1999 (3) TMI 94 - HC - Customs

Summary

Issues:
1. Penalty imposed under sub-sections (3) and (4) of Section 8 of the Foreign Exchange Regulation Act, 1973.

Detailed Analysis:
The judgment involves a challenge to a penalty imposed on the appellants for contravening sub-sections (3) and (4) of Section 8 of the Foreign Exchange Regulation Act, 1973. The appellants held an Import Licence for a c.i.f. value of Rs. 20 lakhs and imported spare parts for their plant/machineries. The Customs Authority held that the appellants exceeded the limit under the import licence by Rs. 26,389, resulting in a redemption fine. The Directorate of Enforcement later imposed a penalty of Rs. 2,500 for the alleged contravention. The appellants contended that there was no FERA violation as the goods were imported under the licence, and the foreign exchange was utilized as intended. They argued that the penalty was imposed solely due to exceeding the value limit of individual items under Customs Regulations, not due to FERA contravention.

The judgment scrutinizes whether there was a genuine contravention of FERA provisions by the appellants. The Deputy Director imposed the penalty without demonstrating how the contravention occurred, merely relying on the Customs Authority's decision. The court found that the foreign exchange was acquired and utilized for the intended purpose of importing valves, as specified in the licence. The FERA Board also failed to show how the appellants contravened Sections 8(3) and 8(4) of FERA. It was noted that the spare parts imported were not prohibited, and the foreign exchange was used as intended. The court emphasized that the burden of proving a violation rests with the prosecution, requiring evidence beyond a reasonable doubt, which was lacking in this case.

Additionally, the judgment referenced legal precedents emphasizing that technical contraventions may not warrant penalties. The appellants had imported spare parts slightly exceeding the value limit specified, which was considered a technical violation by the Customs Authority. The court concluded that since there was no substantiated contravention of FERA provisions, the penalty imposed was unwarranted. Consequently, the appeal was allowed, and the impugned orders imposing the penalty were quashed and set aside. The judgment highlighted the importance of establishing clear evidence of contravention before imposing penalties under FERA, ensuring a stringent burden of proof is met by the prosecution.