TaxTMI 
TaxTMI 
2005 (5) TMI 82
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....ars from the date of issuance of the licence. The said machinery was imported on payment of concessional rate of duty at the rate of 10% amounting to Rs. 10,12,390/-. The appellant executed a bank guarantee on 15-9-1997 in favour of the revenue to secure the duty foregone i.e. Rs. 21,81,700/-. The machinery, after its import, came to be installed at the unit of the appellant No. 1 at Goa. 3. In view of unforeseen and unfortunate conditions such as global economic crisis and certain disputes and demands raised by the Customs and Excise Department, there was complete disruption of manufacturing activities at the appellant's unit. In view of these circumstances and the fact that the foreign collaborator, Mr. Eric Lee became bankrupt in the year 1999, the appellant was not in a position to export at all. The appellant was called upon by the Office of the Deputy Director General of Foreign Trade, Panjim vide letter dated 29-10-1999 to submit six monthly progress reports of exports made by the appellant company duly certified by a Chartered Accountant. A copy of the said letter is produced on record vide Annexure P-2. It was pointed out by the appellant vide letter dated 31-12-1999 th....
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....tended by the appellants that though the period for completion of export obligation in fact expired only in August, 2002, in March 2000, almost two years in advance, the authorities had started taking coercive action against the appellant for non-fulfilment of export obligation. 9. The Deputy Director General of Foreign Trade, Mumbai issued a show cause notice on or about 24-5-2002 informing the appellants about proposed imposition of penalty under Section 11 of the Foreign Trade (Development and Regulation) Act, 1992 for the alleged non-fulfilment of export obligation under EPCG licence, and for the alleged violation of Rules 10, 13 and 14 of the Foreign Trade (Regulation) Rules, 1994. 10. The appellants gave a reply in detail on or about 20-6-2002, inter alia, requesting to drop the proposed action to impose penalty and to withdraw the show cause notice. However, the Deputy Director General of Foreign Trade, Mumbai, without considering the background imposed the penalty of Rs. 9,00,000/- on the appellants vide his order dated 12-7-2002. A copy of which is produced at Annexure P-12. 11. It is against the aforesaid order dated 12-7-2002 an appeal was filed before the Addit....
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.... months from the expiry of the said year/block year, pay duties of customs plus 24% of an amount equal to that proportion of the duty leviable, on the goods which bears the same proportion as the unfulfilled portion of the export obligation bears to the total export obligation. The licence-holder shall, if he fails to discharge a minimum of 25% of the export obligation prescribed for any particular year for three consecutive years under 10% EPCG scheme or for any particular block of two years for two consecutive blocks under Zero duty EPCG scheme, be liable to pay forthwith, the whole of duties of customs plus 24% interest leviable on the goods imported." 15. It was submitted that in the instant case machinery was imported in September, 1997 and the trial production commenced in March, 1998. However, on 29-10-1999, vide Annexure P-2, Foreign Trade Development Officer, Goa, called upon the appellant to furnish a report about the export, as according to the respondents, no information was conveyed that the appellant exported material. It may be noted that Clause 6.15 of the Handbook of Procedures, Vol. I refers to extension of export obligation period. The said clause reads as ....
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....that the Deputy Commissioner of Customs also issued a show cause notice dated 22-3-2000 in exercise of powers under Section 28 of the Customs Act alleging that the appellant failed to fulfil the export obligation and the conditions specified in Notification No. 28/97, dated 1-4-1997 and thereafter a show cause notice was issued as to why the goods should not be confiscated under Section 111(c) of the Act as also the customs duty of Rs. 21,81,700/- and interest thereon should not be recovered under Section 112 of the Act for non-fulfilment of export obligation. Ultimately the Commissioner, hearing the matter, gave an option to redeem the goods under Section 125 of the Act by paying a fine of Rs. 10,00,000/- and on payment of differential duty of Rs. 21,81,700/- with interest at the rate of 24%. Over and above a penalty of Rs. 2,00,000/- was imposed under Section 112 of the Act. The appellants did not opt for option to redeem the capital goods and, therefore, the bank guarantee furnished by the appellants was encashed and the amount of customs duty came to be recovered. Not only that, but on account of seizure of imported material, the Revenue got the machinery worth Rs. 84,36,581/-.....
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....5) Where any contravention of any provision of this Act or any rules or orders made thereunder or the export and import policy has been, is being, or is attempted to be, made, the goods together with any package, covering or receptacle and any conveyances shall, subject to such requirements and conditions as may be prescribed, be liable to confiscation by the Adjudicating Authority. (6) The goods or the conveyance confiscated under sub-section (5) may be released by the Adjudicating Authority, in such manner and subject to such conditions as may be prescribed, on payment by the person concerned of the redemption charges equivalent to the market value of the goods or conveyance, as the case may be." 21. It is not the case of the respondents that the appellants imported the machinery in contravention of the provisions of the said Act. It is the case of the revenue that the appellants failed to export the goods in view of the obligations. Thus, there is no question of making any export in contravention of the provisions of this Act. The appellants imported the second-hand machinery in accordance ....
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....contravention of the Act, the provision would apply. After importing in accordance with law, merely for non-fulfilment of export obligation, for the reasons beyond the control of a person it cannot be said that at the time of import he committed an offence or committed a breach. When after following the procedure laid down in the Act a licence has been issued, capital goods have been imported, installed and trial production commenced, it cannot be said that at the time of import, there was an intention not to export the goods. Sub-sections (1) and (2) of Section 11 of the said Act cannot be attracted in a case when there is a failure to export the goods when it is beyond the control of a person. If at all one would like to export the goods or import the goods, then he has to do the same in accordance with the provisions of the said Act. If it is found that there is a positive act on the part of a person concerned by exporting the goods in breach of said Act, then sub-section (2) of Section 11 can be attracted. But in the instant case in absence of any act of export, it cannot be said that there is a contravention of the provisions contained in Section 11 of the aforesaid Act. 25....
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..... Thus, a mechanism has been set up under Section 11 of the said Act where exports are made or attempt to be made in violation of the same." 27. On behalf of the revenue it was submitted that the real question is whether penalty can be imposed under Section 11(2) of the said Act for the failure to fulfil the export obligations under the Export Import Policy 1997-2002. It was contended that the import was permitted with a view to promote exports, and having failed to export the goods, there is a contravention of the policy and hence, the appellant is liable to a penalty as indicated in sub-section (2) of the Foreign Trade (Development and Regulation) Act, 1992. It was further submitted on behalf of the revenue that the Apex Court has held in the case of Director of Enforcement v. M/s. MCTM Corporation Pvt. Ltd. and Others (AIR 1996 SC 1100) that contravention of Foreign Exchange Regulation Act, 1947 would attract penalty under Section 23(1)(a) of the said Act. In that case the respondents failed to repatriate the foreign exchange lying in Malaysia which they had a right to receive in India and had thereby failed to take or refrain from taking action which had the effect of non-se....
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....onal and international price difference came to be recovered. It is required to be noted that the petition was filed in this Court as the amount of pre-deposit was not furnished in the form of a bank guarantee, and thus, the appeal came to be dismissed on 11-6-1999. Review application was filed and in the meanwhile the petitioner received an order from the respondent for deposit of Rs. 20,00,000/- which was the penalty imposed upon it, failing which recovery proceedings were threatened. It is at this stage the petition was filed challenging the order-in-original and the order-in-appeal. However, it is required to be noted that only three grounds were raised which are as under :- (1) Without giving an opportunity of hearing, the order was made; (2) Section 11(2) cannot be invoked after invocation of the bank guarantees; and (3) The order-in-appeal is vitiated since it has not been passed by the appellate committee legally constituted. It is in this background the Court rejected the petition. The Court in para 9 observed that admittedly two bank gu....
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....2) of the Foreign Trade (Development and Regulation) Act, 1992, more particularly, when there is no breach of Section 11(2) of the said Act and a contrary stand is taken by the Union of India specifically in the case of Gokaldas Images Ltd. & Others (supra) that Section 11 of the said Act would be attracted to a stage after the export. Therefore, in the opinion of the Court, it cannot be said that there is a contravention of Section 11(2) of the said Act but not fulfilling the export obligation. 31. One must bear in mind the principle enunciated by the Apex Court in the case of M/s. Hindustan Steel Ltd. v. State of Orissa [1978 (2) E.L.T. (J 159) (S.C.) = 1969 (2) SCC 627] wherein the Court was required to examine whether the imposition of penalty for the failure to register as a dealer was justified. The Apex Court pointed out in para 8 as under :- "8. Under the Act penalty may be imposed for failure to register as a dealer - Section 9(1) read with Section 25(1)(a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a qua....