M/S. JEWELS MAGNUM Vs. DEVELOPMENT COMMISSIONER MEPZ

JUDGEMENT

(1.) The petitioner calls in question the legality and correctness of the order dated 20.04.2015 passed by the respondent, in and by which, the respondent imposed penalty of Rs.61.76 Crores under Section 11 (2) of the Foreign Trade (Development & Regulation) Act, 1992 on the petitioner for having violated the conditions of the Letter of Approval.

(2.) The case of the petitioner is that the petitioner firm is a partnership firm engaged in the business of import and export of gold jewellery and other precious stones since 2006. For the purpose of importing and exporting such gold jewellery, the petitioner firm has obtained a Letter of Approval (LoA) on 10.06.2008 issued by the Assistant Development Commissioner for manufacture of "gold bangles and pendants" at the petitioner's firm situate inside the Madras Export Processing Zone (MEPZ), Special Economic Zone, Tambaram, Chennai. On the basis of such letter of approval, the petitioner firm set up a manufacturing facility for gold jewellery and articles and commenced export of gold medallions. According to the petitioner, gold medallions are nothing but pendants. In other words, the petitioner firm manufactured 'gold medallions' which are technically called as pendants. Both the medallions and pendants are one and the same and they were used to hang on the neck. The respondent also permitted the petitioner to continue to export the gold articles inasmuch as all the pendants are not medallions but all medallions are pendants. Further, before export of the goods, they were physically examined by the customs authorities with respect to description, quantity, weight etc., and they have not raised any objection. In fact, the petitioner firm had successfully exported the gold jewel during the financial year 2008-2009, 2009-2010, 2010-2011 and 2011-2012 and during this period, there was no complaint or objection raised by the respondent with respect to violation of the conditions of LoA. However, on and from 31.03.2012, since the Government withdraw certain tax benefits to SEZ, the petitioner did not continue the business and the petitioner unit was lying idle. Subsequently, on 24.04.2013, the petitioner unit was closed and a letter to that effect was also submitted to the appropriate authority. The appropriate authority also granted permission on 28.06.2013 for closure of the unit and to exit the SEZ after paying all customs duty/VAT for durable and taxable items such as machineries and raw materials. The petitioner firm also, before exit, paid Rs.1,38,170/- towards payment of VAT for capital goods and raw materials. According to the petitioner, during the course of their business, the petitioner unit was also awarded "Certificate of Appreciation" by the respondent for achieving highest turnover in 2010-2011 in gem & jewellery sector.

(3.) According to the petitioner, while the facts are so as stated above, on 21.02.2014, the respondent issued a cause to clarify as to why action should not be taken against them for manufacture and export of certain products without their approval. On 07.02014, the petitioner firm sent their detailed reply denying such averments. Subsequently, a show cause notice dated 29.04.2014 was issued to the petitioner invoking Section 14 of the Foreign Trade (Development and Regulation) Act, 1982 (hereinafter called as the Act) contending that the petitioner had violated the conditions of LoA by exporting 'Gold Medallions' as against the approved items of 'Gold Bangles and Pendants'. The petitioner submitted their reply on 31.05.2014 denying having violated the conditions of LoA. Thereafter, the respondent issued a Corrigendum dated 14.08.2014 to the earlier notice by invoking Section 14 of the Act revising the averments contained in para No.7 of the earlier notice and replaced them with new averments. However, even before the petitioner could submit their reply to the corrigendum, the respondent passed an order dated 009.2014 imposing penalty. Challenging the order dated 009.2014, the petitioner filed WP No. 25765 of 2014 before this Court. By an order dated 11.02.2015, this Court set aside the order dated 009.2014 of the respondent on the ground of violation of principles of natural justice and remanded the matter back to the respondent for fresh consideration after affording an opportunity of hearing to the petitioner to submit a reply to the corrigendum dated 14.08.2014. Pursuant to such direction, the respondent called upon the petitioner to appear for an enquiry on 24.02015. On that date, the petitioner appeared before the respondent and submitted a written submission contending that the respondent is not justified in imposing the penalty without following the Rules prescribed. During the personal hearing, it was specifically contended that the functional utility of medallion and pendant are one and the same and therefore the predominant and primary usage of the utility has to be taken into account apart from understanding the definitions given to those articles in the common parlance. Further, on that date, the petitioner also submitted affidavits obtained from goldsmith, jewellery dealer and Madras Jewellers & Diamond Merchants Association submitted on 26.02015 to prove that both pendant and medallion are one and the same. Notwithstanding such submissions, the respondent has passed the order dated 20.04.2015 imposing penalty on the petitioner firm, which is impugned in this writ petition.