TaxTMI 
TaxTMI 
2016 (10) TMI 817
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.... cannot adjudicate the show cause notice abruptly; C. Your Lordships may hold that once respondents have recognized the impossibility of achieving value addition as per 1987-92 policy through circular of 1993, there is no question of imposing any penalty at all for shortfall in value addition and that too, without considering the value addition in the subsequent period; D. Your Lordships may hold that option exercised by the petitioner in terms of the 1989 circular cannot be denied on the ground of delay alone and that too, without following the principles of natural justice; E. Pending admission, hearing and final disposal of this petition, your Lordships be pleased to stay the recovery and/or any other adverse proceedings that may be initiated by Respondents in terms of the impugned order dated 26.10.2015. F. An ex parte ad interim relief in terms of para (E) above may be granted. G. Such other and further reliefs as deemed just and expedient in the facts and circumstances of the case be granted." 2. Case of the petitioner is that the petitioner-company has set up an Export Oriented Unit for manufacture and export of rubber hand gloves in terms of letter of permission ....
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....er the letter of permission. 5. Feeling aggrieved by the said order of penalty, the appellant filed an appeal before the appellate authority on 01.04.2014. The appellate authority has granted an opportunity of hearing. The case was put up before the appellate authority by the petitioner by pointing out various circumstances, under which, the value addition could not be achieved by the petitioner. It was inter alia contended that when the petitioner went into commercial production, in initial phase of export, they were unable to capitalize on the boom period as the commencement has taken place only in March 1992. By the time their commercial production started, the downward trend in the industry of glove had already began. It was submitted by the petitioner-company that the extreme competitive international market coupled with an extremely low price with inadequate working capital forced the petitioner company to curtail their production. On account of financial crunch, the petitioner unit could not meet with the standard of value addition fixed. It was also submitted that the Indian Latex was more expensive than the international latex and therefore the market scenario was not per....
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....onable period of time, sought the powers to be exercised in the year 2013 by issuing notice and consequent issuance of the order impugned in the petition. Therefore, the very initiation against the petitioner is beyond the reasonable period and therefore on that ground alone the learned counsel requested the Court to set aside the order impugned. It was submitted by the counsel for the petitioner that there is a detailed explanation submitted on representing the case and the authority has not dealt with such submissions which have been made. Therefore, the orders passed by the authorities are not only suffers from the vice of non-application of mind but are based upon an irregular exercise of power. It was also brought to the notice of the Court that the authorities have not considered the entire period of ten years for which the unit was allowed to set up. If the authority could have considered the later period of five years and compared the figures then substantially the petitioner-company has achieved the target for which the letter of permission was issued and therefore having not considered orders are based upon misconstruction of the terms of letter of permission. The learned....
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....e just and proper and are passed in exercise of discretion vested in law and also passed after granting full opportunity to the petitioner and therefore prayed to the Court not to exercise discretion in favour of the petitioner. Learned counsel has contended that the petitioner-unit was from the beginning put to the notice about the standard which is required to be maintained at the time when letter of permission initially granted. The learned counsel has drawn attention of the Court to the conditions attached to the letter of permission reflected on page 40 of the petition compilation onwards and precisely submitted that there is a sheer violation of Conditions No. 11 and 12. Therefore, undisputedly once the petitioner unit has contravened the condition which are engrafted in letter of permission, the natural consequence is to impose penalty. Therefore, the authorities below have rightly exercised their discretion based upon such circumstance. It was also submitted by the learned counsel that in addition to the terms of letter of permission, an undertaking was also specifically filed by the very petitioner-unit. The petitioner unit undertook the entire letter of permission along w....
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....t, the authorities have rightly exercised the due discretion vested in law and imposed a penalty. The learned counsel has in sum and substance contended that there was a clear breach on part of the petitioner-unit to achieve the requisite target which was a part of the condition of letter of permission and therefore, the authority has rightly imposed the quantum of penalty. On the contrary it is submitted that the balance is strike upon by the authority to arrive at a penalty which is reflected in the order-inoriginal and therefore submitted that no interference be made in extraordinary jurisdiction of this Court. 11. Having heard learned counsel appearing for the respective sides, following facts are emerging from the record: (i) When the petitioner-unit commenced the production and entered into the export transaction, by that time, the market scenario has changed, as cogently explained by the petitioner. The situation was changed to that extent that the Indian Latex was more expensive as compared to international latex and therefore, a time had come that petitioner had to import latex from South-east Asian countries and sale them initially to try to meet with the target. (ii....
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.... trade policy, he shall be liable to a penalty of not less than then thousand rupees and not more than five times the value of the goods or services or technology in respect of which any contravention is made or attempted to be made, whichever is more. (3) Where any person signs or uses, or causes to be made, signed or used, any declaration, statement or document submitted to the Director-General or any officer authorised by him under this Act, knowing or having reason to believe that such declaration, statement or document is forged or tampered with or false in any material particular, he shall be liable to a penalty of not less than ten thousand rupees or more than five times the value of the goods or services or technology in respect of which such declaration, statement or document had been submitted, whichever is more. (4) Where any person, on a notice to him by the adjudicating Authority, admits any contravention, the Adjudicating Authority may, in such class or classes of cases and in such manner as may be prescribed, determine, by way of settlement, an amount to be paid by that person. (5) A penalty imposed under this Act may, if it is not paid by any person, be recove....
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....rplus, if any to such person. (6) Where the terms of any bond or other instrument executed under this Act or any rules made thereunder provide that any amount due under such instrument may be recovered in the manner laid down in sub-section (5), the amount may, without prejudice to any other mode of recovery, be recovered in accordance with the provisions of that sub-section. (7) Without prejudice to the provisions contained in this section, the Importer-Exporter Code Number of any person who fails to pay any penalty imposed under this Act, may be suspended by the Adjudicating Authority till the penalty is paid or recovered, as the case may be. (8) Where any contravention of any provision of this Act or any rules or orders made thereunder or the foreign trade policy has been, is being, or is attempted to be, made, the goods (including the goods connected with services or technology) together with any package, covering or receptacle and any conveyances shall, subject to such conditions and requirements as may be prescribed, be liable to confiscation by the Adjudicating Authority. (9) The goods (including the goods connected with services or technology) or the conveyance conf....
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....ired value addition." Now, if the observation is to be seen in the context of the circumstances prevailing on record, the quantum of penalty which has been inflicted upon to the extent of Rs. 2,27,40,000/- is of far consequences harsh and cannot be said to be a reasonable penalty. 14. So far as the contentions of the learned counsel for the petitioner with respect to clubbing of a period of first block of five years with second block of five years appears to be impermissible in view of the fact that there is a specific provision contained under the letter of permission wherein in separate block period of initial five years and second block of five years, target, as stipulated, is to be achieved. Therefore, when petitioner is a signatory to such letter of permission, it is not open on part of the petitioner to contend the clubbing of the said period. So far as another contention with regard to mensrea being missing on the part of the petitioner is concerned, the Court is not impress upon such aspect in view of the fact that there are conditions contained under letter of permission specifically based upon which the permission to set up a unit is granted and therefore, it was obligat....
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....ited by the counsel for the petitioner are taken into consideration, the same would assist the Court to arrive at a just decision to deal with the same. First authority which has been cited is in case of Hanil Era Textiles Limited vs. Union of India(supra). 17. In the context of this learned counsel further relied upon the decision delivered by this Court in case of Disco Garments Pvt. Ltd. vs Union of India (supra) wherein in a similar situation when the unit of that case was not in a position to fulfill the export obligation, the Court has observed and dealt with the issue as reflected in relevant paras which are quoted here under: "20. In view of the aforesaid discussion and factual background of the case, we find that there is no allegation whatsoever to the effect that the petitioner-Company have misapplied the goods imported under the letter of approval nor there is any allegation against the petitioner-Company that the goods manufactured out of the goods so imported have been diverted elsewhere. It is also an admitted position that neither the show cause notice nor the orders impugned in the present petition mention, which clause of section 4-I of the Act 1947 is attracte....
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.... ...It is well established that while interpreting any provision contemplating imposition of penalty, is on the face of it a penal nature, cannot be lightly invoked exercised without giving due adherence to the core facts and circumstances of the case. It cannot be said as an open and shut case of clear violation of the petitioner. There are ample reasons which had to led to present imbroglio. The respondents are well within the knowledge of these circumstances, and they themselves, did act on the application of the petitioner for debonding and allowing domestic sale and authorities without the knowledge of the authorities, used or misdirected the materials. Unless an act of violation is directly attributable to the person, penal liability cannot be extended. Each case has to be considered on its own merits and circumstances. Therefore, we are of the view that the entire impugned action since inception by invocation of provisions of Section 4-I of the Act by the authorities is totally arbitrary and illegal, apart from being unsustainable in the facts and circumstances of the case." 19. In another decision in case of Neeldhara Weaving Factory vs. DGFT, New Delhi (supra) wherein als....
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.... other special facts and circumstances by the reason of which it could be said that exercise of suo motu p0wer after 15 years of the order interfered with was within a reasonable time. That being the position in our view, the order of the Financial Commissioner stands vitiated having been passed after a long lapse of 15 years of the order which has been interfered with. Therefore, while holding that the Financial Commissioner would have power to proceed suo motu in a suitable case even though an appeal preferred before lower appellate authority is withdrawn may be by the State. Thus, the view taken by the High Court is not sustaitnable.." (17) Accordingly, we do not find any justification for levy of penalty after 14 years of default. The contention of the counsel for the revenue to the effect that the petitioner having committed default cannot be permitted to raise these technical pleas is to be noticed and rejected, being without any merit." 20. Even in another case of Dewan Tyres Ltd vs. Union of India reported in 2014 (307) ELT 496, the Allahabad High Court had analyzed all the provisions relevant to the issue in question has also dealt with the aspect of penalty and held th....