M/S. Atlas Interactive India Pvt. ... vs Union Of India & Ors.
2009 Latest Caselaw 4399 Del

                             Reportable
*             IN THE HIGH COURT OF DELHI AT NEW DELHI

+                            WP (C) No. 8271 of 2007


%                                          Reserved on: September 03, 2009
                                          Pronounced on: October 30, 2009

M/s. Atlas Interactive India Pvt. Ltd.                  . . . Petitioner

                   through :                Mr. Amit Sibal with
                                            Mr. Siddharth Silwan and
                                            Mr. Vinay Tripathi, Advocates


              VERSUS

Union of India & Ors.                                   . . . Respondents

                   through :                Mr. A.S. Chandhiok,
                                            Additional Solicitor General
                                            Mr. Amit Bansal, Mr. Ritesh
                                            Kumar, Mr. Sandeep Bajaj and
                                            Ms. Manisha Singh, Advocates

CORAM :-
    THE HON‟BLE MR. JUSTICE A.K. SIKRI
    THE HON‟BLE MR. JUSTICE VALMIKI J. MEHTA

       1.     Whether Reporters of Local newspapers may be allowed
              to see the Judgment?
       2.     To be referred to the Reporter or not?
       3.     Whether the Judgment should be reported in the Digest?


A.K. SIKRI, J.

1. The brief factual matrix transpires as under :

2. The petitioner had entered into a franchisee agreement on

20.4.2004 with the Bharat Sanchar Nigam Ltd. (hereinafter referred

to as BSNL). As per this agreement, the petitioner was to provide

broadband connection to landline subscribers of BSNL in Ghaziabad,

Noida, Faridabad and Gurgaon. For this purpose, the petitioner was

to supply broadband and triple play equipment. It decided to

procure the same through its supplier ZTE Corporation, China

(hereinafter referred to as the „supplier‟). In order to fulfil this

obligation with BSNL, the petitioner entered into two sales contracts

with the supplier to supply ADSL port and related broadband

equipment for a total capacity for 10,000 subscribers. These

agreements were entered into on 2.12.2004 and on that basis the

petitioner imported the aforesaid equipment which reached India

between 23.12.2004 and 24.6.2005. The petitioner got the

equipments cleared on payment of requisite customs duty of

Rs.5,72,86,977.79p. We may mention at this stage itself that though

the equipment was valued at Rs.24,33,21,540/-, the petitioner had

not paid any such amount to the supplier in China. In fact, no

amount was paid by the petitioner to the supplier at all. The

imported equipment, however, could not be provided to BSNL as

much before the equipment could reach India, BSNL terminated the

contract of the petitioner vide notice dated 10.12.2004 with effect

from 9.1.2005. The case of the petitioner is that because of this

arbitrary termination of the contract, the equipment could not be

utilized and remained in unpacked condition in its godown.

3. Against the termination of the contract, the petitioner filed a petition

under Section 9 of the Arbitration and Conciliation Act, 1996 in this

Court being OMP No. 482/2004. Though vide order dated

17.2.2005, this Court constituted the Arbitral Tribunal, the

arbitration proceedings could not commence due to non-payment of

fee by the petitioner and, therefore, the Arbitral Tribunal was

constrained to terminate the proceedings vide its orders dated

5.9.2006.

4. The petitioner states that as the goods were of no use to it after the

termination of the franchisee agreement, it applied for re-export of

the said goods under Section 74 of the Customs Act, 1962

(hereinafter referred to as the „Act‟) to M/s. Atlas Opportunities Ltd,

Karlol CSONTO, c/o. In Store Media, A.S. Mileticova, 4482109,

Bratislava, Slovakia where the goods were purportedly required.

Letter dated 30.8.2008 in this behalf was addressed by the petitioner

to the customs authorities seeking permission to re-export the goods.

The petitioner was, however, asked to obtain GR waiver clearance

from the Reserve Bank of India (RBI). It took more than nine

months to get such a permission from the RBI. In the meantime, on

18.7.2006, the goods were transmitted to customs warehouse at ICD,

Patparganj after fulfilling the parameters laid down under Section 74

of the Act. The petitioner also alleges that though its agent informed

the petitioner that the goods had been examined by the customs

authorities and were stuffed in the shipping line containers and were

ready to be shipped in February 2009, all of a sudden on 18.2.2007,

without any notice or intimation to the petitioner, the Department

of Revenue Intelligence (DRI), the respondent No.2 herein, seized

and sealed the containers containing the goods. They also seized all

the original documents such as bill of entries, duty payment receipts,

shipping bills, RBI GR waiver from the Customs Clearing Agents of

the petitioner, namely, M/s. R.B. Ramnathlambah & Sons Pvt. Ltd.

Though all this was done without panchnama or preparing the list of

itinerary, it was followed by summons dated 19.4.2007 issued under

Section 108 of the Act to the petitioners Director Mr. Ravinder Singh

Chauhan asking him to appear before the DRI on 23.4.2007

pertaining to the said import. The petitioner states that in the

meanwhile since almost 19 months had elapsed from the date of

filing of the shipping bills, the use and requirement for the goods also

ended in Slovakia. The supplier in China, however, agreed to take

back the goods and, thus, on 28.4.2007 the petitioner and the

supplier informed DRI about this with a request to release the

original documents to the petitioner for filing the said amendment in

the shipping bills so that goods could be shipped to China.

However, the DRI refused to release the original documents even

when the petitioner kept on sending various letters and reminders to

the authorities in this behalf. Thus, according to the petitioner,

goods have been illegally seized and retained by the respondents

without compliance of mandatory procedure contained in Sections

105 and 110 of the Act and, therefore, the petitioner filed the present

petition on 6.11.2007 with the following prayers :-

"a) issue a writ of Mandamus or any other appropriate writ, order of direction be issued against the respondents to hand over the original documents together with the goods illegally seized by the respondents for being re-exported to the consignor forthwith;

b) issue writ of Certiorari or any other appropriate writ, order or direction be issued and after calling the records, see the propriety, legality and validity of the order and quash the same, allow the petitioner to re-export the goods immediately

and refund the Customs duty in accordance with Section 74 of the Customs Act.

c) issue a writ of Mandamus ordering the respondents to waive all the Govt. Charges for the period when the petitioner was unable to re-export the goods.

d) And may further be pleased to pass such further order or orders as this Hon‟ble Court may deem fit and proper in the facts and circumstances of the case. "

5. On 7.11.2007, notice was issued in this petition, pursuant to which

counter affidavit was filed by the respondents. On 12.12.2007, the

respondent was directed to file supplementary affidavit clarifying

certain aspects as mentioned in that order. The said supplementary

affidavit was also filed by the respondents on 24.1.2008. The

petitioner has filed rejoinder to the counter affidavit of the

respondent as well as reply to the supplementary affidavits. With the

pleadings having completed, matter was finally heard.

6. In the counter affidavit filed by the respondents, it is explained that

on investigation of the matter by the DRI, based on specific

information received, it was found that drawback benefit under

Section 74 of the Act was wrongly claimed by the petitioner. Report

dated 11.6.2007 of DRI in this behalf was sent to the Commissioner

of Customs, ICD, Tuglakabad. Based on the said report, the

following issues arose :-

"(a) The „Let Export Order‟ under Section 51 of the Act was given in January 2007 i.e. after the expiry of statutory period of two years in respect of two shipping bills bearing No. 146/8.11.2006 and 149/8.11.2006 as under :-

SB No. Let Export BE No./Date Duty paid as per 98% of the Date Date BE duty paid claimed as DBK

146/8.11.06 9.1.07 848296/31.12.04 21,27,380 20,84,832 149/8.11.06 16.1.07 843008/23.12.04 28.07.757 27,51,602 Total 49,35,137 48,36,434

The exporter failed to produce any permission of Board for extension of two years limit specified under Section 74 of the Act.

(b) GR waiver certificate obtained earlier was also not valid on the date of „let export order‟ and had expired long back.

(c) Present Market Value of the goods is less than drawback being claimed in the light of technological obsolescence.

(d) As per their letter dated 28.4.2007, the petitioner is now to re-export the goods back to the supplier in China instead of earlier declared consignee, i.e. M/s. Atlas Opportunities Ltd. as that order is cancelled now. In such a case, it appears that they would be required to file fresh shipping bills, which would render all the shipping bills hit by the limit of two years prescribed under Section 74 of the Act.

(e) On invoice of 80,000 USD paid as „professional services‟ to the overseas consignor (located in Israel) by the supplier in respect of goods supplied to the petitioner in India has come to the notice recently. These charges were not declared and included in the assessable value at the time of import. This needs to be inquired further as to whether these charges are includible in the assessable value of goods from the angle of undervaluation of import goods and consequent evasion of duty."

As per DRI‟s report, the petitioner has not fulfilled the

conditions of Section 74 and Section 76 of the Act.

7. The matter was, therefore, under investigation. Pending

investigation it was decided to provisionally release the goods of the

petitioner for the purpose of re-export, subject to execution of a

Bond. The petitioner was informed about this provisional release for

re-export vide letter dated 5.12.2007. The respondents have also

stated that the goods were seized and, therefore, requirement of

drawing of panchnama did not arise. The DIR had not sealed the

containers either. The documents submitted by the Assistant

Commissioner (Customs), ICD, Patparganj, Delhi were retained as

they were required for further scrutiny/investigation.

8. In the supplementary affidavit, the respondents reiterated that the

instant case pertained to examination and detention of the said

goods and it was not a case of seizure and, therefore, no show-cause

notice had been issued. It is also clarified that execution of the Bond

was not being sought under Section 110 of the Act. The petitioner

had essentially filed shipping bills to claim benefit under Section 74 of

the Act. The claim of the petitioner was still under scrutiny. In these

circumstances, the re-export of the goods could only be allowed

provisionally in terms of Section 18 of the Act. It is also stated that

though Circular No. 33/2005, filed as Annexure R-2 to the counter

affidavit, refers to seized goods, the guidelines laid down in the said

circular would be equally applicable to the other circumstances also

wherein the exported goods have been put under scrutiny. The

reason for insisting execution of the Bond, according to the

respondent, is that when the goods are imported without payment

of duty, for subsequent re-export, such a Bond was required as per

the standing order No. 2/2001 dated 7.3.2001. The circumstances

for re-export under Section 74 of the Act are analogous to the

aforesaid circumstances. The respondents have also referred to the

Board‟s instructions issued vide Letter F. No. 450/82/95/CUS-IV

dated 7.7.1997 and Circular No. 42/01-CUS dated 31.7.2001 wherein

it is specifically provided that where it is not practicable to seize the

goods, the goods may be detained for investigation and pending

such investigation the goods could be provisionally released for re-

export on furnishing a Bond.

9. Mr. Amit Sibal, learned counsel appearing for the petitioner, made

strenuous plea that the detention of goods and taking away the

documents amounted to seizure, inasmuch as, in the absence of those

documents it was not possible for the petitioner to re-export the

goods. According to him, when in sum and substance the goods

were seized, the procedure for seizure of such goods was required to

be followed, but admittedly no seizure orders were passed and,

therefore, the seizure was illegal. He also submitted that on

14.2.2007, the goods were seized and even till the expiry of six

months, i.e. 14.8.2007, no show-cause notice was issued, which is

required to be done under Section 110(2) of the Act and, therefore,

continued retention of such goods clearly became illegal. He

submitted that the term „seizure‟ has to be given its proper meaning

and whenever there is an interference with the possessory rights or

where the dominion of goods is transferred, which is not legal, it

would not amount to seizure. If the seizure is illegal, the petitioner

had civil right to seek return of such goods. Support of the judgment

of this Court in the case of Rajesh Arora v. Collector of Customs,

1998 (101) ELT 246 was sought to be taken to buttress this plea. It

was further argued that even when the investigation was completed

on 11.6.2007, goods were still retained and, therefore, the

respondent was to bear the charges. With regard to duty drawback,

it was argued that the same was legally drawn and it could not be a

reason to retain the goods.

10. Detailed submissions on the aforesaid aspects were made by the

learned counsel for the petitioner.

11. Mr. Chandhiok, learned Addl. Solicitor General appearing for the

respondents, refuted the arguments of the petitioner. He pointed

out that when the equipment in question was imported between

23.12.2004 to 24.6.2005, duty was paid thereupon. Thereafter,

shipping bills were filed in September 2004 for re-export of the

goods claiming duty drawback. In November 2006, two shipping

bills were filed with regard to 14 bill of entries. Since the petitioner

requested for re-export of goods under Section 74 of the Act, the

team of DRI officers visited ICD, Patparganj, Delhi for verification as

the information received indicated substitution of original goods by

junk and goods being not worth the amount of drawback made, it

required fresh examination. In these circumstances, the Customs

authorities were requested not to allow re-export till clearance by the

DRI. Pending such an investigation, re-export could not have been

allowed and this did not amount to seizure of goods. The DRI had

not sealed the containers either until further inquiry with respect to

the information received was in progress. The learned ASG also

pointed out that there was something dubious about the entire deal,

inasmuch as, the supplier in China agreed to supply the equipment

worth more than Rs.24 crores without charting a single penny.

Further, when the BSNL terminated the contract and the goods were

not required, instead of sending the goods back the supplier at China,

the petitioner chose to re-export the same to some other party in

Slovakia. When the DRI started investigation about the said party

and wanted the petitioner to establish the credentials thereof, as the

respondents had the apprehension that the said company was not in

existence, the petitioner, for fear of exposure, took a somersault and

changed the request for re-export to the supplier in China rather than

sending it to Slovakia. The learned ASJ referred to the statement of

Mr. Chauhan, Director of the petitioner, recorded under Section 108

of the Act, which finds mention in the show-cause notice issued

under Section 124 as well. As per the statement, though it is

mentioned that M/s. Atlas Opportunities Ltd. at Slovakia is a sister

concern, there was no communication in writing received by the

petitioner with regard to scrapping of the project of M/s. Atlas

Opportunities Ltd.

12. It was further submitted that the petitioner was not serious about the

release of documents, which were taken by the respondents for

further investigation, inasmuch as, the request for release of

documents was made for the first time only on 27.3.2007.

Information regarding change of consignee was also received only on

28.4.2007. Thereafter, till filing of the petition on 6.11.2007, no

request for release of goods was made. This request was made for

the first time only on 5.12.2007 and request for release of documents

was made on 7.12.2007. He submitted that there was not even an

allegation that documents were with the respondent. The learned

ASG has referred to various provisions of the Act, particularly

Sections 60(2), 51, 110, 124 and 149 of the Act, on the basis of which

he explained the scheme of seizure and confiscation as per the

aforesaid provisions. He also argued that there was no order of

seizure. Only documents were required for investigation and it was

permissible for the respondents to carry out the said investigation in

view of the information received, as explained above. He pointed

out that under Section 18 of the Act, assessment of the duty could be

made even in case of duty drawback.

13. After considering the respective arguments, we are of the opinion

that in the facts of this case it is not even necessary to deal with all

the aforesaid contentions of the parties while exercising our

extraordinary jurisdiction under Article 226 of the Constitution of

India.

14. We find it to be somewhat puzzling that the supplier at China agreed

to deliver the equipments worth more than Rs.24 crores to the

petitioner for free. This is the equipment which the petitioner

wanted to supply to BSNL for broadband facilities. BSNL terminated

the contract. According to the petitioner, it was a wrongful

termination. However, the petitioner though started litigation with

BSNL alleging wrongful termination, it left the same midway and did

not take the proceedings to their logical conclusion. Naturally, when

the equipment of more than Rs.24 crores was to be supplied to

BSNL, stakes were high. However, the petitioner, after getting the

arbitrators appointed, allowed walkover in its legal battle with the

BSNL and, thus, gave up its purported claims against BSNL. No

satisfactory explanation is forthcoming as to why the petitioner

wanted to re-export the said goods to its so-called sister concern in

Slovakia. When the inquiry into this duty drawback was initiated by

the DRI on some information received about the petitioner and in

the process DRI wanted to find out the genuineness of the Slovakian

company and to see as to whether there is such a company or not,

the petitioner all of a sudden came out with the plea that the

equipments were not required by the Slovakian party and now it

wanted to re-export the same to the supplier in China. The entire

transaction is shrouded with mystery, to say the least.

15. That apart, we also find that no serious efforts were made by the

petitioner to seek release of documents for re-export either. The

request for such purpose was made much belatedly, which gives an

impression that the petitioner was only buying time. This impression

further gets strengthened from the fact that no serious efforts were

made by the petitioner to re-export the goods even when the

respondents allowed the same, subject to furnishing of Bond.

Though, during the arguments, an attempt was made to contend

that it was not open to the respondent to put a condition of

furnishing a Bond, the circumstances lead us to believe that the

petitioner was not serious about this condition as well. When re-

export was allowed on provisional basis, the present writ petition

had already been filed and was pending in this Court. The petitioner

never moved any application challenging the said condition of

furnishing Bond and seeking orders allowing re-export without such

stipulation. What is more important is that no attempt is even made

to amend the petition and incorporate the prayer challenging the

condition of furnishing a Bond imposed for re-export. In the absence

of any such miscellaneous application or amendment in the prayers,

this Court cannot go into the issue as to whether such a condition

was rightly put or not.

16. When we proceed with the matter on this basis, the irresistible

conclusion is that the state of affairs in which the petitioner has

landed is its own creation. Insofar as the respondents are concerned,

pending investigation, they had allowed the re-export on provisional

basis. However, the petitioner did not utilize this opportunity. In

the meantime, show-cause notice dated 2.8.2009 under Section 124

of the Act has been issued calling upon the petitioner to show-cause

as to why :-

"(a) Let Export Order granted under Section 51 of the Act should not be cancelled for -

                       (i)    misdeclaration of name and address of the
                              consignee; and

(ii) not having valid GR Waiver Certificate on the date of Let Export Order.

(b) The duty drawback claimed of Rs.5,61,40,985/- should not be denied to them as they failed to comply with condition as stipulated under Section 74 of the Act.

(c) the impugned goods valued Rs.24,13,60,578.30p should not be confiscated under Section 113(h)(i) of the Act for the reasons stated above; and

(d) the penalty should not be imposed upon them under the sub-section (iii) of Section 114 of the Act for mis-declaration of consignee and without having valid GR Waiver Certificate with intention to avail benefit of duty drawback under Section 74 of the Act."

17. Further, action in the matter is possible only after the conclusion of

the proceedings in the said show-cause. Therefore, at this stage, only

relief that can be granted is to allow the petitioner to re-export the

goods, subject to furnishing of the Bond (as that condition is not

challenged) and leaving the petitioner to seek the appropriate

remedy after the orders pursuant to the said show-cause notice are

passed by the respondents.

18. The petition is disposed of in the aforesaid terms.

No costs.

(A.K. SIKRI) JUDGE

(VALMIKI J. MEHTA) JUDGE October 30, 2009 nsk