Legal principle

Non-fulfilment of an advance licence export obligation is independently penal under the FT(D&R) Act, and recovery of differential duty under Section 28 of the Customs Act, 1962 does not foreclose that penalty, while refusal of pre-deposit waiver under the Section 15 proviso is a discretionary exercise not interferable with absent perversity or non-application of mind.

Court decision

The Division Bench upheld the Appellate Authority's order, holding that its exercise of discretion and reasons did not suffer from non-application of mind or perversity; the petitioner's contentions (including the plea that only Section 28 Customs Act could apply) found no acceptance. However, the Court granted liberty to pay the penalty within 30 days, upon which the appeal would be restored on file, with any additional grounds considered and the appeal decided on merits; writ petitions were disposed of with no order as to costs.

Facts

S & S Power Switchgear Ltd., a manufacturer of vacuum circuit breakers, disconnectors and other engineering goods, obtained advance licences (granted 26.06.1997 and 31.03.1997) to import raw materials against an export order from a Malaysian buyer, but could not fulfil the export obligation in full even after an extension of time. The Adjudicating Authority, by order dated 02.08.2004, imposed a total penalty of Rs.83,63,653/- (1% of unfulfilled FOB value plus customs duty saved plus 15% on duty saved for 6 years) plus a personal penalty of Rs.10,000/- under Section 13 of the FT (D&R) Act, 1992, after show cause notice and personal hearing. The petitioner appealed under Section 15 to the Additional Director General of Foreign Trade, seeking waiver of pre-deposit of the penalty, but the Appellate Authority declined waiver and dismissed the appeal on 20.10.2005, prompting writ petitions seeking certiorarified mandamus for a fresh hearing without insisting on the deposit.

Key provisions

• Section 13, The Foreign Trade (Development and Regulation) Act, 1992 — Adjudicating Authority.
• Section 11, The Foreign Trade (Development and Regulation) Act, 1992 — Contravention of provisions of this Act, rules, orders and foreign trade policy.
• Section 28, Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded