Proceedings cannot be initiated by Excise for exemption notification violation

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

JUDGMENT

The Relevant Text of Judgment are as follows :

28. It is an admitted fact that the petitioners had instead of availing alternative remedy straightway approached this Court seeking extraordinary writ jurisdiction under Article 226 of the Constitution of India. However, in certain circumstances, the High Court can exercise its extraordinary writ jurisdiction under Article 226 of the Constitution of India, if the following circumstances exists.

(i) when the authority has passed the order without jurisdiction and by assuming jurisdiction which there exist none;

(ii) has exercised power in excess of jurisdiction and by overstepping or crossing the limits of jurisdiction; or

(iii) has acted in flagrant disregard to law or rules or procedure or has acted in violation of the principles of natural justice where no procedure is specified.

29. Having considered the contentions of both the sides and the material placed on record and the decisions cited at the Bar, and the legal provisions as above, it is an admitted fact that the DRI has issued the impugned notice proposing recovery of excise duty refunded by the department of DGFT by way of TED for the material supplied to 100% EOU (deemed export) as well as proposing recovery of interest and imposition of penalty on the petitioners, as also on the co- noticee. It also appears that during the adjudication proceedings, the department has sought for information from the concerned department Central Excise regarding examination of goods by it. It also appears that the Assistant Commissioner, Jamnagar vide his letter dated 27.10.2013 (page No.167 of the petition) has categorically stated that the receipt of the goods has been physically verified, during the period February 2009. However, it is stated therein that during June, 2010 M/s. Apple Internation (100% EOU) has received copper Alloy Ingots from M/s. Rajhans Impex Pvt. Ltd. under ARE-3 No. 09/02.06.2010, 14/19.06.2010 and 15/19.06.2010 without CT-3 certificate and the receipt of the goods has not been physically verified. It is further stated therein that no refund / rebate of the duty paid on their supplies to the EOUS has been granted to M/s. Rajhans Impex Pvt. Ltd., Jamnagar. It also reveals from the letter dated 28.08.2014 of the Superintendent (PI), Central Excise Division, Surendranagar that the goods were sent to M/s. Shrikrupa Exports and as per the affidavit filed on behalf of Srijan Exports, Chandigrh (page Nos.173-174 of the petition), the firm has received the consignment with form No. ARE-3 and the same has been examined by the jurisdictional Superintendent of Central Excise and the officer has visited the factory premises after verifying the contentions of the documents and the material received, has certified the facts of receipt of the goods.

Proceedings cannot be initiated by Excise for exemption notification violation

30. It appears from ARE-3 (page No. 23 onwards of the petition) that there is signature of the Superintendent of the Central Excise, ARE – 2, Surendranagar and it also appears from the remarks column thereof that the clearance is against Advance Authorization and duty debited in CENVAT.

31. It also appears from the impugned order-in-original (page No.204 of the petition) that the date of order is shown as 31.03.2017 and date of issuance is 05.04.2017. While referring to the letters of jurisdictional Central Excise Offices of recipient EOUs, it has been observed therein that the concerned authority has stated that in certain transactions, the officer has physically verified the goods. So far as other transactions are concerned, it was not physically verified. It also appears from the impugned order that while referring to the various documents and statements of truck owners, the authority has come to the conclusion that the petitioners have clandestinely disposed of the goods in local market and proposed confiscation of the goods and the penalty and the interest thereof.

32. It is one of the contention of the respondent that the physical verification of the goods was not done and that EOUs were not subject to the physical verification by the Central Excise Officer as well as they did not give any intimation of the receipt of the goods without CT-3 to the Central Excise Officer. It appears that the Custom Department’s stand is that due to non-verification of the goods by the concerned officer, the petitioners have clandestinely disposed of the goods in the local market. Now, it is pertinent to note that for non-performance of the official duty by the officer of the Excise Department cannot be a ground to initiate the action against the petitioner – company who is holding valid Advance Authorization and has claimed benefit of deemed export in view of para 8.3 of FTP. Under the provisions contained in the FTP, especially para 8.3, entitles the petitioners to get benefit of deemed export.

33. It is pertinent to note that in view of Rules 25 and 26 of the Central Excise Rules referred to hereinabove, it is admitted legal position that if there is any breach under the said Rules, the Central Excise Department has an authority to confiscate and impose penalty upon defaulting individual or the firm. Now, in this case, it is an admitted fact that the Excise Department has clearly informed the Custom Department that no refund was extended by it to the petitioners herein. At this juncture, it is pertinent to note that for certain goods, the different authorities have been empowered to investigate and to take necessary action. In this case, the question is relating to the refund of the excise duty by the DGFT. As such, the authority which may take action against the petitioners is DGFT. Of course, DRI can, after investigation, inform the concerned DGFT to take action against the present petitioners for breach of condition of Advance Authorization or deemed export or for wrongful taking TED.

34. Now, admittedly, the petitioner is holding Advance Authorization and that Advance Authorization has not been cancelled by the competent authority. It is also admitted fact that whatever refund has been granted, is issued by the DGFT. It also appears from the correspondence between other department that the jurisdictional Excise Offices have certified the facts of receipt of the goods though the material was not physically verified. It also appears that DRI is demanding the amount which has been refunded by the DGFT.

35. It also reveals from the letter dated 27.10.2013 (page No.167 of the petition) that the Central Excise Department has not sanctioned any refund / rebate of the duty paid on the supplies to the EOUs. It also appears that the refund of TED is sanctioned by the DGFT and if DGFT has acted under the different provisions and the refund is sanctioned under those provisions, the proper authority is DGFT who can initiate proceedings against the petitioners for violation of exemption notification and the Advance Authorization Licence. Now, it is an admitted fact that the Advance Autorization Licence of the petitioners is still valid and no action is taken by the DGFT for breach of condition thereof. As such, initiation of proceedings by the customs is nothing but an exercise of power in excess of jurisdiction. When the Custom Department has exercised power in excess of jurisdiction, than, this Court can exercise its extraordinary writ jurisdiction under Article 226 of the Constitution of India. Therefore, considering peculiar facts of this case, the impugned order-in-original is required to be set aside.

36. In view of the above, the present petitions deserve to be allowed. Accordingly, the petitions are allowed. The impugned order-in-original No.MUN-CUSM-000-COM-030-16- 17 dated 31.03.2017 passed by respondent No.2 is hereby quashed and set aside.

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