M/S Taarika Exports and Anr Vs. Union of India and Anr  Insc 512 (7 May 2007)
Dr. ARIJIT PASAYAT & D.K. JAIN
CIVIL APPEAL NO. 2378 OF 2007 (Arising out of SLP (Civil) No. 25852 of 2005)
Dr. ARIJIT PASAYAT, J 1. Leave granted.
2. Challenge in this appeal is to the order passed by a Division Bench of
the Delhi High Court dismissing the Letters Patent Appeal filed against the
order of a learned Single Judge.
3. Background facts in a nutshell are as follows:
4. A show cause notice was issued to the appellants under Section 4L of the
Imports and Exports (Control) Act, 1947 (in short the 'Act') for action under
Section 4-I and under clause 10 for action under clause 8 of the Import
(Control) Order, 1955 (in short 'Control Order") read with Section 20(2) of
the Foreign Trade (Development & Regulation) Act, 1992 (in short
"Foreign Trade Act") for not exporting the goods as also utilizing
the imported goods and failure to export within the stipulated time. The
appellants during the material point of time were engaged in the import and
export activities under the Import and Export Code. On 13.10.1991 the Regional
Licensing Authority had issued an advance licence to the appellants. The
appellants undisputedly used the license in full so far as the import of raw
materials thereunder free of customs duty is concerned but only a part of the
finished goods under the said licence was exported. Resultantly, there was a
shortfall on account of export obligation. Appellants submitted that the
conditions under the licence were unrealistic and, therefore, non-fulfillment
of the obligation was beyond their control. The show cause notice in question
was issued on 7.5.1995 proposing, inter alia, imposition of fiscal penalty for
non fulfillment of export obligation under the licence as well as for
mis-utilization of the goods valued at Rs.9,10,125/- imported under the said
licence free of customs duty. Appellants submitted their reply to the show
cause notice. The Additional Director General of Foreign Trade (in short
'DGFT') passed an order dated 13.11.1995 imposing a penalty of Rs.45 lakhs for
shortfall in export obligation to the extent of Rs.27,20,462/-. An appeal was
preferred before the Appellate Committee. By order dated 12.8.1997 the
Appellate Committee dismissed the appeal of the appellants.
Subsequently, a writ petition was filed under Article 226 of the
Constitution of India, 1950 (in short the 'Constitution') before the Delhi High
Court. The writ petition was numbered as CWP.
623 of 1998. By judgment and order dated 30.5.2003 learned Single Judge
dismissed the writ petition holding that there was no ground to interfere with
the orders of the adjudicating authority as well as the Appellate Committee. A
Letters Patent Appeal was filed which as noted above was dismissed by a
5. Stand of the appellants is that what was really alleged related to a
technical non-compliance of an export obligation.
Such a compliance cannot be expected and demanded as the same was impossible
to be done on the basis of quantity of raw materials that the appellants were
allowed to import under the concerned licence.
6. Learned counsel for the respondents on the other hand submitted that the
authorities below and the High Court have clearly noted the infractions and the
penalty imposed was within the permissible limit of Section 4-I(1) of the Act
read with Section 20(2) of the Foreign Trade Act.
7. Relevant portions of the show cause notice read as follows:
"1. You had obtained an advance licence No.0300410 dated 13.10.1991 for
a cif value of US$ 40,400 for import of the following items:
1. Dupion Yarn 1210 Kgs.
2. Mulberry Raw Silk 75.00 Kgs.
3. Fusing lining anatrial 6750 Kgs.
2. The said licence was issued from the office of Jt.
DGFT, Bombay. The above said licence was issued to you. Subject, inter alia,
to the following conditions:
(1) You would export 5400 Nos. of Mulberry mixed jackets/blazer with fussing
lining material for an fob value of Rs.36,42,800/- (US$ 1,41,603.66) within a
period of nine months from the date of clearance of the first consignment.
(2) To ensure fulfillment of export obligation you would, before clearance
of the first consignment, execute a bond/LUT.
(3) The goods imported against the said advance licence would be utilized
exclusively in the manufacturing of the resultant products.
(4) In the event of the licencee falling (a) to fulfill the export
obligation within the prescribed time limit stipulated above or (b) to produce
the prescribed documents/information within 30 days after the expiry of the
export obligation period; the bond/LUT agreement condition shall be enforced
and the licencee shall be liable to the different follow up, penal actions
prescribed in the Import Export Police and Handbook of procedure 1992-93. The
licensee shall also pay without demur to the customs authorities the concerned
duty on the proportionate quantity of goods corresponding to the products not
exported. Any shortfall will also be liable to adjustment from any application
for licence pending in this office or received in future.
(5) The action in clause 4 shall be without prejudice to any other action
that may be taken against the licencee under the Import and Export (Control)
Act, 1947 and Import (Control) Order dated 07.10.1955 as amended.
3. In terms of the above conditions you executed an indemnity -cum-guarantee
bond with the licencing office on 14.01.1992. It is observed that you requested
the Jt. DGFT, Bombay on 21.02.1992 for amendment of licence to import only
dupion yarn 1100 kgs. and mulberry raw silk of 250 Kgs. and delete item at Sl.
No. 3 fusing lining material of CIF value of US$ 6,750/- and committed to
fulfil the export of resultant product for an fob value of US$ 1,41,603.66 and
also to amend the export description i.e., mulberry mixed silk garments
(shorts, pants, blazers and skirts) containing dupion yarn of 1100 kgs. and
mulberry raw silk of 250 Kgs.
The request was considered by Jt. DGFT, Bombay on 31.03.1992 and the licence
was accordingly amended.
4. According to information available on record and in the absence of any
documentary evidence furnished by you, it is evident that you had made import
1177.00 Kgs. of dupion yarn and mulberry raw silk 70.00 kgs. against the said
advance licence in January 1992. However, you had exported 2429 pcs. of
mulberry silk garments weighing dupion yarn 33.141 kgs. and 78.889 of mulberry
raw silk for fob value of Rs.9,62,337.92 and failed to export the remaining
quantity of 2971 pcs for fob value of Rs.27,20,452/- within the stipulated
time. Vide letter dated 22.12.92 you made a request to Jt.
DGFT Bombay office for grant of extension of six months enabling them to
export the balance quantity by 30.04.1993. You again applied to Jt.- DGFT
Bombay office for another extension which was rejected by RALC in its meeting
held on 09.04.1993. As such the period of export obligation expired on
30.04.1993. Subsequently you approached this office advance licensing committee
several times for extension in export obligation period against the subject
advance licence but your request was rejected every time. You were also advised
by this office on 29.11.94 to produce certain documents/information in r/o.
advance licence in question. You sent your reply on 05.12.1994 and supplied
this office photocopies of advance licences relating to earlier advance
licences and other related documents but failed to produce the requisite
documents in r/o the advance licence in question. However, you were again
reminded on 02.02.1995 to furnish the requisite information/documents. In reply
to this office letter, you furnished the photocopies of bank certificate of
export and realization, etc. but again you failed to send us the requisite
information / documents."
The adjudicating authority inter-alia noted as follows:
"The said licence was issued to them by the office of the Joint
Director General of Foreign Trade, Bombay, subject, inter-alia, to the
(i) They would export 5400Nos. of mulberry mixed silk jackets/blazer viith
fusion lining material for an FOB value of Rs.36,42,800/- (US$ 1,41,603.66)
within a period of nine months from the date of clearance of first consignment.
(ii) To ensure fulfillment of export obligation they would, before clearance
of the first consignment, execute a bond for Rs.
42,74,529.16 with Bank Guarantee for Rs.
(iii) The goods imported against the said Advance licence would be utilized
exclusively in the manufacturing of the resultant product.
(iv) In the even of their failure (A) to fulfill the export obligation
within the prescribed time limit stipulated above or (B) to produce the
prescribed documents/information within 30 days after the expiry of the export
obligation period, the bond/LUT agreement condition shall be enforced and the
licensee shall be liable to the different follow up, penal actions prescribed
in the import-export police and handbook of procedures, 1990 93. The licensee
shall also pay, without demur to the customs authorities, the concerned duty on
the proportionate quantity of goods corresponding to the products not exported.
Any shortfall will also be liable to adjustment from any application for
licence pending in that office or received in future.
(v) The action in clause (iv) shall be without prejudice to any other action
that may be taken against the licensee under the Import (Control) Order, 1955,
8. The Appellate Committee also analysed the position and concurred with the
view expressed by the adjudicating authority.
9. We find that the authorities have analysed the factual position in detail
and have concluded that there was infractions of the conditions imposed under
the licence. It is to be noted that before the learned Single Judge a plea was
taken that the goods are still lying with the appellants. There was no question
of the appellants having used or utilized them in violation of the conditions
imposed by the licence. Learned Single Judge noted that no such plea was taken
by the party earlier. Neither in the reply to the show cause notice nor before
the Appellate Committee such a plea had been taken.
Before this Court also an attempt was made to submit that the goods are
lying in stock and, therefore, there was no question of utilization. No
material in this regard is produced before the authorities as was rightly
observed by the learned Single Judge.
10. The penal provision is contained in Section 4-I(1) of the Act. The same
reads as follows:
"4-I(1). Liability to penalty.- Any person who, (a) in relation to any
goods or materials which have been imported under any licence or letter of
authority, uses or utilizes such goods or materials otherwise than in
accordance with the conditions of such licence or letter of authority; shall be
liable to penalty not exceeding five times the value of goods or materials, or
one thousand rupees, whichever is more, whether or not such goods or materials
have been confiscated or are available for confiscation."
11. The stand that the conditions were incapable of compliance seems to be
at variance with the stand taken earlier. By letter dated 22.12.1992 appellants
made a request to the Regional Licensing Authority for grant of extension of
six months to enable them to export the balance quantity by 30.4.1993. They
again applied to the Joint Director General of Foreign Trade, Bombay Office for
further extension. The same was rejected. Period of export obligation expired
Subsequently, the appellants approached DGFT office several times for
extension of export obligation period which was rejected. Therefore, the plea
that the conditions were incapable of compliance has been rightly turned down
by the authorities and the High Court.
12. Finally, it was submitted that considering the value of the articles
involved, imposition of penalty of Rs.45 lakhs is extremely high. The minimum penalty
provided is Rs.1,000/- and the maximum is five times of the value of goods
13. Considering the value of the articles involved we are of the view that
penalty of Rs.20 lakhs instead of Rs.45 lakhs would meet the ends of justice.
It is submitted that pursuant to the order of this Court dated 9.12.2005 a sum
of Rs.20 lakhs had been deposited by the appellants. If that is so, there shall
not be requirement of making any further deposit.
14. The appeal is disposed of accordingly with no order as to costs.