The court ruled that penalties cannot be imposed without proper notice and opportunity to be heard, especially when the entity is no longer operational.

ORDER

This Writ Petition has been filed challenging the order passed by the first respondent dated 30.01.2017 and 18.04.2017 and consequent notice of the third respondent dated 25.09.2018, thereby, issue demand to the tune of Rs.29,00,000/- (Rupees Twenty Nine Lakhs only) towards non fulfillment of export obligation in full against the authorisation. 2. Heard the learned counsel on either side and perused the materials available on record.

3. The petitioner is engaged in manufacturing paper cups and its machineries were imported from Abroad. The petitioner also availed benefit of deduction in import duty by obtaining Bank guarantee for the import duty with a condition to export paper cup. However, the manufacturing unit is not able to run profitably and it was closed in the year 2013. Therefore, there was loss to the petitioner and the export obligation could not be fulfilled by the petitioner. Hence, the first respondent release the demand to the tune of Rs.29,00,000/- (Rupees Twenty Nine Lakhs only) for non fulfillment of export obligation by the petitioner. In pursuant of the demand, the third respondent issued notice to recover the said sum under the Revenue Recovery Act.

4. The learned Senior Central Government Standing Counsel for the first respondent submitted that the petitioner's Company had obtained EPCG authorisation No.3530003207 dated 29.04.2008 for duty saved amount of Rs.1,46,132/- for import of capital goods with export obligation to export paper cup worth 28,901.26 US Dollars within a period of 8 years from the date of issue of authorisation. However, the petitioner also obtained EPCG authorisation No.3530003640, dated 17.04.2009, for duty saved amount of Rs.4,28,517/- for import of capital goods with export obligation to export paper cup worth 67.021.23 US Dollars within a period of 8 years from the date of issue of authorisation.

5. Thereafter, the petitioner had not submitted statements of exports evidencing fulfillment of export 50% of export obligation. Therefore, the petitioner was issued notice dated 06.05.2016, thereby informing that the export obligation period expired and requested to submit the document within 15 days. However, the said communication was refused to receive by the petitioner. Once again, the petitioner was served with notice dated 03.11.2016 under Section 14 for action under Section 11-(2)(3) (5)(6) and (7) of FT (DR) Act 1992 as amended in 2010 and also for action under para 2.17 of HBP and action under Rule 7(k) of the Foreign Trade Regulation Rules, 1993. The said notice was also returned as “refused”. Finally, on 30.01.2017, the first respondent passed an order for denied entities list, thereby, ordered no further authorisation and any other benefit shall be issued to the petitioner or to any other Company, in which the Directors of this Company are directly or indirectly involved in the day to day activities of that Company as per provisions of handbook ready with Rule 7(1) of the Foreign Trade (Regulation) Rules, 1993. The said notice was also returned as refused to receive and also left. Finally on 19.04.2017, the first respondent ordered to recover a sum of Rs.6,00,000/- and Rs.23,00,000/- towards penalty for non fulfillment of obligation against EPCG authorisation.

6. After receipt of the same, the petitioner did not respond and as such finally on 18.04.2017, the first respondent passed an order that the petitioner and the Directors are guilty of violating the condition of authorisation in question, thereby liable to pay penalty under Section Section 11-(2) of the Foreign Trade (Development and Regulation) Act, 1992 , to the tune of Rs.6,00,000/- and Rs.23,00,000/- towards non fulfillment of export obligation in full against the subject authorisation. Thereafter, the third respondent was directed to recover the said amount under the Revenue Recovery Act. In pursuant to the order passed by the first respondent, the third respondent issued notice to the petitioner / Directors under