Shri Parimal B. Patel, New Adarsh Society, Sanala Road, Morbi Dist.Rajkot ORDER-IN-APPEAL

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Lambert Gibbs
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1 GOVERNMENT OF INDIA MINISTRY OF COMMERCE OFFICE OF ADDITIONAL DIRECTOR GENERAL OF FOREIGN TRADE NISHTA BHA VAN (NEW CGO BLDG.), NEW MARINE LINES, CHURCH GATE, MUMBAI APPEAL DIVISION Appeal File No: 08/01l144/00087/AM17/A'badl Date: Name of the Appellant: Shri Parimal B. Patel, New Adarsh Society, Sanala Road, Morbi Dist.Rajkot ORDER-IN-APPEAL Order appealed against: Order-in-Original No. 24/36/ /AM05 dated Passed by Jt. DGFT, Rajkot Passed by: Present on behalf of Appellant Dr. Sonia Sethi, Appellate Authority and Additional Director General of Foreign Trade, Mumbai Shri. Pankaj D. Rachchh, Advocate The relevant facts of the case in brief are as follows: Shri Parimal B. Patel, resident of Madhuvan, New Adarsh Society, Sanala Road, Morbi , Rajkot, (one of the directors of MIs. Sogo Ceramics Ltd., Rajkot) has filed this appeal on under Section 15 of the Foreign Trade (Development & Regulation) Act, 1992, against the Order-in-Original No. 24/36/ /AM05 dated passed by Jt. DGFT, Rajkot. 2. MIs. Sogo Ceramics Ltd., Morbi, Gujarat I had applied and obtained an EPCG authorization No dated for a duty saved amount of Rs to import Capital Goods for the manufacture and export of Vitrified Granito Tiles. One of the conditions of the authorization was that the firm would fulfil export

$\ obligation for FOB value of USD.418377.56 block wise as stipulated it! the authorization/licence within a period of 8 years from the date of issuance of the licence.$

2 \ obligation for FOB value of USD block wise as stipulated it! the authorization/licence within a period of 8 years from the date of issuance of the licence. In addition, the firm was also required to maintain Specifie Average Export Performance. The 1st block expired on The appellant Shri Parimalbhai Bhanjibhai Patel, was one the directors on the date of submission of application and on the date of issue of EPCG authorization. Shri Parimalbhai B. Patel was required to ensure fulfilment of export obligation. As per the rules, they should have furnished the documents for fulfilment of proportionate Export Obligation within 3 months of expiry of the block year. Appellant failed to submit the documents towards fulfilment of export obligation; they were placed under Denied Entity List (DEL) on by the Licensing Authority. And by the same order, they were also again given a further chance to furnish the prescribed documents in proof of fulfilment of export obligation and annual average export performance or to get the case regularized by payment of applicable custom duty along with interest thereon. 3. Even after placing them under DEL, they didn't submit the export documents towards fulfilment of export obligation and therefore a Show Cause Notice (SCN) dated was issued asking them to show cause as to why action under Section 11(2) of the Foreign Trade (Development & Regulation) Act, 1992should not be taken against them for imposition of fiscal penalty for their failure to comply with the conditions of the licence. An opportunity of Personal Hearing was also offered to them. A copy of the show cause notice was also sent to all the Directors including Shri Parimal B. Patel, (the Appellant). The company or the directors did not bother to submit the prescribed documents and failed to fulfil the export obligation against the above referred licence thereby violating the conditions of the licence which tantamount for action under Section 11(1) and are, therefore, liable for penalty under section 11(2) and (7) of Foreign Trade (Development& Regulation) Act, 1992,as amended. 4. The firm and its directors violated the conditions of the licence; the adjudicating authority imposed a penalty of Rs 59,10,000 on licensee Mis. Sogo Ceramics Pvt. Ltd., Rajkot and Rs /- on each of the Directors of the firm for non-fulfillment of export obligation. 5. None of the directors furnished any reply or availed the opportunity of personal hearing allowed to them. Adjudicating Authority found each of the directors guilty of violation of conditions of the licence under Section 11(1) & (2) of the Foreign Trade (Development & Regulation) Act, The Adjudicating Authority imposed a penalty of Rs /- on each of the Directors for non-fulfilmentof export obligation. 6 Aggrieved by the above said Order-in-Original, the Appellant Shri Parimalbhai Bhanjibhai Patel, has preferred this appeal dated (filed on ) in his individual capacity stating that penalty under Section 11 (2) can be imposed only 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 there under or the export and import policy.

3 7 The appellant was given an opportunity of Personal Hearing on vide letter dated by the Add!. DGFT, Ahmedabad. The Advocate of the Appellant vide letter dated had requested to postpone the Personal Hearing. The advocate of the appellant vide letter dated was informed to attend Personal Hearing on The appellant or the Advocate of the appellant did not attend the Personal Hearing granted to them on In the interest of natural justice, a last opportunity of personal hearing was granted to the appellant on Another opportunity of personal hearing was also granted to the appellant on Shri P. D. Rachchh, Advocate on behalf of appellant, director of the firm, appeared for personal hearing before me on the said date. He contended that the director is not liable for penalty. The appellant further contended that provisions of Section II of FT (D&R) Act, 1992 are not applicable in the present case. The appellant quoted precedence of judgment of Hon 'ble High Court of Delhi. It is stated in the appeal that penalty under Section II (2) can be imposed only on the person who makes or abets or attempts to make any export or import in contravention of any provisions of the FT(D&R) Act, 1992 or Rules or Orders made there under or the export and import policy. Findings: After hearing the appellant and going through the Adjudicating Order as well as documents available on record and after due application of mind, I, find that the:- A. It is pertinent to state here that under the erstwhile Companies Act, 1956, there was no specific provision governing the liability of a Director. However, as per the followingamongst other decisions, laid down by various Courts, a director was held to be liable for offences committed during his tenure. In the case of Sunil Bharti Mittal vis CBI (Appeal No. 34 of 2015), the Supreme Court, while discussing the circumstances where a DirectorlPerson in-charge of the affairs of the company can be prosecuted for the acts of a Company, observed that "No doubt a corporate entity is an artificial person which acts through its officers, directors, managing director, chairman etc. If such a company commits an offence involving mens rea, it would normally be the intent and action of that individual who would act on behalf of the company When the company is the offender, vicarious liability of the Directors cannot be imputed automatically, in the absence of any statutory provision to this effect" Therefore, a Director can be made liable if:- (i) (ii) (iii) (iv) Relevant Statute lays down the provisions for imposing liability on a director or circumstances exists that warrant lifting of Corporate veil, A specific director is found responsible for relevant functions of the Company leading to the circumstances for lifting of corporate veil Evidence that such Director has used the Company for fraudulent purposes or personal gains is brought on record. EPCG Authorization No dated was issued with Export Obligation Period of8 years valid up to The Director

4 Shri Parimalbhai B. Patel was liable and responsible for ensuring fulfilment of Export Obligation. It was his liability and duty to ensure fulfilment of Export Obligation. He failed and neglected to make arrangements for fulfilment of Export Obligation. The SCN dated was also made available to all individual directors including Shri Parimalbhai Patel. He was also given an opportunity of personal hearing before adjudicating authority as at Para 6 of Show Cause Notice dated Due process was followed. The appellant Shri Parimal B. Patel is still holding the position of Director as per IEC data base.. B. It is found that EPCG Authorization No dated was issued with Export Obligation Period of 8 years valid up to The Director Shri Parimalbhai B. Patel is liable and responsible to ensure fulfilment of Export Obligation. It was his liability and duty to ensure fulfilment of Export Obligation. He failed and neglected to make arrangements for fulfilment of Export Obligation. The SCN dated was also made available to all individual directors including Shri Parimalbhai Patel. He was also given an opportunity of personal hearing before adjudicating authority as at Para 6 of the Show Cause Notice dated Due process was followed. The appellant Shri Parimal B. Patel is still a Director as per IEC data base.. C. Appellant failed to submit the export documents towards fulfilment of export obligation even after the expiry of Export Obligation Period. Default of nonfulfilment of export obligation has occurred during the tenure of Shri Parimal B. Patel, as a director, who is responsible for his act which tantamount to violation of Section 11(2)of Foreign Trade (Development& Regulation)Act, D. Submission made by the appellant is not acceptable. In view of the above findings, there is absolutely no justification to interfere with the Order-in-Original passed by Adjudicating Authority and, therefore, in the interest of justice, 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; ORDER Appeal stands rejected (Dr. Soni ethi) Additional Director General of Foreign Trade

5 I To, 1. Mis. Sogo Ceramics Pvt. Ltd., Old Ghutu Road, Morbi, Rajkot , GUJARA T. 2 The appellant Shri Parimal B. Patel. 3. DGFTwith ref. to their file No , 397&398/201 2-J 3/ECA-I 4. Licensing Authority (R.A, Rajkot) 5. R. L.A. Ahmedabad, 6. Computer Cell (R.A, Mumbai)

File No.9/229/AM-14/ECA Date: ORDER IN ORIGINAL

File No.9/229/AM-14/ECA Date: ORDER IN ORIGINAL Government of India MINISTRY OF COMMERCE & INDUSTRY OFFICE OF THE JOINT DIRECTOR GENERAL OF FOREIGN TRADE 6 TH FLOOR, RESHAM BHAWAN, LAL DARWAJA, SURAT-3953 E-mail : surat-dgft@nic.in File No.9/229/AM-4/ECA