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TMI Blog2014 (6) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... ctly related with quantum of penalty. The words "subject to such limits as may be specified" cannot be read as prefixed with word "any penalty" under Section 13 of Act, 1992. The authorization could be made by Central Government, in my view, with reference to quantum of penalty or the value of goods or any other reasonable and relevant indicia. To suggest that "subject to such limits" will always mean that it is and it must be in the context of quantum of penalty, would result in rendering the scope of authorization to be made by Central Government narrowed down to a large extent which, in my view, would not be justified - since value of goods in respect of which contravention has been alleged was more than ₹ 45 lacs but less than ₹ 1 crore, therefore, the Deputy Director General of Foreign Trade was well within his competence to take action under Section 11 and pass order of penalty. It thus cannot be said that order of penalty is without jurisdiction. Time period of passing the order - order passed after more than one decade - Held that:- licence having been issued on 10.02.1994, petitioners were to complete export obligation upto February, 1995 and import obli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner : Rahul Mishra, Abhishek Mishra, Vivek Chaudhary For the Respondent : A.S.G.I., K. N. Singh ORDER 1. The petitioner-M/s Dewan Tyres Ltd., a Company registered under Companies Act, 1956, was engaged in manufacturing of Automobiles Tyres and Tubes. At the time of filing of this writ petition, the petitioners are said to have closed business, having become sick. 2. Be that as it may, the dispute relates to the period of 1994, when petitioner-Company was granted Value Based Advance Licence No. P/L/2322966 on 10.02.1994 by Controller, Import and Export, Ministry of Commerce Industries under Duty Exemption Scheme under Imports and Exports (Control) Act, 1947 (hereinafter referred to as the Act, 1947 ). The Licence was issued for import of CIF (Cost, Insurance and Freight), for value of U.S. Dollars 1,42,445/- (INR Rs. 45,58,240/-). As per the condition of licence, petitioner-Company was to fulfill export obligation of FOB (Free on Board), value of U.S. Dollars 2,27,344/- (INR Rs. 72,75,000/-). The import period of licence was one year from the date of issuance and export period was three years from the date of issuance of licence. The goods imported against advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udhary, Advocate assisted by Sri Rahul Mishra and Sri Abhishek Mishra, Advocates, has advanced arguments on behalf of petitioners while Sri R.B. Singhal, learned Assistant Solicitor General of India assisted by Sri K.N. Singh, Advocate has appeared and made his submissions on behalf of respondents. 9. Learned counsel for the petitioners has assailed the impugned penalty orders on four grounds: (i) The Deputy Director General, who has passed impugned order of penalty, had no authority under Section 13 read with notifications issued thereunder to impose penalty of more than one crore and, therefore, the impugned order is without jurisdiction. (ii) A penalty order after more than a decade is patently illegal and unreasonable. (iii) There is no finding recorded by respondents in the impugned orders that petitioners have any intention or motive to violate the provisions of Act, 1992 or the terms and conditions of licence. In absence of any finding in respect of mens rea, penalty could not have been imposed. (iv) Lastly, there was no valid notice issued to petitioners before passing impugned adjudicatory order imposing penalty and, therefore, entire proceedings including i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the provisions of Act, 1992 or the rules framed and orders issued thereunder or conditions of export and import policy. Sub-section (1) of Section 11 makes it obligatory upon a licence holder to observe faithfully, the provisions of Act, 1992, or the rules framed and orders issued thereunder, or conditions of export and import policy, which is for the time being in force. The language of sub-section (2) of Section 11 is in prohibitive term, namely, none shall import or export except in accordance with provisions of Act, Rules and Policy etc. Sub-section (2) provides the quantum of penalty for violation of sub-section (1), i.e., if any person makes or abates or attempts to make any export or import in contravention of Act, 1992 or Rules or Orders made thereunder or export and import policy, he would be subject to a penalty not exceeding Rs. 1000/- or five times of value of goods in respect of which any contravention is made or attempted to be made, whichever is more. Sub-section (3) to (6) of Section 11 are in the nature of procedure including the provision akin to compounding and also relating to seizure and release of goods. 16. Sub-section (3) of Section 11 provides that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zette dated 30.12.1993 and have come into force from the date of publication in the official gazette. 23. Rule 16 thereof talks of procedure for settlement, if any, where a person contravenes previsions of Act, Rules, Regulations or orders etc. in the process of export and import, after having been issued a notice proposing penalty for such violation, admits the same, and, is desires of settling the amount of penalty. It reads as under: Rule 16. Settlement.--(1) The Adjudicating Authority may determine the amount of settlement to be paid by the person to whom a notice, has been issued and who has opted for settlement and has admitted the contravention specified in the notice, in the following cases, namely:- (i) where it is of the opinion that the contravention of any provision of the Act or these rules or the Policy has been made without mens-rea or without wilful mistake or without suppression of facts, or without any collusion, or without fraud and forgery, or without an intent to cause loss of foreign exchange; or (ii) where the person importing the goods has not met the requirements of the actual user conditions as specified in the policy and has not misutilised t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Table below for the purposes of exercising powers under section 13 read with section 11, subject to the limits specified against such officers in the corresponding entry in column 3 of the said Table, namely:- Sl. No Designation of officer Value of the goods in relation to which the power may be exercised. 1 Additional Director General of foreign Trade Without limit 2 Zonal Jt. Director General of Foreign Trade/Export Commissioner Upto Rs. 10 crores 3 Joint Director General of Foreign Trade Upto Rs. 5 crores 4 Deputy Director General of Foreign Trade Upto Rs. 1 crore 5 Assistant Director General of Foreign Trade Upto Rs. 10 lakhs 6 Foreign Trade Development Officer Uto Rs. 5 lakhs 7 Development Commissioner, Export Processing Zone Without limit in respect of Exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision reasonable, practicable and workable. If otherwise there is no ambiguity, the words in a statute are to be given their widest amplitude so as to cover each and every incident which may reasonably be conceded within the ambit thereof. The authorization could be made by Central Government, in my view, with reference to quantum of penalty or the value of goods or any other reasonable and relevant indicia. To suggest that subject to such limits will always mean that it is and it must be in the context of quantum of penalty, would result in rendering the scope of authorization to be made by Central Government narrowed down to a large extent which, in my view, would not be justified. There is no ambiguity in the statute so as to compel this Court to do so and by not confining scope of above phrase to the extent as suggested by learned counsel for the petitioner, neither this Court would be doing any violence nor it can be said that statute is being misconstrued. Moreso, when a power has been exercised by State authorities in a particular manner, there is no presumption in validity thereof unless shown otherwise. If exercise of power can reasonably be construed within the scope an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 07.08.1998 have been placed on record as Annexures-2 and 3 to the counter affidavit. 34. A perusal of notice dated 22.06.1998 shows that in reference to petitioners' own letter dated 23.02.1998 they were advised to furnish original documents of shipping bill, bank realization certificate etc. for redemption. Then the notice dated 07.08.1998 requires petitioners to submit documents like shipping bills, bank certificate etc. by 08.09.1998, failing which it shall be presumed that petitioners have defaulted 100% in fulfillment of export obligation against advance import licence and appropriate action would be taken accordingly. The petitioners failed to submit documents hence were declared defaulter by order dated 31.03.2004/07.04.2004. Thereafter notice proposing penalty under Section 11(2) of Act, 1992 was issued on 28.06.2005. It thus cannot be said that here is a case where respondents initiated proceedings for the first time after 10 years inasmuch as before declaring petitioners defaulter, respondents have given enough opportunity to them to submit requisite documents. 35. However, after reading para 3 of the notice dated 28.06.2005, it appears that earlier letters w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Act was silent on the question of levy of duty on escaped turn over hence Rule 12 which provided for recovery of escaped duty was outside the purview and scope of Act. The Court held that rule carries out the purpose of the Act as it seeks to provide for recovery of duty. Mere fact that no period of limitation for recovery of duty is provided, that by itself will not make Rule 12 unreasonable and arbitrary, i.e., violative of Article 14 of the Constitution. Rejecting contention in para 6 of the judgment, the Court said: We find no substance in the submission. While it is true that rule 12 does not prescribe any period within which recovery of any duty as contemplated by the rule is to be made, that by itself does not render the rule unreasonable or violative of article 14 of the Constitution. In the absence of any period of limitation, it is settled that every authority is to exercise the power within a reasonable period. What would be a reasonable period would depend upon the facts of each case. Whenever a question regarding the inordinate delay in issuance of a notice of demand is raised, it would be open to the assessee to contend that it is bad on the ground of delay and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ahimpatnam Taluk Vyavasaya Collie Sangham Vs. K. Suresh Reddy (supra) the question which was considered by Court is quoted in para 1 of the judgment, as under: Whether Collector can exercise suo-motu power under sub-section (4) of Section 50-B of Andhra Pradesh (Telangana Area) Tenancy and Agricultural Land Act, 1950 at any time or such power is to be exercised within a reasonable time. 43. Here also the Court observed that when a power is conferred, to be exercised at any time, it should be exercised within a reasonable time and while affirming the decision of High Court, taking above view, it said: In the absence of necessary and sufficient particulars pleaded as regards fraud and the date or period of discovery of fraud and more so when contention that the suo-motu power could be exercised within a reasonable period from the date of discovery of fraud was not urged, the learned Single Judge as well as the Division Bench of the High Court were right in not examining the question of fraud alleged to have been committed by the non-official respondents. Use of the words at any time in sub-section (4) of Section 50-B of the Act only indicates that no specific period of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on facts and circumstances of each case. In cases of fraud, this power could be exercised within a reasonable time from the date of detection or discovery of fraud. While exercising such power, several factors need to be kept in mind, such as effect on the rights of third parties over immovable property due to passage of considerable time, change of hands by subsequent bona fide transfers, the orders attaining finality etc. It further said that without stating from what date the period of limitation starts and within what period the suo-motu powers is to be exercised, in sub-section (4) of Section 50-B of Andhra Pradesh (Telangana Area) Tenancy and Agricultural Land Act, 1950, the words at any time are used so that the suo-motu power could be exercised within reasonable period from the date of discovery of fraud depending on facts and circumstances of each case in the context of the statute and nature of rights of parties. 45. Looking to the facts of the present case, I do not find that above observations do help petitioners in any manner. 46. In State of Himachal Pradesh Vs. Rajkumar Brijender Singh (supra) the Financial Commissioner's power under Section 20(2) and ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rwise aforesaid decision also lends no credence to petitioners. 48. Now coming to the judgment of Bombay High Court in Parekh Shipping Corporation Vs. Asstt. Collector (supra) I find that there the documents were demanded for the first time after 12 years from the date of vessel leaving port of Bombay. The case set up by petitioners was that it is impossible for agents of foreign vessel to keep the record for such a long time to show whether goods were short-landed or not. This explanation was accepted by Bombay High Court and it said as under: In our judgment, the submission is correct and deserves acceptance. It surpasses our imagination as to what prompted respondent No. 1 to wait for a duration of 12 years to issue show cause notice. The exercise of powers under Section 116 of the Customs Act, if necessary, must be undertaken within a reasonable time. Shri Venkateswaran submitted that the Customs Excise and Gold Control Tribunal has held that show cause notice issued beyond the period of five years from the date of vessel leaving the Port is arbitrary and unreasonable. In our judgment, the period of five years is more than reasonable. Indeed, the bond executed by the Age ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly on payment of duty. This stand which has been taken in the reply to the show cause notices was not found to be incorrect in the order-in-original. As such the imposition of penalty of the equal amount of duty under the order-in-original cannot be sustained. 20. It is well settled that when the statutes create an offence and an ingredient of the offence is a deliberate attempt to evade duty either by fraud or misrepresentation, the statute requires `mens rea' as a necessary constituent of such an offence. But when factually no fraud or suppression or misstatement is alleged by the revenue against the respondent in the show cause notice the imposition of penalty under Section 11 AC is wholly impermissible. 52. To my mind the aforesaid decision would apply to the provision up for consideration in the case in hand also since it is penal provision empowering the authority to impose penalty on account of certain violation on the part of petitioners which is subject to imposition of penalty under the statute. A perusal of orders impugned in this writ petition nowhere shows that this aspect has been taken care by authorities concerned before passing impugned orders. 53. N ..... X X X X Extracts X X X X X X X X Extracts X X X X
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