2014 (6) TMI 124 - HC - Customs

Imposition of penalty u/s 11 - Jurisdiction of Deputy Commissioner - whether Deputy Director General was competent to pass the order of penalty or not since it goes to the very root of the matter and renders entire proceedings without jurisdiction if this issue is decided in favour of petitioners - Held that - This Court has seen that quantum of penalty which may be imposed under Section 11 is with reference to value of good in respect of which contravention is made. The minimum amount of penalty is ₹ 1000/- or five times of the value of goods in respect of which any contravention is made or attempted to be made in view of use of the word, whichever is more . Therefore, wherever the value of goods is more than ₹ 201/- the penalty under Section 11(2) would always be five times of the value of such goods for the reason that quantum of penalty is five times of value of goods and, therefore, whenever the value of goods exceed ₹ 200/- the amount of penalty would be ₹ 1000/- and more. The value of goods, therefore, is directly related with quantum of penalty. The words subject to such limits as may be specified cannot be read as prefixed with word any penalty under Section 13 of Act, 1992. The authorization could be made by Central Government, in my view, with reference to quantum of penalty or the value of goods or any other reasonable and relevant indicia. To suggest that subject to such limits will always mean that it is and it must be in the context of quantum of penalty, would result in rendering the scope of authorization to be made by Central Government narrowed down to a large extent which, in my view, would not be justified - since value of goods in respect of which contravention has been alleged was more than ₹ 45 lacs but less than ₹ 1 crore, therefore, the Deputy Director General of Foreign Trade was well within his competence to take action under Section 11 and pass order of penalty. It thus cannot be said that order of penalty is without jurisdiction. Time period of passing the order - order passed after more than one decade - Held that - licence having been issued on 10.02.1994, petitioners were to complete export obligation upto February, 1995 and import obligation upto February, 1997. So far as export obligation is concerned, he was also under an obligation to produce requisite documents in respect of export obligation before licensing authority within 30 days after expiry of period meant for export obligation - The respondents claimed to have issued first letter on 22.06.1998 requesting petitioners to submit requisite export documents for redemption of legal undertaking. As per their stand, petitioners failed to reply the said notice. Another notice claimed to have been issued by respondent-competent authority, i.e., respondent no. 2 on 07.08.1998 and thereafter several reminders were issued on 02.03.2000, 24.05.2000, 16.08.2000, 27.09.2000, 24.01.2000 and 11.06.2003. The copy of first two notices dated 22.06.1998 and 07.08.1998 have been placed on record as Annexures-2 and 3 to the counter affidavit. Since very beginning the department has been pursuing petitioners to furnish requisite documents and several letters and notices were issued. Therefore, it cannot be said that there was an extraordinary undue delay or on account of such delay, petitioners were not in a position to furnish requisite material on account of weeding or loss etc. or for any other valid reason. It thus cannot be said that on mere ground of delay, particularly, when petitioner is equally responsible, the impugned proceedings of penalty can be held illegal or unreasoned. Mens Rea u/s 11AC - since it is penal provision empowering the authority to impose penalty on account of certain violation on the part of petitioners which is subject to imposition of penalty under the statute. A perusal of orders impugned in this writ petition nowhere shows that this aspect has been taken care by authorities concerned before passing impugned orders. Court finds that no valid notice has been issued to petitioners. During course of argument counsel for respondents admitted that copy of notice dated 28.06.2005 which they have filed as Annexure CA-5 clearly shows that it is an incomplete and misprinted notice form and, therefore, the same cannot be said to be a valid notice issued to petitioners and in absence of any valid notice order of penalty cannot be sustained. - matter remanded back for fresh decision - Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction of the Deputy Director General to impose a penalty exceeding one crore.
2. Legality of imposing a penalty after more than a decade.
3. Requirement of mens rea for imposing a penalty.
4. Validity of notice issued before imposing the penalty.

Detailed Analysis:

1. Jurisdiction of the Deputy Director General:
The petitioner argued that the Deputy Director General lacked authority to impose a penalty exceeding one crore, as per Section 13 of the Foreign Trade (Development and Regulation) Act, 1992. The court examined the notification dated 20.01.1999 and subsequent amendments, which authorized various officers to impose penalties based on the value of goods. The court concluded that the Deputy Director General was competent to impose the penalty since the value of the goods in question was between Rs. 45 lakhs and Rs. 1 crore, affirming the jurisdiction under Section 13 of the Act.

2. Legality of Imposing a Penalty After More Than a Decade:
The petitioner contended that the penalty order issued after more than ten years was illegal and unreasonable. The court noted that the respondents had issued several notices and reminders to the petitioners from 1998 to 2003, requesting the submission of export documents. The court found that the respondents had been pursuing the petitioners to comply with the export obligations, and thus, the delay in issuing the penalty order was justified. The court held that in the absence of a prescribed limitation period, the action must be taken within a reasonable time, which depends on the facts of each case.

3. Requirement of Mens Rea for Imposing a Penalty:
The petitioner argued that the penalty could not be imposed without a finding of mens rea or criminal intent. The court referred to the case of Commissioner of Central Excise, Chandigarh vs. Pepsi Foods Ltd., which established that mens rea is a necessary constituent for imposing penalties under penal provisions. The court found that the impugned orders did not address the aspect of mens rea, making the penalty imposition unsustainable.

4. Validity of Notice Issued Before Imposing the Penalty:
The petitioner claimed that no valid notice was issued before the penalty imposition, violating the principles of natural justice. The court examined the notice dated 28.06.2005 and found it to be incomplete and misprinted. The court concluded that the notice was invalid, and thus, the penalty order could not be sustained.

Conclusion:
The court quashed the impugned orders dated 11.09.2009 and 13.06.2011, allowing the writ petition. However, the judgment did not preclude the respondents from passing a fresh order in accordance with the law.