Mandatory hearing and reasoned procedure govern cancellation of VKGUY duty credit benefits; action taken without them is unsustainable.

Communications cancelling VKGUY duty credit scrip benefits and demanding duty must comply with the mandatory safeguards under Section 9(4) of the Foreign Trade (Development and Regulation) Act, 1992 and Rule 10 of the Foreign Trade (Development and Regulation) Rules, 1993. The statutory scheme requires recorded reasons and a reasonable opportunity of hearing before suspension or cancellation, and audit-based action cannot bypass those procedural requirements. On the stated facts, the communications were treated as unsustainable for breach of natural justice and non-compliance with the prescribed procedure, and the matter was remitted for fresh action in accordance with law after hearing the petitioners.

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Issues: Whether the impugned communications cancelling the benefit and demanding duty could stand without compliance with the procedure under Section 9(4) of the Foreign Trade (Development and Regulation) Act, 1992 and Rule 10 of the Foreign Trade (Development and Regulation) Rules 1993.

Analysis: The petitioner had already availed the duty credit scrips under the VKGUY Scheme and they had been utilised by subsequent purchasers. The impugned action was taken on audit scrutiny, but the record showed no compliance with the mandatory procedural safeguards governing suspension or cancellation of the licence or benefit. The statutory scheme required recording of reasons and affording a reasonable opportunity of being heard, and the prescribed rule procedure was also required to be followed. Action taken without following those safeguards was inconsistent with natural justice.

Conclusion: The impugned communications were unsustainable and were set aside; the matter was remitted for fresh in accordance with law after giving the petitioners an opportunity of hearing.

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