2013 (8) TMI 274 - HC - Customs

Enforcement Committee's Authority Upheld in Compensation and Penalties Ruling

The Court upheld the Enforcement Committee's jurisdiction to demand compensation and levy penalties under the Foreign Trade (Development and Regulation) ... Jurisdiction and Power of Enforcement Committee - Whether the Enforcement Committee constituted under the notification had the jurisdiction and power to demand compensation and to levy a penalty – Held that:- The imposition of the penalty does not in the circumstances warrant interference in our extra ordinary jurisdiction under Article 226 of the Constitution - The power to impose penalty was conferred upon the Director-General of Foreign Trade and upon such other officer as the Central Government may by notification in the official gazette authorize in that behalf - Both the notifications constituted an authorisation which was relatable to the power conferred by Section 13 - The Enforcement Committee when it deals with cases involving fraudulent activity, misrepresentation of facts and falsification of documents in connection with obtaining, instituting, utilization or proving the utilisation of quotas had been conferred with a wide power of an all-encompassing nature. The Committee noted that the exporter had all along prepared and kept separate documents with the wilful intention of fraudulently getting the EMD released on the basis of forged documents - the Committee noted that none of the Bank realization certificates contained in the CD had been issued by the Bombay Mercantile Co-operative Bank while the entire set of bogus documents submitted for proving the utilization of quotas was shown as having been issued by that Bank - the finding of fabrication and/or fabrication of documents was confirmed and had attained finality. Whether the recommendations made by the Enforcement Committee to the Director-General of Foreign Trade was valid – Held that:- Suspension of the Importer-exporter Code Number of the assesse and the further recommendation that the companies in which certain specified persons were partners, proprietors or directors should not be issued an IE Code Number - This was a recommendation made by the Committee - In the event that the DGFT decides to take any action on the basis - he would had to follow due process of law before taking action and to hear the affected persons – Decided against assesse. Issues Involved:1. Jurisdiction and power of the Enforcement Committee to demand compensation and levy a penalty.2. Legitimacy of the findings of fact regarding forgery and fraudulent activities by the Petitioner.3. Validity of the penalties and compensation demanded by the Enforcement Committee.4. Recommendations made by the Enforcement Committee to the Director-General of Foreign Trade.Issue-wise Detailed Analysis:1. Jurisdiction and Power of the Enforcement Committee to Demand Compensation and Levy a Penalty:The primary issue was whether the Enforcement Committee had the jurisdiction and power to demand compensation and levy a penalty. The Petitioner argued that the Committee was not vested with such powers under the Foreign Trade (Development and Regulation) Act, 1992, and that such powers were exclusively vested in the Director General of Foreign Trade or delegated officers. The Respondents contended that the notification dated 12 November 1999, issued under the Exim Policy and the Foreign Trade (Development and Regulation) Act, 1992, conferred broad powers on the Enforcement Committee to deal with fraudulent activities, misrepresentation of facts, and falsification of documents. The Court held that the Committee's power to 'deal with cases' involving fraud and malpractices included the authority to demand compensation and levy penalties. The subsequent notification dated 9 November 2004, which continued the applicability of the earlier notification, reinforced this interpretation.2. Legitimacy of the Findings of Fact Regarding Forgery and Fraudulent Activities by the Petitioner:The Petitioner was found to have forged export documents and utilized quotas under Group I to export goods falling under Group II, which commanded a premium in the market. Additionally, the Petitioner submitted false and forged bank documents to prove the utilization of quotas under Group II. These findings were based on discrepancies noted in the 'namesake' statements and confirmed by the Bombay Mercantile Cooperative Bank's letter alleging fraud. The Court noted that these findings of fact were not challenged in the earlier proceedings, and the Division Bench had upheld the debarment based on these facts. The Committee reiterated these findings in its impugned order, which the Court found sustainable based on the material on record.3. Validity of the Penalties and Compensation Demanded by the Enforcement Committee:The Enforcement Committee demanded compensation of Rs. 5.68 crores, representing the premium the Petitioner would have paid for obtaining quotas for Group II products, and Rs. 3.05 crores, representing the amount for which the Petitioner submitted fraudulent proof of shipment. The Committee also imposed a penalty of 25% on these amounts. The Court upheld the demand for compensation and the penalty, noting that the Committee's actions were within the scope of its powers under the notification dated 12 November 1999 and the subsequent notification dated 9 November 2004. The Court emphasized that the Committee was entitled to direct the Petitioner to provide restitution in the public interest and to rectify the consequences of the wrongful acts.4. Recommendations Made by the Enforcement Committee to the Director-General of Foreign Trade:The Enforcement Committee recommended the suspension of the Petitioner's Importer-exporter Code Number and suggested that companies associated with certain individuals should not be issued an IE Code Number. The Court stated that these were recommendations, and any action taken by the Director-General of Foreign Trade based on these recommendations would require following due process of law, including hearing the affected persons.Conclusion:The Court dismissed the petition, finding no merit in the Petitioner's arguments. The Enforcement Committee's actions, including the demand for compensation, levy of penalties, and recommendations to the Director-General of Foreign Trade, were upheld as being within the scope of its powers under the relevant notifications and the Foreign Trade (Development and Regulation) Act, 1992. The findings of fact regarding the Petitioner's fraudulent activities were confirmed, and the penalties imposed were deemed appropriate and justified.