Court upholds statutory provisions, questions penalty orders. Notice issued for penalty merit review.

The court upheld the constitutional validity of the statutory provisions challenged by the petitioners but acknowledged a prima facie case concerning the penalty orders. A notice was issued limited to the merit of the penalties, returnable on 26.08.2016, with direct service permitted.

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Issues Involved:
1. Challenge to the penalty order.
2. Constitutional validity of subsections (2) and (3) of section 11 of the Foreign Trade (Development and Regulation) Act, 1992.
3. Discretionary power and guidelines for penalty imposition.

Issue-wise Detailed Analysis:

1. Challenge to the penalty order:
The petitioners contested an appeal order dated 05.06.2016 by the Government of India, which upheld a penalty of Rs. 2.97 crores on the company and personal penalties on the Directors. They argued that the penalty was disproportionate given that the customs duty involved was only Rs. 1.91 lacs. They also contended that the show cause notice did not propose a penalty under section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992.

2. Constitutional validity of subsections (2) and (3) of section 11 of the Foreign Trade (Development and Regulation) Act, 1992:
The petitioners challenged the constitutional validity of subsections (2) and (3) of section 11, arguing that these provisions vest unlimited discretion in the competent authority without providing any guidelines, making them arbitrary and violative of Article 14 of the Constitution of India. They claimed that the discretion allowed by these provisions is "unbridled, uncanalised, and therefore arbitrary."

3. Discretionary power and guidelines for penalty imposition:
The petitioners argued that the statutory provisions allow for a range of penalties from Rs. 10,000 to five times the value of the goods, services, or technology involved, without guidelines for exercising such discretion. They cited several Supreme Court decisions to support their argument that such discretionary power should be guided by clear principles to avoid being arbitrary.

The court acknowledged the principle that the legislature cannot abdicate its essential legislative function to the executive but also recognized the need for a degree of tolerance in vesting discretionary powers within the boundaries laid down in legislation. The court referenced several Supreme Court cases, including the District Registrar and Collector, Hyderabad v. Canara Bank, M/s. Devi Das Gopal Krishnan v. State of Punjab, and Om Kumar v. Union of India, to illustrate the balance between legislative delegation and executive discretion.

The court noted that the Foreign Trade (Development and Regulation) Act, 1992, provides detailed provisions for the Central Government to lay down foreign trade policy and conditions for import and export. Section 11(2) specifies that penalties for contraventions must range between Rs. 10,000 and five times the value of the goods or services involved. The court emphasized that such penalties must be discretionary to account for the varying nature of contraventions, from technical breaches to fraudulent activities.

The court concluded that the Act includes sufficient guidelines and safeguards to ensure that the executive's discretionary powers are not arbitrary. The Director General or authorized officers can impose penalties, but only within specified limits and after giving the affected parties an opportunity to be heard.

Conclusion:
The court found no merit in the petitioners' challenge to the constitutional validity of the statutory provisions. However, it recognized a prima facie case regarding the merits of the penalty orders and issued a NOTICE limited to this aspect, returnable on 26.08.2016, with direct service permitted.

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