2009 (10) TMI 489 - HC - Customs

Penalty - Export oriented undertaking - Submission of the petitioner that there was delay in grant of licence and subsequent developments leading the petitioner that there was delay in grant of licence and subsequent developments leading the petitioner to opt for alternative. Held that - penal provisions not rightly invoked/exercised without giving due adherence to core facts and circumstances of case. Unless an act of violation is directly attributable to person, penalty liability cannot be extended.

Issues Involved:
1. Delay in issuance of industrial licence and its impact.
2. Compliance with export obligations and value addition requirements.
3. Applicability of Section 4-I of the Imports and Exports (Control) Act, 1947.
4. Legality of the penalty imposed under Section 4-I of the Act, 1947.

Detailed Analysis:

1. Delay in Issuance of Industrial Licence and Its Impact:
The petitioner, an industrial concern, entered into a memorandum of understanding with 'Energy Conversion Devices Inc., of USA' (ECD) to provide technology and buy-back 50% of the installed capacity. The petitioner applied for a letter of intent on 20-8-1986, which was granted on 19-4-1988 after a delay of 20 months. The subsequent application for conversion to an industrial licence faced another delay, with the licence issued on 26-12-1989, 12 months later. The petitioner argued that these delays led to an increase in project costs from Rs. 15 crore to Rs. 20.25 crore and affected the viability of the project. The court noted that the delays, which amounted to almost 54 months, were not attributable to the petitioner.

2. Compliance with Export Obligations and Value Addition Requirements:
The petitioner commenced commercial production on 1-4-1990 and faced further delays due to ECD's sale to M/s. Cannon, which resulted in a shift of production plans to Mexico. The petitioner sought alternative markets for exports and domestic sales. Despite these efforts, the petitioner managed to export goods worth Rs. 68.09 lakhs between 1-4-1991 and 31-3-1996. The petitioner applied for debonding to enable domestic sales and was permitted by the Appellate Committee, Government of India, subject to certain conditions. The Assistant Commissioner of Excise assessed duties and penalties, which were contested by the petitioner.

3. Applicability of Section 4-I of the Imports and Exports (Control) Act, 1947:
The court examined whether Section 4-I of the Act, 1947, which imposes penalties for non-compliance with export obligations, was applicable. The provision states that any person who uses or utilizes imported goods otherwise than in accordance with the conditions of the licence shall be liable to a penalty. The court referred to the Supreme Court's decision in Taarika Exports and Another v. Union of India And Another, which held that non-fulfillment of obligations due to uncontrollable circumstances does not exempt one from liability.

4. Legality of the Penalty Imposed Under Section 4-I of the Act, 1947:
The court found that the respondents did not dispute the delays and events leading to the petitioner's situation. The delays were not attributable to the petitioner, and the change in ECD's ownership and production plans were beyond the petitioner's control. The petitioner had sought and obtained permission for debonding and domestic sales. The court held that the authorities did not properly consider these factors before imposing the penalty. The imposition of the penalty was deemed arbitrary and illegal, as the petitioner did not intentionally violate any conditions.

Conclusion:
The court concluded that the petitioner could not be held liable for the penalty imposed under Section 4-I of the Act, 1947. The impugned proceedings dated 3-3-1998 and 4-5-1999 were set aside, and the writ petition was allowed. The court emphasized that penal provisions should not be invoked without considering the core facts and circumstances of the case.

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