2018 (7) TMI 1760 - HC - Customs

Implementation of impugned order - issuance of Advance Licenses - amendments in Licenses - cancellation of licenses - penalty - violation of Rule 10 of the Foreign Trade (FTR) Rules and Section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992 - Held that - The finding and conclusion in paragraph 19 of the impugned order having been the sole basis on which these petitions were admitted, a statusquo order was granted restraining the respondents from giving effect to and implementing the impugned order. Rather that was the statement of the respondents themselves and they did not implement it for more than a decade now - no useful purpose will be served by allowing the impugned order to be enforced and implemented. Moreso, when none of the contentions based on the admitted facts are dealt with in the impugned order. Moreso, when none of the contentions based on the admitted facts are dealt with in the impugned order. In the facts peculiar to this case and when the impugned order does not deal with the without prejudice arguments, ignores the mitigating factors, they, all the more we are disinclined to allow the respondents to enforce such an order - The impugned order is quashed and set aside - petition allowed.

Issues Involved:
1. Validity of the cancellation of the Quantity Based Advance Licence.
2. Imposition of penalty on the transferees of the licence.
3. Interpretation and application of the Standard Input Output Norms (SION) and Export Import Policy.
4. Alleged misrepresentation, suppression of facts, and fraud by the exporter and transferees.
5. Procedural propriety and fairness in the issuance of show cause notice and adjudication process.

Issue-wise Detailed Analysis:

1. Validity of the cancellation of the Quantity Based Advance Licence:
The court examined whether the cancellation of the advance licence by the respondent was lawful. The licence was issued based on norms prevailing before 1st April 1997, but later amended norms reduced the import entitlement. The court noted that the exporter had fulfilled the export obligations, and the licence was transferred to the petitioner. The cancellation was challenged on the grounds that it was retrospective and not justified since the imports were within the revised norms. The court found that the cancellation was not supported by cogent reasons and quashed the impugned order.

2. Imposition of penalty on the transferees of the licence:
The court scrutinized the imposition of a penalty of ?2.50 crores each on the transferees. The petitioner argued that they had imported goods within the revised norms and had paid customs duties for part of the imports. The court observed that the show cause notice did not specifically call upon the petitioner to show cause against the penalty, and the adjudicating authority's findings were based on allegations without concrete evidence. The court concluded that the penalty was unjustified and set it aside.

3. Interpretation and application of the Standard Input Output Norms (SION) and Export Import Policy:
The court delved into the interpretation of SION and the Export Import Policy, particularly paragraph 66, which states that licences should be issued based on norms prevailing at the time of export. The petitioner contended that the norms applicable at the time of export should govern the licence issuance. The court agreed with this interpretation, noting that the DGFT had initially issued the licence based on the old norms, and the subsequent amendments were not justified.

4. Alleged misrepresentation, suppression of facts, and fraud by the exporter and transferees:
The court examined the allegations of misrepresentation, suppression of facts, and fraud. The adjudicating authority had concluded that there was a possibility of violation of the policy through fraud, suppression, or misrepresentation. However, the court found that the findings were not substantiated with clear evidence. The court emphasized that the allegations were not adequately proven, and the impugned order was based on speculative conclusions rather than concrete facts.

5. Procedural propriety and fairness in the issuance of show cause notice and adjudication process:
The court assessed the procedural propriety of the show cause notice and the adjudication process. The petitioner argued that the show cause notice did not specifically address the cancellation of the licence or the imposition of a penalty on them. The court observed that the adjudicating authority's order merely reiterated the allegations without addressing the petitioner's contentions or the mitigating factors. The court found that the process lacked fairness and transparency, leading to the quashing of the impugned order.

Conclusion:
The court quashed and set aside the impugned order cancelling the licence and imposing penalties, citing a lack of cogent reasons and procedural fairness. The court ruled in favor of the petitioner, allowing them to import the balance quantity of Vitamin Mixes as endorsed on the licence and extending the validity period for utilization of the licence. The writ petitions succeeded, and the rule was made absolute with no order as to costs.

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