2006 (2) TMI 482 - HC - Customs

Summary

Issues:
Challenge to initiation of proceedings under Section 4-I of the Imports and Exports (Control) Act, 1947 against the petitioner based on a notice to show cause dated 26-2-1993.

Detailed Analysis:

Issue 1: Repeal of the Act of 1947 and its impact on penalty proceedings
The Act of 1947 has been repealed, but under Section 20(2) of the Foreign Trade (Development & Regulation) Act, 1992, the repeal does not affect the institution of penalty proceedings. This means that despite the repeal of the Act of 1947, penalties can still be imposed under the Act of 1992.

Issue 2: Export obligation under the CG Licence
The petitioner was granted a CG Licence with a condition to export a certain percentage of products annually. The petitioner failed to meet this export obligation, leading to the initiation of proceedings under Section 4-I(1)(a) of the Act of 1947.

Issue 3: Interpretation of Section 4-I(1)(a) of the Act of 1947
Section 4-I(1)(a) imposes liability for penalty if goods or materials imported under a license are used otherwise than in accordance with the license conditions. The petitioner argued that the penalty cannot be imposed for failure to fulfill export obligations but only for misuse of imported goods.

Issue 4: Violation of export obligations vs. user obligations
The respondents initiated proceedings against the petitioner for violating export obligations, specifically condition No. 4 of the CG Licence. However, the Act of 1947 focuses on user obligations related to the use of imported goods, not export obligations. Therefore, the initiation of proceedings for export obligation violation was deemed incompetent.

Issue 5: Lack of jurisdiction in proceedings
The respondents lacked jurisdiction to proceed against the petitioner under Section 4-I of the Act of 1947 for violating export obligations. As the penalty under this section is for misuse of goods, not for failing to meet export obligations, the notice to show cause was considered without jurisdiction and subsequently quashed.

Conclusion:
The petition for writ was allowed, and the impugned notice dated 26-2-1993 was quashed as it lacked jurisdiction. The court ruled in favor of the petitioner, emphasizing the distinction between user obligations and export obligations under the Act of 1947.