Legal principle

Self-certification by an SEZ unit is founded on faith, honesty and probity, and a false declaration of origin to obtain GSP certification is a penal violation that cannot be excused merely because the certifying authority did not independently verify the declaration.

Court decision

The Delhi High Court dismissed the writ petition with costs to the respondents, upholding the Appellate Authority's order: the penalty was justified because the petitioner had made false declarations to procure wrong GSP certificates of Indian origin and could not wash away its responsibility; the contention that no violation under the FT Act/SEZ Act occurred was rejected. The reduced penalty of Rs. 22.60 crore (recovery of undue profit), setting aside of personal penalties on Directors, and restoration of the IEC upon recovery of the reduced penalty were sustained.

Facts

M/s Xtraa Cleancities Ltd. (now Nandan Cleantec Industries Ltd.), a unit in the Visakhapatnam SEZ manufacturing biodiesel, obtained two GSP Certificates of Indian Origin dated 29th March 2010 for export of biodiesel (FAME) to Switzerland. Following intelligence from the Export Inspection Council, investigation showed the petitioner had manufactured only 5700.647 MT of Indian biodiesel while 19299.644 MT of American-origin biodiesel was blended in excess of the permissible 50% threshold, pursuant to false declarations. The Development Commissioner, VSEZ cancelled the GSP certificates, imposed a penalty of Rs. 66.30 crores under Section 11(2) of the FT Act, personal penalties of Rs. 3.30 crores and Rs. 50 lakhs on two officials, and suspended the petitioner's Importer-Exporter Code for one year. The Appellate Authority under Section 15 of the FT Act, after remand, reduced the penalty to recovery of the Rs. 22.60 crore 'undue profit', set aside personal penalties on the Directors, and directed restoration of the IEC upon recovery of the reduced penalty.

Key provisions

• Section 8(1)(b), The Foreign Trade (Development and Regulation) Act, 1992 — Suspension and cancellation of Importer-exporter Code Number.
• Section 15, The Foreign Trade (Development and Regulation) Act, 1992 — Appeal.