Divine Chemtee Ltd. Vs Principal Commissioner of Customs and Ors. (Andhra Pradesh High Court)
Facts- The petitioner is a private limited company registered as a unit of Special Economic Zone (SEZ) with the Visakhapatnam Special Economic Zone (VSEZ). The petitioner imported four consignments and stored the material in the bonded warehouse. The petitioner undertook certain operations on its imported consignments in order to export the same. The petitioner thereafter filed a shipping bill with VSEZ for export of the consignment of Bio Diesel.
The officers of DRI visited the bonded warehouse and drew samples of the said export material on the ground that the petitioner was attempting to export bio diesel imported vide BEO dated 21.02.2011, without undertaking any process and without even bringing the imported material to the factory premises in SEZ and by wrongly obtaining Certificate of Origin as India, to certain clients in European Union facilitating them to avoid anti-dumping duty being imposed by the European Union on bio diesel which originated in USA.
Accordingly, the officers of DRI detained the said export material under Section 110 of the Customs Act, 1962, which was subsequently converted into a seizure on the ground that the value of the imported consignment was grossly undervalued. The petitioner made a representation to DRI against the illegal seizure of the export goods and requested for the release of the same on the ground that they were meant for export. The DRI allowed release of the said goods on production of a bond.
A notice was issued to the petitioner proposing to levy penalty u/s. 112(a) and Section 114 of the Customs Act, 1962. Accordingly, a consequential order was passed by the revenue authorities against the petitioner. The petitioner filed a writ petition before the High Court against this order.
Conclusion- Therefore, removal of the goods from SEZ area or storage of goods in bonded warehouse for the purpose of export, imported under a licence issued for the said purpose as and when vessel is available or otherwise, in our view, cannot be brought within the purview of DRI officials under the Customs Act and it is only officials under SEZ Act, who would be bestowed with jurisdiction to initiate the proceedings.
The petitioner is having licence to trade, storage of goods outside the SEZ area namely in a bonded warehouse, for the reasons stated earlier, cannot automatically confer power on the DRI Officers to initiate proceedings under the Customs Act.
Held, the Customs authorities (DRI officials) have no power or jurisdiction to inspect or seize goods in respect of units situated in the SEZ area. The Court held that only the Officers empowered under Section 22 of the SEZ Act have the power to investigate any offence committed in the SEZ unit. The Court thus held that the Customs Act is not applicable in respect of the units situated in the SEZ unit.
FULL TEXT OF THE JUDGMENT/ORDER OF ANDHRA PRADESH HIGH COURT
The present Writ Petition came to be filed to declare the Order – in – Original No.VIZ-CUSTOM-000-COM-009-20-21, dated 30.06.2020, passed by the 1st respondent pursuant to the reply given to the Show Cause Notice dated 11.12.2014, as illegal, arbitrary and without jurisdiction.
2. The circumstances, which lead to filing of the present Writ Petition, are as under:-
(a) The 1st petitioner is a private limited company engaged in manufacture of Bio-Diesel and Glycerine at Visakhapatnam Special Economic Zones (VSEZ). It was registered as a unit of Special Economic Zone (SEZ) with Visakhapatnam Special Economic Zone (VSEZ) vide Letter of Approval (LOA) dated 17.05.2006, granted by the Board of Approvals (BOA), New Delhi, for conducting authorized operations of manufacture of Bio Diesel and Glycerine. The Commerce Ministry issued another LOA dated 30.07.2009, allowing trading in Bio Diesel, as an authorized operation, by the 1st petitioner.
(b) It is seen from the Statement of Objects and Reasons of the Special Economic Zones Act, 2005 [for short, “the Act”], the Government of India has announced the Special Economic Zone scheme in April, 2000 with a view to provide internationally competitive environment for exports. The objectives of Special Economic Zones includes making available goods and services, free of taxes and duties supported by integrated infrastructure for export production, expeditious and single window approval mechanism and a package of incentives to attract foreign and domestic investments for promoting export lead growth. The SEZ units are put under the administrative control of the Development Commissioners under the Ministry of Commerce to grant necessary permissions, to provide other facilities and also to undertake investigation and impose penalties for violation of any of the provisions of the Act.
(c) Before introduction of SEZ Act, 2005, the working of SEZ was regulated by the provisions contained in Chapter XA of the Customs Act, 1962. As per Notification dated 14.03.2006, the provisions of Chapter XA of the Customs Act, 1962 were specifically made not applicable to the working of the SEZ. The Central Government through Ministry of Commerce and in exercise of the power granted under Section 21(1) of the SEZ Act, 2005 specified the officers with the powers of investigation, inspection or search or seizure as provided under the said Act and the Development Commissioner of the respective SEZ has been made the Enforcement Officer under sub-section (2) of Section 21 of the Act. The officers of Customs are notified as proper officers under the SEZ Act, 2005 only with effect from 05.08.2016, with a condition that the said Officer is required to report before the 3rd respondent within seven days, the details of action if any, initiated by it. Therefore, any violation by a unit in SEZ was to be investigated under the SEZ Act, 2005 only by the Development Commissioner i.e., respondent no.3 herein till 05.08.2016.
(d) The petitioner has been undertaking authorized operations i.e., manufacture of Bio Diesel and export of the same and also trading of the said goods as permitted under the Letters of Approval, dated 17.06.2006 and 30.07.2009, from its manufacturing premises located within the SEZ area at Visakhapatnam. During 2009-10 and 2010-11, the petitioner imported four consignments of Fatty Acid Methyl Ester (FAME) of different grades from M/s. Natural Bio Energy LLC, USA and exported Bio Diesel manufactured with certain specifications, after undertaking blending and other operations on the imported FAME with the Bio Diesel of different grades manufactured at the factory situated in VSEZ.
(e) The petitioner imported four consignments by duly filing Bill of Entries, transferred and stored the material in the Bonded Warehouse of M/s.East India Petroleum Ltd (EIPL) at Visakhapatnam. It is also to be noted that the petitioner transferred the Bio Diesel manufactured at VSEZ factory to EIPL Bonded Warehouse after filing Shipping Bills for blending with imported FAME and after due process the petitioner exported the blended cargo from the bonded warehouse. Bio Diesel is also called as Fatty Acid Methyl Ester (FAME). The main raw materials for manufacture of Bio Diesel are vegetable acids, vegetable oils, fatty acids and also fatty acid methyl ester (FAME) which are imported from Malaysia, Indonesia and the U.S.A. as well as domestically procured material.
(f) The petitioner imported 42,137.424 MTs of FAME and imported consignments and blended it with 6,022.762 MTs of Bio Diesel manufactured by it to export the blended Bio Diesel as per the specifications of its clients. Since the petitioner does not have sufficient storage capacity to store huge quantity of bio diesel imported, in some cases, blending was done in the tanks located in the Customs Private Bonded warehouse. Further, in the year 2011, the petitioner filed shipping bill with VSEZ for export consignment of 27,000 MT of Bio Diesel. The same was manufactured by the petitioner using 26,044.06 MT of FAME imported from M/s.Natural Bio Energy LLC, USA vide Bill of Entry dated 21.02.2011.
(g) After filing the Shipping bill on 10.03.2011, for export of Bio Diesel cleared by the authorized officer of SEZ to the storage tanks of EIPL, the officers of the 2nd respondent visited the bonded warehouse of EIPL on 11.03.2011 and drawn samples of the said export material on the ground that the petitioner was attempting to export bio diesel imported vide Bill of Entry dated 21.02.2011, without undertaking any process and without even bringing the imported material to the factory premises in SEZ and by wrongly obtaining Certificate of Origin as India, to certain clients in European Union facilitating them to avoid anti-dumping duty being imposed by the European Union on bio diesel which originated in USA.
(h) Subsequently, the officers detained the material to an extent of 27,000 MTs under panchanama, dated 19.04.2011, under Section 110 of the Customs Act, 1962. The detention was subsequently converted into seizure on 20.04.2011 under a panchanama, dated 20.04.2011, on the ground that the value of the imported FAME was grossly undervalued. Later, the petitioner addressed a letter to respondent no.2 to take action against the illegal seizure of the export goods and also requested for release of the consignment as the same was meant for export. The 2nd respondent allowed release of the goods on production of bond equivalent to the value of the seized goods i.e., Rs.132,91,00,000/- and on retention of 1500 MT of Bio Diesel as security.
(i) On due investigation, a show cause notice dated 11.12.2014 was issued to the petitioner answerable to the respondent no.1. The said show cause notice was also issued to the 2nd petitioner, Managing Director of the 1st petitioner proposing penalty under Section 112(a) and 114 of the Customs Act, 1962. On 05.06.2015 the petitioner gave interim reply to the respondent no.1 and final reply on 20.08.2019. In his reply, the petitioner stated that the impugned order came to be passed with many factual errors evidencing the fact that the respondent no.1 had mechanically passed the order without application of mind.
3. The main plank of argument is that the respondent no.2 had no jurisdiction to initiate any action against a unit situated in SEZ as the offences under the Customs Act are not yet notified to be investigated by the DRI and any offence in a SEZ unit are to be dealt with only by the Development Commissioner under the SEZ Act i.e. respondent no.3. Hence, issuance of show cause notice is bad in law.
4. Counters came to be filed by the respondent nos.1 and 2 denying the allegations made in support of the affidavit filed in the Writ Petition, mainly contending that the petitioner has admitted that he has filed wrong declarations in Form-A for issue of GSP Country of Origin (Preferential) obtained from Development Commissioner of VSEZ and Export Inspection Agency (EIA) that the product under export is a product of Indian Origin. It is averred that the mis-declarations of the values, Country of origin, slight change in the descriptions of the same product and routes etc., by the petitioner are clear indications of the modus operandi adopted and there is enough material available which confirm that no manufacturing activity took place and VSEZ has been utilized for fraudulent purpose. As the SEZ unit was being mis-utilised to pursue the fraudulent intentions, causing irreparable damage to the reputation of Indian Nation and harming other domestic industry in the name of providing jobs to a few people in their factory in order to carry out their design, thereby defeating the very purpose for which the SEZ Scheme has been brought into force, the action under Customs Act, 1962 has been initiated by the DRI in the interest of the Nation.
5. The respondent no.3 filed counter, contending that he has no role to play nor concerned with the matter and the Adjudication Order was passed by the Principal Commissioner, Customs against the petitioner as the issue involved is outside the purview of SEZ area.
6. Relying upon the answers given by the 2nd petitioner during investigation by the customs authorities, the learned counsel for the respondents would contend that everything done was outside the SEZ area and hence the Customs Authorities get jurisdiction to issue the Show Cause Notice.
7. Sri N. Harinath, learned Assistant Solicitor General, for respondent no.4 mainly argued that since no processing was done, the petitioners herein has violated the conditions of licence and also violated the provisions of the SEZ.
8. At the outset, the main argument advanced by learned counsel for the respondents is with regard to maintainability of the Writ Petition when the petitioners have an alternative remedy of appeal.
9. It is not in dispute that a remedy of appeal is available, but here is a case where jurisdiction of the authority in issuing the Show Cause Notice is questioned. The Hon’ble Supreme Court in Radha Krishan Industries vs. State of Himachal Pradesh and others1 has laid down certain guidelines as to when a Writ Petition would lie before the Court though there is a remedy of appeal, the same are, as under:
“27. The principles of law which emerge are that:
27.1. The power under Article 226 of the Constitution to issue writs can be exercised not only for the enforcement of fundamental rights, but for any other purpose as well.
27.2. The High Court has the discretion not to entertain a writ petition. One of the restrictions placed on the power of the High Court is where an effective alternate remedy is available to the aggrieved person.
27.3. Exceptions to the rule of alternate remedy arise where : (a) the writ petition has been filed for the enforcement of a fundamental right protected by Part III of the Constitution; (b) there has been a violation of the principles of natural justice; (c) the order or proceedings are wholly without jurisdiction; or (d) the vires of a legislation is challenged.
27.4. An alternate remedy by itself does not divest the High Court of its powers under Article 226 of the Constitution in an appropriate case though ordinarily, a writ petition should not be entertained when an efficacious alternate remedy is provided by law.
27.5. When a right is created by a statute, which itself prescribes the remedy or procedure for enforcing the right or liability, resort must be had to that particular statutory remedy before invoking the discretionary remedy under Article 226 of the Constitution. This rule of exhaustion of statutory remedies is a rule of policy, convenience and discretion.
27.6. In cases where there are disputed questions of fact, the High Court may decide to decline jurisdiction in a writ petition. However, if the High Court is objectively of the view that the nature of the controversy requires the exercise of its writ jurisdiction, such a view would not readily be interfered with.”
10. From the judgment of the Hon’ble Supreme Court, it is very much clear that a Writ Petition can be entertained by this Court though an alternate remedy is available when the authority issuing the Show Cause Notice has no jurisdiction to issue the same. Hence, we have no hesitation in coming to the conclusion that in the given set of circumstances, Writ Petition can be entertained.
11. The 1st petitioner is a unit situated in Visakhapatnam SEZ. Vide proceedings dated 17.05.2006, the petitioner unit was permitted to carry on manufacture of Bio Diesel with Glycerin as bi-product. Later, on 30.07.2009, permission granted to the petitioner was amended by including trading of Bio Diesel and blended Bio Diesel as permissible activity.
12. It would be appropriate to extract the contents of the two licences, which are as under:-
F.No.9/SEZ/187/VSEZ/2006/2973
Date: 17/05/2006.
To,
M/s.Cleancities Biodiesel India Pvt. Ltd,
No.8, Prashansannagar,
Road No.72, Jubilee Hills,
Hyderabad – 500 033.
E-mail: [email protected]
Subject: Your proposal for setting up a unit in the Visakhapatnam Special Economic Zone for manufacture of Biodiesel for Export – reg.
Reference: Your application No.2956, dated 17/05/2006.
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Dear sirs,
With reference to the above mentioned, application, Development Commissioner, Visakhapatnam Special Economic Zone is pleased to extent to you all the facilities and entitlements admissible to a unit in a Special Economic Zone subject to the provisions of the Special Economic Zones Act, 2005 and the rules and orders thereunder and for the establishment of a unit at Visakhapatnam Special Economic Zone in the State of Andhra Pradesh for undertaking authorized operations, namely manufacturing as under:-
