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TMI Blog2016 (10) TMI 817X X X X Extracts X X X X X X X X Extracts X X X X ..... on and has failed to achieve the target and as such authorities ought to have considered well recognized doctrine of proportionality which passing impugned orders.. Order set aside - matter remanded back for reconsideration - Decided in favor of petitioner. - Special Civil Application No. 5346 of 2016 - - - Dated:- 19-8-2016 - AKIL KURESHI AND A.J. SHASTRI JJ. Mr. Dhaval Shah Mr. SS Iyer, Advocates for the Appellant. Mr. Devang Vyas Ms. Trusha K Patel, Advocates for the Respondent. JUDGMENT (PER : HONOURABLE MR.JUSTICE A.J. SHASTRI) 1. The petitioner, by way of present petition, is challenging the legality and validity of the impugned order dated 21.10.2015 and sought incidental reliefs as follows: A. Your Lordships may be pleased to issue a writ of or in the nature of certiorari or mandamus or any other writ, order or direction quashing and setting aside the impugned order dated 21.10.2015 as illegal being not maintainable, unfair, discriminatory, perverse, absurd, harsh, barred by law as well as barred by time; B. Your Lordships may hold that without disposing of the pending option exercised and representations made by the petitioner seeking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hieved a value addition in excess. During the passage of time, the Exim policy 1992-97 was pronounced wherein the revised value addition formula was made applicable to Export Oriented Units and in furtherance of it, the Ministry of Commerce, Government of India issued a circular on 08.09.1993. By virtue of this, the units were requested to exercise an option within three months from the date of issue either to continue under the old formula or changeover to the revised value addition formula w.e.f. 1993-94. 3. It is the case of the department that despite the said circular having been issued, the petitioner-company did not make any proposal for revised value addition within prescribed time limit. However, case of the petitioner is that on 17.02.1994, the request was already submitted to the authority but authority found the said letter was not on record and thereby since the deadline was only upto 07.12.1993, the petitioner failed to exercise said option as stated. 4. Resultantly, a show-cause notice came to be issued by the Development Commissioner, KASEZ, and after granting an opportunity of hearing, the authority imposed a fiscal penalty of ₹ 2,27,40,000/- for failur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court by filing present petition by invoking extra ordinary jurisdiction of this Court under Articles 226 and 227 of the Constitution. 6. Learned counsel Mr. S.S.Ayer appearing on behalf of learned advocate Mr. Dhaval shah for the petitioner contended that the orders passed by the authorities below are not just and proper and not in consonance with the provisions of law and therefore, the same be set aside. It was also contended that it is not a case of the authorities below of any nature that the petitionercompany has mis-utilized the terms of the letter of permission, has also not misrepresented and no mischief is attributable to the petitioner-company and thereby he requested the Court not to allow the penalty to be imposed upon. Learned counsel further submitted that to invoke the provision of penalty, there must be first of all, a mensrea of the petitioner-company be established and looking to the entire record, nowhere the petitioner's mensrea is reflected or even alleged. Therefore, in the absence of this condition precedent, no order of penalty can be passed by the authority. It was also submitted that the alleged violation or non-fulfillment of the terms of le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner further submitted that while passing impugned order, the authorities below have not considered the doctrine of proportionality while inflicting penalty upon the petitioner-unit. Several circumstances and factors to arrive at a penalty quantum ought to have been considered and though the same have been put to the notice of the authorities, none of the factors have been dealt with and extreme penalty came to be inflicted upon to a unit which was facing a severe financial crunch. It was also submitted by the counsel for the petitioner that sub section (2) of Section 11 of the Foreign Trade (Development and Regulation) Act, 1992 is vesting a discretion upon the authority to impose penalty from the range of ₹ 10,000/- to not more than five times the value of the goods in respect of which contravention is alleged and thus, discretion has not been properly exercised by the authorities and therefore, requested the Court that such order of penalty is not sustainable. By submitting ultimately the learned counsel requested the Court to set aside the impugned order passed by the authority below and grant the relief, as prayed for, in the petition. 9. To oppose the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the condition of letter of permission in the initial block period of five years i.e. from 1991 to 1996, the authority has rightly considered and has passed the order. Learned counsel also drawn attention of the Court that there was a sizeable shortfall in the initial block period of five years to the extent of 26.31% as against the requirement of minimum value addition of 45.93%, the petitioner-unit achieved only 19.62%. Therefore, the authorities have rightly exercised the discretion and held that petitioner-unit cannot club the subsequent period with initial block period of five years. Counsel further submitted that a detailed order came to be passed by the original authority while passing an order-inoriginal dated 12.02.2014 wherein, a specific finding came to be arrived at on each of the issues and the authority which passed an order has arrived at a finding that petitioner-unit has failed to achieve the value addition, as prescribed under letter of permission dated 25.08.1988. It was also brought to the notice by the counsel for the respondent-authority that even under the new formula, the petitioner-unit could not have achieved the required value addition looking to the ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord that during the course of personal hearing, the entire circumstance is put-forth before the authority and has requested to take a reasonable view. (vi) The main material aspect which is emerging from the record is that the appellate authority, while dealing with an order-in-original has practically paid no attention to the quantum of penalty whether penalty is imposed upon by the original authority is reasonable, just and proper or not. There appears to be a complete non consideration and therefore, the conclusion arrived at is based on no reasoning. 12. In the background of this bare perusal of the relevant provision of the Foreign Trade (Development and Regulation) Act, 1992 ['the Act' for short] is very much needed . Section 11 deals with the Contravention of provision of this Act, rules orders and foreign trade policy, relevant portion which reads as under: 11. Contravention of provision of this Act, rules orders and foreign trade policy- (1) No export or import shall be made by any person except in accordance with the provisions of this Act, the rules and orders made thereunder and the foreign trade policy for the time being in force. (2) Where a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1962 (52 of 1962); or (d) if the amount cannot be recovered from such person in the manner provided in clauses (a), (b) and (c), (i) the Director-General or any officer authorised by him may prepare a certificate signed by him specifying the amount due from such person and send it to the Collector of the District in which such person owns any property or resides or carries on business and the said Collector on receipt of such certificate shall proceed to recover from such person the amount specified thereunder as if it were an arrear of land revenue; or (ii) the Director-General or any officer authorised by him (including an officer of Customs who shall then exercise his powers under the Customs Act, 1962 (52 of 1962) and in accordance with the rules made in this behalf, detain any movable or immovable property belonging to or under the control of such person, and detain the same until the amount payable is paid, as if the said amount is payable under the Customs Act, 1962 (52 of 1962); and in case, any part of the said amount payable or of the cost of the distress or keeping of the property, remains unpaid for a period of thirty days next after any such distress, may c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said aspect of penalty, the circumstances stated here-in-above appears to have been not gone into by the authorities in the right spirit. It appears from the record that there is no deliberate attempt on part of the petitioner-unit to flout the terms of the letter of permission. On the contrary, situation prevailing in the market has compelled the petitioner-unit to face severe financial crunch and therefore, there was no deliberate act on part of the petitioner unit not to obey the terms of the letter of permission upon which the unit was set up. Therefore, it appears that the learned counsel for the petitioner rightly contended that there is no mensrea upon which penalty can be imposed and there to of such magnitude. This Court having gone through in detail order-in-original as well as the appellate order and found that ultimately, while exercising the discretion qua Section 11(2) on the issue of penalty authority, appears to have no proper justification. If we look at the observation of the authority who pass an order-in-original on the contrary there is categorical finding as contained in para 27 which is based upon the material on record as well as representation of the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue with regard to proportionality while inflicting penalty. 15. In addition to this, the appellate authority which is couched with a specific power to examine the validity of an order has surprisingly not even dealt with this proportionality of the penalty in any manner. The appellate authority has arrived at a conclusion in para 5 of the order reflected on page 25 of the petition compilation practically has not taken up the issue nor even dealt with the issue of proportionality of penalty which is the center of controversy of present proceedings. Therefore, there appears to be complete non-application of mind on the part of the authorities below to exercise discretion as invested in Section 11(2) of the Act. Additional feature of the present proceedings is that, there is no allegation of either misrepresentation or mis-utilization of the terms of letter of permission nor any mischief is alleged of any nature and therefore, the bona fides of the petitioner-unit have not been questioned by the authority. The only fault appears to be of the petitioner-unit is that it has not met with the condition of letter of permission and has failed to achieve the target and as such authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and even the appellate authority, taking into consideration the genuine problems of the petitioners, has been pleased to reduce the fiscal penalty from ₹ 10 lac to ₹ 5 lac, It cannot be concluded that there is any misutilization or misdeclaration on the part of the petitioners. The respondents cannot be permitted to substitute the reasons in order to attract the provision of Section 4-I of the Act 1947. We therefore find that the impugned orders dated 09.09.1996 and 03.04.1998 are unsustainable in the eyes of law and in the facts of the present case the provisions of section 4-I of the Act 1947 are not attracted and, therefore, the petitioners are not liable to pay penalty. It is however, made clear that it would be open for the respondent authorities to take any other action for non-fulfillment of export obligation and nonachieving of value addition as per letter of approval against the petitioners under any other Acts, Rules and Regulations in force. 18. In another decision relied upon by the counsel for the petitioner is in case of Suryovonics Ltd. vs. Ministry of Commerce (supra) wherein also the Court was dealing with the circumstances of non-fulfillment of ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioner for levy of penalty. (13) In State of HP and ors. vs. Rajkumar Brijender Singh and others, AIR 2004 SC 3218 referring to Section 20 of the HP Ceiling on Land Holdings Act, 1973, conferring suo motu power on Financial Commissioner, interpreting the words at any time , it was held that such power had to be exercised within reasonable time. The relevant observations are:- 6. It is true that sub section(3) provides that such a power may be exercised at any time but this expression does not mean there would be no time limit or it is in infinity. All that is meant is that such powers should be exercised within a reasonable time. No fix period of limitation may be laid but unreasonable delay in exercise of the power would tend to undo the things which have attained finality. It depends on the facts and circumstances of each case as to what is the reasonable time within which the power suo motu action could be exercised. For example in this case, as the appeal had been withdrawn but the Financial Commissioner had taken up the matter in exercise of his suo motu power, well it could be open for the State to submit that the facts and circumstances were such that it would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g penalty, and has also not considered that the alleged violation of first five years block period and action is initiated after an unreasonable period. A bare perusal of the order passed by the appellate authority clearly indicates that there is no consideration of whatsoever nature with regard to the aspect of penalty and the quantum thereof. Factor stated above clearly attracts well recognized doctrine of proportionality and therefore, this Court is of the opinion that there appears to be a clear error in exercising power by the appellate authority and therefore in the background of this fact, we deem it proper to set aside the order passed by the appellate authority with a consequential direction remanding the matter back to the appellate authority to consider afresh and pass a reasoned order. In the context aforesaid, the appellate authority i.e. respondent No.3 herein is directed to reconsider the case of the petitioner unit afresh, re-examine an issue of proportionality of penalty after giving proper opportunity to the petitioner and pass a reasoned order keeping in mind the aforesaid circumstances. 23. With these directions, we set aside the impugned order dated 21.10.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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