Export obligation under exemption notification unmet; penalty on proprietorship upheld, but separate penalty on proprietor set aside

Duty-free import under the export-linked exemption was available only on fulfilment of the conditions in Notification No. 80/95-Cus. Because the export obligation was admittedly not fulfilled and the claim of transfer to job workers was unsubstantiated, the DEEC benefit was treated as misused and the penalty on the proprietorship concern was upheld. Separate penalties on both the proprietorship concern and its proprietor for the same default were held impermissible, so the proprietor's separate penalty was set aside. The duty demand remained undisturbed.

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Issues: (i) Whether the personal penalty imposed on the proprietorship concern was liable to be interfered with in view of the admitted non-fulfilment of export obligation under the import exemption scheme; (ii) Whether separate penalties could be sustained on both the proprietorship firm and its proprietor for the same default.

Issue (i): Whether the personal penalty imposed on the proprietorship concern was liable to be interfered with in view of the admitted non-fulfilment of export obligation under the import exemption scheme.

Analysis: The imported mulberry raw silk was treated as duty-free only on fulfillment of the conditions attached to Notification No. 80/95-Cus. The record showed that the export obligation was not fulfilled and the claim that the goods had been sent to job workers was not substantiated. In these circumstances, the benefit of the DEEC scheme was found to have been misused and the goods were treated as having been diverted from the export-linked purpose for which the concession was granted.

Conclusion: The penalty on the proprietorship concern was upheld.

Issue (ii): Whether separate penalties could be sustained on both the proprietorship firm and its proprietor for the same default.

Analysis: The liability arose from the same business activity of the proprietorship concern, and the Court treated imposition of distinct penalties on the firm and on its proprietor as impermissible. On that basis, the separate penal consequence against the proprietor could not stand independently of the penalty on the proprietorship concern.

Conclusion: The separate penalty on the proprietor was set aside.

Final Conclusion: The appeal relating to the proprietorship concern failed, while the appeal of the proprietor succeeded to the extent of deletion of the separate penalty, leaving the duty demand undisturbed.

Ratio Decidendi: Separate penalties cannot be imposed on a proprietorship concern and its proprietor for the same default, though the penalty on the concern itself may be sustained where export obligation under the exemption notification remains unfulfilled.

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