Retrospective cancellation of expired DEPB scrips is impermissible, and any consequential penalty cannot survive.

A DEPB scrip is a time-bound fiscal benefit and, once its validity expires, it ceases to have operative legal value. The power to suspend or cancel a licence under Section 9(4) of the Foreign Trade (Development and Regulation) Act, 1992 does not permit retrospective cancellation of an instrument that has already expired in law and in practice absent express statutory authority. On that basis, cancellation of the DEPB after expiry was held illegal, and the penalty imposed consequentially was unsustainable.

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Issues: Whether a DEPB scrip could be cancelled ab initio after the expiry of its validity and whether the consequential penalty could survive.

Analysis: The DEPB scheme granted only a time-bound fiscal benefit and, on expiry of its validity, the scrip ceased to have operative value. Power under Section 9(4) of the Foreign Trade (Development and Regulation) Act, 1992 to suspend or cancel a licence could not be exercised against an instrument that had already ceased to exist in practical and legal terms. The provision did not authorise retrospective cancellation in the absence of an express statutory mandate. Since the cancellation was without jurisdiction, the penalty imposed as a consequence thereof also could not stand.

Conclusion: The cancellation of the DEPB after expiry of its validity was illegal and the consequential penalty was unsustainable.

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