2016 (9) TMI 776 - HC - Customs

Court Quashes Order Cancelling DEPB

M/s Supreme Castings Ltd. Versus Joint Director General of Foreign Trade, Green Field, Ludhiana And Another

The court allowed the writ petition, quashing the order that cancelled the DEPB and imposed a penalty. It held that the DEPB could not be cancelled after ... Cancellation of DEPB license - Section 9(4) of the 1992 Act - imposition of penalty under Section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992 - export of consigmnent of hand tools - Bank Certificate of Export Realization - licence as defined in Section 2 (g) - issue, suspension and cancellation of licence - Section 9 - Chapter 7 of the Export and Import Policy, 1997-2002 - Notification No. 1(RE-99)/1997-2202 dated 31-3-2000 - validity of DEPB licence - Held that: - the DEPB shall be valid for a period of 12 months from the date of issue. The DEPB was issued on 25.8.2000. Thus, it remained valid only till 24.8.2001. The show cause notice for imposition of penalty u/s 11(2) of the 1992 Act was issued on 20.10.2003. Thereafter another show cause notice- cum-corrigendum was issued on 5.7.2004 proposing to cancel the DEPB ab initio. It was thereafter that the order dated 30.11.2004 was passed cancelling the DEPB imposing penalty of ₹ 2,00,000/- on the petitioner. All these actions are after the expiry of the period of validity of the DEPB. Once the period of validity of the DEPB has expired no action to cancel or withdraw it can be taken because then there is no ‘DEPB' in existence to be cancelled and on which the cancellation order can operate. Cancellation of DEPB in such a situation is a meaningless order and can have no consequence. Section 9(4) enables the Director General or officer authorised by him to cancel or suspend the licence - in Section 9(4) there is no power to cancel or suspend the licence retrospectively. The order of cancellation of the DEPB being illegal and without jurisdiction the penalty imposed being a consequence thereof also cannot sustain - petition allowed - decided in favor of petitioner. Issues Involved:1. Whether the DEPB is a 'scrip' or a 'licence' and its implications under Section 9(4) of the Foreign Trade (Development and Regulation) Act, 1992.2. Whether the DEPB could be cancelled after the expiry of its validity period.3. Whether the cancellation of DEPB should be limited to the disputed amount for one shipping bill only.Detailed Analysis:Issue 1: Whether the DEPB is a 'scrip' or a 'licence' and its implications under Section 9(4) of the Foreign Trade (Development and Regulation) Act, 1992.The petitioner argued that the DEPB is a 'scrip' and not a 'licence' and thus could not be cancelled under Section 9(4) of the 1992 Act, which only allowed for the suspension or cancellation of a licence. The term 'licence' was later amended in 2010 to include 'certificate, scrip or other instrument bestowing financial or fiscal benefits,' but this amendment is not retrospective. The respondent countered that the DEPB is indeed a licence, and the 2010 amendment is clarificatory, implying that the power to cancel DEPB existed even before the amendment. The court examined the definitions and provisions under the 1992 Act and the 2010 amendment, as well as the nature of DEPB as explained in various Supreme Court judgments.Issue 2: Whether the DEPB could be cancelled after the expiry of its validity period.The court noted that the DEPB in question was issued on 25.8.2000 and remained valid until 24.8.2001. The show cause notice for the imposition of penalty was issued on 20.10.2003, and the cancellation order was passed on 30.11.2004, both after the expiry of the DEPB's validity. The court held that for something to be cancelled or suspended, it must be existing or subsisting. Since the DEPB had already expired, it was no longer in existence and thus could not be cancelled. The court cited the case of M/s Stella Industries (P) Ltd. Vs. State of Haryana, which held that an eligibility certificate could not be withdrawn after its currency had expired. Similarly, the court concluded that the DEPB could not be cancelled after its validity period had expired.Issue 3: Whether the cancellation of DEPB should be limited to the disputed amount for one shipping bill only.The petitioner contended that the dispute was only in respect of one of the three shipping bills and that the cancellation should have been limited to the disputed amount of Rs. 1,00,980/- instead of the entire DEPB amount of Rs. 9,30,514/-. However, the court did not find it necessary to opine on this issue, given its decision on the second issue.Conclusion:The court allowed the writ petition, quashing the order dated 30.11.2004, which cancelled the DEPB and imposed a penalty of Rs. 2,00,000/-, and the order dated 07.02.2006, which dismissed the petitioner's appeal. The court held that the DEPB could not be cancelled after its validity period had expired, rendering the cancellation order and the penalty imposed illegal and without jurisdiction.