears to the bonafide. In the given facts
and circumstances, no ulterior motive or mal-intent can be ascribed to
Balaji in accepting the certificate of M/s Moody International.
18. It is also relevant to note that the value of HMS was only ` 33,600/-
which was not significant in comparison to the total value of the goods
imported. This fact has been completely ignored by the respondents while
imposing penalty on Balaji.
19. In view of the above, the respondents had misdirected themselves in
imposing penalty on Balaji. Accordingly, the impugned orders dated
09.02.2011 and 07.09.2006 are set aside. The writ petition is allowed and
the parties are left to bear their own costs.
VIBHU BAKHRU, J
OCTOBER 14, 2014
RK
W.P.(C) 1788/2011 Page 10 of 10