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SUPREME COURT OF INDIA
ABHAY S. OKA, UJJAL BHUYAN, JJ.
M/s. Embio Limited – Appellant
Versus
Director General of Foreign Trade & Ors. – Respondents
Civil Appeal No. 6394 of 2024 (Arising out of Special Leave Petition (C) No. 4974 of 2021)
Decided on : 13-05-2024
Foreign Trade (Development and Regulation) Act, 1992 – Section 11(2) – Imposition of penalty – Predecessor of appellant was granted licence for import of capital goods under concessional custom duty subject to condition that they would export final product and earn foreign exchange equivalent as mentioned in licence within five years from date of licence – In view of grant of licence, predecessor of appellant was allowed to clear imported capital goods at a concessional rate of 15 per cent – For non-payment of balance customs duty demand, customs authorities issued a show cause notice – Pursuant to said notice, Bank Guarantee furnished earlier by predecessor of appellant was encashed – There is no allegation made by respondents against appellant's predecessor of making or attempting to make any export or import in contravention of FT Act, any Rules or orders made thereunder, or foreign trade policy – There is no allegation of attempting to make an export or import which is covered by Section 11 (2) – There is no allegation against appellant or its predecessor of making export or import in contravention of export and import policy – Section 11 (2) is a penal provision – It must be strictly construed – Demand for penalty cannot be sustained – Order of penalty set aside. (Paras 10, 13 and 14)
Facts of the case:
Appellant filed a Writ Petition under Article 226 of Constitution of India before Karnataka High Court, challenging order imposing a penalty of Rs. 23,38,882/-. Under provisions of Section 11(2) of Foreign Trade (Development and Regulation) Act, 1992. Said Writ Petition was dismissed. By impugned Judgment, a Writ Appeal against order of Single Judge was dismissed.
Findings of Court:
Order-in-Original passed by third Respondent levied the impugned penalty of Rs.23,38,882/-. Order-in-Original records that Karnataka Biotics did not comply with export obligation under license granted under the FT Act.
Result : Appeal allowed.
1. The appellant filed a Writ Petition under Article 226 of the Constitution of India before the Karnataka High Court, challenging the order imposing a penalty of Rs. 23,38,882/— under the provisions of Section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992 (for short, ‘the FT Act’). The said Writ Petition was dismissed. By the impugned judgment, a Writ Appeal against the order of the learned Single Judge was dismissed.
2. The appellant was formerly known as Emmellen Biotech Pharmaceuticals Limited, which amalgamated with Karnataka Malladi Biotics Limited based on an order of the Bombay High Court dated 24th March 2009.
FACTUAL ASPECT
3. A few factual aspects will have to be set out. Karnataka Malladi Biotics Limited (for short, ‘Karnataka Biotics’) obtained an Export Promotion Capital Goods Licence (for short, ‘the licence’), which enabled it to import certain capital equipment at a concessional rate of customs duty. Under the licence, Karnataka Biotics was permitted to import capital goods worth Rs. 23,38,882/- equivalent to US$ 64,987 CIF value, subject to the condition of the appellant exporting the finished goods worth US$ 2,59,948 and earning an equivalent amount in a freely convertible foreign currency within five years from the date of the licence. Karnataka Biotics imported goods as permitted under the licence and commenced commercial production. However, the Board for Industrial Finance and Reconstruction (for short, ‘BIFR’), in its meeting dated 11th August 1999, declared Karnataka Biotics as a sick unit under Section 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short, ‘SICA’). The said company submitted a rehabilitation proposal to the operating agency. As Karnataka Biotics had enjoyed the benefit of concessional duty, a demand notice was issued by the Commissioner of Customs on 3rd April 2002, making a demand for the differential duty of Rs. 5,38,525/- from Karnataka Biotics. As the said company could not pay the demanded amount, a sum of Rs. 4,86,800/- was recovered by enforcing the bank guarantee furnished by the said company.
4. On June 3, 2003, the BIFR sanctioned Karnataka Biotics' rehabilitation scheme under Section 18 of SICA. On July 16, 2004, the third respondent passed an Order-in-Original imposing a penalty of Rs. 23,38,882/— on Karnataka Biotics for non-fulfilment of export obligation under the licence. An appeal preferred before the appellate authority against the said demand was dismissed, and a review filed before the Central Government was rejected.
5. In 2007, a Writ Petition was filed by the Karnataka Biotics before the High Court of Karnataka to challenge the demand for penalty. On 24th March 2009, Karnataka Biotics amalgamated with Emmellen Biotech Pharmaceuticals Limited under the orders of the High Court. Accordingly, a certificate of incorporation for the change of the name of Emmellen Biotech Pharmaceuticals Limited to M/s Embio Limited (appellant herein) was issued. The Writ Petition filed by Karnataka Biotics was allowed by a learned Single Judge of the Karnataka High Court. The respondents challenged the same by filing a Writ Appeal. A Division Bench of the High Court disposed of the appeal by granting permission to withdraw the Writ Petition with the liberty to file a fresh Writ Petition, presumably in view of the amalgamation.
6. The present appellant filed a Writ Petition before the High Court of Karnataka. The learned Single Judge dismissed the Writ Petition by the order dated 14th November 2017. One of the grounds of dismissal was that Karnataka Biotics had withdrawn the earlier Writ Petition without reserving any liberty to reagitate the same issue. By the impugned judgment, a writ appeal preferred by the appellant against the order of the Single Judge was dismissed on the ground that Karnataka Biotics had withdrawn the earlier Writ Petition without reserving any liberty to reagitate the issues involved.
SUBMISSIONS
7. The learned senior c
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