Advance licence breach and export obligation default can justify penalty, but quantum may be reduced on statutory review

Breach of advance licence conditions and failure to fulfill export obligation can attract penalty where imported goods are not used in accordance with the licence. The authorities found, on detailed examination of the record, that the licence conditions were breached and liability arose under the foreign trade penalty provisions. The Court upheld the penalty in principle, but considered the value of the goods and the statutory punishment range when reviewing quantum, and reduced the penalty amount accordingly.

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Issues: Whether the penalty imposed for failure to fulfill export obligation and misuse of goods imported under advance licence called for interference and reduction.

Analysis: The authorities had found, on detailed examination of the record, that the licence conditions were breached and that the imported goods were not utilized in accordance with the licence. The liability to penalty arose under Section 4-I(1) of the Imports and Exports (Control) Act, 1947 read with Section 20(2) of the Foreign Trade (Development & Regulation) Act, 1992. Although the breach was upheld, the Court considered the quantum of penalty in light of the value of the goods and the statutory range of punishment.

Conclusion: The penalty was upheld in principle, but the amount was reduced from Rs. 45 lakhs to Rs. 20 lakhs.

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