1989 (4) TMI 171 - HC - Customs

Summary

Issues:
Challenge to withdrawal of export entitlements under the Simplified Payment Scheme (SPS) for a specific period due to directors' association with a debarred firm.

Analysis:
The petitioners, a private limited company exporting processed foods, faced withdrawal of export entitlements under the SPS due to directors' association with a debarred firm. The withdrawal was based on the debarment of the directors/partners of the petitioners' company from receiving licenses under the Import policy. However, the department later withdrew the orders against the petitioners after the directors resigned. The petitioners challenged the withdrawal of benefits for the period 1st April 1983 to 31st March 1985, arguing that the debarment did not apply to them as a separate legal entity.

The court acknowledged the petitioners' contentions, emphasizing that the debarment order was against the firm and its partners, not the petitioners. The court found the withdrawal of benefits contradictory, especially since the petitioners were allowed to apply for cash assistance under the normal scheme despite the debarment issue. Referring to a similar case, the court highlighted that when the Import Control Order clauses were not applied, the department did not contest the petition. Therefore, the court quashed the withdrawal of SPS benefits for the relevant period.

The respondents argued that the delay in filing the petition and the association of debarred partners with the petitioners warranted dismissal. They contended that the corporate veil should be pierced due to the partners' actions. However, the court rejected these arguments, noting that no departmental action was taken against the petitioners, and the entitlement was clear. The court emphasized that technical grounds like delay or appeal procedures should not defeat the petitioners' legitimate rights.

In conclusion, the court ruled in favor of the petitioners, making the rule absolute and granting them costs. The judgment highlighted the importance of upholding the petitioners' entitlements under the SPS and rejected the arguments for dismissal based on delay or corporate veil piercing.