Foreign Trade (Development and Regulation) Act, 1992 - Imposition of penalty for non-fulfillment of export obligation under an Export Promotion Capital Goods Licence - Interpretation of Section 11(2) of the FT Act - Effect of rehabilitation scheme under the Sick Industrial Companies (Special Provisions) Act, 1985.

Introduction

The appellant filed a Writ Petition challenging the imposition of a penalty under Section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992 (FT Act), which was dismissed by the Karnataka High Court. A subsequent Writ Appeal against the High Court's order was also dismissed.

Factual Aspect

• Background of Karnataka Malladi Biotics Limited (formerly Emmellen Biotech Pharmaceuticals Limited) obtaining an Export Promotion Capital Goods Licence (licence) enabling concessional customs duty for importing capital equipment.
• Failure to fulfill export obligations led to a demand notice and subsequent penalty imposition by the Commissioner of Customs.
• Rehabilitation scheme sanctioned under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) provided for a waiver of customs duty but not penalty.

Submissions

• Appellant's counsel argued that the rehabilitation scheme's duty waiver precluded penalty imposition and that the withdrawal of the earlier Writ Petition reserved liberty to file a fresh one.
• Respondents contended that contravention of licence terms justified penalty imposition.

Consideration of Submissions

• Court noted that the withdrawal of the first Writ Petition explicitly reserved liberty to file a fresh one, contrary to lower court findings.
• Rehabilitation scheme waived only customs duty, not penalty, as evidenced in the Order-in-Original.
• Interpretation of Section 11(2) of the FT Act required strict construction; no allegation of export/import contravention under this section.
• Court set aside lower court judgments/orders and the penalty imposition.

Conclusion

The appeal was allowed, and no costs were ordered.