THE HON’BLE SRI JUSTICE B.SUDERSHAN REDDY AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION NO.5521 OF 2005 JUDGMENT: (per Sri Ramesh Ranganathan, J) DATE: 12-08-2005 BETWEEN: M/s Eastern Granites Limited …… Petitioner And 1. The Commissioner of Customs and Central Excise, Guntur and another ….. Respondents Orders passed by the Customs, Excise and Service Tax Appellate Tribunal in C/appeal No.374/2003, dated 30.09.2004 and the consequential final order No. 1459 of 2004, dated 03.09.2004 are impugned in the writ petition as being contrary to the provisions of the Customs Act and in violation of Article 14 and 19 of the Constitution of India. The facts, to the extent necessary for the purpose of this writ petition, are that the petitioner, M/s. Eastern Granites Limited, is a Company set up as a 100% Export Oriented Unit at Ketanakonda, Krishna District for manufacture and export of granite panels/slabs, tiles and granite monuments. Among the concessions given to the petitioner, as a 100% Export Oriented Unit, was waiver of import duty on capital machinery imported for the purpose of setting up of the export oriented unit and the goods imported for the purpose of utilizing the same for manufacture of goods which would subsequently be exported out of India. The petitioner availed this facility of waiver of duty under the Customs Act. Under the scheme, for availing the benefit of duty free import of goods, issued in Notification No.13/81-CUS, dated 09.02.1981 under the Customs Act and Notification No.123/81-CE dated 02.06.1981 and 57/94- CE dated 01.03.1994 under the Central Excise Act, units availing the facilities and concessions granted under these schemes were required to execute agreements with the Development Commissioner, Ministry of Commerce, whereunder the units were required to undertake export of the entire production subject to the right to sell upto 5% of the production within India. Under the said agreement, the Development Commissioner was entitled to levy a fine in the event of failure on the part of the unit in performing its part of the agreement. The company is said to have entered into an agreement with the Development Commissioner, Visakhapatnam on 05.01.1993, whereunder it was required to export its entire production and failure to do so was to result in the company being held liable for payment of the entire Customs and Central Excise duties and for liquidated damages as quantified by the Development Commissioner. The petitioner, which claims to have commenced production in 1994-95, to have became sick and to have suspended its operations by 1998-99, was issued show cause notice dated 16.03.2001 asking it to show cause as to why customs duty payable on the import of goods should not be collected and why central excise duty payable on the capital goods which were procured without payment of Central Excise duty should also not be collected. Both the petitioner and its Managing Director submitted their reply thereto, vide letter dated 07.03.2002, and were also given a personal hearing on 19.06.2003. The defence of the company was that stoppage of commercial production was due to reasons beyond its control, that the company had registered itself as a sick industrial undertaking before the Board of Industrial and Financial Reconstruction, that the Development Commissioner had imposed a penalty of Rs.20,000/- on the company for its failure to carry out export obligation and therefore, the 1st respondent Commissioner of Customs and Central Excise had no jurisdiction to adjudicate the matter. However, order dated 29/30.07.2003 was passed, where under the 1st respondent confirmed payment of customs duty Rs.6,95,52,486/- in terms of Notification 13/81-CUS and Central Excise Duty at Rs.13,18,276/- in terms of Notification No.123/81, 57/94 and 1/95 besides demanding interest. The 1st respondent also confiscated the imported goods valued at Rs.7,53,99,080/- and gave an option to the company to redeem the goods on payment of fine of Rs.6,95,00,000/-. Penalty of Rs.6,00,00,000/- was imposed on the company under Rule 173Q of the Central Excise Rules. The 1st respondent, in its order dated 29/30.07.2003, held that the export obligation achieved by the unit was dismal, that despite being conscious of not achieving export obligations for the years 1994, 1995 and 1996, they continued to import goods in the subsequent years 1995, 1996 and 1997. Aggrieved by the order of the 1st respondent dated 29/30.07.2003, the petitioner filed an appeal before the 2nd respondent. Along with the appeal, the petitioner sought for stay of operation of the order of the 2nd respondent and for waiver of pre- deposit of duties and redemption of fine imposed under the Central Excise and Customs Act. The 2nd respondent, vide order dated 30.4.2004, while holding that the company had not fulfilled its export obligations and was required to pre-deposit the duty amounts of Rs.6,95,52,486/- and Rs.13,18,276/- within a period of four months from the date of the order, held that on such pre-deposit being made, the penalty imposed on the company and its Managing Director stood waived and recovery stayed. It was made clear that in case, the said amounts were not deposited by the appellants, the appeals were liable to be dismissed under Section 129E of the Customs Act. The 2nd respondent, in its order dated 3-9-2004, while taking note of the fact that by stay order dated 27-4-2004, the appellants were directed to pre-deposit the duty demanded of Rs.6,95,52,486/- and Rs.13,18,276/- and to report compliance, held that since the appellants had not complied with the terms of the stay order the appeals were dismissed under Section 129E of the Customs Act. Sri R. Raghunandan, learned counsel for the petitioner, submits that the petitioner company had not violated any of the conditions in the notification, that the authority, to determine whether any of the conditions of the agreement were violated, is the Development Commissioner, that the authorities under the Central Excise and Customs Acts do not have jurisdiction, that the petitioner company is a sick company and is not in a position to pay duty or tax or penalty, that the customs authorities ought not to have initiated fiscal action without referring the matter to the Commerce Ministry, that the petitioner did not commit any fraud by their failure to carry out their export obligations and that their inability to do so was on account of recession in the international market etc. Sri A.Rajasekhar Reddy, learned Assistant Solicitor General, submits that the petitioner violated the conditions prescribed in the exemption notifications issued by the Central Government, that the Development Commissioner in her order dated 28- 3-2002 had confirmed this fact and had imposed penalty, that in view of the judgment of the Supreme Court in C.T.O v. Coramandel Pharma, the embargo under Section 22(1) of the SICA Act applies only to dues included in the sanctioned scheme and not to amounts due thereafter, that in the absence of any averment in the affidavit, that the Central Excise and Customs dues were part of the sanctioned scheme, the petitioner was not entitled for the protection under the SICA Act, that failure to fulfill the export obligation automatically resulted in duty being demanded and that the Commissioner had no discretion in the matter. Learned counsel further submits that as the petitioner had not complied with Section 129 E of the Customs Act, whereunder it was required to pre-deposit the amount of duty and penalty imposed under the order of the 1st respondent, there was a statutory bar on the appeal being entertained and that the 2nd respondent rightly dismissed the appeal for failure of the petitioner to make the said pre-deposit. We find considerable force in this submission of the learned Assistant Solicitor General. While the provisions of Section 129E of the Customs Act confer discretion on the 2nd respondent to dispense with pre-deposit in certain cases, no case has been made out by the petitioner warranting interference of this Court in the exercise of discretion by the 2nd respondent in refusing to waive the pre-deposit. Having failed to comply with the legal obligations of export of goods as prescribed under the agreement and the Schemes of the Central Government, the petitioner cannot take advantage of its sickness to escape liability or avoid payment of duty and penalty imposed on it under the Central Excise Act and the Customs Act. The writ petition is accordingly dismissed. No order as costs. _________________________ B. SUDERSHAN REDDY,J Date: .08.2005 __________________________ RAMESH RANGANATHAN,J Asp/mrkr