2010 (3) TMI 524 - HC - Customs

Penalty- value declared in VBAL application much higher than value mentioned in Bill of entry. No explanation as to why documents relied upon by respondent not enclosed with show cause notice. Petitioner stating that documents not available with them. Factory attached and case for recovery of debt pending and documents cannot be produced. Held that- Joint DGFT ought to have furnished documents received from customs or should have summoned them from customs but did not do so. Jurisdiction of Deputy DGFT limited to 1 crore but no explanation how order passed imposing penalty of Rs. 2 crore. Impugned order set aside. Petition allowed.

Summary

Issues:
Challenging order imposing fiscal penalty for under-invoicing items imported against Value Based Advance Licence (VBAL); Violation of export obligation leading to penalty; Violation of principles of natural justice; Jurisdictional issues in passing penalty order exceeding authorized limit; Non-submission of required export documents; Financial difficulties affecting document production; Failure to grant adjournment of hearing.

Analysis:

1. Challenging Order Imposing Fiscal Penalty:
The Petitioner challenged the order imposing a fiscal penalty of Rs. 2 crores for under-invoicing items imported against a VBAL. The Petitioner contended that the import rate was mistakenly mentioned, and if corrected, the export proceeds were fully realized, thus no violation occurred.

2. Violation of Export Obligation:
The Petitioner was alleged to have violated the export obligation, leading to penalty proceedings. However, the Court found that the Petitioner had fulfilled the condition of exporting riboflavine tablets worth US $25,000 within the stipulated period, thereby complying with the VBAL terms.

3. Violation of Principles of Natural Justice:
The Petitioner argued that the order dated 9th October 2002 was violative of natural justice principles as the hearing adjournment request was denied, and the order was passed ex parte. The Court found the procedure adopted by the ADGFT unreasonable in this regard.

4. Jurisdictional Issues:
There were jurisdictional issues raised regarding the authority of the Deputy DGFT to pass a penalty order exceeding the authorized limit. The Court noted discrepancies in the jurisdictional competence and set aside the penalty order based on this ground.

5. Non-submission of Export Documents:
The Petitioner failed to submit certain export documents, notably the DEEC book, leading to allegations of non-compliance. The Court considered the circumstances, including financial difficulties affecting document production, and found the procedure adopted by the ADGFT unreasonable in not obtaining the necessary documents directly from the customs authorities.

6. Failure to Grant Adjournment:
The Petitioner's request for an adjournment of the hearing was denied, raising concerns about procedural fairness. The Court noted that the impugned order did not adequately explain the denial of adjournment and other procedural irregularities.

In conclusion, the Court set aside the impugned orders dated 9th October 2002 and 15th December 2005, allowing the writ petition with costs awarded to the Petitioner. The judgment addressed various legal issues, including procedural fairness, jurisdictional competence, compliance with export obligations, and the impact of financial difficulties on document production.