Entitlement to import of Marble quota - fulfillment of prescribed conditions

PJ/Case Laws/2010-11/1163

Case: Akash Universal Ltd, Mumbai v/s Union of India

Citation: 2011-TIOL-281-HC-MUM-EXIM

Issue:- Entitlement to marble quota- The difference between CA certificate and Balance Sheet figures does not affect the entitlement criteria- quota is allowed.

Brief Facts:- Petitioner is a public limited company having their registered office at Mumbai and their factory at Silvassa. They are engaged in manufacture of marble tiles and marble slabs falling under Chapter 25. The goods are manufactured by the petitioner mostly out of imported marble blocks.

Restriction has been placed on the import of marble blocks imported into India under Foreign Trade Policy read with Licensing Notes to Chapter 25 of ITC-HS and import is allowed only under a licence. Petitioner was granted licences for import of marble blocks for last many years. Guidelines for issuance of licence to import marble blocks for the year 2010-11 was notified vide DGFT Notification No.36/2009-14 dated 31.3.2010 and DGFT Circular No. 29/2009-14 dated 31.3.2010.

The petitioner had also applied to the Joint DGFT, Mumbai on 3.4.2010 for issuance of licence to import marble blocks in terms of the said Notification read with Circular dated 31.3.2010. However, the petitioner’s application for issuance of licence to import marble blocks for the year 2010-11 was rejected by the Respondent No. 2 - the Director General of Foreign Trade (DGFT) vide communication dated 10.5.2010.

Petitioner has challenged the non-grant of licences to them.

Petitioner’s Contention: - Petitioner pointed out that their application was rejected merely on the ground that there was a discrepancy in the domestic sales turnover shown in the Schedule H of the balance sheet filed with the R.O.C. for the year 2005-06 and 2006-07 and the domestic sales turnover shown in the Chartered Accountant’s Certificate (CAC).

Respondent’s Contention:- Respondent submitted that in the CAC for the relevant years the figure of high seas sales turnover has been included which is not permissible and that there was a deliberate attempt on the part of the petitioner to give an inflated turnover figure for the purpose of import quota under the policy for the import of rough marbles.

Reasoning of Judgment:- The High Court perused Notification No. 36/2009-14 dated 31.3.2010 which lays down the eligibility criteria to be satisfied by the units for obtaining licence to import marble. It was observed that it was an admitted position that the petitioner has two gang saw machines installed in their factory. The petitioner’s eligibility criteria of domestic sales turnover on annual basis of marble blocks/tiles which is Rs. 1 crore is also satisfied as the petitioner’s annual turnover in the previous years is more than Rs. 16 crores and the average turnover during the last five years works out to Rs. 25 crores. Thus, the petitioner was an eligible unit and their entitlement is to the extent of 4500 MT of marble blocks as per the said Notification.

The High Court noted that the discrepancy stated is that instead of furnishing domestic sales turnover, the total turnover has been furnished. Admittedly, the domestic sales turnover achieved during the years in question is much more than the prescribed domestic sales turnover of Rs. 1 Crore. Therefore, notwithstanding the discrepancy in domestic sales turnover as per the balance-sheet filed with R.O.C. for the financial years 2005-06 and 2006-07 and the CA Certificate, it cannot be disputed that the petitioner was infact entitled for allocation of import quota for import of rough marble blocks as per Notification No. 36/2009-14 dated 31.3.2010 inasmuch as in both the years the domestic sales turnover was shown to be more than 22 crores which is way beyond the entitlement criteria of Rs. 1 crore of annual domestic sales turnover of the marble blocks. Thus, the discrepancy, if any, in submitting the domestic sales turnover inclusive of the high seas sales turnover of about Rs. 2 Crores which was incorrectly included in the CA Certificate, does not affect the merits of the case of the petitioner. It is noticed that the petitioner in their letter dated 28.4.2010 had however clearly set out the break-up of domestic sales figures alongwith high seas sales turnover separately. As such, it cannot be said that there was any attempt on the part of the petitioner to suppress any fact or to furnish inflated figures. In any event, it cannot be said that by inflating the figures, the petitioner’s entitlement to the import quota would in any manner have been affected. At best, it can be only said to be negligence on the part of the petitioner for which the petitioner cannot be penalised by denying him the import quota.

It was noted that the Respondent-Union of India also does not dispute the position that the petitioner would not have gained any additional benefit by showing inflated figures from Rs. 22 crores (approx.)to Rs. 24 crores (approx.) in the CA Certificate and that their entitlement would not have been in any manner affected on that count.

The High Court also noted the observations of the Director General of Foreign Trade in his order dated 29.7.2010 which was passed pursuant to the show cause notice dated 19.5.2010 issued to the petitioner for imposition of penalty and suspension/cancellation of IEC code u/s. 8 of the said Act for mis-declaration. It was held that thus, even according to the DGFT, by increasing the figures of the domestic sales turnover, there would have been no change in the entitlement of the petitioner and no malafide intention could be ascribed to them and that the mis-declaration on the part of the petitioner may be on account of negligence or carelessness. The DGFT has proceeded to impose a token penalty of Rs. 1 lakh on the petitioner in pursuance of the show cause notice.

Petitioner stated before the High Court that the petitioner is only interested in the import licence for the import quota and that they are not pressing their prayer to set aside the order dated 29.7.2010 imposing penalty of Rs. 1 lakh, (which is paid by them under protest) if the petitioner is granted the important licence. The HC accepted the statements of the petitioner.

The High Court held that the DGFT was not justified in rejecting the petitioner’s application for issuance of licence. Accordingly, the impugned communication dated 10.5.2010 and the subsequent communications dated 19.10.2010 and 21.02.2011 reiterating the rejection pursuant to the petitioner’s representations are quashed and set aside. The Respondents are directed to grant the licence for import of marble blocks for the year 2010-11 to the petitioner forthwith.

Decision:- Petition allowed.

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PJ/Case Laws/2010-11/1163

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