Full Judgment Text
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CASE NO.:
Appeal (civil) 2378 of 2007
PETITIONER:
M/s Taarika Exports and Anr
RESPONDENT:
Union of India and Anr
DATE OF JUDGMENT: 07/05/2007
BENCH:
Dr. ARIJIT PASAYAT & D.K. JAIN
JUDGMENT:
J U D G M E N T
CIVIL APPEAL NO. 2378 OF 2007
(Arising out of SLP (Civil) No. 25852 of 2005)
Dr. ARIJIT PASAYAT, J
1. Leave granted.
2. Challenge in this appeal is to the order passed by a
Division Bench of the Delhi High Court dismissing the Letters
Patent Appeal filed against the order of a learned Single Judge.
3. Background facts in a nutshell are as follows:
4. A show cause notice was issued to the appellants under
Section 4L of the Imports and Exports (Control) Act, 1947 (in
short the ’Act’) for action under Section 4-I and under clause
10 for action under clause 8 of the Import (Control) Order,
1955 (in short ’Control Order") read with Section 20(2) of the
Foreign Trade (Development & Regulation) Act, 1992 (in short
"Foreign Trade Act") for not exporting the goods as also
utilizing the imported goods and failure to export within the
stipulated time. The appellants during the material point of
time were engaged in the import and export activities under
the Import and Export Code. On 13.10.1991 the Regional
Licensing Authority had issued an advance licence to the
appellants. The appellants undisputedly used the license in
full so far as the import of raw materials thereunder free of
customs duty is concerned but only a part of the finished
goods under the said licence was exported. Resultantly, there
was a shortfall on account of export obligation. Appellants
submitted that the conditions under the licence were
unrealistic and, therefore, non-fulfillment of the obligation was
beyond their control. The show cause notice in question was
issued on 7.5.1995 proposing, inter alia, imposition of fiscal
penalty for non fulfillment of export obligation under the
licence as well as for mis-utilization of the goods valued at
Rs.9,10,125/- imported under the said licence free of customs
duty. Appellants submitted their reply to the show cause
notice. The Additional Director General of Foreign Trade (in
short ’DGFT’) passed an order dated 13.11.1995 imposing a
penalty of Rs.45 lakhs for shortfall in export obligation to the
extent of Rs.27,20,462/-. An appeal was preferred before the
Appellate Committee. By order dated 12.8.1997 the Appellate
Committee dismissed the appeal of the appellants.
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Subsequently, a writ petition was filed under Article 226 of the
Constitution of India, 1950 (in short the ’Constitution’) before
the Delhi High Court. The writ petition was numbered as CWP.
623 of 1998. By judgment and order dated 30.5.2003 learned
Single Judge dismissed the writ petition holding that there
was no ground to interfere with the orders of the adjudicating
authority as well as the Appellate Committee. A Letters Patent
Appeal was filed which as noted above was dismissed by a
Division Bench.
5. Stand of the appellants is that what was really alleged
related to a technical non-compliance of an export obligation.
Such a compliance cannot be expected and demanded as the
same was impossible to be done on the basis of quantity of
raw materials that the appellants were allowed to import
under the concerned licence.
6. Learned counsel for the respondents on the other hand
submitted that the authorities below and the High Court have
clearly noted the infractions and the penalty imposed was
within the permissible limit of Section 4-I(1) of the Act read
with Section 20(2) of the Foreign Trade Act.
7. Relevant portions of the show cause notice read as
follows:
"1. You had obtained an advance licence
No.0300410 dated 13.10.1991 for a cif value of US$
40,400 for import of the following items:
1. Dupion Yarn 1210 Kgs.
2. Mulberry Raw Silk 75.00 Kgs.
3. Fusing lining anatrial 6750 Kgs.
2. The said licence was issued from the office of Jt.
DGFT, Bombay. The above said licence was issued
to you. Subject, inter alia, to the following
conditions:
(1) You would export 5400 Nos. of
Mulberry mixed jackets/blazer with
fussing lining material for an fob value of
Rs.36,42,800/- (US$ 1,41,603.66) within
a period of nine months from the date of
clearance of the first consignment.
(2) To ensure fulfillment of export
obligation you would, before clearance of
the first consignment, execute a
bond/LUT.
(3) The goods imported against the said
advance licence would be utilized
exclusively in the manufacturing of the
resultant products.
(4) In the event of the licencee falling (a)
to fulfill the export obligation within the
prescribed time limit stipulated above or
(b) to produce the prescribed
documents/information within 30 days
after the expiry of the export obligation
period; the bond/LUT agreement
condition shall be enforced and the
licencee shall be liable to the different
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follow up, penal actions prescribed in the
Import Export Police and Handbook of
procedure 1992-93. The licensee shall
also pay without demur to the customs
authorities the concerned duty on the
proportionate quantity of goods
corresponding to the products not
exported. Any shortfall will also be liable
to adjustment from any application for
licence pending in this office or received
in future.
(5) The action in clause 4 shall be without
prejudice to any other action that may be
taken against the licencee under the
Import and Export (Control) Act, 1947
and Import (Control) Order dated
07.10.1955 as amended.
3. In terms of the above conditions you executed an
indemnity -cum-guarantee bond with the licencing
office on 14.01.1992. It is observed that you
requested the Jt. DGFT, Bombay on 21.02.1992 for
amendment of licence to import only dupion yarn
1100 kgs. and mulberry raw silk of 250 Kgs. and
delete item at Sl. No. 3 fusing lining material of CIF
value of US$ 6,750/- and committed to fulfil the
export of resultant product for an fob value of US$
1,41,603.66 and also to amend the export
description i.e., mulberry mixed silk garments
(shorts, pants, blazers and skirts) containing dupion
yarn of 1100 kgs. and mulberry raw silk of 250 Kgs.
The request was considered by Jt. DGFT, Bombay
on 31.03.1992 and the licence was accordingly
amended.
4. According to information available on record and
in the absence of any documentary evidence
furnished by you, it is evident that you had made
import 1177.00 Kgs. of dupion yarn and mulberry
raw silk 70.00 kgs. against the said advance licence
in January 1992. However, you had exported 2429
pcs. of mulberry silk garments weighing dupion
yarn 33.141 kgs. and 78.889 of mulberry raw silk
for fob value of Rs.9,62,337.92 and failed to export
the remaining quantity of 2971 pcs for fob value of
Rs.27,20,452/- within the stipulated time. Vide
letter dated 22.12.92 you made a request to Jt.
DGFT Bombay office for grant of extension of six
months enabling them to export the balance
quantity by 30.04.1993. You again applied to Jt.-
DGFT Bombay office for another extension which
was rejected by RALC in its meeting held on
09.04.1993. As such the period of export obligation
expired on 30.04.1993. Subsequently you
approached this office advance licensing committee
several times for extension in export obligation
period against the subject advance licence but your
request was rejected every time. You were also
advised by this office on 29.11.94 to produce
certain documents/information in r/o. advance
licence in question. You sent your reply on
05.12.1994 and supplied this office photocopies of
advance licences relating to earlier advance licences
and other related documents but failed to produce
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the requisite documents in r/o the advance licence
in question. However, you were again reminded on
02.02.1995 to furnish the requisite
information/documents. In reply to this office letter,
you furnished the photocopies of bank certificate of
export and realization, etc. but again you failed to
send us the requisite information / documents."
The adjudicating authority inter-alia noted as follows:
"The said licence was issued to them by the office of
the Joint Director General of Foreign Trade,
Bombay, subject, inter-alia, to the following
conditions:
(i) They would export 5400Nos. of mulberry
mixed silk jackets/blazer viith fusion lining
material for an FOB value of Rs.36,42,800/-
(US$ 1,41,603.66) within a period of nine
months from the date of clearance of first
consignment.
(ii) To ensure fulfillment of export obligation they
would, before clearance of the first
consignment, execute a bond for Rs.
42,74,529.16 with Bank Guarantee for Rs.
5,91,729.16.
(iii) The goods imported against the said Advance
licence would be utilized exclusively in the
manufacturing of the resultant product.
(iv) In the even of their failure (A) to fulfill the
export obligation within the prescribed time
limit stipulated above or (B) to produce the
prescribed documents/information within 30
days after the expiry of the export obligation
period, the bond/LUT agreement condition
shall be enforced and the licensee shall be
liable to the different follow up, penal actions
prescribed in the import-export police and
handbook of procedures, 1990 \027 93. The
licensee shall also pay, without demur to the
customs authorities, the concerned duty on
the proportionate quantity of goods
corresponding to the products not exported.
Any shortfall will also be liable to adjustment
from any application for licence pending in
that office or received in future.
(v) The action in clause (iv) shall be without
prejudice to any other action that may be
taken against the licensee under the Import
(Control) Order, 1955, as amended."
8. The Appellate Committee also analysed the position and
concurred with the view expressed by the adjudicating
authority.
9. We find that the authorities have analysed the factual
position in detail and have concluded that there was
infractions of the conditions imposed under the licence. It is to
be noted that before the learned Single Judge a plea was taken
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that the goods are still lying with the appellants. There was no
question of the appellants having used or utilized them in
violation of the conditions imposed by the licence. Learned
Single Judge noted that no such plea was taken by the party
earlier. Neither in the reply to the show cause notice nor
before the Appellate Committee such a plea had been taken.
Before this Court also an attempt was made to submit that the
goods are lying in stock and, therefore, there was no question
of utilization. No material in this regard is produced before the
authorities as was rightly observed by the learned Single
Judge.
10. The penal provision is contained in Section 4-I(1) of the
Act. The same reads as follows:
"4-I(1). Liability to penalty.- Any person who,
(a) in relation to any goods or materials which have
been imported under any licence or letter of
authority, uses or utilizes such goods or materials
otherwise than in accordance with the conditions of
such licence or letter of authority; shall be liable to
penalty not exceeding five times the value of goods
or materials, or one thousand rupees, whichever is
more, whether or not such goods or materials have
been confiscated or are available for confiscation."
11. The stand that the conditions were incapable of
compliance seems to be at variance with the stand taken
earlier. By letter dated 22.12.1992 appellants made a request
to the Regional Licensing Authority for grant of extension of
six months to enable them to export the balance quantity by
30.4.1993. They again applied to the Joint Director General of
Foreign Trade, Bombay Office for further extension. The same
was rejected. Period of export obligation expired on 30.4.1993.
Subsequently, the appellants approached DGFT office several
times for extension of export obligation period which was
rejected. Therefore, the plea that the conditions were incapable
of compliance has been rightly turned down by the authorities
and the High Court.
12. Finally, it was submitted that considering the value of the
articles involved, imposition of penalty of Rs.45 lakhs is
extremely high. The minimum penalty provided is Rs.1,000/-
and the maximum is five times of the value of goods involved.
13. Considering the value of the articles involved we are of
the view that penalty of Rs.20 lakhs instead of Rs.45 lakhs
would meet the ends of justice. It is submitted that pursuant
to the order of this Court dated 9.12.2005 a sum of Rs.20
lakhs had been deposited by the appellants. If that is so, there
shall not be requirement of making any further deposit.
14. The appeal is disposed of accordingly with no order as to
costs.