Union of India & Anr Vs. Adani Exports
Ltd. & Anr  Insc 1136 (12 November 2007)
Arijit Pasayat & S.H. Kapadia
APPEAL NO. 5152 OF 2007 (Arising out of S.L.P. (C) No.21705 of 2006) Dr. ARIJIT
Challenge in this appeal is to the order passed by a learned Single Judge of
the Gujarat High Court, setting aside the order passed by the Appellate
Tribunal for Foreign Exchange (for short 'Tribunal') dated 4th January, 2006 in
Appeal nos. 199, 500 and 501 of 2006 whereby the application for dispensation
of pre-deposit was rejected.
Background facts in a nutshell are as follows:-
basis of the alleged violation of certain provisions of the Customs Act 1962
(in short the 'Act') notices were issued to certain noticees including the
present respondents primarily on the ground of mis-declaration as to the
description and narration of the goods imported and on the ground of
over-invoicing so far as valuation is concerned and consequentially misusing
foreign exchange. Show-cause notices were issued by the adjudicating authority
and on consideration of the submissions and replies filed, the orders in
original were passed by the Commissioner of Customs (hereinafter referred to as
the 'Commissioner'). The orders passed by the original authority were
challenged by the respondents before the Customs, Excise and Service Tax
Appellate Tribunal, Bangalore (in short 'CESTAT'). Notices were
also issued under Foreign Exchange Management Act, 1999 (in short 'Management
Act'). The Additional Director General passed orders in terms of the Foreign
Exchange Regulation Act, 1973 (in short 'the Regulation Act') which has been
repealed along with the provisions of the Foreign Exchange Management Act 1999
(in short the 'Management Act'). The order was passed after considering the
replies and submissions in response to the show-cause notices. The adjudicating
authority found the noticees guilty of the charges and in terms of the powers
conferred under Section 50 of the Regulation Act read with Section 49(3) and
49(4) of the Management Act imposed the following penalties:
penalty of Rs.7,50,00,000/- (Rupees Seven Crores fifty lakhs only) on Shri Dharmesh
P. Shah, Proprietor of M/s. Vaishal Impex, (noticee No.1).
penalty of Rs.4,00,000/- (Rupees Four Crores only) on M/s. Adani Exports
Limited, (noticee No.2).
penalty of Rs.2,00,00,000/- (Rupees Two Crores only) on Shri Rajesh Adani,
Director of M/s. Adani Exports Limited. (noticee No.3).
Questioning correctness of the adjudication order, appeals were preferred
before the Tribunal. Along with the appeals, application for dispensation of
deposit of penalty amount was filed. The same was rejected as noted above by
order dated 4.1.2006.
Tribunal was of the view that neither any prima facie case was made out nor the
financial stringency established to warrant dispensation of pre-deposit. A writ
petition was filed before the Gujarat High Court primarily questioning the said
order and also incidentally questioning legality of the proceedings. The High
Court not only dealt with the impugned order before it relating pre-deposit
aspect but also the merits of adjudication. It elaborately discussed the merits
of the adjudication proceedings, though it itself noted that the Special Civil
Applications were filed questioning correctness of the order relating to
pre-deposit. Not only the High Court held that the order directing deposit was
unsustainable but also held that the order of adjudication was unsustainable,
overlooking the fact that the appeals were pending before the Tribunal. The
High Court set aside the order passed by the adjudicating authority and
remitted the matter to the adjudicating authority i.e. the Additional Director
support of the appeal learned counsel for the appellant submitted that the
approach of the High Court is clearly unsustainable. High Court itself noticed
that the primary challenge was to the order passed by the Tribunal relating to
pre-deposit. Though some grounds were taken relating to the merits of the
adjudication, the High Court should not have dealt with them and should have
left those matters to be adjudicated by the Tribunal. Instead of doing that,
the High Court set aside the order referring to certain observations made by
CESTAT in other cases. It is further submitted that the view taken by CESTAT in
those cases has been questioned before this Court and the appeal has been
admitted. In that view of the matter the order passed by the High Court is
Learned counsel for the respondent on the other hand submitted that there was
an earlier order passed by CESTAT which was in favour of the respondents-noticees.
Therefore, the High Court was justified in remitting the matter to the
is not in dispute that the respondents have filed appeals before the Tribunal.
As noted by the High Court, primary challenge in the writ petitions was to the
order relating to pre-deposit. While dealing with that the High Court was not
justified in going into the merits and expressing its views and thereafter
remitting the matter to the Tribunal.
course was not available to be adopted.
Tribunal has highlighted the relevant aspects while rejecting the prayer for
dispensation of pre-deposit. The three aspects to be focused while dealing with
such applications are
prima facie case
of convenience and
Tribunal categorically found that these factors were established by the
respondents. Even when Tribunal decides to grant full or partial stay it has to
impose such conditions as may be necessary to safeguard the interest of
revenue. This is an imperative requirement under Section 129E of the Act.
Normally, therefore, we would have asked the respondent assessee to comply with
the orders of Tribunal, by setting aside the impugned order. But considering
the fact that the Tribunal already passed consequential order on the basis of
the High Court's order on 18.8.2006, we dispose of the appeal with following directions:
Impugned order passed by the High Court and the consequential order passed by
the Tribunal on 18.8.2006 are set aside.
The parties are directed to appear before the Tribunal without any further
notice on 3.12.2007.
The Tribunal shall take up the appeal by hearing them without insistence on
The appeals shall be heard on day to day basis.
The respondent shall file an undertaking before the adjudicating authority to
liquidate the demands, if any, sustained by the Tribunal subject of course, to
the right of appeal if any, within eight weeks from the date of receipt of
Tribunal's order. This of course would be subject to any order of interim
protection, passed in the appeal.
The appeal is accordingly disposed of without any order as to costs.