Case Title – M/s. Embio Limited Vs. Director General of Foreign Trade & Ors. 2024 INSC 408
Case Number – Civil Appeal No. 6394/2024 Arising Out of Special Leave Petition (C) No. 4974/2021
Dated on – 13th May, 2024
Quorum – Justice Abhay S. Oka
FACTS OF THE CASE
In the case of M/s. Embio Limited Vs. Director General of Foreign Trade & Ors. 2024 INSC 408, the former known Emmellen Biotech Pharmaceuticals Limited, M/s. Embio Limited instituted a Writ Petition challenging the penalty imposed under the Foreign Trade (Development and Regulation) Act, 1992. The reason for the imposition of the penalty was the non-fulfilment of export obligations by the Karnataka Malladi Biotics Limited, which had acquired an Export Promotion Capital Goods License. The Karnataka Malladi Biotics Limited, due to its status as a sick unit under the Sick Industrial Companies (Special Provisions) Act, 1985, was unable to undertake its export obligations, which led to the penalty. The Appellant, in this case, contended that a rehabilitation scheme sanctioned by the BIFR waved the customs duty payable on account of non-fulfilment of the export obligations.
ISSUES
The main issue of the case whirled around whether the imposed penalty under Section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992 was justifiable due to the non-fulfilment of the export obligations?
Whether the Appellant was entitled to the benefit scheme, inclusive of the waiver of the customs duty?
LEGAL PROVISIONS
Section 11 of the Foreign Trade (Development and Regulation) Act, 1992 prescribes the Contravention of provisions of this Act, Rules, Orders, and Foreign Trade Policy
Section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992 prescribes that where any person makes or abets or attempts to make any export or import in contravention of any provision of this Act or any rules or orders made thereunder or the foreign trade policy, he shall be liable to a penalty of not less than ten thousand rupees and not more than five times the value of the goods or services or technology in respect of which any contravention is made or attempted to be made, whichever is more
Section 3(1)(o) of the Sick Industrial Companies (Special Provision) Act, 1985 prescribes the Definition of the term “Sick Industrial Company”
Section 18 of the Sick Industrial Companies (Special Provision) Act, 1985 prescribes the Preparation and Sanction of Schemes
CONTENTIONS OF THE APPELLANTS
The Appellants, through their counsel, in the said case contented that the penalty was unlawful as there was a waiver of the customs duty under the rehabilitation scheme sanctioned by the BIFR.
The Appellants, through their counsel, in the said case contented that the Section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992 does not cover the failure to fulfil the export obligations as a ground for imposition of the penalty.
CONTENTIONS OF THE RESPONDENTS
The Respondents, through their counsel, in the said case contented that the penalty was justifiable as the Karnataka Malladi Biotics Limited had failed to fulfil its export obligations under the license.
The Respondents, through their counsel, in the said case contented that the rehabilitation scheme did not include a waiver of the penalty for non-fulfilment of the export obligations.
COURT ANALYSIS AND JUDGMENT
The court in the case of M/s. Embio Limited Vs. Director General of Foreign Trade & Ors. 2024 INSC 408, observed that it was an error on the part of the Division Bench and the Single Judge Bench in recording that the first Writ Petition was withdrawn without reserving the liberty to file a fresh one. The court noted that the rehabilitation scheme provided for a waiver of customs duty but did nit explicitly waive the penalties for the non-fulfilment of export obligations. The court analysed the Section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992, concluding that the Act applies to the contraventions related to the exports or imports, not merely failures to fulfil obligations. The court stated that as there were no accusations of contravening the Foreign Trade (Development and Regulation) Act, 1992 or policies, and that the penalty was based solely on the non-fulfilment of export obligations, the demand for penalty could be sustained. The court, in this present case, consequently, set aside the judgments of the lower courts and the penalty imposed, allowing the appeal with no costs.
“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”
Judgement Reviewed by – Sruti Sikha Maharana
Click Here to View Judgment
