Adani Enterprises Ltd. vs Union of India

Akil Kureshi, J.—Petitioners have challenged an order dated 24-3-2012 passed by the respondent No. 3-Additional Commissioner of Customs, Jamnagar. The petition arises in following factual background. The petitioner No. 1 is a company registered under the Companies Act. The petitioners No. 2 and 3 are its office-bearers. These petitioners were served with a show-cause notice dated 17-1-2011 wherein they were shown as noticees No. 1 to 3 respectively. Such notice was also issued against other persons. Such persons, however, are not before us. In such show-cause notice, it was alleged that -

12.1 From the details of DOC exported (Annexure-B) submitted by them and on the basis of documents and statement of the relevant manufacturers discussed in foregoing paragraph above, it appears that the said noticee no. I had exported the DOC availing facility of Duty Draw Back which was purchased by them from the manufacturers viz. - M/s. Ambika Solvex Ltd., Akola (Noticee No. 4), and M/s. Dhanlaxmi Solvex Pvt. Ltd., Shajapur (Noticee No. 5)., which have manufactured the said DOC under bond availing facility of Rule 19(2) of the Central Excise Rules, 2002 by procuring Food Grade Hexane without payment of duty from petroleum companies by following the procedure prescribed under Notification No. 43/2001-CE. (N.T.), dated 26-6-2001, as amended and Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 and used such Food Grade Hexane, procured without payment of Central Excise duty in the manufacture of De-Oiled Cake which were purchased and subsequently exported by the Noticee no. 1 under claim of Drawback. To suppress this fact from the Customs and Central Excise Authorities, the manufacturers of DOC viz. - M/s. Ambika Solvex Ltd., Akola (Noticee No. 4), and M/s. Dhanlaxmi Solvex Pvt. Ltd., Shajapur (Noticee No. 5), in connivance with the exporter (the Noticee No. 1), have not issued ARE-2 for removal of the said DOC and issued only the export invoices.

12.2 It also appears that the De-Oiled Cake manufactured by availing benefit of Rule 19(2) of CER, 2002 were exported by the said noticee no. 1 during the year 2006-07 to 2009-10 by claiming Drawback @ 1% of FOB. The details of exports of DOC made by the said noticee and the amount of Drawback claimed on such export is amounting to Rs. 1846639/- as per the chart (Annexure-B) submitted by the Noticee No. 1.

12.3 It also appears that at the time of filing Shipping Bill under claim of Drawback in respect of export of De-Oiled Cake, the said noticee had suppressed the facts that the Export goods (DOC) has been manufactured availing the benefit of Rule 19(2) of CER, 2002 from the department.

On the basis of such allegations, the petitioners and other noticees were called upon why duty drawback amount of Rs. 18,46,639/- be not recovered with interest and further why penalty u/s 114 and 114AA of Customs Act, 1962 (hereinafter to be referred to as ''the Act'') be not imposed on them.

The petitioners opposed the show-cause notice proceedings by filing detailed reply. The adjudicating authority thereupon proceeded to conduct the hearing of the case. On 9-12-2011, when the matter was fixed for personal hearing and notice of such hearing was duly served on the petitioners, the petitioners under the letter dated 5-12-2011 made a request to keep the adjudication in abeyance in view of the fact that Soyabean Processors Association of India had made a representation before the Central Board of Excise and Customs.

The adjudicating authority adjourned the proceedings and re-fixed the personal hearing on 9-1-2012. Once again, the present petitioners under their letter dated 7-1-2012 repeated the request to keep the adjudication in abeyance on the same ground of the Association having approached C.B.E. & C under a representation. Other noticees i.e. noticee No. 4 prayed for time on the ground that he was entitled to benefits under Notification No. 84/2010 whereas noticee No. 5 under his letter dated 9-1-2012 conveyed that he wishes to send additional written submission.

4.1 Considering such request, the adjudicating authority once again adjourned the proceedings for personal hearing on 21-3-2012. The re-fixed date of hearing was also communicated to all the noticees including the petitioners herein.

4.2 The petitioners once again wrote a letter dated 21-3-2012 to the adjudicating authority requesting to keep the hearing in abeyance as they were in the process of filing an application for settlement of the case before the Settlement Commission. The noticee No. 4 had also under his letter dated 21-3-2012 requested for adjournment but on some other ground.

4.3 The Additional Commissioner-the adjudicating authority, however, did not accept the request of the petitioners and proceeded to pass the impugned order. With respect to the latest request for adjournment of the hearing, he observed as under :-

I have carefully gone through the case records, submissions made by the noticees in their defence replies, I find that personal hearings in the case were fixed on 9-12-2011, 9-1-2012 and on 21-3-2012 but none of the Noticees remained present. Noticee No. 1, 2 & 3 in response to the letters communicating them the date fixed for hearings have requested to keep the adjudication proceedings in abeyance for the reason that the Soyabean Processors Association of India have made a representation before the C.B.E. & C. on the issue. At last, they informed vide their letter dated 21-3-2012 that they are in process to file an application for settlement of the case before the Hon''ble Settlement Commission.

I find that the Show Cause Notice has been issued to the Noticees on 17-1-2011 and personal hearings were fixed three times as discussed above. In terms of proviso to sub-section (2) of Section 122A of the Customs Act, 1962, no adjournment of hearing shall be granted for more than three times to a part)'' during the proceeding of adjudication.

Further, I find that the Noticee No. 1 to 3 i.e. M/s. Adani Enterprises Ltd., Adani House, Near Methakhali Six Road, Navrangpura, Ahmedabad, Shri Atul Chaturvedi, Chief Executive Officer, M/s. Adani Enterprises Ltd., Adani House, Near Methakhali Six Road, Navrangpura, Ahmedabad, Shri Bharat Dixit, Associated Manager, M/s. Adani Enterprises Ltd., Adani House, Near Methakhali Six Road, Navrangpura, Ahmedabad have not filed any application u/s 127B of the Customs Act, 1962 before the Settlement Commission till date though the notice was issued to them before one year i.e. on 17-1-2011. It has been intimated by the said Noticees that they are in process of filing the application before the Settlement Commission. I find no reason to keep the adjudication proceeding pending for an indefinite period as the subject case is pending for more than one year. Therefore, I proceed with the adjudication of the case on the basis of records available and submissions made by the Noticees.

4.4 The adjudicating authority thereupon proceeded to examine the allegations made in the show cause notice with the aid of available material on record and the replies filed by the noticees including these petitioners. He eventually, in the impugned order, directed recovery of the drawback amount of Rs. 18,46,639/- with interest and also imposed penalties u/s 114 and 114AA of the Act.

This order of the adjudicating authority, the petitioners have challenged in the present petition primarily on the ground that the petitioners were desirous of approaching the Settlement Commission with an appropriate application for settlement. The adjudicating authority, therefore, ought to have postponed the hearing to enable the petitioners to do so. As per the amended provisions of Section 127A of the Act, a case could be stated to be pending only if the proceedings are pending before the adjudicating authority. In view of the Order-in-Original passed by the adjudicating authority, it would not be possible for the petitioners to approach the Settlement Commission. Such petition is opposed by the respondents on the ground that there was no duty on the Additional Commissioner to wait indefinitely. The petitioners were granted sufficient time previously, as prayed for

Learned counsel Shri Modh for the petitioners vehemently contended that the Additional Commissioner committed a grave error in rejecting the application of the petitioners for adjournment. He submitted that the purpose of providing for Settlement Commission is to achieve finality to tax disputes. The Additional Commissioner was duty bound to grant reasonable time to the petitioners when they had shown clear inclination to approach the Settlement Commission.

6.1 Inviting our attention to the decision of Bombay High Court in the case of Mandhana Dyeing v. Union of India reported in 2010 (251) E.L.T. 481, counsel submitted that the Additional Commissioner ought to have kept in mind the very purpose of setting up Settlement Commission and accordingly ought to have give some reasonable time to the petitioners to make proper application for settlement.

6.2 Counsel submitted that the order of the Additional Commissioner is in gross violation of the principles of natural justice. On such ground itself, the entire order is required to be set aside and the proceedings are required to be remanded before the same authority for fresh consideration.

6.3 Counsel further submitted that initially the petitioners were awaiting the outcome of the representation made by the Association before the C.B.E. & C. When no positive developments took place, they decided to approach the Settlement Commission for which purpose for the first time, a request was made to the Additional Commissioner for adjournment. The Additional Commissioner committed an error in rejecting such a request on the ground that as per the proviso to Section 122A of the Act, he could not have adjourned the proceedings for more than three times.

On the other hand, learned counsel Ms. Amee Yajnik opposed the petition contending that the impugned order is appealable. Statutory appeal to the Commissioner is provided. No extraordinary reasons are shown by the petitioners to bypass such statutory remedy. She further submitted that the Additional Commissioner had, after giving reasonable opportunity to the petitioners to participate in the proceedings, passed the order. No fault can be found with his approach.

Having thus heard learned counsel for the parties and perused the documents on record, it emerges as an undisputed position that in response to the show-cause notice issued to the petitioners and other noticees, the adjudicating officer fixed the hearing from time to time. None of the petitioners participated in such proceedings except for making requests or adjournment through correspondence. On two previous occasions, the adjudicating officer had granted time at the request of the petitioners. The third request was made by the petitioners under their letter dated 21-3-2012 to postpone the hearing which was fixed on the same day. It would be necessary to take note of the contents thereof which read as under :-

We refer to notice of hearing F. No. VIII/10-03/Add. Commr./O & A/ 2011/15379, dated 11-1-2012 whereby personal hearing in the subject SCN is fixed on 21-3-2012.

In this context, we would like to submit that we are in process to file an application for settlement of the case before the Hon''ble Settlement Commission. We shall submit a copy of the said application to your good office as soon as the same has been filed.

In view of the above, we request you to kindly keep the matter in abeyance.

Such request was turned down by the Commissioner who thereupon proceeded to adjudicate the show cause notice proceedings with the aid of material collected by the Department and the written replies of the noticees.

There was no statutory duty on part of the/Additional Commissioner to grant adjournment to enable the petitioners to approach the Settlement Commission. His duty was to consider the request of the petitioners on the basis of reasonableness. The petitioners had no right to seek unlimited adjournments nor seek adjournment without any basis. In fact, proviso to Section 122A of the Act provides that the adjournment shall not be granted for more than three times.

On previous two occasions, the petitioners had prayed for adjournment on the ground that the Association was to approach the C.B.E. & C. for finding some solution. The third request was made on the premise that the petitioners would like to approach the Settlement Commission. In such request letter also, the petitioners did not specify any time within which they would make such an application nor did they pray for any specific adjournment date. What they conveyed to the Additional Commissioner was that they would like to approach the Settlement Commission and that a copy of such an application would be produced as soon as the same is filed. In that view of the matter, the Additional Commissioner should keep the matter in abeyance.

The request of the petitioners for time was thus open-ended. They did not specify any reasonable time within which they would make such an application or specify the time for which the proceedings should be adjourned. They only prayed that hearing be kept in abeyance. They conveyed that application for settlement will be produced as and when filed.

As already observed, it was not the statutory duty of the Additional Commissioner to accept any application for adjournment. He, of course, was bound to consider any reasonable request made for adjournment for a reasonable period of time which was allowable within the four corners of law.

The approach of the Additional Commissioner, therefore, to adjudicate after granting reasonable opportunities and adjournments, cannot be found fault with. After service of show-cause notice, the petitioners had nearly one year before the Additional Commissioner decided not to grant any further adjournments. If the petitioners were keen and serious in making a clear breast as is being suggested to us; they could have and ought to have applied to the Settlement Commission within such time. Only to enable the petitioners to make such an application, it was not necessary for the Additional Commissioner to go on adjourning the hearings for indefinite period of time.

Under the circumstances, we do not find any reason to interfere by setting aside the order of the Additional Commissioner only with a view to reviving the stage of the proceedings being pending before the Additional Commissioner so as to enable the petitioners to approach the Settlement Commission. In the result, the petition is dismissed. We have not examined the merits of the order passed by the Additional Commissioner. In fact, no submissions have been made before us by either side. Therefore, even after dismissal of the petition, it would be open for the petitioners to challenge the order of the Additional Commissioner on merits before the appellate authority. If they do so within a period of three weeks from today and also seek condonation of delay in filing such an appeal, the appellate authority shall consider the appeal on merits considering the fact that the petitioners were in the meantime pursuing their remedies before this court during the interregnum period. This would therefore not be a case of condonation of delay but of excluding such period for the purpose of computing limitation. Subject to the above observations, the petition is dismissed. Notice discharged.