VIRENDER MOHAN JAIN Vs. UNION OF INDIA

JUDGEMENT

(1.) THROUGH this criminal writ petition filed by Virender Mohan Jain-petitioner under Article 226 of the Constitution of India read with Section 482 of the Code of Criminal Procedure, he has prayed for the quashing of order of detention No. F No. 673/22/2001-CUS, VIII dated 28.9.2001 passed by Sh. Somnath Pal, Joint Secretary to the Government of India, New Delhi under Section 3(1) of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act 1974, hereinafter to be referred as "COFEPOSA" against him dubbing it as illegal, unconstitutional and based on extraneous, irrelevant and vague grounds violative of Articles 14, 19 an 21 of the Constitution of India.

(2.) IT is alleged that he is carrying on business of trading and exports of chemical goods in the name and style of M/s Dadri Inorganics Pvt. Ltd. Charkhi Dadri, Haryana. In the year 1997 Government of India introduced an export incentive scheme under the name "Duty Entitlement Pass Book Scheme hereinafter to be referred as "DEPB Scheme". This scheme was primarily aimed at encouraging export. Under this scheme, the benefit extended to the exporter making an export mainly consists of duty credit licence granted to him for export of duty free goods. Further more, under this scheme, the exporter is under obligation to declare the present market value, herein after to be referred as "PMV" of the goods exported by him since the benefit under the scheme cannot exceed 50% of the PMV. Copy of the public notice No. 45/97 dated 12.5.1997 highlighting the DEPB Scheme is Annexure P-1. This DEPB Scheme was introduced in the export and import policy 1.4.1997 to 31.3.2002. After the public notice Annexure P-1, another public notice bearing No. 66/97 dated 25.6.1997 was issued by the Customs Department wherein it was, inter alia, clarified that in case upon examination of the goods, the examining officer finds prima facie the declared PMV to be unduly high, then the matter may be referred to the Assistant Commissioner and in such cases, the PMV may be verified/determined through market inquiries etc. It was also clarified that in case of product attracting credit at the rate of 50% or more, the amount of credit shall not exceed 50% of the PMV. Therefore, the exporter was required to declare in the shipping bill filed under the DEPB Scheme, the PMV where the credit entitlement was 15% and above, copy of this public notice is Annexure P-2. Another circular was issued by the Ministry of Finance, Department of Revenue bearing No. 69/97 dated 8th December, 1997 wherein revised guide-lines for determining/verification of the PMV under the DEPB Scheme were issued. It was highlighted in these guide-lines that the condition of restricting the credit amount under the DEPB Scheme of 50% of the PMV was prescribed to prevent the exporter from obtaining the excessive amount of credit by inflating the FOB price of the export product. It was further stated in these guide-lines that FOB value may be higher as per the contract between the exporter and foreign buyer but the PMV of the goods is an index of their local (whole sale/retail) price exclusive of duties, sales tax etc. Further more, comprehensive guide-lines were issued for determining the PMV in case of manufacturer exporters as well as merchant exporters. Copy of the circular is Annexure P-3. The perusal of this circular would show that in-built mechanism has been provided with regard to the verification of the PMV declared by an exporter. It also provides for an opportunity to the exporter to justify the correctness of the PMV declared by issue of a show cause notice. Further the perusal of the circular would show that neither any penal action has been proposed for an inappropriate declaration of the PMV nor any other coercive method has been described for taking action in this regard. Circular further indicates that the process of ascertaining/verification of the PMV is a relative process which may vary and accordingly a show cause notice has been prescribed before taking a final view in the matter. It is further alleged in this petition that the chronology of the entire DEPB Scheme, if read in totality, clearly indicates that no penal action is required in the case of declaration of the PMV as the price in the market varies from person to person/location to location on the basis of quality, design, availability of ready goods in the market, terms of payment etc. Thereafter, another circular was issued bearing No. 23/99 dated 11.5.1999 (Annexure P-4) in which a period of 5 years for the issue of show cause notice was provided in cases involving fraud, mis-statement or suppression of facts etc. It was further indicated in this circular that where the PMV declared by the exporter is not accepted then a show cause notice can be issued to the exporter for either the rejection or revision of the PMV. It is alleged that the entire perusal of DEPB Scheme alongwith all the circulars as stated above, leave no scope of doubt that the benefit under the scheme can be availed by an exporter, only when the PMV declared by him is accepted and not before that. In order to ascertain the PMV, a full-fledged mechanism has been provided and an opportunity of hearing the exporter before the fixing of the PMV is also provided. The competent authority has been empowered to either reduce or reject the PMV and, thus the entitlement of an exporter under the DEPB Scheme is variable. Proceedings for verification of the PMV are totally independent and cannot be compared with any other process initiated under the Customs Act etc. There is not even a whisper as to what penal action is to be taken following the assessment of the PMV, even in a case where the PMV declared is found to be on the higher side. It is alleged that the scheme has left no scope of doubt that even in case of fraud/collusion, willful mis-statement or suppression of facts regarding the PMV, no penal action is contemplated. The authorities are competent to reject or reduce the PMV declared by an exporter which is the only action contemplated to be taken under DEPB Scheme. It is alleged that petitioner exported eight consignments of Magnesite Chrome Magnesia Ramming Mass, between November, 1998 to January 1999 to M/s Fairdeal Building Chemicals, Sharjah, UAE, valuing approximately Rs. 1.99 crores (US$ 4,67,600) under claim of "Duty Entitlement Pass Book Scheme" (DEPB). Copy of shipping bill for one such consignment bearing No. 23166 dated 15.12.1998 is Annexure P-5. Copy of the DEPB licence issued for one such consignment bearing No. 0199137 dated 10.3.2000 is annexure P-6. It is alleged that thus the exports were initially allowed on provisional basis subject to chemical tests of the sample drawn and price verification. The shipping bills were, however, finalised later after the receipt of test reports from the Central Revenues Control Laboratory (CRCL). Credits against 4 consignments were issued by the Director General of Foreign Trade (DGFT) during the period between August, 1999 to March, 2000 amounting to approximately Rs. 21.67 lacs but no credit was utilised by the petitioner at all. It is further alleged that it was alleged by the department of customs that they had received an information that number of exporters at Delhi were availing undue DEPB benefit by exporting goods at highly inflated prices and mis-declaring the description of the products. Accordingly, searches were conducted at and enquiries were made with various exporters including him (petitioner), who in his statement, inter alia stated that he was procuring his supplies through M/s Ratanlila and Co. Ltd. and M/s Lila Enterprises against bills, payments for which were being made through cheques and were duly reflected in their accounts. It is further alleged that it is further the allegation of the department of customs that Mr. C.P. Gupta, Director of M/s Ratanlila and Co. Ltd., Prop. of M/s Lila Enterprises stated that while he was issuing bills and receiving cheques for payment, he was not supplying any material. He stated that he was persuaded by a friend of Mr. K.K. Jain to provide bills without supplying materials. Further Mr. K.K. Jain, collected blank cheque books of the accounts duly signed by him (C.P. Gupta) to withdraw the money deposited in above account. After all the above enquiries, Customs Department again sent another set of samples to CRCL on 8.12.2000 out of samples retained from the consignments sent by the petitioner between November, 1998 to January, 1999 and claimed that this time they found the samples deficient in chromium oxide content. The above reports of CRCL of samples drawn nearly 2 years ago, were however not made available to the petitioner till date. On the basis of the above and some other material, it is gathered, that the department came to the conclusion that the petitioner and some other exporters in collusion with other parties were defrauding the Government for wrongful gains under the DEPB Scheme. As a follow up of the above allegation was the cancellation of the Import-Export Control Code issued to him on 23.3.2001. He was thereby rendered incapable to exporting/importing any material thereafter. Copy of the order in this behalf is Annexure P-7. EXIM policy clearly debars any person to export/import without Import/Export Code No. as per 4.9 of the EXIM policy Annexure P-8. Apprehending that the Customs Department would falsely implicate him under the Customs Act, 1962 or under the Central Excise Act, 1944, petitioner approached this Court through criminal misc. petition No. 43180-M of 2000 for the grant of anticipatory bail to him. This Court passed order Annexure P-9. It is alleged that the whole case has been conceived with malafide intentions and ulterior motives of investigating officer, Sh. Sanjeev Gautam, Deputy Commissioner (SIIB), New Customs House, New Delhi as he could not fulfil his illegal demands. During investigation, he was threatened number of times for arrest. He made complaint against Sh. Sanjeev Gautam for harassment, mis-behaviour and man-handling and using foul and sordid language against him. He also mentioned in the complaint against Sh. Sanjiv Gautam that inspite of the order of this Court granting him anticipatory bail, he was taken to the police station and subjected to physical harassment, he was forcibly dragged into the Customs House in utter violation and contempt of the order passed by this Court. He sent complaint against Sh. Sanjiv Gautam to various authorities. Annexure P-10 is the copy of the said complaint. The detention order passed against him is illegal, unconstitutional, arbitrary, and against the settled provisions of law and is liable to be set aside on the grounds that it is evident from the chronology of the events as narrated in this petition that the DEPB Scheme is absolutely independent from the other schemes formulated by the Government. It has in- built mechanism and the entire process had been detailed therein, Government has issued revised circulars from time to time and comprehensive guide-lines have been issued for determination and verification of the PMV under the Scheme. Scheme provides for opportunity to the exporter in order to enable him to justify the correctness of the PMV declared by him by issuing a show cause notice. It is clearly provided under the scheme that the PMV can only be reduced or rejected. The allegation that there was a gross over-valuation of the export consignment cannot stand the test either of illegality or of fairness.

(3.) PETITIONER is now being sought to be detained with a view to prevent him from indulging in smuggling activities in future, under Section 2(c) of the COFEPOSA. According to Section 2(39) of the Customs Act, smuggling in relation to any goods means any act or omission, which will render such goods liable to confiscation under section 111 or under section 113. The perusal of Section 113 of the Customs Act according to the petitioner shows that the case of the petitioner does not fail in any of the clauses mentioned therein. No penal action has been proposed for an improper declaration under the DEPB and no coercive method has been described for taking action in this regard. The perusal of the entire scheme indicates that the process which may vary and accordingly, a show cause notice has been prescribed before taking a final view in to the matter. The chronology of the entire DEPB Scheme, if read in totality clearly indicates, that no penal action is required in the case of declaration of the PMV as the price in the market varies from person to person/location to location on the basis of quality, design, availability of ready goods in the market, terms of payment etc. The goods exported by the petitioner were neither prohibited as contemplated under Section 2(33) of the Customs Act. Assuch, the export made by the petitioner does not attract the provision of Section 133 of the Customs Act. COFEPOSA was enacted for the purpose of conservation and augmentation of foreign exchange and prevention of smuggling activities and for matters connected therewith. If the petitioner has indulged in over-invoicing the exports, it follows that instead of adversely affecting the said object, it has augmented the foreign exchange as in fact the import proceeds of all the consignments have indeed been received in the country. Annexure P-13 is the copy of one such bank certificate of export and realisation indicating that entire FOB value in foreign exchange had been repatriated. Various clauses under Section 133 of the Customs Act deal with either dutiable or prohibited goods or for clearances under duty draw back scheme amongst other things. There is no clause which deals with clearances under the DEPB Scheme. In such a situation, the impugned goods under the DEPB Scheme are not liable to confiscation under section 113 of the Customs Act. No smuggling could be said to have taken place. The provisions of COFEPOSA cannot be said to have been attracted. The impugned order of detention is wholly illegal and void ab-initio. The consignments were first cleared on provisional basis, the same were finalised after the test reports were received without any adverse finding. After nearly two years the samples were again sent for re-test without any notice/intimation to the petitioner, which it is alleged, were found deficient in certain respects which defies imagination unless the samples had deteriorated on account of uncertain chemical stability over two years period. He has not been supplied with the re-test report till date to react about the deficiency claimed. He had obtained Import-Export Control Code No. in 1998, which was cancelled on 23.3.2001 subsequent to the search of his business place on 9.8.2000. On cancellation of the Code, there was no question of petitioner's conducting his export business and, therefore there can be no justification for a preventive detention after about 6-7 months of the cancellation of the Code. It is alleged that there will be serious in-roads in his liberty and fundamental rights.