The Delhi High Court recently set aside the cancellation of a Duty Entitlement Pass Book (DEPB) license issued to a trader, M/S Saha Traders, by the Directorate General of Foreign Trade (DGFT). The Court criticized the extraordinary delay of almost 15 years in resolving the issue after issuing the Show Cause Notice (SCN) in 2005, deeming it a gross violation of natural justice.
Justice Sachin Datta, while ruling on the matter, referred to the case of Vos Technologies India Pvt. Ltd. v. The Principal Additional Director General & Anr. (2024), where it was emphasized that financial or penal matters cannot remain unresolved for extended periods. The Court noted that such delays lead to arbitrariness and unnecessary hardship for the affected parties.
Background of the Case
The petitioner, M/S Saha Traders, engaged in import-export activities between 2002 and 2003. Based on transactions with M/S Ceean Commerce Pvt. Ltd., the petitioner applied for and was granted 38 DEPB licenses with a total Freight on Board (FOB) value of approximately Rs. 67.36 crore and a corresponding Cost Insurance Freight (CIF) value of Rs. 8.08 crore.
Subsequently, the petitioner lawfully transferred these freely tradable licenses to various importers. However, the Customs Department later initiated an investigation into the transactions with M/S Ceean Commerce Pvt. Ltd., alleging that the exports to Bangladesh were fictitious. This led to the issuance of the impugned SCN on May 2, 2005, accusing the petitioner of fraudulently obtaining DEPB benefits.
Despite numerous correspondences, personal hearings, and requests for relevant documents, the SCN remained unadjudicated for over a decade. Finally, in 2019, the DGFT issued a cancellation order for the 38 DEPB scrips without prior notice or an opportunity for the petitioner to be heard.
The Court strongly condemned this procedural lapse, stating:
“It is apparent that the cancellation order dated 07.08.2019 was passed without any prior intimation/notice to the petitioner, effectively condemning the petitioner unheard.”
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The Court further noted that the cancellation letters were identical, indicating a lack of independent consideration. Justice Datta remarked:
“Evidently, there has been no application of mind as to the factual aspects highlighted by the petitioner in reply dated 06.12.2005 to the impugned SCN, prior to issuing the said cancellation letter dated 07.08.2019.”
The High Court found that the DGFT’s prolonged inaction and the subsequent arbitrary cancellation violated the fundamental principles of natural justice. Citing Vos Technologies India Pvt. Ltd., the Court reiterated:
“Matters which have the potential of casting financial liabilities or penal consequences cannot be kept pending for years and decades together.”
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The Delhi High Court allowed the petition and quashed the impugned SCN, the 2019 cancellation order, and the associated 38 DEPB cancellation letters. The Court held that even if an appellate remedy was available, a writ petition was justified given the blatant disregard for due process.
Appearance: Mr. Indranil Banerjee and Mr. Shubhankar Jha, Advocates for Petitioner; Mr. Ruchir Mishra, Mr. Sanjiv Kumar Saxena, Ms. Poonam Shukla, Mr. Mukesh Kumar Tiwari and Ms. Reba Jena Mishra, Advocates for UoI
Case title: M/S Saha Traders Zonal Joint Director General Of Foreign Trade(Cla)
Case no.: W.P.(C) 7295/2021
