2006 (4) TMI 564 - HC - Customs

Summary

Issues Involved:
1. Issuance of a licence requiring export obligations.
2. Conflict between licence conditions and bond requirements.
3. Forfeiture order and subsequent appeals.
4. Imposition of customs duty and conversion of licence.
5. Compliance with principles of natural justice.

Issue-wise Detailed Analysis:

1. Issuance of a Licence Requiring Export Obligations:
The petitioner, a registered partnership firm, faced penalization due to lapses by the licensing authorities. The firm applied for a licence to import raw materials for manufacturing goods to supply to Rastriya Chemicals & Fertilizers Limited (RCF). The licence issued required the petitioner to fulfil the export obligation by supplying goods to RCF, a Government of India Undertaking. Despite fulfilling this obligation, action was taken against the petitioner for not exporting goods outside India as per the bond.

2. Conflict Between Licence Conditions and Bond Requirements:
The petitioner was issued a Special Imprest Licence (SIL) permitting import of raw materials under certain conditions, including supplying goods to RCF. However, the bond executed required exporting goods outside India. This conflict between the licence condition and bond terms led to confusion and penal actions against the petitioner. The bond executed on 17/6/1983 included a clause that mandated exports to a place outside India, conflicting with the licence condition to supply to RCF.

3. Forfeiture Order and Subsequent Appeals:
A show cause notice was issued to the petitioner for violating the bond and licence conditions. Despite fulfilling the export obligation to RCF, a forfeiture order was passed, demanding the bond amount and additional penalties. The petitioner's appeals were rejected on grounds of non-submission of required documents. The second appellate authority dismissed the appeal, noting that the forfeiture order had no financial effect as it was not implemented at the bank's level.

4. Imposition of Customs Duty and Conversion of Licence:
The customs authorities sought to recover customs duty from the petitioner for raw materials imported duty-free. The petitioner proposed to deposit the duty and sought conversion of the Special Imprest Licence into a Project Import Licence. However, the Ministry of Finance rejected this request, citing the impossibility of verifying conditions after 20 years. The court noted that the licensing authority should have taken remedial steps immediately due to the erroneous issuance of the licence.

5. Compliance with Principles of Natural Justice:
The petitioner argued that the forfeiture order violated principles of natural justice as it was passed by an officer different from the one who heard the matter. The court agreed, noting that the hearing and order should be by the same officer. Additionally, the first appeal was decided by the same officer who passed the forfeiture order, which was also deemed contrary to law.

Judgment:
The court concluded that the licensing authorities' actions were unjustified given the petitioner's fulfilment of export obligations as per the licence. The court ordered:
a) The licensing authorities shall not enforce the bond/bank guarantee executed by the petitioner.
b) The JCCI, Bombay, shall amend the Special Imprest Licence to regularize the imports at a concessional rate of duty.
c) The petitioner's request for cash assistance under the Special Imprest Licence would not survive.

The petition was disposed of with no order as to costs.