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2013 (1) TMI 620 - HC - CustomsPenalty on non fulfillment of export obligation in respect of the value based advance license - Held that - As there was a scheme of arrangement dated 17 December 1992, under which a division of Apar Limited was spun off to Apar Lamps Private Limited, which came to be named on 22 January 1993 as GE Apar Lighting Private Limited. The sequence of events in the present case took place shortly thereafter, the export having taken place within six months thereafter. Under the terms of the Exim Policy 1992-1997, both a merchant exporter or manufacturer exporter would otherwise be eligible for duty free licenses on certain conditions. There is no dispute about the fact that exports have been made and that foreign exchange has been realized. In this view of the matter,the imposition of a penalty in the amount of ₹ 5.60 lakhs is disproportionate. Ends of justice would be met if the penalty which has been imposed by the adjudicating authority is reduced to an amount of ₹ 1.00 lakhs. The order of the adjudicating authority as confirmed in appeal, shall stand modified accordingly.
Issues:
1. Interpretation of export obligation under the Exim Policy for 1992-1997. 2. Compliance with export obligation by the Petitioner as a manufacturer exporter. 3. Imposition of penalty under section 11 of the Foreign Trade (Development and Regulation) Act, 1992. Issue 1: Interpretation of export obligation under the Exim Policy for 1992-1997 The case involved a dispute regarding the fulfillment of export obligations under the Exim Policy for 1992-1997. The Petitioner, a manufacturer exporter, exported goods under a value-based advance license. The license required the Petitioner to export goods of a specified description and FOB value. The Appellate Authority upheld the penalty imposed due to the Petitioner's failure to prove fulfillment of the export obligation. The Court analyzed the provisions of the Exim Policy, emphasizing that exports could be made in anticipation of a license and that the license and imported materials became freely transferable after fulfilling the export obligation and realizing export proceeds. Issue 2: Compliance with export obligation by the Petitioner as a manufacturer exporter The Respondents argued that the Petitioner, registered as a manufacturer exporter, failed to manufacture the goods exported under the license. The license conditions required the Petitioner to manufacture and export goods as specified. The Court noted that the goods were manufactured by GE Apar Lighting Private Limited, a company related to the Petitioner. Despite the Petitioner's submission that the export obligation was fulfilled and foreign exchange realized, the Appellate Authority confirmed the penalty due to the Petitioner's failure to provide documentary evidence of the relationship between the companies. Issue 3: Imposition of penalty under section 11 of the Foreign Trade (Development and Regulation) Act, 1992 The adjudicating authority imposed a penalty of Rs.5.60 lakhs on the Petitioner, considering the CIF value of the goods exported. The Court, however, found this penalty disproportionate based on the circumstances of the case. It noted a scheme of arrangement where a division of the Petitioner was spun off to another company shortly before the exports took place. The Court reduced the penalty to Rs.1.00 lakh, considering that exports were made, and foreign exchange was realized, thereby modifying the adjudicating authority's order. In conclusion, the High Court of Bombay analyzed the issues related to the interpretation of export obligations under the Exim Policy, the Petitioner's compliance as a manufacturer exporter, and the imposition of penalties under the Foreign Trade Act. The Court reduced the penalty imposed on the Petitioner, emphasizing the fulfillment of export obligations and the circumstances surrounding the export transactions.
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