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Addl Director General of Foreign trade sets aside fiscal penalty of ten crores levied on the assessee and also considers bill of export in substitution to the certificate issued by the special economic zone pertaining to EPCG scheme.


An appeal was filed under section 15 of Foreign Trade (Development and Regulation) Act, 1992 before the Additional Director General of Foreign Trade, Chennai Zone challenging an exparte order passed by the Adjudicating Authority wherein the assessee company was placed under Denied Entity List (DEL) and a fiscal penalty of ten crores was levied upon them. This order came to be passed during the peak of the pandemic.

The reasoning for passing an exparte order was the the non-fulfillment of discharge obligation availed by the assessee company under the Export Promotion Capital Goods (EPCG) Scheme. This was inferred only because the assessee was not in a position to produce a bill of entry insofar as a particular year was concerned. However the same was substituted and filed by way of a certificate issued by the SEZ confirming the fulfilment of the export obligation.

In the order-in-appeal, the Appellate Authority concluded that even though the assessee company discharged the export obligation however due to the non-availability of the Bills of Exports, the Adjudicating Authority proceeded to decide the case without affording an opportunity of hearing, thereby in violation of fundamental principles of natural justice.

As a result, the Appellate Authority set aside the order-in-original levying the fiscal penalty of ten crores and remanded the case to the Adjudicating Authority for de-novo examination and to pass appropriate orders. The Appellate authority expressed its finding on being convinced with the discharge of the export obligation by the assessee after the perusal of the documents.

Government of India
M/o Commerce and Industry
Office of the Zonal Additional Director General of Foreign Trade
26 Haddows Road,Shastri Bhavan Annexe
Phone:044-28283400/CHENNAI – 600006

F.No. 04/95/A(7)/ECA/AM 22


VME Precast Pvt. Ltd (Appellate Authority DGFT)


M/s VME Precast Pvt. Ltd. Chennai 600037has filed this Appeal under Section-15 of the Foreign Trade (Development & Regulation) Act, 1992, against Order-in-Original 04/21/021/00547/AM 10 dated 15.03.2021.

M/s VME Precast Pvt. Ltd. Chennai was granted an EPCG authorisation 0430007947 dated 10.12.2009, for a duty saved value of Rs. 2,57,78,547/- for import of capital goods as given in the authorisation, with an obligation to export ” Hollow Core Slabs etc” for a FOB value of US $ 42,43,382.22, over and above the fixed annual average. The firm had not submitted the export obligation fulfilment documents even after the expiry of the export obligation period. A Show Cause Notice was issued with an opportunity of Personal Hearing, calling for explanation for non-submission of the documents. The firm in its reply sought 30 days time to submit the same which was granted. After a month again the firm asked more time as Bill of Exports was not available. After grant of further such time, the firm was unable to submit the documents. Hence the firm was placed in DEL and Order in 15.03.2021 imposing a penalty of Rs. 10 crores was issued..

Aggrieved by the above Order in Original, the firm has filed the appeal seeking to set aside the Order in Original as the export obligation has been fulfilled. The appellant has stated in the appeal that they did not know the importance of the Bill of Export document had made efforts to obtain it. It is stated that a letter in lieu of Bill of Export has been obtained from the SEZ and requested it to be taken into consideration.

A Personal Hearing was granted to the firm on 12.09.2022. The appellant had authorised advocates A.Shabnam Banu and Sushil Sarayu to attend on their behalf. During the Personal Hearing, stated that though the export obligation had been fulfilled and documents were submitted the same was not considered due to absence of Bill of Exports document. As the same could not be obtained even in spite of best of efforts from the SEZ, a letter in lieu of the same certifying supplies to the SEZ units has been obtained and requested to set aside the Order in Original. It was further stated that even though they had replied to the Show Cause Notice, the opportunity of Personal Hearing could not be availed, due to the pandemic situation prevailing. Hence the Adjudication Order had been issued ex-parte, without them being able to present their case in person and explain the facts. As such they contended that the principles of natural justice has also not been adhered to while issue of the Order in Original and hence sought to set aside the Order.

I have gone through the appeal and the submissions made during the Personal Hearing. The main issue in this case is the non-production of Bill of Export document. The appellant has made constant efforts with the SEZ to obtain it after coming to know that the document is vital for supplies to SEZ units. A letter from the DC MEPZ certifying that the supplies to SEZ units had indeed taken place, has been issued based on ARE-1 submitted. Realisation of proceeds through supplies to SEZ has been evidenced by Appendix 22-B. It is also pertinent to point out that principles of natural justice has not been followed in the instant case due to the reason that the Hearing could not be availed because of prevailing pandemic situation and the Order has been passed ex-parte. The appellant appears to have fulfilled the export obligation through supplies to SEZ units which has been certified by the letter from DC MEPZ,and hence there does not seem to be loss to the Government exchequer or an intent to defraud the Government.

I, therefore, in exercise of the powers vested in me under Section 15 of the Foreign Trade (Development &Regulation ) Act, 1992, as amended, pass the following Order:


F.No. 04/95/A(7)/ECA/2022

Dated 19 /09/2022

Order in Original imposing penalty and placing the firm in DEL is set aside.

Case is remanded back to to Adjudicating Authority for denovo examination and pass appropriate orders.

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April 2024