2022 (8) TMI 13 - HC - Customs

Cancellation of the IEC - EPCG Scheme - levy of penalty - suspension of import export code as per section 11(7) of the Foreign Trade (Development and Regulation) Act, 1992 - no such show cause notice or personal hearing has been granted to the appellant prior to suspension of the license - violation of principles of natural justice - HELD THAT - It is not in dispute that the appellant was issued with import export licence bearing code no.0492020779, besides they had obtained four EPCG authorizations. Since they failed to comply with the export obligation, during the month of November, 2013, they were issued with show cause notice, proposing to levy penalty. In the very same show cause notice issued by the third respondent, there was a proposal made as to why the Import Export Code issued to the appellant should not be suspended under Section 11(7) of the FTDR Act, 1992 as amended during 2010. However, no show cause notice as contemplated under the Act, was issued and no opportunity was provided to the appellant, before suspending the IEC, by the third respondent. Taking note of the fact that the said show cause notice issued in November, 2013, culminated in an order dated 16.01.2014 passed by the first respondent and thereafter, no further proceedings were initiated against the appellant prior to cancellation of the IEC, the learned Judge while disposing the writ petition filed by the appellant, challenging the order of cancellation of IEC passed by the third respondent, has correctly directed the jurisdictional officer under the Act, to issue appropriate show cause notice to the appellant, within a period of 30 days from the date of receipt of a copy of the order; further directed the appellant to file a reply within a period of 30 days; and thereafter, directed the jurisdictional officer to pass appropriate order, in accordance with law, within a period of 90 days, after giving adequate opportunity of hearing to the appellant. Further, the interest of the appellant was rightly protected by extending the status quo order for a period of 90 days. Writ appeal dismissed.

Summary

Issues involved:
1. Violation of Section 8 of the Foreign Trade (Development and Regulation) Act, 1992 regarding cancellation of Import Export Code.
2. Failure to comply with export obligations leading to the suspension and subsequent cancellation of Import Export Code.
3. Lack of issuance of a separate show cause notice prior to the cancellation of the Import Export Code.
4. Applicability of show cause notice under Section 8 of the Act for cancellation or suspension of the license.
5. Direction of the jurisdictional officer to issue a fresh show cause notice and subsequent proceedings.

Analysis:
1. The appellant challenged the order of cancellation of their Import Export Code (IEC) issued by the third respondent, alleging a violation of Section 8 of the Foreign Trade (Development and Regulation) Act, 1992. The appellant contended that no show cause notice or personal hearing was provided before the suspension of the license. The learned Judge directed the jurisdictional officer to issue a fresh show cause notice, calling upon the appellant to explain why the IEC should not be cancelled, within specified timelines. The appellant sought to set aside this order, emphasizing the mandatory requirement of a show cause notice under Section 8 for cancelling or superseding the IEC license.

2. The Central Government Standing Counsel argued that the appellant failed to fulfill the export obligations specified in the authorizations, leading to the suspension of the IEC license. However, it was acknowledged that no separate show cause notice was issued before the cancellation of the IEC code. The learned Judge's direction to issue a show cause notice as per the Act was deemed appropriate, considering the circumstances. The appellant's failure to comply with export obligations was a key factor in the suspension and subsequent cancellation of the IEC license.

3. The appellant's case involved the issuance of multiple EPCG authorizations for import purposes, with corresponding export obligations. Despite a show cause notice in November 2013 proposing penalties and suspension of the IEC, no formal show cause notice under the Act was issued before the suspension by the third respondent. The learned Judge correctly directed the jurisdictional officer to initiate the necessary proceedings, including issuing a show cause notice, providing an opportunity for the appellant to respond, and ensuring compliance with legal procedures.

4. The learned Judge's order, which included timelines for issuing show cause notices, filing replies, and passing appropriate orders, aimed to safeguard the appellant's interests and ensure procedural fairness. The extension of the status quo order for a specified period further protected the appellant's position during the proceedings. The court upheld the learned Judge's decision, stating that it did not warrant any interference, given the procedural irregularities and the need for adherence to statutory requirements.

5. Subsequent to the court's order, a show cause notice was issued by the Joint Director General of Foreign Trade, allowing the appellant to present their case and contentions before the relevant authority. The dismissal of the writ appeal without costs signified the court's affirmation of the procedural steps taken and the direction provided by the learned Judge, ensuring a fair and lawful process for addressing the issues related to the cancellation of the IEC license.

This comprehensive analysis highlights the legal complexities, procedural irregularities, and the court's emphasis on adherence to statutory requirements in the context of the appellant's challenge regarding the cancellation of their Import Export Code.