2024 (6) TMI 144 - HC - Customs

Levy of penalty - export of dimensional blocks during the year 2011-16, directly from the quarries, which were not licensed premises under the Letter of Permission - contravention of provisions of Section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992 - HELD THAT - The Letter of Permission was issued for manufacturing and exporting the dimensional granite blocks, processed, dressed, cut in all assorted dimensions and granite slabs from the unit at 145, Injambakkam, Chennai. Admittedly, during the period 2011-16, the petitioner had made export from the quarry site to the tune of Rs. 961.79 lakhs. The petitioner was not able to bring the blocks from the quarry to the factory due to logistics constraints. As per the Letter of Permission issued to the petitioner, the unit had to export the entire production or service, excluding rejects and sales in the domestic tariff area as per the provisions of export oriented unit scheme for a period of five years from the date of commencement of production. As per notification No.52/2003 Cus. Dated 31.03.2003, the quarried goods shall be removed from the quarry site only to supply to unit's own processing unit or for supply to another export-oriented unit or the unit in the special economic zone engaged in processing or production or manufacture of articles of granite and export thereon and shall not be allowed to be exported as such or to be cleared in domestic tariff area. But the petitioner failed to follow the mandatory stipulation that goods quarried can be shifted from quarry site only for supply to the unit's own processing zone or for supply to another export oriented unit. A breach of civil obligations which attracts penalty in the nature of fine under the provisions of the Act and the Regulations would immediately attract the levy of penalty irrespective of the fact whether contravention must be made by the defaulter with guilty intention or not. A penalty imposed for a tax delinquency is a civil obligations, remedial coercive in its nature and is far different from the penalty for a crime, or a fine or forfeiture provided as punishment for the violation of criminal or penal laws. This Court finds no infirmity or illegality in the order passed by the first respondent as well as the second respondent. The writ petitioner is devoid of merits and liable to be dismissed - Petition dismissed.

Summary

Issues involved: Challenge to order imposing penalty for direct export of granite blocks from quarry site without bringing them to factory.

Summary:
The petitioner, a company engaged in manufacturing and exporting granite blocks, challenged the penalty imposed for directly exporting blocks from the quarry without bringing them to the factory as required by the Letter of Permission. The petitioner argued that there was no contravention of provisions under the Act, Rules, and Foreign Trade Policy. The petitioner relied on a judgment stating that exporters are eligible for exemption if positive net foreign exchange is maintained and export obligations are fulfilled.

Upon review, it was found that the petitioner did export directly from the quarry site without following the stipulations of the Letter of Permission and relevant notifications. The petitioner failed to shift quarried goods to the processing unit as required. The petitioner attempted to justify the direct exports by citing a specific notification, claiming that operations like trimming and dressing were carried out before export.

The court held that a breach of civil obligations attracting penalty under the Act and Regulations would warrant the imposition of a penalty, regardless of guilty intention. The penalty for tax delinquency is considered a civil obligation, distinct from penalties for criminal violations. Ultimately, the court found no illegality in the order imposing the penalty, leading to the dismissal of the writ petition.

The judgment underscores the importance of complying with export regulations and permissions, emphasizing the consequences of failing to adhere to specified procedures in export activities.