2021 (3) TMI 1375 - HC - Customs

Penalty imposed for EPCG License violation; IEC suspension challenged in court

The respondent found the petitioner guilty of violating EPCG License conditions, imposing a penalty of Rs. 39,42,308 and restricting future licenses due ... EPCG Licence scheme - Failure to discharge the export obligations - declared as defaulter - placed in the Denied Entity List (DEL) so that benefit under Foreign Trade Policy are stopped including pending/future refusal of licence under Section 7.1(k) of the Foreign Trade (Regulation) Rule, 1993 - levy of penalty u/s 11(2) of the FTDR Act, 1992 - suspension of IEC under Section 11(7) of FTDR Act, 1992 as amended during 2010 - HELD THAT:- The petitioner has filed the present writ petition and submits that even if the petitioner has not paid the penalty that was originally passed by an order dated 16.01.2014 and subsequently in the remand proceedings. The cancellation of IE Code has to be in accordance with law in terms of Section 8 of the FTDR Act, 1992. The fact remains that a show cause notice 2013 was issued to the petitioner in November by the Assistant Director General of Foreign Trade. In the show cause notice, there was also a proposal as to why the Import and Export Code of the petitioner should not be suspended under Section 11(7) of FTDR Act, 1992 as amended during 2010 - the said show cause notice also culminated in an order dated 16.01.2014 of the first respondent. It did not however suspended the license of the petitioner. It was passed however without prejudice to any other action that may be taken under the Act, Rules or Regulations in force. Since no further show proceedings were initiated against the petitioner for cancellation of the there Import and Export code of the petitioner. The jurisdictional officer under the Foreign Trade (Development and Regulation) Act, 1992 is directed to issue appropriate show cause notice to the petitioner under the provisions of the aforesaid Act to show casue as to why Import and Export Code of the petitioner should not be cancelled? Such show cause notice may be issued within a period of 30 days of receipt of this order. The status quo as on date shall continue for a period of 90 days and will be subject to further outcome of the proposed order to be passed by the jurisdictional officer under the provisions of the aforesaid Act. Petition disposed off. Issues:1. Violation of conditions of EPCG License and imposition of penalty.2. Request for consideration of alternative exports to discharge export obligations.3. Suspension and cancellation of Importer-Exporter Code (IEC) without proper procedure.Analysis:1. The petitioner imported capital goods under an EPCG License but failed to fulfill export obligations, leading to a show cause notice proposing penalties and potential suspension of benefits under the Foreign Trade Policy. The respondent held the petitioner guilty of violating license conditions and imposed a penalty of Rs. 39,42,308 along with restrictions on future licenses. The order highlighted the failure to respond to the show cause notice as a basis for the penalty.2. The petitioner sought approval to export Cotton Seed Hulls and Linters to meet obligations, resulting in multiple orders and subsequent writ petitions challenging rejections. Despite these efforts, the requests were consistently denied, leading to further legal challenges. The complex series of events culminated in the Foreign Trade Development Officer's order, which became the subject of another writ petition.3. The petitioner argued that while the show cause notice mentioned the potential suspension of the Importer-Exporter Code (IEC), no such action was taken initially. However, before filing the writ petition, the petitioner discovered that the license had been suspended without following the due process outlined in Section 8 of the Foreign Trade (Development & Regulation) Act, 1992. The respondent's unilateral suspension of the IEC was contested as a violation of procedural fairness.4. The respondent contended that the IEC was suspended in 2014, but no supporting documentation was provided. The petitioner's failure to meet export obligations was acknowledged, along with the ongoing dispute regarding alternative exports. Despite the absence of further proceedings for IEC cancellation, the court directed the jurisdictional officer to issue a formal show cause notice within 30 days, allowing the petitioner to respond and ensuring a decision within 90 days. The status quo was maintained pending the outcome of this process, emphasizing adherence to legal procedures in IEC matters.