Delhi High Court
Go-Go International vs Uoi & Ors on 18 November, 2013
Author: V. K. Jain
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 13.11.2013
Date of Decision: 18.11.2013
+ WP(C) No.876 of 2008
GOENKA & GOENKA ..... Petitioner
Through: Mr. Raja Chatterjee, Ms. Runa Bhuyan,
Ms. Rita Jha & Ms. Manisha P., Advs.
versus
UOI & ORS ..... Respondents
Through: Mr. Kuljeet Rawal & Mr. Jagjit Singh,
Advs. for R-3.
+ W.P.(C) 1214/2008
BIRDY FASHION P. LTD. ..... Petitioner
Through: Mr. Raja Chatterjee, Ms. Runa Bhuyan,
Ms. Rita Jha & Ms. Manisha P., Advs.
versus
UOI & ORS ..... Respondents
Through: Mr. Amrit Pal Singh, CGSC with
Mr. Roshal Lal Goel, Adv.
Mr. Kuljeet Rawal & Mr. Jagjit Singh,
Advs. for R-3.
+ W.P.(C) 1216/2008
BIRDY FASHION P.LTD. ..... Petitioner
Through: Mr. Raja Chatterjee, Ms. Runa Bhuyan,
Ms. Rita Jha & Ms. Manisha P., Advs.
versus
UOI & ORS ..... Respondents
Through: Mr. Kuljeet Rawal & Mr. Jagjit Singh,
W.P.(C) No.876/2008&connected matters Page 1 of 18
Advs. for R-3.
+ W.P.(C) 1217/2008
GOENKA & GOENKA ..... Petitioner
Through: Mr. Raja Chatterjee, Ms. Runa Bhuyan,
Ms. Rita Jha & Ms. Manisha P., Advs.
versus
UOI & ORS ..... Respondents
Through: Mr. Kuljeet Rawal & Mr. Jagjit Singh,
Advs. for R-3.
+ W.P.(C) 1218/2008
GO-GO INTERNATIONAL ..... Petitioner
Through: Mr. Raja Chatterjee, Ms. Runa Bhuyan,
Ms. Rita Jha & Ms. Manisha P., Advs.
versus
UOI & ORS ..... Respondents
Through: Mr. Amrit Pal Singh, CGSC with
Mr. Roshal Lal Goel, Adv.
Mr. Kuljeet Rawal & Mr. Jagjit Singh,
Advs. for R-3.
+ W.P.(C) 1219/2008
GO-GO INTERNATIONAL ..... Petitioner
Through: Mr. Raja Chatterjee, Ms. Runa Bhuyan,
Ms. Rita Jha & Ms. Manisha P., Advs.
versus
UOI & ORS ..... Respondents
Through: Mr. Kuljeet Rawal & Mr. Jagjit Singh,
W.P.(C) No.876/2008&connected matters Page 2 of 18
Advs. for R-3.
CORAM:
HON'BLE MR. JUSTICE V.K.JAIN
JUDGMENT
V.K.JAIN, J.
Section 5 of the Foreign Trade (Development & Regulation), Act,
1992 provides for formulation and announcement of the Export and
Import Policy by the Government of India and amendment of the said
policy from time to time. Section 11 of the said Act provides that no
export can be made except in accordance with the provisions of the said
Act, Rules and Orders made thereunder, as also the Export and Import
Policy for the time being in force. Pursuant to the aforesaid provision,
the Government of India, vide notification dated 12.11.1999 announced
the policy for allotment of entitlements for the year 2000-2004 in
respect of the countries where the exports are covered by restraints
under the provisions of Agreement on Textile and Clothing. Similar
policy was notified by the Government for previous years as well.
Under the said policy, export of garments and knit-wears to certain
countries such as USA, Canada and European Union known as „Quota
Countries" could be undertaken only on the basis of quota allotted to the
exporters by the respondents - Apparel Export Promotion Council
(AEPC) which was to function as Quota Administering Authority, in
terms of the said notification. The quota for the export for each
allotment was to be allocated under the following system at the rate
indicated against each of them:
System of Allotment Percentage of Annual
Level
(a) Past Performance Entitlement (PPE) System 70%
(out of which HVE) (5%)
(b) New Investor‟s Entitlement (NIE) System 15%
(c) Non Quota Entitlement (NQE) System 5%
(d) First Come First Served (FCFS) System 10%
(ii) Quantities that become available from time to time
on account of surrenders, flexibilities or otherwise shall
also be allocated under the First Come First Served
(FCFS) System.
The allotment of quota was to take place in two parts - each consisting
f 50% of the allotment. The first part of the quota was valid from
the date of allotment till 31st May of the year whereas the second part
was valid till 30th September of the said year. In case of the allotment
valid till 31st May, transfer could be allowed till the last date and the un-
utilized quota lapsed. In case of allotment valid till 30 th September,
transfer could be allowed till 20th September and the original quota
holder or the transferee could get an extension till 31 st December on
payment of the Bank Guarantee (BG) and Earnest Money Deposit
(EMD) at the specified rates.
The BG submitted by the exporters while seeking extension of
un-utilized quotas expressly guaranteed that the exporter shall abide by
all the terms and conditions of the allotment mentioned in the
notification dated 12.11.1999 issued by the Government of India, as
amended from time to time and Policy Circular No.99/20 dated
16.11.1999 issued by AEPC, as amended from time to time on the
Scheme for Export of Garments and Knit-Wears from India and also any
other instructions and/or directions issued by AEPC and would produce
proof of shipment of the goods in the manner and under the terms and
conditions prescribed by AEPC. In the event of exporter‟s failure to
utilize the export entitlements, as stipulated in the said notification and
circular or in the event of his failing to submit proof of shipment to
prove such utilization in the prescribed manner and within a prescribed
period, the guarantor was to pay the guarantee amount due and payable
under the guarantee, without any demur and raising any further
controversies, merely on the first written demand from AEPC. Any such
demand made on the guarantor was to be conclusive as regards the
amount due and payable by the guarantor as per the guarantee.
The First Come First Serve (FCFS) Quota was introduced with a
view to boost new exporters who did not have the confirmed quota in
their hands so that they get an opportunity to undertake export of
readymade garments to the quota countries.
3. Noticing that the exporters were not able to utilize 100% of the
endorsed quota which resulted in loss of precious foreign exchange to
the country, besides causing denial of such quota to the genuine
exporters who were in a position to undertake exports, and also to
reduce wastage of quota which tarnishes the image of the country and
affects bilateral agreement on account of such non-utilization, AEPC
used to release additional quantities of quota so as to ensure optimum
utilization.
4. In case the quota utilization was above 90%, AEPC did not forfeit
any part of BG. There was proportionate forfeiture of BG in case the
utilization was between 75% to 90% of the quota, whereas the entire
bank guarantee was forfeited in case the utilization was less than 75%.
Before forfeiting BG/EMD, the AEPC had to issue show cause notice to
the exporter and it has been passing an adjudication orders after giving
opportunity of reply and hearing to them. The order of adjudication
could also be challenged before the prescribed Appellate Authorities.
While applying for quota, as well as seeking its revalidation, the
exporter give an undertaking to utilize the entire quota without fail.
5. In W.P(C) No.1218/2008, a show cause notice dated 26.6.2002
was issued to the said petitioner on account of non-utilization of FCFS
quota for the year 2001. After considering its reply and finding failure to
undertake export, the adjudication order dated 11.9.2002 was passed
forfeiting a sum of Rs.2,31,377/-. Being aggrieved from the said order,
the aforesaid petitioner filed an appeal claiming performance to the
extent of 84.26%. The First Appellate Authority, considered the
aforesaid claim, reduced the amount of forfeiture to Rs.6,79,48/-. The
second appeal filed by the said petitioner was, however, dismissed vide
order dated 4.10.2005. The petitioner filed a writ petition before the
Karnataka High Court which came to be dismissed for want of territorial
jurisdiction.
6. In W.P(C) No.876/2008, a show cause notice dated 22/26.5.1998
was issued to the petitioner for utilizing FCFS Quota for the year 1997
only to the extent of 69.63% and claiming shortfall in export to the
extent of Rs.418941. Since neither any reply was filed by the said
petitioner nor did it submit any proof of shipment of the goods, the
aforesaid amount was forfeited. The first appeal as well as the second
appeal filed by the said petitioner were dismissed vide orders dated
30.11.2000 and 23.11.2004 respectively noticing that no documentary
evidence was produced by the said petitioner in support of its plea of
force majeure. The petitioner filed a writ petition before the Karnataka
High Court which came to be dismissed for want of territorial
jurisdiction.
7. In W.P(C) No.1214/2008, a show cause notice dated 2/3.7.2001
failing to utilize FCFS Quota for the year 2000 was also issued to the
petitioner seeking to forfeit the amount of Rs.5,82,260/-. Another show
cause notice dated 9.5.1996 on account of non-utilization of FCFS
Quota was issued to the said petitioner seeking to forfeit a sum of
Rs.3,56,745/-. The aforesaid notices were adjudicated vide two separate
orders, the first one being dated 13.8.1996 and the other dated
19.7.2001. In the appeal filed by it, the petitioner claimed that they
could not remove rectifiable discrepancy and on account of late receipt
of fabric which also had weaving defects and therefore entire fabric was
rejected and the order was cancelled by the buyer. The aforesaid
contention, however, was rejected by the First Appellate Authority vide
order dated 13.8.1996 noticing that utilization was only 62.23%.
Disposing of the appeal vide order dated 22.3.2003, against the second
order, the First Appellate Authority did not accept the contention of the
petitioner that the goods were ready but the buyer postponed the order
and rejected the appeal noticing that the quota utilized was only 58.13%.
One of the second appeals filed by the petitioner was dismissed whereas
the other second appeal was partly allowed vide order dated 30.9.2003.
The petitioner filed a writ petition before the Karnataka High Court
which came to be dismissed for want of territorial jurisdiction.
8. In W.P(C) No.1216/2008, a show cause notice dated 11.4.2005
was issued to the petitioner on account of non-utilization of quota for
the year 2004 and seeking forfeiture of a sum of Rs.1,19,539/-. Since no
reply was furnished, the Adjudicating Authority after considering the
matter upheld forfeiture of the entire amount vide order dated 31.8.2005.
In the first appeal, the petitioner alleged late receipt of quota for the
second cut-off and also claimed that the buyer did not extend the
shipment date and, therefore, they honoured the order by using PPE
Quota. The said appeal, however, was dismissed vide order dated
23.11.2005. The second appeal filed by the petitioner came to be
dismissed vide order dated 27.2.2006 since no one appeared for the
petitioner and the plea taken in the appeal did not find favour with the
Second Appellate Authority. The petitioner filed a writ petition before
the Karnataka High Court which came to be dismissed for want of
territorial jurisdiction.
9. In W.P(C) No.1217/2008, a show cause notice dated 13/10.9.1999
was issued on account of non-utilization of PPE/PPT Quota for the year
1998. No reply to the said show cause notice was furnished and no one
appeared on behalf of the petitioner for personal hearing. The
Adjudicating Authority thereupon forfeited the amount of
Rs.17,12,700/- vide order dated 26.11.1999. On receipt of application
dated 28.10.2002 from the said petitioner seeking settlement of the
forfeited amount in installments/ lumusum in terms of the Circular dated
23.4.2011, the aforesaid amount was reduced to Rs.10,17,558/- The said
petitioner preferred an appeal claiming non-utilization due to strike. But
the same appeal came to be dismissed vide order dated 28.3.2002. The
second appeal filed by the said petitioner was also dismissed vide order
dated 14.9.2002 noticing that there was no evidence of the alleged
strike. The petitioner filed a writ petition before the Karnataka High
Court which came to be dismissed for want of territorial jurisdiction.
10. In W.P(C) No.1219/2008, a show cause notice dated 9.10.2001
was issued on account of non-utilization of FCFS Quota for the year
2000 and seeking forfeiture of a sum of Rs.26,79,276/-. The petitioner
neither submitted any reply nor did it appear for personal hearing. The
Adjudicating Authority thereupon passed an order forfeiting a sum of
Rs.25,23,413/-. The First Appellate Authority did not find merit in the
contention of the petitioner claiming go-slow activity of the concerned
unit and short-realization due to change in the mode of shipment from
sea to air and dismissed the said appeal vide order dated 7.10.2003.
However, in the second appeal, the petitioner produced copy of the
agreement entered into between the workers and the management in
support of its plea of strike and full relief was, therefore, extended to it
for the said strike period. The petitioner filed a writ petition before the
Karnataka High Court which came to be dismissed for want of territorial
jurisdiction.
11. Being aggrieved from the orders passed by AEPC as also the
orders passed by the First Appellate Authority and the Second Appellate
Authority, the petitioners are before this Court seeking quashing of the
orders passed by the Second Appellate Authority.
12. The impugned orders have been assailed by the petitioners on the
following three grounds:-
i. Quotas are allotted by individual countries for each category. For
example, if USA is allotting quota of one lakh pieces to India then the
Quota Issuing Authority in India cannot issue quota for more than one
lakh pieces. As per Garment Export Entitlement Policy, the said
allocation is distributed in various hands and though there can be
variation of each quantity against each head, the total quantity cannot
exceed the quantity allocated by the importing country. AEPC,
however, has been allocating excess quota and such act of AEPC being
ultra vires the Garment Export Entitlement Policy, it has no right to
impose penalty in terms of the said policy;
ii. For the purpose of computing quota utilization, AEPC is
calculating the percentage of extended quantity alone, i.e., the quota
extended up to 31st December of the year and is not taking into
consideration the quantity exported during the whole of the year as a
result, if a person exports say 900 pieces prior to 30 th September, takes
extension for 100 pieces and then exports 50 out of those 100 pieces up
to 31st December, his utilization is taken as 50%, resulting in forfeiture
of his EMD/BG, whereas hand if the exporter exports 900 out of 1000
pieces from 30th September to 30th December, his EMD/BG is released
in full even though in the first case, the exporter has exported 950 pieces
out of 1000 and in the second case, he has exported 900 out of 1000
pieces. This interpretation of AEPC, according to the petitioner, leads
to absurd result and is not borne out from the policy. In this regard, it is
also submitted by the petitioners that if the shortfall in export is up to
11%, the country does not lose the quota which is carried over to the
next year and, therefore, the shortfall has to be assessed as the
percentage of entitlement of the whole year and not for the extended
period alone.
iii. It was lastly submitted by the learned counsel for the petitioners
that in the absence of shortfall in quota utilization for the country as a
whole, levy of penalty would amount to unjust enrichment of the
Government.
13. As regards the first contention, the case of the respondents is that
there has been historical gap between the quota issued and the quota
actually utilized by the exporters. Noticing that the exporters were
unable to utilize the entire quantity endorsed to them and non-utilization
results in loss of foreign exchange, besides depriving quota to the
genuine exporters who are in a position to make exports, AEPC has
been releasing excess quota to the exporters. A perusal of the affidavit
filed before Karnataka High Court in WP No. 43683 of 2004, a copy of
which has been filed by the petitioners, would show that despite the
FCFS Quota, issued by AEPC in the years 2001, 2002 and 2003 being
130%, 149.08% and 120% respectively, the actual quantity utilized in
the aforesaid year was only 91.68%, 88.44% and 98.57% respectively.
The aforesaid statement of quota utilization would show that in the past,
even after releasing substantial additional quota, the targeted utilization
of 100% could not be achieved by the exporters. One can easily
visualize to what extent the utilization would have been had AEPC not
released any additional quota to the exporters in the aforesaid years.
Considering the past experience, it can be hardly be disputed that release
of additional quota to the exporters was always in the public interest.
The extension of time granted to the exporters for utilizing the second
part of the quota up to 31st December is only a concession given to the
exporters who are otherwise expected to utilize the first part up to 31 st
May and the second part up to 30th September of the year. The aforesaid
extension granted to the exporters has no linkage with the quota released
by AEPC to the exporters and is given on a specific undertaking give by
the exporters to utilize the said quota up to 31st December of the relevant
year. As noted earlier, the exporter, while obtaining such extension
unequivocally and unconditionally guarantees to utilize the said quota
and furnish proof of shipment of goods to AEPC. He also agrees
unconditionally that in the event his failing to utilize the export
entitlement and furnish its proof to AEPC, he would pay the amount of
EMD/BG, without any demur and without raising any controversy with
respect to the demand raised by AEPC on account of such a default.
Nothing prevents the exporters from surrendering the quota which he
could not utilize till 30th September and he is under no obligation to seek
extension from AEPC on the condition of furnishing BG/EMD which is
liable to be forfeited in case of default being committed by them.
Having failed to utilize the quota up to 30th September and taken
extension for utilization of the said quota on or before 31st December
subject to the condition that the EMD/BG furnished by him shall stand
forfeited in the event of default being committed by him, the exporter
cannot challenge the imposition of penalty in terms of the EMD/BG
furnished by him on the ground that AEPC had issued more than the
quota available to it for issuance in a particular year. The exporters do
not suffer, in any manner, on account of AEPC issuing excess quota to
them. This is not the case of the petitioner that they could not fulfil their
export obligation on account of AEPC having issued excess quota in the
year concerned. Therefore, whether AEPC releases excess quota to the
exporters or not is not the concern of the petitioners. In case, they fail to
utilize the quota during the extended period, they are required not only
in terms of the policy, but also in terms of their agreement with AEPC to
pay the amount of penalty, as stipulated in the policy of the
Government.
14. In LPA No. 1120/2005 titled M/s Gokaldas Images Ltd. Vs.
Union of India and Anr., decided on 09.02.2009, the appellants, inter
alia, contended that since AEPC had over-allotted the quota, levy of
penalty was unjustified as non/under utilization had caused no loss and
the policy itself was abandoned. Rejecting the contention, the Division
Bench held as under:-
"3. The second contention of the appellants
has no merit and was not raised before the
learned Single Judge nad has no basis and
foundation in the pleadings. Even otherwise,
it is not possible to accept the said contention
that AEPC had abandoned the Garment Export
Entitlement Policy by over-issue of quota to
exporters. The appellants and other exports
were issued quota and they had exported
garments on the basis of the said quota under
the Policy. The appellants had also furnished
and given bank guarantees or had deposited
earnest money in terms of the Garment Export
Entitlement Policy. Abandonment as such
requires mental intention and conscious
decision. Garment Export Entitlement Policy
was statutory in character. We cannot accept
the contention of the appellants that the
Garment Export Entitlement Policy was
abandoned....."
15. As regards the second contention, it would be seen from a perusal
of the policy that it is only the second part of the quota valid till 30th
September, which can be extended up to 31st December of the year on
payment of EMD/BG at the specified rates. There is no extension of the
first part of the quota which is valid till 31st of May. Therefore, for the
purpose of computing the quota utilization, AEPC is required to take
into consideration only the export undertaken after such extension and
not the export undertaken during the whole of the year. The extension
of time to fulfil the export obligation being confined to quota valid till
30th September of the year, AEPC is fully justified in not considering the
exports against the quota which was not the subject matter of extension.
The view taken by AEPC in this regard is fully justified not only under
the policy of the Government, but also under its contractual obligations
with the exporter.
16. A similar contention was rejected by this Court in Gokaldas
Images Ltd. Ors. vs. Union of India and Anr.116(2005) DLT 47. The
contention of the petitioners in that case finds mention in para 13 and 14
which reads as under:-
"13. The second issue raised by learned senior
counsel for the petitioners is about the
methodology to determine utilization of the
export entitlement. This aspect becomes
important as in terms of the Policy if the
exporter has utilised 90% of the export
obligation, the issue of encashment would not
arise. As noticed above, the obligations have
to be complied by 30th of September, but the
quota can be revalidated beyond the said date
till 31st of December on furnishing of
EMD/BG. The methodology adopted is to
consider the ratio of the target achieved by the
exporter in proportion to the unutilised quota
for which extension was sought. It is the
submission of the petitioners that while
working out such default, it should be
proportionate to the total entitlement of the
petitioner and not restricted to the extended
quota.
14. To illustrate the aforesaid issue, e.g., the
quota is of 1,00,000 and 15,000 remains
unutilised till 30th of September, extension
can be sought for the same subject to
furnishing of EMD/BG. Out of this remaining
15, 0000, if 10, 000 is utilised by 31st of
December, according to AEPC, the
encashment is liable to take place since the
default is of 66% being 10,000/15,000.
However, if the contention of the petitioners
was to be accepted, this default would be
10,000/1,00,000, which would be within the
permissible limit of 10%."
The view taken by the Court on the aforesaid plea is contained in
para 27 and 32 which read as under:-
"27. However, the same exporter is given a
further chance to fulfilll the export obligations
by seeking extension of the time-period up to
31st of December. It is when such extension is
granted that the same is made subject to
certain conditions as per the very terms of the
original entitlement. The exporter, with open
eyes, accepts the same. In order to ensure due
compliance and utilisation of the export
entitlement, the BG/EMD condition is put.
The same is not utilised or encashed if the
exporter performs at least to the extent of 90%.
32. The second plea of the petitioners also
has to fail because it is based on a premise as
if the exporter has a right to export till 31st of
December. This is no so. The entitlement is
given to export up to 30th of September. The
exporter has a right to surrender the unutilised
quota, but if chooses to seek extension of time
till 31st of December to perform its
obligations, naturally, the performance has to
be judged on the touch-tone of the
performance after 30th of September and not
by including the performance for the prior
period. This is the methodology adopted by
the respondents while determining the
performance of the exporter dependent on the
extended quota and rightly so."
Thus, this issue is no more res integra.
17. I find no merit in the last contention of the petitioners as well. As
noted earlier, despite releasing additional quota to the exporters, the
Government could not achieve the desired results and, therefore,
imposing penalty on the defaulting exporters in terms of the undertaking
given by them to AEPC sub-serves a valid public interest. In the
absence of such penalty, there may be further shortfall in the quota
utilization as there would be no pressure on the exporters to achieve the
desired target. In any case, there is no material before the Court to show
that in the years in which there was shortfall in utilization of second part
of the quota on the part of the petitioners, the country was able to
achieve 100% or at least 89% capacity utilization. The plea taken by the
petitioners, therefore, is liable to be rejected.
18. For the reasons stated hereinabove, I find no merit in the writ
petitions and the same is hereby dismissed.
Interim order, if any, stand vacated. No order as to costs.
NOVEMBER 18, 2013/rd/bg V.K. JAIN, J.
