Delhi High Court
Pernod Ricard India Pvt. Ltd. vs Special Director Of Enforcement on 4 February, 2014
Author: S. Muralidhar
IN THE HIGH COURT OF DELHI AT NEW DELHI
CRL.A. 118 of 2008
Reserved on: January 28, 2014
Decision on: February 4, 2014
PERNOD RICARD INDIA PVT. LTD. .....Appellant
Through: Mr. Rajeev K. Virmani, Senior
Advocate with Mr. Ashish
Kothari and Mr. Abhay Pratap
Singh, Advocates
versus
SPECIAL DIRECTOR OF ENFORCEMENT .....Defendant
Through: Mr. Subhash Bansal, Advocate
WITH
CRL.A. 148 of 2008
SUNIL MEHDIRATTA .....Appellant
Through: Mr. Rajeev K. Virmani, Senior
Advocate with Mr. Ashish
Kothari and Mr. Abhay Pratap
Singh, Advocates
versus
SPECIAL DIRECTOR OF ENFORCEMENT .....Defendant
Through: Mr. Subhash Bansal, Advocate
CORAM: JUSTICE S. MURALIDHAR
JUDGMENT
04.02.2014
1. Crl. A. 118 of 2008 by Pernod Ricard India Pvt. Ltd. ('PRIPL') and Crl. A.
148 of 2008 by Sunil Mehdiratta are directed against the impugned common
order dated 30th October 2007 passed by the Appellate Tribunal for Foreign
Exchange ('AT') dismissing their respective Appeal Nos.1116 and 1117 of
2004, thereby affirming the order dated 21st September 2004 passed by the
Special Director ('SD'), Directorate of Enforcement ('DoE') holding the
Appellants to be in violation of Section 8(3) and (4) of the Foreign Exchange
Regulation Act, 1973 ('FERA') and levying a penalty of Rs. 2,00,00,000 on
the company and Rs. 50,00,000 on Mr. Sunil Mehdiratta.
2. By an order dated 14th February 2008, the impugned order was stayed by
this Court and thereafter the said interim order made absolute by order dated
15th November 2010.
Background facts
3. The background to the present appeals is that PRIPL, earlier known as
Seagram India Pvt. Ltd. ('SIPL'), a subsidiary of Seagram Company Ltd.,
Canada ('SCL'), was permitted by the Government of India by a letter dated
20th July 1993 to set-up a wholly owned subsidiary for the establishment of a
non-molasses based spirit manufacturing/blending facility to make potable
spirit. The letter noted that the project would involve import of scotch whisky
and malt to be used in upgrading locally manufactured liquor products
through blending. It is stated that, in terms of the Excise laws prevalent in
India, the potable liquor that is permitted to be sold for consumption cannot
have alcoholic strength in excess of 42.8% V/V.
4. Seagram Manufacturing Ltd. ('SML') was incorporated as a wholly owned
subsidiary of SIPL. SML, with effect from 5th November 2001, became a
private limited company, Seagram Manufacturing Ltd. (SMPL). On 20th
September 1994 SMPL applied to the Director General of Foreign Trade
('DGFT') for import of scotch whisky concentrate/malts for upgrading the
local production through blending. Since SMPL was permitted to establish a
manufacturing/blending facility to make potable spirit, it disclosed in its
application that it planned to import proprietary vatted malts for upgrading
locally manufactured liquor products to be sold under Seagram's
international brands.
5. The import license dated 20th December 1994 issued to SMPL by the
DGFT described the goods to be imported as "concentrate of alcoholic
beverages ('CAB')". In other words, the goods to be imported had to be
alcohol of a concentration higher than 42.8 V/V. It is stated that upon receipt
of the said license, SMPL imported the first consignment of CAB from
Joseph E. Seagram & Sons, Scotland, a related party. It is stated that SMPL
submitted to the customs officers a provisional duty ('PD') bond along with
the bill of entry indicating its relationship with the supplier. Thereafter, the
customs authorities referred the matter to the Special Valuation Branch
('SVB') to enable the consignments to be cleared on the basis of provisional
assessment in terms of Section 18 of the Customs Act, 1962 ('CA'), subject
to SMPL furnishing a PD bond. In terms of the PD bond, SMPL undertook to
pay the difference between the duty finally assessed and the duty
provisionally assessed, as and when the final assessment took place. It is
stated that in light of the PD bond furnished by SMPL, the bills of entry
('B/E') filed by SMPL for further imports were also provisionally assessed
during the years 1994-2000.
6. It is stated that, sometime in 1998, the Directorate of Revenue Intelligence
('DRI') initiated an investigation into the imports of CAB by SMPL. On 19th
December 2000, the DRI issued a show cause notice ('SCN') to SMPL in
which it was stated that SMPL had misdeclared the value and the description
of the imported goods between the years 1994 to 2000. SMPL was asked to
show cause to the Commissioner of Customs, New Delhi why the value of
the imported goods be not determined as suggested therein and penalty be not
imposed on it. A demand under Section 28 of the CA was also raised.
Order of the High Court
7. Aggrieved by the aforementioned SCN, SMPL filed CWP No. 1348 of
2001 before this Court. The said writ petition was disposed of by the Division
Bench by an order dated 27th August 2001, which reads as under:
"Heard. Notice issued under Section 28 and Section 111 of the
Customs Act, 1962 (in short the Act) is assailed in this writ petition.
Learned Solicitor General, on instructions, submits that the notice
may be treated to be one for the purpose of finalization of the
assessment in terms of Section 18(2) of the Act. It is further
submitted that if it is so thought proper, notice in terms of Section
111 read with Section 124 shall be issued. Learned counsel for the
petitioner, on the other hand, contends that the stage for initiation of
action under Section 111/124 has not yet taken place. According to
the petitioner, Section 28 of the Act has no application to the facts
of the case because a final assessment in terms of Section 18(2) has
not yet been made. In view of the statement of the learned Solicitor
General, we need not go into that question. Obviously, the
authorities are free to decide as to whether at the present juncture
any notice in terms of Section 111/124 is warranted or is called for.
In case the authority decides to initiate action under the said
provisions, it shall be open to the petitioner to approach the
appropriate forum for its remedy. It goes without saying that if such
a notice is issued, the petitioner can, in the first instance, respond to
that highlighting its objections, if any, to the issuance.
The writ petition and the application stand disposed of in the above
terms."
8. In other words, it is seen that since no final assessment had taken place, the
question of raising a demand under Section 28 of the CA did not arise. It was
for that reason that the Solicitor General of India stated that the SCN could be
treated as one for the purposes of finalization of assessment under Section 18
(2) of the CA.
9. The case of the Appellants is that the remittances for the imports of CAB
from December 1994 to April 2000 was by way of a foreign exchange
requisition and was further duly remitted by SMPL's bank towards the
payment of the invoices of the foreign suppliers of CAB. It is stated that the
foreign exchange was utilized for the imports of CAB and remitted only after
the goods arrived in India and were cleared. The foreign exchange was
directly remitted by the bank after it was satisfied that the remittance was for
the goods imported as declared in the invoice, the import licences and
elsewhere.
The DoE's Memorandum
10. On the basis of the SCN dated 19th December 2000 issued by the DRI, the
DoE issued a SCN/Memorandum dated 23rd May 2002 to SMPL and its
executives. The Appellant has summarized the allegations in the SCN thus:
"(a) During December 1994 to April 2000, SMPL had imported
three types of blend matured whiskies, namely, "Something
Special", "Passport" and "100 Pipers" and vatted malts used in the
production of admix whisky;
(b) Value of such imports covered by 197 consignments from
Chivas Brothers Ltd. and Joseph E. Seagram & Sons was GBP
24,88,840;
(c) The above items were supplied at lower prices as compared to
the supplies to the other countries;
(d) The said blend matured whisky and vatted malts were imported
by declaring the same as 'concentrate of alcoholic beverages' as
against the actual description of scotch whisky;
(e) That by declaring lower value than the actual value and by
misdeclaring the description of the imported goods, SMPL have
failed to utilize the foreign exchange of GBP 28,88,840 for the
purpose for which it was so acquired and thereby appeared to have
contravened the provisions of Section 8(3) read with Section 8(4) of
FERA and
(f) That by misdeclaring the value of the goods, SMPL have
violated Section 8(1) of FERA."
11. The Memorandum asked SMPL and its executives to show cause why
proceedings under Section 51 FERA could not be initiated against them. The
relied upon documents included the SCN dated 19th December 2000 of the
DRI, the statement recorded by the DRI, the letters obtained by the DRI from
the Indian High Commission in London and the statement dated 18th March
2002 of one Mr. Mukesh Narain recorded under Section 40 FERA.
The Adjudication Order
12. In the adjudication order dated 21st September 2004, the SD held that the
pending provisional assessment proceedings under the CA would hold good
only for the "assessment by the customs for levy of customs duty." It was
held that the FERA provisions would be attracted once there was
misdeclaration of the consignments "in terms of quality, description and
quantity based upon which foreign exchange was acquired and remitted."
The SD stated that, in the absence of any other document, in order to
ascertain whether SMPL had misdeclared the imported goods "the only
available option is to examine the import documents submitted by the
company to the customs at the time of clearance of the consignments and
whether the customs authorities observed any discrepancies in the
declarations with the actual goods." The SD noted that "all the import
documents were gathered from the customs department and explanations
were obtained from the noticee importer." The SD concluded that "The
declarations made by the noticee importer in the requisite import documents
clearly demonstrate that the descriptions of the goods were 'Concentrate of
Alcoholic Beverages' whereas the goods were actually scotch whisky @ 63%
which was used for blending with Indian liquor @ 42.8% as per rules
prevalent in India." The SD observed that SMPL had admitted that, in the
B/Es dated 26th May 1997 and 13th August 1997, the quantities declared were
6946.40 and 7505 bulk litres ('BL'), whereas, in the relevant invoices, the
quantity was expressed in alcoholic litres ('A/L'), which in BL terms, worked
out to be 11745 and 12562 BL. It was held that the explanation offered by
SMPL that the matter would have to be resolved at the time of "final
assessment" under the CA would not hold good as far as FERA was
concerned, since the offence was complete from the time the importer
misdeclared the goods. The SD further observed that the goods supplied to
SMPL were grossly under-invoiced on the basis of the comparative study of
the prices of imports by other liquor manufacturers in India. It was noted that
the other liquor manufacturers were importing the goods of the same quality
at much higher rates. Accordingly, it was held that the charges against SMPL
for contravention of Section 8(3) and (4) FERA had been established.
However, it was held that the charge under Section 8(1) FERA had not been
proved.
13. As regards Mr. Mehdiratta, the SD observed that he was "actively
involved in the import negotiations, fixation of prices, dealing with the
suppliers etc." and, therefore, his involvement in the transactions which
resulted in the commission of the offences stood proved. Consequently, the
SD proceeded to levy penalties, as earlier mentioned, on the company as well
as on Mr. Mehdiratta.
The order of the Appellate Tribunal
14. Aggrieved by the aforementioned order of the SD, SIPL (with which
SMPL had amalgamated during the pendency of the adjudication
proceedings) and Mr. Mehdiratta filed Appeal Nos. 1116 of 2004 and 1117 of
2004 respectively. The AT dismissed the appeals and one more appeal by the
Managing Director of SMPL by the common impugned order dated 30th
October 2007.
15. In the impugned order, the AT referred to an order dated 25th March 2003
passed by the Customs, Excise and Gold (Control) Appellate Tribunal
('CEGAT'), New Delhi disposing of the appeal filed by SMPL against the
order dated 31st May 2002 and 4th June 2002 passed by the Commissioner of
Customs, New Delhi adjudicating two SCNs, one issued by the DRI dated
19th December 2000 covering the imports of alcoholic beverages from the
period January 1995 to June 2000 and the second issued by the
Commissioner, ICD, Tughlakabad, New Delhi dated 16th August 2001
covering the imports during the period July 2000 to May 2001 and
confirming the extra duty payment of Rs. 41,70,49,724. The AT held that
scotch whisky was also CAB having strength of 42.8% V/V and that SIPL
had not brought on record any material to show the correct concentrate
strength of the CAB imported by it. Relying on Section 106 of the Evidence
Act 1872, the AT observed that "the true nature of the imported goods is
within the special knowledge of the appellants who did not prefer to
disclose." It was accordingly held that the DoE had succeeded in proving
that the imported goods were not mere concentrates of alcoholic beverages
but having higher concentrated strength than the scotch whisky when bottled
in India. The AT also referred to varying quantities mentioned in the B/Es
and that "there is a huge gap between the actual quantities imported than
what had been declared."
16. As regards Mr. Mehdiratta, the AT referred to para 12 of SCN dated 23rd
May 2002 that he and the other co-noticees were responsible to the company
for the conduct of its business during the relevant period and, therefore, he
could not escape the liability.
Misdescription of goods
17. One of the first questions to be addressed is whether by importing CAB
of concentration 60% and above, there was a misdescription of goods and a
consequent misdeclaration by SMPL so as to invite action for violation of
Sections 8 (3) and 8 (4) FERA. The said provisions read as under:
"8. Restrictions on dealing in foreign exchange.--
......
(3) Where any foreign exchange is acquired by any person, other
than an authorised dealer or a money- changer, for any particular
purpose, or where any person has been permitted conditionally to
acquire foreign exchange, the said person shall not use the foreign
exchange so acquired otherwise than for that purpose or, as the case
may be, fail to comply with any condition to which the permission
granted to him is subject, and where any foreign exchange so
acquired cannot be so used or the conditions cannot be complied
with, the said person shall, within a period of thirty days from the
date on which he comes to know that such foreign exchange cannot
be so used or the conditions cannot be complied with, sell the
foreign exchange to an authorised dealer or to a money-changer.
(4) For the avoidance of doubt, it is hereby declared that where a
person acquires foreign exchange for sending or bringing into India
any goods but sends or brings no such goods or does not send or
bring goods of a value representing the foreign exchange acquired,
within a reasonable time, or sends or brings any goods of a kind,
quality or quantity different from that specified by him at the time
of acquisition of the foreign exchange, such person shall, unless the
contrary is proved, be presumed not to have been able to use the
foreign exchange for the purpose for which he acquired it or, as the
case may be, to have used the foreign exchange so acquired
otherwise than for the purposes for which it was acquired."
18. As noted by the AT, for potable alcohol to be sold in India, the
permissible level of concentration is 42.8% V/V. Whether it is scotch whisky
or vatted malt, any concentration higher than the above permissible strength
of 42.8% would have to be classified as CAB. In this context, reference has
been made to the classification of alcoholic beverages under Heading No.
22.08 of the Customs Tariff, which at the relevant point in time, read as
under:
Heading No. Sub-Heading Description of Rate of duty
No. article
Standard Preferential
Areas
22.08 Undenatured ethyl
alcohol of an
alcoholic strength
by volume of less
than 80% vol;
spirits, liqueurs and
other spirituous
beverages;
compound
alcoholic
preparations of a
kind used for the
manufacture of
beverages.
2208.10 Compound 200%
alcoholic
preparations of a
kind used for the
manufacture of
beverages.
2208.20 Spirits obtained by 290%
distilling grape
wine or grape Marc
2208.30 Whiskies 290%
2208.40 Rum and tafia 290%
2208.50 Gin and Geneva 290%
2208.90 Other 290%
19. Heading No. 22.08 covers exclusively compound alcoholic preparations
of a kind used for manufacture of beverages. The HSN explanatory notes
divide Heading 22.08 into the following categories:
"(a) Undenatured ethyl alcohol of an alcoholic strength by Volume
of less than 80% vol; Spirits, liqueurs, and other spirituous
beverages;
and
(b) Compound alcoholic preparation of a kind used for the
manufacture of beverages.
The HSN further states as follows:-
(1) Undenatured Ethyl Alcohol of An Alcoholic Strength by
Volume of Less Than 80% Vol; Spirits, Liqueurs And Other
Spirituous Beverages
The heading covers, whatever their alcoholic strength;
A. Spirits produced by distilling wine, cider or other fermented
beverages or fermented grain or other vegetable products, without
adding flavouring; they retain, wholly or partly, the secondary
constitutes (esters, aldehydes, acids, higher alcohols, etc.) which give
the spirits their peculiar individual flavours and aromas.
B. Spirits, liqueurs and cordials, containing added flavouring and, in
the case of liqueurs and cordials, usually certain amount of added
sugar.
C. All other spirituous beverages not falling in any proceeding
heading of this Chapter.
Provided that their alcoholic strength by volume is less than 80% vol,
the heading also covers undenatured spirits (ethyl alcohol and neutral
spirits) which, contrary to those at (A), (B) and (C) above are
characterized by the absence of secondary constituents giving a
flavor or aroma. These spirits remain in the heading whether
intended for human consumption or for industrial purposes."
20. The HSN, therefore, makes it clear that undenatured ethyl alcohol is not
the same as the spirits listed under A,B and C above. Consequently, heading
2208.90 covered undenatured ethyl alcohol of an alcoholic strength of less
than 80%. What is apparent from the HSN is that "compound alcoholic
preparations" are not intended to be consumed immediately. The CAB
imported by SMPL was admittedly 60 to 63% V/V concentration. It was,
therefore, not possible to be consumed immediately. It was also not imported
in bottles, but in large wooden vats. It could not have been sold as such for
consumption. It was meant to be mixed with water or blended with spirits to
bring it to the strength of 42.8% V/V. As a result, while importing CAB,
SMPL correctly described the goods as falling under Heading No. 2208.10.
Once that sub-heading stood removed, the goods could be classified under
Heading No. 2208.90.
21. In Bussa Overseas and Properties v. Union of India 1991 (53) ELT 165
(Bom), the issue was whether whisky or gin with concentration of 60% and
61% V/V ought to be classified as CAB. The Bombay High Court accepted
the contention of the importers that since the concentrate was not consumable
as such, the correct classification was under Heading No. 2208.10 as
contended by them and not 2208.30, as contended by the Department. The
CEGAT in its order dated 25th March 2003 in the assessment proceedings in
this case, set aside the order of Commissioner of Customs finding it to be
contrary to the aforementioned decision of the Bombay High Court. The
CEGAT observed that no material had been placed before it by the Revenue
to contradict the contention of SMPL that for marketing potable whisky in
India, the ethyl alcohol concentration had to be 42.8 V/V. The CEGAT noted
that the imported product was whisky of 60% strength which could not be
sold to the consumer directly but only after converting it into whisky that was
potable. The order of CEGAT, which incidentally has attained finality,
concluded as under:
"From the facts of the case it can be seen that the product imported
was also concentrated whisky of 60% strength. The department
contended that the products are nothing but concentrated whisky.
They are potable. The mere fact that it can be consumed after
dilution by adding more water or soda than in the case of ordinary
whisky or Gin sold in the market, does not mean that it is not
consumable and cannot be drunk at all. The department contended
that the goods imported have to be classified as Whisky or gin. The
petitioners on the other hand contended that the goods imported are
known in the trade as concentrated whisky or gin which are
qualitatively different from whisky or gin known to trade.
Concentrate whisky or gin is not and cannot be sold to consumers or
even wholesalers directly as whisky or gin. They have to be sold to
distilleries only who after due process convert them into India made
foreign whisky or gin. It is only thereafter the product is known and
sold as potable whisky or gin."
22. In that view of the matter, the order of the SD holding that there was
misdeclaration of the goods, because what was imported was scotch whisky
of 63% strength, is not sustainable in law. Interestingly, the SD notes that the
imported CAB of 63% concentration was to be used for blending of Indian
liquor at 42.8%. In other words, what was imported by SMPL could not be
sold as such for consumption and answered the definition of CAB. The AT
too appears to have overlooked the fact that CAB of a concentration higher
than 42.8% V/V could not be sold as such and had to be diluted or blended to
bring it to 42.8% V/V concentration.
23. Mr. Subhash Bansal, learned counsel for the DoE, referred to the
information obtained from the exporters abroad. He referred to para 6 of
SD's order dated 21st September 2004 which noted that while the goods were
described by overseas suppliers as CAB in their invoices, in the export
declarations they declared the goods to be "wholly malt scotch whisky and
scotch blend whisky" and that in the export declaration, the commodity code
number was declared which specifically covered for scotch whisky. He
further submitted that anything less than 100% concentration could not be
classified as "concentrate."
24. As pointed out by Mr. Rajeev K. Virmani, learned Senior counsel for the
Appellants, the above submission overlooks the fact that much turns on the
strength of the spirit that is sought to be imported. By a letter dated 20th July
1993, SCL Canada was permitted to set up a subsidiary for manufacturing
and marketing non-molasses based potable spirit. The said letter noted that
"project will involve import of scotch whisky and malt to be used in
upgrading locally manufactured liquor products through blending." SCL was
asked to obtain an import licence as per the prescribed policy and procedure
under EXIM Policy. CAB is mentioned place at Sl. No. 30 in the list of
restricted items in Appendix 2, Part B of the 1988-1991 Import and Export
Policy. SMPL applied for and was granted an import licence permitting it to
import CAB. The import licence dated 20th December 1994 indicates the end
product as alcoholic beverages. In the form submitted by SMPL for obtaining
permission for remitting foreign exchange for the import, the description of
the goods is "concentrate of alcoholic beverages." Clearly, therefore, there is
a distinction drawn between CAB and alcohol for potable use. If what was
imported was alcohol of a concentration of higher than 42.8 V/V, then clearly
it satisfied the description of CAB. The mere fact that the exporters declared
the goods to be "wholly imported scotch whisky" did not mean that they
were alcohol of a concentration that rendered them fit for consumption.
Misdeclaration of quantity
25. On the question of misdeclaration of quantity, the Appellants are right in
their submission that two B/Es mentioned in the adjudication order have not
been referred to in the SCN dated 23rd May 2002. The Bombay High Court in
Dodsal P. Ltd. v. FERA Board (2004) 52 SCL 466 (Bom) set aside an
adjudication order on a similar ground. The statement of Mr. Mukesh Narain,
which is also referred to in the adjudication order, explains that indication of
the quantity as 'BL' instead of 'AL' was an error. This has been noted by the
CEGAT in its order dated 25th March 2003 and held to be not relevant to the
assessment proceedings. In any event, the issue of misdeclaration not having
been mentioned in the SCN, ought not to have been adjudicated upon by the
SD.
Misdeclaration of value
26. The third issue concerns the value declared in the invoices. The SD
appears to have misinterpreted what was stated in the Memorandum dated
23rd May 2002. Page 2 of the SCN set out the rates at which the different
brands of whisky were supplied by SCL "to other countries" and compared
them with rates charged for the supplies to India. These were not "invoice
prices of imports of similar goods by other manufacturers of alcoholic
beverages" as was erroneously noted in the adjudication order of the SD.
Consequently, the conclusion of the SD in para 44 that the goods supplied to
SMPL "were grossly under invoiced" is not based on any material available
to the SD. If there was such material, then it was not put to the Appellant and
therefore could not have formed the basis of the order.
No violation of Sections 8 (3) and 8 (4) FERA
27. The DoE has been unable to counter the submissions of the Appellants
that the foreign exchange acquired was fully utilized for making payments
against the import invoices. The language of Section 8 (3) read with Section
(4) indicates that the said provisions would be attracted in three possible
situations in the context of the import of goods. First, where a person fails to
bring or send goods for which the foreign exchange was acquired. Second,
where the person does not send or bring goods of a value representing the
foreign exchange acquired. Third, where he brings goods of a kind, quantity
and quality different from that which is specified while acquiring the foreign
exchange.
28. As already noted hereinbefore, the DoE has been unable to show that
SMPL imported goods different in quality or quantity from that declared at
the time of acquiring foreign exchange for the import. The DoE has also been
unable to show that the invoiced value of the goods imported by SMPL was
not equivalent to the foreign exchange remitted by it. In this connection, the
decision of the Bombay High Court in The Tata Engineering and
Locomotive Company Ltd. v. Director of Enforcement (decision dated 20th
March 1999 in First Appeal No. 918 of 1982) would be relevant. There it was
held that as long as the foreign exchange was acquired for the import of spare
parts and the same was utilized for the import of the said items and not any
other items, there would be no violation of Sections 8 (3) and 8 (4) FERA. In
the present case also, the foreign exchange acquired has been used entirely
for the goods imported and, therefore, there was no violation of Sections 8
(3) and 8 (4) FERA.
29. Finally, it must be noted that on the issue of valuation the Supreme Court
has, in Pernod Ricard India Private Limited v. Commissioner of Customs,
ICD Tughlakabad (2010) 8 SCC 313, affirmed in part an order of the
Customs, Excise and Service Tax Appellate Tribunal ('CESTAT') directing
the Commissioner of Customs to re-determine the value of the imported CAB
in terms of Rule 5 (1) (c) read with Rule 6 of the Customs Valuation
(Determination of Price of Imported Goods) Rules, 1988. Thus, even in the
assessment proceedings under the CA, the issue is about the proper valuation
of the goods. This cannot, per se, form the basis of the proceedings under
Sections 8 (3) and 8 (4) FERA. In the present case, apart from the SCN under
the CA and the statement of Mr. Mukesh Narain under Section 40 FERA,
there was no independent investigation undertaken by the DoE.
The liability of Mr. Mehdiratta
30. Finally, as regards the individual liability of Mr. Mehdiratta, apart from
stating in the Memorandum that he was "responsible to the company for the
conduct of its business during the relevant period", there is nothing indicated
as to on what basis such conclusion has been reached. The adjudication order
also fails to deal with this issue and merely states that "it is observed from the
records" that the co-noticees Mr. Akram Fahmi and Mr. Mehdiratta "were
actively involved in the import negotiations, fixation of prices, dealing with
the suppliers etc." There is no basis for this conclusion. Consequently, the
fastening of the liability on Mr. Mehdiratta for the contravention of Sections
8 (3) and 8 (4) FERA is not based on any material whatsoever and cannot be
sustained in law.
Conclusion
31. For the aforementioned reasons, the adjudication order dated 21st
September 2004 insofar as it concerns the Appellants and the impugned
common order dated 30th October 2007, insofar as it dismisses Appeal Nos.
1116 and1117 of 2007, are hereby set aside. The appeals are allowed in the
above terms with costs of Rs. 5,000 in each appeal.
S. MURALIDHAR, J.
FEBRUARY 4, 2014
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