NAMCO INDUSTRIES PVT. LTD. Vs. UNION OF INDIA

JUDGEMENT

(1.) By this petition under Article 226 of the Constitution of India, the petitioner is challenging the show cause notice issued by the Additional Director General of Foreign Trade, invoking the powers under the Foreign Trade (Development and Regulation) Act, 1992 (hereinafter referred to as "the FTDR Act").

(2.) The petitioner claims that the entire show cause notice is issued at the behest and instance of the Director General, Directorate of Revenue Intelligence. In that regard, our attention is invited to Paras 4 to 7 of the show cause notice, copy of which is at page 138 of the paper book. These paras appear at page 139 thereof. It is submitted that the show cause notice would not have been issued, but for a very detailed communication from the Directorate of Revenue Intelligence. That is issued sometime in June, 2016. Our attention is invited to Paras 7.3 and 7.4 of that communication to submit that eventually the Principal Additional Director General holds the transaction as fictitious one. The conclusion that is reached by the Principal Additional Director General is that there is misdeclaration of value coupled with the fact of non-fulfilment of stipulated export obligation specified for the first block which stands expired. The authorisation deserves to be cancelled. The understanding of the Additional Director General that he will not be in a position to issue show cause-cum-demand notice for recovery of Customs duty and imposition of penalty until an order for cancellation of the EPCG authorisation is issued is fundamental flawed. It is stated that the EPCG licences, which have been issued by the Mumbai Zonal office of the Director General of Foreign Trade, in terms of Chapter V of the Foreign Trade Policy and Customs Notification dated 11th September, 2009 as amended with a condition to fulfil export obligation does not envisage the cancellation so long as the terms and conditions of that licence are complied with. Therefore, the Additional Director General of Revenue Intelligence cannot insist on a cancellation. The show cause notice from the Additional Director General of Foreign Trade is not based on an independent satisfaction but purely on the communication from the Additional Director General of Revenue Intelligence. Hence, the present case is firstly of exceeding the jurisdiction vested in the Director General of Foreign Trade and secondly, the Director General of Foreign Trade exercising its powers at the behest of the Additional Director General of Revenue Intelligence. Therefore, no useful purpose will be served by the petitioner submitting to the jurisdiction of the Additional Director General of Foreign Trade.

(3.) Mr. Shroff, learned senior counsel appearing for the petitioner, while reiterating the above contentions, points out that a sister concern of the petitioner entered into an agreement with a Swedish company and for purchase of certain goods. Relying upon the terms and conditions of the sale, it is submitted that the agreement to purchase the goods never fructified. It was not implemented. The petitioner's Director, who was also the Managing Director of Namco Corporation Limited discussed the issue with his cousin in Dubai having a company, namely, M/s. Escorp Commodities LLC, UAE. On 20th November, 2009, the petitioner company entered into an agreement with M/s. Escorp Commodities LLC for procurement of the complete, refurbished, restored to working condition and revamped to manufacture, the requisite final product, namely, plates of width up to 2,500 mm and minimum thickness up to about 4 mm with various assurances mentioned in the said agreement. On 20th April, 2010, the petitioner company entered into a further agreement with M/s. Escorp Commodities LLC for supply of various rolls made of special alloy steel, suitable for rolling plates, out of mild steel/alloy steel slabs. In July, 2010, the complete refurbished and revamped machinery in working condition, as agreed under the agreement dated 20th November, 2009 was shipped by the Dubai supplier to India from the port of loading at Gavle, Sweden to the port of discharge in India at Kandla. On the basis of two EPCG licences, the bills of entry were filed for clearance of the capital goods sometime in February, 2011. The goods were examined. The certificates issued by the Chartered Engineer were also perused, but the proper officer held that the goods were undervalued and the value of containers should be added. That is how the order was passed by the Commissioner of Customs on 10th March, 2011. The goods under the two bills of entry were confiscated and penalties were imposed. The appeal is pending before the CESTAT. Then, the show cause notice issued by the Department was eventually dropped. After all this, the petitioner suffered heavy losses, but could not recover and had to move an application before the BIFR. The reference before the BIFR also could not proceed in accordance with law. Several summonses were issued by the Directorate of Revenue Intelligence. Mr. Shroff then refers to the alleged hardship that was caused to the petitioner. It is submitted that in the above circumstances, intervention of the Hon'ble Supreme Court was sought in Writ Petition (Cri.) No. 66 of 2016 filed under Article 32 of the Constitution of India. It is submitted that out of sheer vengeance, the Directorate of Revenue Intelligence caused a communication to be issued to the Additional Director General of Foreign Trade forcing her to commence the proceedings under the FTDR Act. It is submitted that there is no merit in the prima facie finding of the Directorate of Revenue Intelligence that it cannot take the proceedings under the Customs Act, 1962 to their logical end on account of the EPCG licences still being in force. Secondly, it is submitted that an authorised official under a distinct statute cannot force the authority like the Director General of Foreign Trade to commence any legal proceedings. The Director General of Foreign Trade acts under the FTDR Act and therefore, could not allow its powers to be abdicated or taken over by the Directorate of Revenue Intelligence. After all these submissions, it is submitted that this court should quash the show cause notice.