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CA Final · Indirect Tax Laws · Foreign Trade Policy

Kaveri Exports Pvt Ltd, Chennai, exported goods worth ₹8,00,000 in breach of a condition of the Foreign Trade Policy. The Adjudicating Authority proposes a penalty under Section 11(2) of the FT(D&R) Act, 1992. What is the correct range of penalty?

The penalty is at least ₹10,000 and at most five times the value of the goods, whichever is more. Five times ₹8,00,000 gives ₹40,00,000 as the ceiling. Section 11(2) applies to exports made in contravention of the Act, rules, orders or the Foreign Trade Policy.

  1. ANot less than ₹10,000 and not more than five times the value of goods, whichever is more, i.e. up to ₹40,00,000Correct
  2. BNot less than ₹10,000 and not more than the value of goods, i.e. up to ₹8,00,000
  3. CNot less than ₹10,000 and not more than ₹5,00,000 irrespective of the value
  4. DNot less than ₹8,00,000 and not more than ₹40,00,000

Explanation

Section 11(2) prescribes a penalty of not less than ₹10,000 and not more than five times the value of the goods, whichever is more. Five times ₹8,00,000 is ₹40,00,000, so the maximum is ₹40,00,000. The option limiting it to the value of goods understates the multiple.

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