2001 (5) TMI 61 - HC - Customs

Summary

Issues:
Challenge to letter of demand for duty saved amount and surrender of special Import Licence, challenge to cancellation of Letter of Permission (LOP), invocation of Bank Guarantee, violation of principles of natural justice in cancellation of LOP.

Challenge to Letter of Demand and Surrender of Licence:
The petitioner challenged a letter demanding payment of duty saved amount, interest, and surrender of a special Import Licence due to alleged non-fulfillment of export obligation. The petitioner's project for manufacturing Color Computer Monitor Terminals in collaboration with a foreign firm received approval from the Reserve Bank of India and a license from the DGFT. The petitioner failed to discharge the export obligation, leading to a demand for payment. The petitioner argued that the demand and invocation of Bank Guarantee were not valid due to the subsuming of export obligations under the E.P.C.G. Scheme. The High Court held that the demand and invocation were premature and invalid, emphasizing the need for compliance with the terms of the Bank Guarantee and the subsumed export obligations.

Cancellation of Letter of Permission (LOP):
The petitioner's LOP was canceled without notice or opportunity to be heard, which the petitioner contended was in violation of natural justice. The cancellation was also deemed premature as the validity period had not expired. The High Court ruled that the cancellation lacked proper justification and violated principles of natural justice. The court set aside the cancellation order, emphasizing the importance of adhering to procedural fairness and the rule of law.

Invocation of Bank Guarantee:
The Bank Guarantee was invoked without meeting the necessary conditions, such as suffering loss or damage by the government and proper authorization by the DGFT. The court found the invocation to be illegal and invalid, as it did not comply with the terms of the Bank Guarantee. The court highlighted the need for the actual beneficiary to invoke the guarantee and the fulfillment of specified conditions for invocation. The court referenced relevant legal principles and previous Supreme Court decisions to support its ruling on the invalidity of the invocation.

Conclusion:
The High Court concluded that the invocation of the Bank Guarantee was illegal and set aside the cancellation of the LOP due to violations of natural justice and premature action. The court emphasized the importance of procedural fairness, adherence to contractual terms, and the rule of law. The petitioner was directed to keep the Bank Guarantee renewed as long as the LOP remained valid. No costs were awarded in the matter, and the signed copy of the judgment was to be provided to the concerned parties.