Allowed

Vasantraodada Patil Sahakari Sakhar Karkhana Ltd. and Ors. v. Union of India and Ors.

Bombay HC9 Feb 2005WP/719/2004

Case brief

AI extract

What is this about?

The High Court addressed writ petitions by sugar producers challenging prosecution notices. The court found sugar meant for export was diverted to the domestic market without required authority sanction under the Essential Commodities Act. The court directed District Magistrates to investigate the authorities' inaction and quashed the prosecution orders against producers.

What did the court decide?

Letters directing prosecution against petitioners quashed; District Magistrates directed to investigate misuse of sugar and conduct inquiry within eight weeks.

Vasantraodada Patil Sahakari Sakhar Karkhana… — Pension and Retirement Benefits | Bombay HC (2005)

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 IN THE HIGH COURT OF JUDICATURE AT BOMBAY

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 CRIMINAL APPELLATE JURISDICTION

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 CRIMINAL WRIT PETITION NO.719 OF 2004

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`1. Vasantraodada Patil Sahakari )`
`Sakhar Karkhana Ltd. )`
`Vithewadi (Lonar) Tal. Deola )`
`Dist. Nasik. )`
`2. Dr.Daulatrao Sonuji Aher )`
`The Chairman of the Petitioner)`
`No.1, Age Adult R/o Deola, )`
`Dist. Nasik. )`
`3. Vinayak Rajaram Baste )`
`Managing Director of the )`
`Petitioner No.1, Age Adult, )`
`R/o Karkhana Site, Vithewadi )`
`Tal.Deola, Dist. Nasik. )... Petitioners`

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 Versus

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 : 2 :

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`1. Union of India, through )`
`Ministry of Consumer Affairs, )`
`Food & P.D. Deptt. Of Food )`
`& Public Distribution, Krishi )`
`Bhavan, New Delhi 110 001. )`
`2. The Chief Director of Sugar )`
`having his office at Krishi )`
`Bhavan, New Delhi -110 001. )`
`3. The Chief Supdt. of Central )`
`Excise & Customs )`
`Malegaon Range, Nasik-III )`
`Div. Market Road Camp, )`
`Malegaon. )`
`4. The Dy. Commissioner, Central )`
`Excise & Customs, Nasik III )`
`Div. Kendriya Rajas Bhavan )`
`Old Agra Road, Gadkari )`
`Chowk, Nasik. )`
`5. The State of Maharashtra )`

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`through Coop. & Textile Dept. )`
`Mantralaya, Mumbai. )`
`6. The Commissioner of Sugar )`
`Maharashtra State, Sakhar )`
`Sankul, Shivaji Nagar, Pune-5 )`
`7. The Collector Nasik )`
`8. The Tahsildar, Ta. Deola, )`
`Dist. Nasik )`
`9. M/s. Jai Jagdish Sugar )`
`Prop. Mr. Deepak Thakker )`
`having its office at Shop )`
`No.8, Paras Bafana Market, )`
`Opp. Nagarpalika, Dhule, )`
`Maharashtra State. )`
`10. The Police Inspector, )`
`Satana Police Station, )`
`Satana, Dist. Nasik. )...Respondents`
`Mr.C.J.Sawant with S.N.Bhadrashete for Petitioners`

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 Mr.D.N.Salvi for Respondent Nos.1 to 4

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 Mr.D.S.Mhaispurkar, for State

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 WITH

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 CRIMINAL WRIT PETITION NO.722 OF 2004

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 Dongrai Sagareshwar Shetkari )
 Sahakari Sakhar Karkhana Ltd. )
 Kadepur (Raigaon), Tal. Kadepur )

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 Dist. Sangli through its Chairman )
 Shri Purthaviraj Deshmukh )

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 age : adult, Occupation ; )
 Agriculture, R/at. Kadepur, )

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 Dist. Sangli. )...Petitioner

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 Versus

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 1. The Chief Director (Sugar) )
 Ministry of Consumer Affairs )
 Food and Public Distribution )
 Department, Government of )
 India, Krishi Bhavan, )
 New Delhi. )

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`2. The Director (Cost), )`
`Ministry of Consumer Affairs )`
`Food & Public Distribution )`
`Department, Government of )`
`India, Directorate of Sugar, )`
`Krashi Bhavan, new Delhi. )`
`3. The Union of India )`
`4. The Commissioner of Sugar )`
`Maharashtra State, Pune. )`
`5. The Collector, Sangli )`
`District Sangli. )`
`6. The Special Auditor No.1 )`
`Cooperative Socieites (Sugar) )`
`Kolhapur. )`
`7. The State of Maharashtra )`
`8. M/s. Shiva Marketing Ltd. )`
`5-5 Commerce Centre, Tardeo, )`

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 Bombay 400 034. )...Respondents

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 Mr.R.V.More for Petitioners

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 Mr.R.F.Lambay for Respondent No.1 to 3

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 Mr.D.S.Mhaispurkar, APP for State.

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 CORAM : R.M.S.KHANDEPARKER &

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 P.V.KAKADE, JJ.

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 DATE : 9th FEBRUARY, 2005.

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 ORAL JUDGEMENT : (Per Khandeparkar, J.)

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 1. Pursuant to the order dated 24th June 2004 and
 considering the issue involved in the mattes, the same
 were directed to be heard for expeditious disposal and
 therefore since August last the matters were being heard
 for final disposal.

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 2. Since common questions of law and facts arise in
 both the Petitions they were heard together. As
 observed above, the petitions were in fact heard on
 number of occasions giving ample opportunities to the
 parties on both the sides to putforth their contention

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 in the matter. The Respondent No.9 in Writ Petition
 No.719 of 2004 and Respondent No.8 in Writ Petition
 No.722 of 2004 though served have not appeared before
 the Court. They are the purchasers and exporters in
 relation to the sugar lifted by them from the respective
 petitioners - producers and who have allegedly diverted
 the sugar released for export to the domestic market.

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 3. The grievance of the Petitioners in both the
 petitions is that the authorities empowered to prosecute
 the persons committing default in relation to the use of
 controlled commodity viz. the sugar are trying to
 prosecute the petitioners without any fault on their
 part and inspite of the fact that there appears to be
 lapse on the part of the concerned authorities to take
 appropriate steps at appropriate time to avoid misuse of
 the sugar and therefore, it requires necessary
 directions by this court for proper investigation in the
 matter to identify the real culprits in the matter.

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 4. It is not in dispute that under specific orders
 issued in accordance with the provisions of Essential
 Commodities Act, 1955 and the orders passed thereunder
 the specified quantity of sugar was directed to be

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 released to the respondent no.9 in Writ Petition No.719
 of 2004 and Respondent No.8 in Writ Petition No.722 of
 2004 for the purpose of export of the said quantity of
 the sugar and such directions were issued to the
 respective petitioners, who are the producers of the
 sugar. It is also not in dispute that pursuant to the
 said directions the specified quantity of sugar was
 released by the petitioners in favour of the respective
 respondents. As regards the petitioner in Writ Petition
 No.722 of 2004 is concerned only a quantity of 1231.5
 metric tone of sugar was delivered to the respondent
 No.8 therein. The correspondence placed on record
 further disclose that the entire quantity of sugar
 lifted by the said respondents instead of being
 exported, it was diverted for consumption in the
 domestic market. It appears that in case of Respondent
 No.9 in Writ Petition No.719 of 2004 such a diversion of
 the product in domestic market was done pursuant to the
 alleged permission obtained from the Central Excise and
 Customs Officers. There does not appear to have
 obtained the necessary permission from the authority who
 is empowered to deal with the disposal of the sugar
 which is a controlled commodity under the Essential
 Commodities Act, 1955. The affidavit in reply filed by

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 the Respondents also nowhere discloses any such

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 permission having been granted by the concerned
 authorities under the said Act for such diversion of the
 sugar to the domestic market instead of export thereof.
 Undisputeldy, the utilisation of the control commodity
 under the provisions of the said Act has to be in
 accordance with the permission granted by the
 authorities under the said Act. Rule 9 of Sugar
 (Control) Order, 1966 (No.G.S.R. 912-ESS.Com.-Sugar,
 New Delhi, dated the 10th June 1966/20th Jyaistha 1888)
 provides that where any person, class or person or
 organisation takes delivery of sugar from any producer
 in pursuance of a direction made under clause (f) of
 sub-section (2) of Section 3 of the said Act, such
 person or class of persons or organisation, as the case
 may be, shall utilise the sugar so delivered for the
 purpose for which such delivery has been taken and for
 no other purpose, and submit to the Chief Director
 within fifteen days of the utilisation of the sugar so
 taken delivery of a certificate to the effect that the
 sugar has been utilised for the purpose for which it was
 taken delivery of. Obviously, therefore, the
 utilisation of the sugar of which the delivery is taken
 in pursuance of the order issued under Section 3 of the

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 said Act has to be in accordance with the Order issued
 by the authority for the purpose of utilisation of the
 sugar. In the case in hand the respondents had obtained
 the sugar in pursuance of the said provision of law i.e.
 under Section 3(2)(1) of the said Act for the purpose of
 export thereof but the same was utilised for domestic
 consumption. Prima facie, there appears contravention
 of the provisions of law.

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 5. The further grievance of the Petitioners is that
 inspite of the default on the part of the exporter of
 the sugar, the Petitioner are sought to be prosecuted
 for the alleged default without any connivance of the
 petitioners with the purchasers. The Petitioners
 therefore seek to quash letter dated 8.12.2003 issued by
 the Chief Director (Sugar) and the letter dated
 12.1.2004 issued by Sugar Commissioner of Maharashtra
 State, Pune, in Writ Petition Nos.719 of 2004 and 722 of
 2004 respectively. Perusal of the said letters
 apparently disclose that the Collector is sought to be
 directed to initiate prosecution for violation of the
 condition of the release order in relation to the sugar
 as the exporter has utilised the sugar for the purpose
 other than for which it was released and that it amounts

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 to contravention in terms of release under Rule 9 of

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 Sugar (Control) Order 1966 read with Section 3 of the
 said Act. As already stated above apart from mere
 allegation, there is nothing placed on record to
 disclose, even prima facie, that the petitioners had
 acted in connivance with the said exporters for the
 purpose of misutilisation of the sugar which was
 released for the purpose of export or in the matter of
 diverting the said sugar for domestic consumption
 instead of export thereof.

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 6. Rule 9 of the Sugar (Control) Order apparently
 discloses that a person who takes delivery of the sugar
 in pursuance of a direction issued under Section 3(2)f)
 of the Act has to submit to the Chief Director of Sugar
 within 15 days of the utilisation of the sugar so taken
 delivery of a certificate to the effect that the sugar
 has been utilised for the purpose for which it was taken
 delivery of. Clause (i) thereof clearly requires to
 utilise the sugar so taken delivery of for the purpose
 for which such delivery was taken and for no other
 purpose. There is ample power available to the
 authorities under the said Act and the said Sugar
 (Control) Order to seek information and to carry out the

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 inspection and search in case of non compliance of the
 provision of law or whenever there is reason to believe
 that there has been misutilisation of sugar or violation
 of the direction issued under Section 3(2)(f) of the
 said Act. Inspite of repeated opportunities being given
 to the Respondents, they have not placed on record any
 material disclosing any such action having been taken by
 them at any point of time to avoid misutilisation of the
 sugar, which was released for export and not for the
 domestic consumption. There is no explanation on record
 as to why prompt action was not taken by the concerned
 authorities at appropriate time to avoid such
 misutilisation of the sugar by the exporters.
 Undoubtedly, the sugar is a perishable commodity and
 being so when the provisions of law clearly warrant the
 authorities to take appropriate steps against the
 persons who violate the provisions of law, it is
 expected from such authorities to be prompt in exercise
 of their powers as also their duties to avoid such
 misutilisation of the control commodities. The
 carelessness and carefree attitude on the part of such
 authorities could defeat the very purpose for which the
 provisions under the Essential Commodities Act are made
 and orders are passed thereunder from time to time.

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 Being so, it is also necessary for the authorities to be
 alert in ensuring the proper implementation of the
 provisions of law comprised under the said Act and
 particularly in respect of the controlled commodities.

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 7. It is really surprising that the commodity which
 is a controlled one in accordance with the provisions
 under Essential Commodities Act and in relation to which
 specific powers are given to the Officers under the said
 Act and various order passed thereunder, the authorities
 did not seem to have discouraged the violation of the
 provisions of law under the said Act and the Orders and
 allowed the Exporter to misutilise the sugar for the
 purpose different than for which it was released. This
 is prima facie apparent from the copies of the
 correspondence placed on record which reveal letters
 from the Office of Central Excise and Customs
 Department. It appears that Respondent no.9 in first
 Writ Petition was allowed to divert the sugar which was
 meant for export, to domestic consumption by the
 officers of the Central Excise and Customs. In that
 regard it is the contention of the respondents that such
 permission was granted in accordance with the provision
 of Government Notification No.42/01 CE(N.T.) dated

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 26.6.2001. Perusal of the said Notification discloses

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 that the same was issued in exercise of powers conferred
 by Sub-Rule 3 of Rule 19 of the Central Excise (No.2)
 Rules, 2001 whereunder the Central Board of Excise and
 Customs had notified the conditions and procedure for
 export of all excisable goods, except to Nepal and
 Bhutan without payment of duty from the factory of the
 production or the manufacture or warehouse or any other
 premises as may be approved by the Commissioner of
 Central Excise. At the same time our attention is drawn
 to clause (v) which speaks of cancellation of
 applications for export. Sub clause (a) of clause (v)
 provides that if the excisable goods are not exported,
 the Assistant Commissioner of Central Excise or the
 Deputy Commissioner of Central Excise or Maritime
 Commissioner or such other officer as authorised by the
 Board on this behalf, as the case may be, to whom the
 bond or letter of undertaking has been furnished, may,
 on written request for cancellation of application,
 cancel said application and allow diversion of goods for
 consumption in India subject to the sub-para (b).
 Sub-clause (b) of clause (v) provides that the exporter
 shall pay the duty as specified in the application along
 with interest at the rate of twenty four per cent per

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 annum on such duty from the date of removal for export
 from the factory or warehouse or any other approved
 premises till the date of payment of duty. Obviously,
 the provision of law comprised under the said
 notification are to ensure proper collection of revenue
 in relation to the commodities which are exported out of
 India and those which are meant for export but actually
 not exported. The relevant clause is in relation to the
 power of the authority to allow the parties to cancel
 the application for export and divert the product which
 is meant for export for the purpose of home consumption.
 That by itself, however, nowhere provides that it will
 have overriding effect as regards the provision of law
 comprised under the Essential Commodities Act and orders
 passed thereunder in relation to controlled commodities.
 The provision of Customs Act and Central Excise Act and
 rules thereunder and various notification issued
 thereunder are in relation to the revenue to be
 collected in relation to the commodities manufactured
 and exported out of India. The provision did not relate
 to the utilisation of the controlled commodities to
 which the Essential Commodities Act and Orders passed
 thereunder apply. Irrespective of permission to cancel
 the application for export and payment of duty in terms

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 of sub-clause (b) of clause (v) of the said Notification

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 that by itself will not entitle the Exporter to divert
 the sugar which was released for the purpose of export
 and not domestic consumption, unless necessary
 permission in that regard is obtained from the concerned
 authorities under the Essential Commodities Act and the
 Orders passed thereunder. In fact once it is known to
 be a controlled commodity, it was also necessary for all
 the other authorities acting under the various
 provisions of law to ensure that the provisions of the
 Essential Commodities Act and the orders passed
 thereunder are duly complied with before granting the
 application for diversion of the controlled commodities
 in local market. Needless to say that we are not
 pronouncing the judgment to the effect that Customs or
 Excise Department would have the power of officers under
 the Essential Commodities Act. We are only pointing out
 that it is always duty of every employee of the
 Government to discourage illegalities and violations of
 the provisions of law and in that respect it would be
 obligation of the officers from the Customs and/or
 Central Excise Department while exercising their powers
 under the statute governing them to ensure that in the
 process of exercise of their duties under the said

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 statutory provisions, the same does not lead to
 violation of the provisions of another statute.
 Certainly in that regard it is the duty of each
 Government Officer to be alert and to perform their
 duties to the best of their ability to discourage
 illegalities and therefore, while allowing the diversion
 of the controlled commodity like sugar for domestic
 consumption, it is necessary to ensure that such
 permission for diversion of the commodity for domestic
 consumption does not result in violation of provision of
 other statute. Prima facie, no such precaution appears
 to have been taken by the authorities under the Customs
 and Central Excise Act in the case in hand.

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 8. It was sought to be argued on behalf of the
 Respondents that petitioners have acted in connivance
 with the exporters for diverting the sugar to the
 domestic consumption instead of exporting the same. In
 that connection in relation to Writ Petition No.719 of
 2004 attention is drawn to the Agreement between the
 Petitioners and the exporter wherein there is a clause
 which reads thus :

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 "Should any quantity of sugar out of the

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 quantity supplied by the seller and accepted by
 the exporter, under this contract not exported
 for any reasons what so ever, beyond the control
 of the exporter e.g. cargo shut out by the
 vessel. Rejected or short cargo etc. The buyer
 will have the right to sell sugar in the
 domestic market however seller shall demand the
 difference towards additional realisation
 Buyer/Exporter agrees for the same."

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 Referring to the said clause it was sought to be
 contended that there was connivance between the
 petitioners and Respondent No.9 in the said petition in
 relation to diversion of the sugar for domestic
 consumption instead of exporting the same and therefore
 the Petitioner is also liable to be prosecuted for
 violation of clause 9 of the Sugar (Control) Order 1966.

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 9. Undoubtedly the agreement dated 30th October,
 2001 between the Petitioners and the said Respondent
 No.9 discloses the above referred clause. It is also a
 matter of record that release order was issued on
 20.10.2000 prior to the execution of the said agreement.
 It is also a matter of record that the agreement relates

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 to 5500 metric tones of sugar and the release order is
 also in relation to 5500 metric tones of sugar. Prima
 facie, therefore it may appear that there was connivance
 between the petitioners and the Respondent No.9 for the
 purpose of misutilisation of the sugar which was
 released by diverting the same for domestic consumption
 instead of exporting. However perusal of the record
 particularly the letters written by the Petitioners one
 after another to the various authorities reveal that the
 Petitioner had been consistently complaining of failure
 on the part of the respondent NO.9 to cooperate with the
 petitioner to disclose the utilisation of the sugar for
 which it was released. Such letters are to be found to
 have been written by the Petitioner right from
 26.12.2001 onwards till 22.6.2002 wherein consistently
 the petitioner had been complaining of failure on the
 part of the Respondent no.9 to disclose to the
 petitioner about the actual export of the sugar which
 was collected by the respondent no.9 from the petitioner
 in pursuance of the release order issued on 25.10.2001.
 This prima facie discloses absence of connivance between
 the petitioner and the Respondent no.9. As regards the
 petitioner in Writ Petition No.722 of 2004 apart from
 mere allegation that the petitioner is also responsible,

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 the respondents have not placed on record any material
 so as to disclose the Petitioner’s connivance with the
 respondent No.8 therein in the matter of diversion of
 sugar for domestic consumption instead of exporting the
 same.

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 10. Considering the above narrated facts and the
 materials placed on record it is apparent that matter
 needs investigation in detail before proceeding to take
 any action against the petitioners as such or any other
 person or officer. The commodity which is meant for
 export and that too the Control Commodity was obtained
 with specific order for the purpose of export and it was
 not exported but used for domestic consumption without
 necessary sanction in that regard from the competent
 authority and in violation of the provisions of law
 particularly under Rule 9 of the Sugar (Control) Order
 1966. These illegal activities had occurred in the year
 2001 and yet the authorities apart from writing letters
 did not take any concrete step nor have taken
 appropriate action against the defaulters. It is
 necessary to investigate as to whether the Officers of
 the concerned Departments are also involved in the
 matter. Such an investigation is required to be made by

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 independent agency having experience in the field of
 investigation and therefore, we direct the District
 Magistrate of Nasik in relation to the matter in Writ
 Petition No.719 of 2004 and the District Magistrate,
 Sangli in relation to Writ Petition No.722 of 2004 to
 enquiry into the matter in detail and then to proceed to
 take appropriate action in accordance with law and also
 to submit the report thereof to this court within a
 period of eight weeks. We make it clear that this
 enquiry shall not come in the way of the prosecution if
 launched or intended to be launched against the
 respondent No.9 in first Petition and Respondent No.8 in
 second Petition for the violation of provisions of law
 comprised under Rule 9 of the said Order or under any
 other provision of law. At present there shall not be
 any prosecution against the petitioners herein for the
 alleged violation of the condition of the release order
 and therefore the impugned letters directing the
 Collector to lead prosecution against the petitioners
 for the alleged offence are hereby quashed and set aside
 being premature. The petitions as far as the relief
 against the prosecution of the petitioners is concerned
 are disposed of with no order as to costs.

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 . For the purpose of report by the District
 Magistrate, the matter to be fixed on 28th April, 2005.

¶81

 (R.M.S.Khandeparkar, J.)

¶82

 (P.V.Kakade, J.)

Vasantraodada Patil Sahakari Sakhar Karkhana Ltd. and Ors. v. Union of India and Ors.

Case brief

What is this about?

What did the court decide?

Vasantraodada Patil Sahakari Sakhar Karkhana Ltd. and Ors. v. Union of India and Ors.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

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