2020 (11) TMI 637 - HC - Customs

Gross overvaluation to fraudulently avail export benefits - Petitioner placed in the Denied Entity List (DEL) - Availment of fraudulent Special MEIS benefits - misdeclaration and forgery of documents - HELD THAT - Any refusal to grant, suspend or cancel any licence, certificate, scrip or any instrument bestowing financial or fiscal benefits, can only be by an order in writing . In fact, Section 9(4) expressly mandates that suspension or cancellation of any licence, certificate, scrip or any instrument bestowing financial or fiscal benefits can only be for good and sufficient reasons . The requirement of giving reasons cannot therefore, be dispensed with and is mandatory - Even otherwise, it is now firmly established that even an administrative decision having civil consequences must record reasons as a mandatory compliance with principles of Natural Justice. This is especially so where the order itself is appealable, like in the present case. Even otherwise, the necessity of giving reasons cannot be undermined. In the present case, the learned counsel for the respondents has admitted that except for the reference on the website to the Impugned Order dated 10.01.2020, there is no separate order dated 10.01.2020 recording reasons for placing the petitioner on DEL. Therefore, in the so-called order there is no reference to the Show Cause Notices and to the replies submitted by the petitioner and how they have been dealt with and appreciated by the Authority. In fact, it gives no reason except stating that the Firm is under D.R.I Ludhiana Investigation . In terms of the Guidelines reproduced hereinabove, the same cannot be a sufficient reason as the respondent/Authority is to apply its independent mind to the allegations against the petitioner. The respondent admits that barring receiving a reference/request dated 04.09.2019 from the DRI, it has no other material to proceed against the petitioner. The reference/request itself is cryptic. The Show Cause Notice was for availing Special MEIS benefits fraudulently by mis-declaration and forgery of documents . The petitioner in its reply had categorically submitted that it had not claimed or submitted any documents for grant of Special MEIS benefits till date. The petitioner had also requested for a copy of the communication received from DRI to understand the background for the proposed action. The Impugned Order dated 10.01.2020 does not show any application of mind to these submissions as the order contains no reasons - Impugned order set aside. The submission of the learned counsel for the respondents that the Impugned Order is interim in nature and therefore principles of Natural Justice can be dispensed with cannot also be accepted. Impugned order set aside - petition allowed.

Summary

Issues Involved:
1. Legality of the Show Cause Notice dated 08.11.2019.
2. Validity of the order dated 10.01.2020 placing the petitioner in the Denied Entity List (DEL).
3. Alleged violation of Principles of Natural Justice.
4. Availability of an alternative remedy under Section 15 of the Foreign Trade (Development and Regulation) Act, 1992.

Issue-wise Detailed Analysis:

1. Legality of the Show Cause Notice dated 08.11.2019:
The petitioner challenged the Show Cause Notice on the grounds of vagueness and lack of specific allegations. The notice stated that the Directorate of Revenue Intelligence (DRI) was investigating the petitioner for "gross overvaluation to fraudulently avail export benefits" and requested not to issue any export incentives to the petitioner. The petitioner contended that it had not claimed any benefits under the Merchandise Exports from India Scheme (MEIS) and requested a copy of the DRI communication, which was not provided. The court found that the notice did not spell out the exact nature of the violation, making it vague.

2. Validity of the Order dated 10.01.2020:
The petitioner discovered in July 2020 that it had been placed in the DEL based on an order dated 10.01.2020, which was not separately communicated to them. The respondents admitted that no separate order existed. The court noted that the Guidelines for Maintaining the Denied Entities List (DEL) require a "speaking order" with reasons for placing a firm in the DEL, which was not provided in this case. The court found that the respondents failed to comply with the mandatory requirement of issuing a reasoned order.

3. Alleged Violation of Principles of Natural Justice:
The petitioner argued that the order was passed without supplying the documents relied upon and without affording an opportunity of hearing. The court emphasized that any administrative decision having civil consequences must record reasons as a mandatory compliance with the principles of Natural Justice. The court found that the respondents did not provide a reasoned order and did not offer a post-decisional hearing, violating the principles of Natural Justice.

4. Availability of an Alternative Remedy under Section 15 of the Foreign Trade (Development and Regulation) Act, 1992:
The respondents argued that the petitioner had an equally efficacious remedy in the form of an appeal under Section 15 of the Act. However, the court held that the availability of an alternative remedy cannot bar the maintainability of a petition under Article 226 of the Constitution where there has been a violation of the Principles of Natural Justice. The court noted that there was no order which could be challenged in appeal, as the so-called order dated 10.01.2020 did not exist in a reasoned form.

Conclusion:
The court set aside the Impugned Order dated 10.01.2020 and the Show Cause Notices dated 08.11.2019 and 02.12.2019 due to the lack of a reasoned order and violation of the principles of Natural Justice. The respondents were granted liberty to pass a fresh order in accordance with the law. The respondents were also directed to pay costs of ? 25,000/- to the petitioner.