TMI Blog2011 (6) TMI 522X X X X Extracts X X X X X X X X Extracts X X X X ..... exure-F to the petition) and has also challenged the order dated 3-4-1998 passed by the Appellate Committee in Case No. 10 (Annexure-I to the petition) whereby the fiscal penalty was reduced to Rs. 5 lac instead of Rs. 10 lac. 2. The petitioners in this petition have, inter alia, prayed as under : (a) YOUR LORDSHIPS may be pleased to issue a writ of mandamus or any other appropriate writ or order quashing the order imposing a fiscal penalty of Rs. 5 Lakhs imposed on the petitioners under the impugned order (Annexure-G) passed by the respondent No. 2. (b) xxx (c) Alternatively, YOUR LORDSHIPS be pleased to waive the penalty be waived in entirety subject to the condition that the petitioner fulfils the balance export obligations in a period of 5 years to be granted from such date as this Hon ble Court deems proper. (d) xxx 3. The factual matrix arising out of this petition are that petitioner No. 1 is a company incorporated under the provisions of the Companies Act, 1956 and was, at the relevant time, engaged in the business of manufacturing and exporting readymade garments. The petitioner-Company was granted industrial approval vide order dated 31-5-1984 for manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to achieve the value addition to the satisfaction of the Development Commissioner and on that basis it was alleged that the petitioner-Company has misutilized the goods so imported under the approval granted. It was further alleged that why action should not be taken as contemplated under Section 4-I of the Act 1947 and asking the petitioners to produce before it for hearing. In response to the said notice, the petitioners filed interim reply dated 11-11-1995. It transpires from the record that the respondent authority gave personal hearing on 15-11-1995 and, as per the directions given at that time, the petitioners also made further written statement dated 17-11-1995. It is the case of the petitioners that at the time of personal hearing all the relevant details as regards the goods imported by the petitioners upto March 1986 and for the further period of April 1986 to September 1995 and so also the value of goods exported by the petitioner-Company upto September 1986 and thereafter during the period from October 1986 to November 1995 were submitted before the authority. It is also stated that in order to get the correct figures relating to the import and exports so submitted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner-Company preferred an appeal before the Appellate Committee. The Appellate Committee considered the appeal of the petitioner-Company and found that the major reason for shortfall was certainly beyond the control of the petitioner-Company. However, found that there was a shortfall in export obligation as well as value addition beyond doubt and while considering the case of the petitioner-Company in sympathetic manner, concluded that the grounds for non-fulfilment of the export obligation were genuine problems. The Appellate Authority was pleased to reduce the fiscal penalty from Rs. 10 lac to Rs. 5 lac and was pleased to partly allow the said appeal vide order dated 3-4-1998. Being aggrieved by the aforesaid orders the present petition is filled raising various grounds in the petition. 10. Respondent No. 3 has filed an affidavit-in-reply and has countered the contentions raised by the petitioners. It has been contended that the orders impugned in the present petition are legal, just and reasonable and have been passed after considering all aspects, including the extent of infringement committed by the petitioner-firm. It has also been contended that the petitioner-f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out that the said condition No. 11 is not a blanket provision and before coming to the conclusion that the penalty is leviable, the authority has to show that the petitioner-Company has violated any conditions of the approval. It was further pointed out that, however, in the case of the petitioners non-fulfilment of export obligation has been wrongly termed as misutilization of goods in absence of any allegation or proof thereof and both the authorities below have not applied their mind on the very applicability of the provisions of Section 4-I of the Act 1947. It was submitted that the respondents lack jurisdiction to proceed against the petitioners under Section 4-I of the Act 1947 for violation of the export obligation and, therefore, the impugned notice as well as impugned orders in the present petition are contrary, unjust and against fundamental principles of imposition of penalty. It was also submitted that as far as the point of jurisdiction and applicability of the provisions of Section 4-I of the Act 1947 is concerned, the same has not been urged before the authorities below. However, it being a pure question of law and goes to the very root of the matter, this Court, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the respondent authorities and it being an admitted position that the petitioners have not fulfilled the export obligation the petitioner-Company is liable to pay penalty as envisaged under Section 4-I of the Act 1947 and hence, urged that the present petition is devoid of any merits and the same deserves to be dismissed. 14. At the outset it may be noted that the petitioners have not urged either before the adjudicating authority or the appellate forum that any provision of Section 4-I of the Act 1947 is not attracted. It transpires from the record that the petitioners have amended the petition at the time of admission and vide order dated 23-4-1999 while admitting the matter this Court had permitted the petitioners to raise the said question of law to the effect that the case of the petitioners does not fall within any of the clauses of Section 4-I of the Act 1947 and, therefore, we see no reason not to permit the petitioners to raise the same at the stage of final hearing, it being a question of law. 15. In order to appreciate the rival contentions raised by both the sides it would be necessary to refer to the relevant conditions of grant of approval dated 13-1-1994 : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n admitted position that as the petitioners could not fulfill the export obligation and could not achieve the value addition as per Condition No. 3 enumerated above, a show cause notice came to be issued on 8-8-1995. It is also worthwhile to enumerate Clause 2, 3, 4 and 5 of the said notice, which are as under : 2. AND WHEREAS under the condition of the aforesaid letter of intent/approval/permission they inter-alia were required to fulfill the expert obligation and to achieve the value addition as per the said conditions. 3. AND WHEREAS they have failed to furnish evidence in token of having fulfilled the said export obligation and to achieve the value addition to the satisfaction of the Development Commissioner M/s. Textiles Export Processing Zone, M/s. Textiles thereby also implying misutilisation of the goods imported under the said letter of intent/approval/permission. 4. AND WHEREAS the above infringement constitutes violation of the Import Export Policy in force at that point of time. 5. Now, therefore, in exercise of the powers vested in me under Section 4-K of the Imports Exports (Control) Act, 1947 and under Clause 8 of the Imports (Control) Order, 1955 read w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso as contemplated under Clause 10 for action under Clause 8 of the Imports (Control) Order, 1955 read with Section 20(2) of the Foreign Trade (Development Regulation) Act, 1992 and, therefore, has been pleased to impose fiscal penalty of Rs. 10 lac. 18. The appellate forum i.e. respondent No. 2 also in its order dated 3-4-1998 while considering the appeal has come to the conclusion that there is shortfall in export obligation as well as value addition beyond doubt. However, sympathetically considering the difficulties expressed by the petitioners has been pleased to reduce the fiscal penalty from Rs. 10 lac to Rs. 5 lac. 19. The impugned show cause notice as well as the impugned orders in the petition are, therefore, based on solitary ground that the petitioners have not fulfilled the export obligation as per the conditions of letter of approval and has not achieved the value addition as per the conditions thereof and have committed breach of undertaking. 20. In view of the aforesaid discussion and factual background of the case, we find that there is no allegation whatsoever to the effect that the petitioner-Company have misapplied the goods imported under the letter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to it in sub-section (1) of section 14 of the Customs Act, 1962. (2) If any person abets the commission of any act or omissions, which act or omission would render any person liable to a penalty under sub-section (1) or attempts to commit any act aforesaid, the person so abetting or attempting should be made to a penalty not exceeding five times the value of the goods or materials in respect of which such abetment or attempt has been made, or one thousand rupees, whichever is more whether or not such goods have been confiscated or are available for confiscation. (3) A penalty imposed under sub-section (1) or sub-section (2), may, if it is not paid, be recovered as an arrear of land revenue. Provided that the adjudicating authority may, by order attach any money belonging to, or owed to, the person on whom any penalty has been imposed under sub-section (1) or sub-section (2), and such attachment shall be made in the same manner in which an attachment is made by a civil court. The above provision is a penal provision which requires strict construction of the same. It clearly lays down the importer s liability to pay penalty upto five times of the value of the import, if any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indication as to which particular clause of Rule 173Q had been contravened, the penalty could not have been imposed. The above judgment has been followed by High Courts in Commissioner of Central Excise, Jalandhar v. Max G.B. Limited and Commissioner of Central Excise Customs v. Nakoda Textile Industries Limited. The decision of this Court in Supercom India Limited v. Directorate General Foreign Trade Ministry of Commerce relied upon by Mr. Aggarwal is of no assistance since the Court proceed on the footing that sub-clause (1)(a) of Section 4-I applied. No point appears to be have been urged, and therefore considered, on whether in fact that sub-clause applied. 18. It was sought to be contended by Mr. Aggarwal that it was Section 4-I(1)(a) of the Act stood attracted. In the first place it must be noticed that this is not the basis on which the ADGFT proceeded to impose the penalty. A fresh reason cannot be supplied for the conclusion reached in the said order. A reading of Section 4-I(1)(a) IEC Act would show that it is attracted when the goods have been imported under any licence and such goods have been used or utilized otherwise than in accordance with the conditions of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uses or utilise such goods or materials; (iii) otherwise then in accordance with the conditions of such licence or letter of authority. The three ingredients to face action under Section 4-I(1)(a) of the Act of 1947 relates to the use of imported goods and materials. These are not concerned to non performance with export conditions. Meaning thereby, that the penalty under Section 4-I of the Act of 1947 is against the violation of user obligations and not against export obligations. It is also pertinent to note that under the Act of 1947 which stood repealed under the Act of 1992 there is no provision for imposing any penalty for violation or not adherence of export obligations. 12. The respondents by notice impugned sought to institute proceedings against the petitioner under Section 4-I of the Act of 1947 for violation of export obligations and not for any user obligation. It is not the case of the respondents that the petitioner used or utilized equipment and machineries imported under the licence dated 20-10-1980 otherwise then in accordance with the conditions of licence in question. The specific case of the respondents is that the petitioner failed to earn foreig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the imposition of the penalty is correct. This case stands dissimilar to the case on hand on facts. 13. Further coming to the facts of the present case, as stated there is no serious dispute on the part of the respondents both in the counter affidavit filed in reply to the writ nor even during the course of arguments on behalf of the respondents about the factum of issuance of licence to the petitioner and the events which lead to present situation. There is no dispute nor any explanation forthcoming on behalf of the respondents as to why the delays as pointed out by the writ petitioner since inception even at the stage of grant of the licence could not be avoided and as to how the petitioner can be held responsible. The delay as pointed out is virtually runs to almost 54 months from 20-8-1986 to final approval by IDBI on 20-2-1991. The petitioners cannot be blamed on this account. There is no dispute to the fact that the party at the other end viz., ECD sold itself to M/s. Cannon a multinational company of Japan and a new establishment under the name and style United Solar Systems Corporation exist in the year 1991. Further the said new company in parallel sought to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kept in view before the order of penalty is thrust against the petitioner. Especially where there is no denial as to these events, the respondents cannot shut their eyes and invoke such onerous provision. It is well established that while interpreting any provision contemplating imposition of penalty, is on the face of it a penal in nature, cannot be lightly invoked exercised without giving due adherence to the core facts and circumstances of the case. It cannot be said as an open and shut case of clear violation of the petitioner. There are ample reasons which had to led to present imbroglio. The respondents are well within the knowledge of these circumstances and they themselves did act on the application of the petitioner for debonding and allowing domestic sale and authorities cannot wholly disown. This is not a case, where the petitioner himself on his own account without the knowledge of the authorities, used or misdirected the materials. Unless an act of violation is directly attributable to the person, penal liability cannot be extended. Each case has to be considered on its own merits and circumstances. Therefore, we are of the view that the entire impugned action since in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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