1. The challenge in this petition is to an order dated 4th June 1997 passed by the Additional Director General of Foreign Trade (`ADGFT’) under Section 4-K of the Imports and Exports (Control) Act, 1947 [`IEC Act’] read with Section 20(2) of the Foreign Trade (Development & Regulation) Act, 1992 [the `FTDR Act’] imposing a penalty of Rs.1 crore on the Petitioner for utilizing material imported duty free “for a value of Rs. 48,07,561/- otherwise than in accordance with the conditions of the said licence.” The petition also challenges an order dated 1st May 1998 passed by the Appellate Committee dismissing the Petitioner’s appeal and the consequential order dated 31st July 1998 issued by the Foreign Trade Development Officer asking the Petitioner to deposit the penalty amount within 20 days.

2. While directing notice to issue in the petition on 12th August 1998, this Court restrained the Respondents from encashing the bank guarantee furnished by the Petitioner to the Respondents as a condition for grant of licence.

3. The Petitioner states that M/s Anil International made an application for grant of duty free licence and pursuant thereto a Duty Free Licence dated 30th October 1989 was issued to the said firm enabling it to import CRCA coils secondary grade restricted both by value and quantity. The maximum value that could be imported was Rs.50,00,000/- and the maximum quantity was 895.400 metric tonnes (MTs). The export obligation was that the Petitioner should export 814 MTs diesel engine parts and accessories of the value of Rs.75,00,000/-.

4. On 7th September 1993 a notice was issued to M/s Anil International having its address at 236, Industrial Area, Ludhiana under Section 4 (L) of the IEC Act asking it to show cause why penalty should not be imposed on the firm and its partners under Section 4(1)(i)(a) of the IEC Act read with Section 20(2) of the FTDR Act on the ground that the firm had failed to fulfil its export obligations in terms of the advance licence dated 30th October 1989. The notice stated that the Adjudicating Authority had reason to believe that the duty free imported goods valued at Rs. 50 lakhs had been utilized by the firm otherwise than in accordance with the conditions of the advance licence.

5. The firm replied on 6th October 1993 stating that its entire records of imports and exports with reference to the licence in question were in the custody of the Central Bureau of Investigation (CBI), New Delhi and, therefore, it was not possible for the firm to reply to the show cause notice. It requested that the notice be kept in abeyance and undertook to send a reply as soon as the records were received back from the CBI.

6. Further letters dated 24th January 1994, 28th November 1994 and 22nd July 1996 were sent to the firm asking it to reply to the show cause notice. The adjudication order dated 4th June 1997 of the ADGFT notes the fact that the last two mentioned letters dated 28th November 1994 and 22nd July 1996 sent to the firm were received back with the remarks “No such person was available at the address.” The subsequent communication dated 17th January 1997 requiring the firm to appear before the ADGFT for a personal hearing on 10th March 1997 “was also received back with similar remarks of the postal authority.”

7. It appears that in the absence of any one appearing on behalf of the firm, the ADGFT proceeded to pass the adjudication order dated 4th June 1997 on the basis of the records. It was noticed that the firm has been utilizing the licence almost in full as far as its imports were concerned leaving a balance of only Rs.1,92,439/- in terms of cif value and 10.780 MTs in terms of weight. It was observed that the firm had failed to intimate the date of clearance of the first consignment which was a mandatory condition of the licence. Further the firm had exported only one consignment for free on board (fob) value of Rs. 1,35,000/- as on 12th December 1989. In the above cir