Bombay High Court Slams Textiles Firm, Imposes ₹5 Lakh Cost For Hiding Facts

Observing that the litigant had come with “not just unclean hands but absolutely dirtied and muddied hands”, the Bombay High Court has imposed a cost of Rs5 lakh on the petitioner for suppressing material facts.

A bench of Justices KR Shriram and Jitendra Jain was hearing a petition filed by M/s DGM Textiles, seeking quashing of the orders passed by the Customs. The firm claimed that it had exported goods under the Customs' drawback scheme, which makes it eligible to get refunds on foreign items used to manufacture the export goods. Accordingly, the petitioner received Rs17,58,772 as drawback for exports between April 1, 2004, to December 31, 2008.

Advocate Siddharth Chandrashekhar, appearing for the respondent, stated that the Customs found that the company had not realised the foreign exchange for the said goods; meaning it hasn't settled the transactions, but procured the drawback. Hence, a demand notice was issued on May 15, 2010, asking DGM to explain why the waived off amount should not be recovered from it. However, the firm contended that it never received the notice.

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Advocate Dhiraj Chavan, appearing for the company, alleged that on January 3, 2013, the assistant commissioner of Customs passed an order without giving them a hearing. It claimed that it learnt about the notice only in 2019 when its shipments for export were withheld by Customs over the issue. Also, the company’s bank accounts were frozen upon the instructions from the tax recovery cell (export) section.

Chavan argued that their appeal was dismissed by the commissioner of Customs (Appeals) on December 24, 2020. Further, its revision application against the order was dismissed by the principal commissioner and ex-officio additional secretary to the Centre on September 18, 2023.

The HC noted that all three orders emphasised that the company had been “lying” when it contended that it never received the notice. Also, the orders referenced a letter sent by the DGM on November 19, 2012; in which it replied to the Customs’ notice, stating that relevant documents would be submitted within a month. However, it never submitted them.

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The bench was irked that the company neither made any reference to the letter nor tried to explain the situation. “We are satisfied that the attempt of the petitioner is not only to hide truth but also to obtain court orders by suppressing material facts,” the bench noted, adding that the firm had been lying throughout.

The court has asked the DGM to pay the cost to the Commissioner of Customs, Mumbai, in two weeks. If it fails to do so then the respondents may recover Rs5 lakh with 18% interest along with the drawback from the date of the original order passed on January 3, 2013, ruled the court.