TaxTMI 
TaxTMI 
2016 (7) TMI 860
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....l exports, sought to avail concessional rate of duty under the Export Promotion Capital Goods Scheme ['EPCGS' for short] or for the reason, the company obtained EPGC license No. P/CG/2134942 for importation of high speed circular knitting machine of CIF. The license was issued with the condition that the company shall earn foreign exchange towards its export obligation within the period of five years. (b) Pursuant to such license, the company imported four machines at the concessional rate of duty. The company engaged itself in manufacturing of under processed fabrics by use of such imported machinery and was also sending goods for process outside the factory. As a result, the quality of the process did not match the requirement of the foreign buyers. The company had to face problems related to rejection of fabrics. The foreign buyers stopped giving further orders. As a result, the company could not fulfill the export obligation as required under the license and as against export obligation of 645000 U.S.Dollars, the company could achieve exports of 75,177 U.S.Dollars. It appears that the company was wound up in the winding up proceedings before the High Court in the yea....
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....ow cause against the imposition of personal penalty in the show-cause notice. He also contended that so far as the petitioners are concerned, there were no allegations or proposals for the imposition of penalty at all. He contended that the orders passed are in violation of principles of natural justice in as much as Section 14 of the FTDR provides for issuance of notice prior to imposition of penalty and the provisions require that the grounds on which penalty is to be imposed be conveyed to the person. He also contended that no charge of any abatement or knowledge of any deliberate contravention has been made against any of the directors and therefore, in absence of such allegation the proposal of levy of penalty on the directors is unfounded. 4. As against this, learned advocate Mr. Lodha appearing for the department supports the action of the department in the show cause notice and submitted that the order in original and order in appeal are fully justified. In support of his contention he submitted that the requirement of the provisions were applied with as there was sufficient show cause notice to the directors since in para 8 of the show cause notice it is stated as under....
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....resentation and hearing and, therefore, the allegation is totally baseless and hence denied. The contention of the petitioners that only charge in th show cause notice was with regard to the suspension of IFC number and nowhere it was mentioned to impose penalty is also incorrect as respondents have intended to take actions in terms of license conditions, Foreign Trade Policy and provisions of FT (D & R) Act, 1992 and hence the contention is only with a view to mislead this Hon'ble Court and devoid of merit and hence vehemently denied by the respondent. Moreover, the Directors are the Officers of Default in terms of Section 5 of the Company Act, 1956 and for any failure of the company, they are equally liable and, therefore, the action taken by the respondents is totally lawful and, therefore, all allegations made on this account is denied by the respondents. It is true that company is separate and legal entity but it is also settled legal position that Directors are treated as Officers of Default, any failure at the end of company, the Directors cannot take shelter of the company being a separate entity. Section 11 of the Foreign Trade (Development and Regulations) Act, 1992 c....
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....should not be taken under Section 11(4) to cancel/suspend the importer/exporter code number 3794000013, if you want to be heard in person to explain the case, appear before the undersigned on 21.10.2003 at 3.00 p.m." 8. The show cause notice therefore does not appear to have been addressed to the petitioners who are the directors nor does it lay down any proposal for imposing of the penalty. So far as the service of notice to the petitioner directors learned advocate for the petitioner relied upon the judgement of Delhi High Court in case of L P Desai vs. Union of India and ors. reported in 108 [2003] DLT 334. He submitted that the view taken by the Delhi High Court is in the similar set of circumstances and relied upon particularly paras 15 and 18, which are reproduced as under: "(15) ... ... Frankly, I do not see how this supports the provision advanced by Mr. Chawla. If it is being suggested that the petitioner cannot make a complaint when the company itself did not inform the petitioner of the receipt of the show cause notice, this is certainly not borne out by the aforesaid decision. The facts were entirely different. There, information that was sought was not prov....