By TIOL News Service

AHEMDABAD, NOV 09, 2017: THE Assistant Director General of Foreign Trade, under the instructions of the Joint Director of Foreign Trade, issued a SCN show-cause notice dated 25.02.2013 to the petitioner pointing out that the petitioner was granted 21 scrips for a total credit of Rs. 211.61 crores under DFCE scheme which was obtained fraudulently by misstating the facts that the company had not included the re-export of the imported goods for claiming such benefits and had utilized the benefits to import goods such as Gold and Silver which were not permitted to be imported under DFCE scheme.

It was averred that the company had obtained such scrips by making mis-representation and mis-declaration suppressing the fact that actual importation and re-export of the same was done with ulterior motive to gain undue benefit of the scheme for the goods which were otherwise ineligible for such benefits.

Alleging that the above was in violation of para 3.7.2.1 of Export & Import Policy 2002-07 read with relevant notifications, the petitioner were issued a SCN seeking -

i) Ab-initio cancel the above mentioned said DFCE scrips (issued under for Status Holder Scheme of Exim Policy 2002- 2007, as amended ) as per section 9(2) of the FTDR Act, 1992.

ii) Refusal of further licenses/benefits/authorizations to you and any other company in which the Directors of this company is a Proprietor/Partners or Director as per Rule 7 FTDR, 1993.

iii) Recovery of all such benefits obtained by you which are ineligible under the said Scheme.

iv) Imposition of fiscal penalty under section 11(2) of the FTDR Act, 1992.

The Joint Director of Foreign Trade passed an orderon 30.10.2013 accepting the petitioner's contentions and dropping the proceedings.

The DGFT initiated revision proceedings in respect of the said order on the ground that - the Joint Director of Foreign Trade did not have pecuniary jurisdiction to adjudicate the show-cause notice since his powers did not exceed monetary limit of Rs. 25 crores as laid down in the notification dated 13.06.2013 and second was that the order-in-original suffered from various infirmities.

The petitioner contested the SCN issued in revisionary proceedings.

The Director of Foreign Trade passed the impugned order dated 24.08.2015 and held that the Joint Director of Foreign Trade did not have authority to act as the adjudicating authority as the pecuniary limit involved crossed Rs. 25 crores, as laid down by the notification dated 13.06.2013.

This order has been challenged before the Gujarat High Court.

The impugned notification reads -

In exercise of the powers conferred by section 13 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992) and in supersession of the earlier Notifications mentioned below, the Central Government hereby authorizes the officers specified in column 2 of the table below for the purposes of exercising powers under section 13 read with section 11 of the FT(DR) Act,1991, subject to the limits specified against such officers in the corresponding entry in column 3 of the said Table, namely-

After considering the submissions made, the High Court adverted to the provisions of sections 5, 6, 9, 11 & 13 of the FT(DR) Act and the notification dated 13.06.2013 and observed -

++ The authorized officer would be exercising powers under the delegated authority. There is no pecuniary limitation in exercising such powers. Nevertheless, as delegator, the Director General would still retain the concurrent authority to exercise such power. On the other hand, the penalty under sub-section (2) of section 11 of the Act would be imposed by the adjudicating authority, as specified in section 13. Section 13 refers to the notification which the Central Government may issue authorizing the Director General or other officers.

++ In plain terms thus, the Joint Director could not have adjudicated the question of penalty where the value of the goods or service or technology covered by the authorization exceeded Rs. 25 crores. This pecuniary limit therefore, would take the present matter out of the purview of the Joint Director.

++ The description in the notification is "value of goods or services or technology covered by an authorization issued, registration certificate/permits issued for import or export or..............". The DFCE scrips would also be in the nature of an authorization issued for import of goods. Merely because such scrips are not separately mentioned in the notification would not mean that the case would not be covered by the said notification. In absence of the scrip, it would not be open for the petitioner to make duty free imports of such goods. In essence therefore, the scrips were in the nature of authorization for import of goods.

++ If that be the conclusion, the order-in-original suffers from exercising jurisdiction which the said authority did not have. It is undisputed that he did rule on the question of imposition of penalty under section 11(2) of the Act.

++ It may be that he did not lack the jurisdiction insofar as the question of cancellation of license under section 9(4) is concerned. However, the notice issued was a composite notice. The issue of cancellation of license and imposition of penalty were closely interlinked. He could not have and, he in fact had not severed the notice into a part which he could adjudicate upon and one which he could not.

++ The Director General of Foreign Trade, therefore, committed no error in quashing the order under section 16 of the Act …

The interim relief was vacated and the petition was dismissed.

(See 2017-TIOL-2338-HC-AHM-CUS)