2018 (5) TMI 66 - HC - Customs

Jurisdiction of Joint Director of Foreign Trade to adjudicate SCN - cancellation of licence u/s 9(4) of the Foreign Trade (Development and Regulation) Act, 1992 - Duty Free Credit Entitlement Scheme (DFCE scrips) - imposition of penalty u/s 11(2) of the Act - Held that - under sub-section (4) of Section 9 of the Act, the Director General or the officer authorized under sub-section (2) would have the power for good and sufficient reasons to suspend, cancel any licence, certificate, scrip or any instrument bestowing financial or fiscal benefits granted under the Act. The powers under sub-section (4) of Section 9 thus, concurrently vest in the Director General as well as the Officer authorized by him. The authorized officer would be exercising powers under the delegated authority. There is no pecuniary limitation in exercising such powers. In terms of section 13, the Joint Director could not have adjudicated the question of penalty where the value of the goods or service or technology covered by the authorization exceeded ₹ 25 crores - This pecuniary limit therefore, would take the present matter out of the purview of the Joint Director. The notice issued was a composite notice. The issue of cancellation of licence and imposition of penalty were closely interlinked. He could not have and, he in fact had not severed the notice into a part which he could adjudicate upon and one which he could not - The Director General of Foreign Trade, therefore, committed no error in quashing the order under Section 16 of the Act under which, the Director General has the power on his own motion or otherwise, call for the records or any proceeding of any decision or order made by any officer subordinate to him and satisfy himself as to the correctness, legality or propriety of such decision or order and make such order as may be deemed fit. Petition dismissed.

Issues Involved:
1. Validity of DFCE scrips obtained by the petitioner.
2. Jurisdiction of the Joint Director of Foreign Trade.
3. Composite nature of the show cause notice.
4. Applicability of pecuniary limits set by the notification dated 13-6-2013.
5. Authority of the Director General of Foreign Trade to revise the order.

Detailed Analysis:

1. Validity of DFCE scrips obtained by the petitioner:
The petitioner, a company engaged in manufacturing and import-export activities, was issued 21 DFCE scrips aggregating to ?211.61 crores under the Duty Free Credit Entitlement Scheme (DFCE). The Assistant Director General of Foreign Trade issued a show cause notice alleging that the petitioner obtained these scrips fraudulently by misrepresenting facts and utilizing them to import ineligible goods such as Gold and Silver, violating para 3.7.2.1 of the Export & Import Policy, 2002-2007. The petitioner resisted the notice, contending no breach in obtaining or utilizing the scrips. The Joint Director of Foreign Trade accepted the petitioner’s contentions and dropped the show cause notice, concluding no violation of the FT(DR) Act, Rules, or EXIM Policy.

2. Jurisdiction of the Joint Director of Foreign Trade:
The Director General of Foreign Trade issued a show cause notice proposing to revise the order-in-original passed by the Joint Director of Foreign Trade, citing two premises: the Joint Director did not have pecuniary jurisdiction to adjudicate the show cause notice since his powers did not exceed a monetary limit of ?25 crores as laid down in the notification dated 13-6-2013, and the order-in-original suffered from various infirmities. The petitioner opposed this, contending that there were no infirmities and that the pecuniary limits did not apply.

3. Composite nature of the show cause notice:
The petitioner’s counsel argued that the show cause notice was issued for proposed action under Sections 9(4) and 11(2) of the Act, with no pecuniary limits for exercising powers under Section 9(4). The imposition of penalty under Section 11(2) was merely consequential. The department’s counsel contended that the show cause notice was composite, with the questions of cancellation of license under Section 9(4) and imposition of penalty under Section 11(2) closely interlinked. The Joint Director should have transferred the entire proceedings to the competent authority.

4. Applicability of pecuniary limits set by the notification dated 13-6-2013:
The court examined the relevant provisions and concluded that the Joint Director could not adjudicate the question of penalty where the value of goods or services covered by the authorization exceeded ?25 crores. The DFCE scrips were considered in the nature of an authorization for import of goods. The notification’s description covered the DFCE scrips, making the pecuniary limit applicable in this case. Therefore, the Joint Director’s order-in-original exceeded his financial jurisdiction.

5. Authority of the Director General of Foreign Trade to revise the order:
The Director General of Foreign Trade, under Section 16 of the Act, has the power to revise the orders of subordinate officers. The Director General set aside the Joint Director’s order due to lack of jurisdiction and remanded the case to the competent authority, Addl. DGFT, Mumbai, for de novo adjudication. The court upheld this action, stating that the Director General committed no error in quashing the order under Section 16 of the Act.

Conclusion:
The petition was dismissed, and the interim relief, if any, stood vacated. The court ruled that the Joint Director of Foreign Trade lacked jurisdiction due to the pecuniary limits set by the notification dated 13-6-2013, and the Director General of Foreign Trade acted within his authority to revise the order.

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