By TIOL News Service

NEW DELHI, MAY 23, 2016: THE meat processing plant of the Petitioner is located at Manesar, Gurgaon (Haryana). It is stated that the meat processing plant is duly approved and registered by Agriculture and Processed Food Products Export Development Authority ("APEDA"). It is also stated that the Petitioner availed export incentives for the export of frozen buffalo meat under Duty Exemption Pass Book Scheme ("DEPB") and VisheshKrishi and Gram UpajYojana ("VKGUY").

By its letter dated 18th January 2006, Petitioner requested the Deputy Director Animal Husbandry, Gurgaon, Haryana to draw samples of meat processed by it for bacteriological test etc. in order to comply with the condition set out in para 21 of Chapter 2 of the Export Policy. This request was declined by the Deputy Director Animal Husbandry, Gurgaon stating that no Veterinary Surgeon has been designated in Haryana for drawing of samples and that the required laboratory testing facility is not available.

Thereafter, Petitioner requested the Deputy Director Animal Husbandry, Gurgaon, Haryana to permit them to get their samples drawn by the Veterinary Officers of Meerut Division in Uttar Pradesh and thereafter get it tested at Animal Husbandry Disease Diagnostic Laboratory, National Capital Territory of Delhi. It is stated that this permission was given and pursuant thereto a request was made to the Veterinary Department of Meerut Division to draw samples from the meat processing unit of Petitioner and send it for testing to the diagnostic laboratory in the NCT of Delhi.

After the Veterinary Officer of the Meerut Division drew the sample they were tested by the Assistant Director, Animal Husbandry Department at the disease diagnostic laboratory, NCT of Delhi. The test report and the certificate issued by the Veterinary Officer accompanied the export documents were submitted by Petitioner and on that basis the Customs Officials issued "let export order". On the basis of the let export order, the DGFT issued the requisite certificates to Petitioner to avail the benefit of DEPB and VKGUY Scheme.

On receipt of 'intelligence' that Petitioner No. 1 has been exporting frozen buffalo meat without valid veterinary health certificates, and without any inspection of the export goods or the ante mortem or post mortem reports of the animals slaughtered and that there was a resultant contravention of the Export of Raw Meat (Chilled/Frozen) (Quality Control and Inspection) Rules, 1992), the Customs officers conducted simultaneous searches on at the corporate office and the meat processing plant of Petitioner at Manesar, Gurgaon (Haryana) and seized all the documents.

Upon conclusion of the investigation, Respondent Customs department by letter dated 26th March 2012 requested the Joint Director General Foreign Trade to examine the question of the allegedly unauthorized export of frozen buffalo meat made by Petitioner under DEPB/VKGYU Scheme and take action against Petitioner since Jt. DGFT was the competent authority in terms of the export import policy to take such action.

Proceedings before the DGFT

Pursuant to the above letter, the Dy. DGFT stopped issuance of DEPB/VKGUY Scheme/FMS/FPS to Petitioner until further clearance was received from the Enforcement Section of Jt. DGFT. A SCN was issued to Petitioner by the Dy. DGFT on 10th April 2012.

The crux of the SCN was that Petitioner had not complied with the statutory provisions in the ITC (HS), Export Schedule-2, Chapter-2 of the Export Policy concerning the export of frozen buffalo meat and offals. The further allegation was Petitioner had been hiring the services of two veterinary doctors of UP who had no jurisdiction whatsoever in relation to the meat processing plant of Petitioner at IMTManesar, Haryana. It was further stated that the Disease Diagnostic Laboratories at Palam and MotiBagh in Delhi were not competent to exercise any jurisdiction for issuing the Veterinary Health Certificates since the exports were made from the Manesar Plant in Gurgaon (Haryana). It was further stated in the SCN that APEDA had approved the Manesar plant of Petitioner only for meat processing whereas dressed carcasses were shown to have been procured from the government slaughter houses. There was no certificate issued by the said slaughter houses certifying ante and post mortem report of the animals.

It was accordingly alleged that "non-adherence to the restrictions prescribed in ITC (HS), prima facie have rendered exports of M/s. F.N.S. Agro Foods Limited unauthorized."It was further stated that no claim under the DEPB/VKGUY Scheme was, therefore, also inadmissible to Petitioner. Accordingly, Petitioner was asked to show cause why its IEC should not be suspended under Section 9(4) of FTDR (Regulations) Rules, 1993; why it should not be declared a defaulter and placed in the Denied Entity List ("DEL") so that benefit under Exim Policy is stopped and why the penalty should not be imposed under Section 11 (2) read with Sections 13 and 14 of the FTDR Act.

On 26th July 2012, the DGFT again wrote to the Collector of Customs (Preventive), Delhi asking him to clarify the following points:

(a) If authorized Govt. doctor is not available in the respective exporting state then how exporters will export the goods after getting testing certificate on the basis of sample drawings. Has Custom issued any instructions to deal with such cases? If yes, then a copy of the same may please be provided to this office.

(b) Has custom notified the name and address of authorized slaughter house for Haryana State, if yes then a copy of the same may please be supplied to this office? If name has not been notified by custom then, is there any restrictions for Haryana exporters to not procure the carcasses/meat from authorized slaughter house of nearby state like slaughter house of Jaipur Nagar Nigam.

The Collector of Customs informed as under:

"It is therefore incumbent upon the very policy making body (DGFT in this case) to devise alternatives in case authorized Government doctor(s) is/are not available in the respective exporting State and as to how the exporter will export goods in such a situation. The Customs has at no point of time, issued any instructions to deal with such cases presumable due to the fact that we do not frame Import/Export Policy not being our Charter of duties."

By an order dated 24th September 2012 the Dy. DGFT came to the conclusion that Petitioner had not violated any of the conditions of export of frozen buffalo meat in terms of the Exim Policy and that they had not committed any fraud under the DEPB/VKGUY Scheme warranting any penalty under Section 11 (2) & (4) read with Section 13 of the FTDR Act. Thus, all the charges against the Petitioners were dropped.

SCN by the Customs Commissionerate at Noida

After waiting for more than a year and half, the Commissioner of Customs, Central Excise and Customs, Noida issued the impugned SCN dated 28th March 2014 asking Petitioner to show cause inter alia as to why –

(i) Frozen boneless buffalo meat valued at Rs. 28,69,97,814/- exported through ICDDadri during the year 2008 to 2011 in contravention of provisions of the ITC (HS) read with Export (Quality Control and Inspection) Act, 1963 the 1992 Rules and Order issued vide S.O. 203 dated 15th January 1993 should not be held liable for confiscation in terms of the provisions of Section 113 (d) read with Section 11 of the Act and Section 11 of FTDR Act and Rules 11 and 14 of FTR Rules;

(ii) Since the goods are not available for confiscation, appropriate fine should not be imposed in lieu of confiscation in terms of the provisions of Section 125 of the Act; imposition of penalties etc.

The Petitioners replied to the said SCN on 17th April 2014 requesting for copies of the relied upon documents and later filed W.P. seeking quashing of the SCN.

During the pendency of W.P. (Civil) No. 6114 of 2014, the Collector of Customs (NS-II), Navi Mumbai, Maharashtra issued the second impugned SCN dated 19th February 2015, which too was challenged by the Petitioners in the second W. P.

Both the petitions were heard together.

Submissions on behalf of the Petitioner/Respondent

The principal submission is that in respect of the very same issue which forms the subject matter of the impugned SCNs, the Dy. DGFT passed a detailed adjudication order exonerating the Petitioners from any violation of the FTDR Act or the FTR Rules. Therefore, on the same set of allegations no further SCN could have been issued by Respondent i.e., the Commissioner of Customs (Preventive), Delhi.

Reliance is placed on the Supreme Court decision in Titan Medical Systems Pvt. Ltd. v. Collector of Customs, New Delhi -2003-TIOL-42-SC-EXIM and Circular No. 15/97-Cus.

The counsel for the Respondent Customs department submitted that the Petitioners should respond to the SCNs and participate in the adjudication proceedings and thereafter pursue their remedies in accordance with law.

The High Court after considering the submissions observed -

++ As observed by the Supreme Court in Titan Medical Systems Pvt. Ltd. v. Collector of Customs, New Delhi (supra) if the licence issuing authority, which in this case is the DGFT, has not questioned the veracity of the transactions undertaken under the licence, the Customs authorities cannot refuse exemption on an allegation that there was any misrepresentation. It was held that if there was any misrepresentation it was the licensing authority which had to take steps to cancel the licence.

++ The impugned SCNs do not refer to alleged violations of the Act that are not consequential upon the alleged violations of the FTDR Act or FTR Rules. As already noticed, this aspect has already been examined thoroughly by the DyDGFT while passing the order dated 24th September 2012. In fact, as can be seen from the body of the order, the DyDGFT during the course of those proceedings consulted the Customs authorities and sought their clarifications on various aspects.

++ Counsel for Revenue was unable to point out any portion of the impugned SCNs which is any different from the SCN and the consequent adjudication order passed by the Dy. DGFT. In the circumstances, the impugned SCNs issued to the Petitioners, more than one and half years after the DyDGFT exonerated them of the very same allegations, is nothing but a harassment of the Petitioners and an abuse of the process of law.

The SCN dated 28th March 2014 issued by the Commissioner, Central Excise, Noida and the SCN dated 19th February 2015 issued by Commissioner of Customs (Export), Navi Mumbai, Maharashtra and all the proceedings consequent thereto were quashed.

The Writ petitions were allowed.

(See 2016-TIOL-990-HC-DEL-CUS)