Case Note & Summary
The petitioner, Essar Shipping Limited, challenged a show cause notice dated January 13, 2023, issued by the Director General of Foreign Trade under Section 14 of the Foreign Trade (Development and Regulation) Act, 1992. The notice alleged that Essar had availed benefits under the Served from India Scheme (SFIS) of the Foreign Trade Policy 2004-2009 by furnishing wrong information. The dispute arose from a Policy Circular of 2008 that clarified that only services originating from or touching India qualified for SFIS benefits. Essar had earlier filed Writ Petition No. 1335 of 2010, which was decided on February 8, 2022, by a Division Bench of the Bombay High Court. That judgment held that the Policy Circular was clarificatory and prospective, and quashed recovery notices issued to Essar. The present show cause notice was issued allegedly in reliance on Paragraph 56 of that judgment, which left open the possibility of action if Essar had made misstatements in its application. The court found that the show cause notice was based on a misreading of the earlier judgment, as the Division Bench had already ruled that the policy circular could not be applied retrospectively to settled claims. The court quashed the show cause notice, holding that it was untenable and based on an erroneous interpretation of the earlier decision.
Headnote
A) Administrative Law - Show Cause Notice - Quashing of SCN - Foreign Trade (Development and Regulation) Act, 1992, Section 14 - The impugned show cause notice was based on a misreading of a Division Bench judgment that had already quashed recovery notices on the ground that the policy circular was prospective. The court held that the SCN was untenable as it sought to reopen settled claims contrary to the earlier judgment. (Paras 3, 14-16) B) Foreign Trade Policy - Served from India Scheme - Policy Circular - Prospective Application - Foreign Trade (Development and Regulation) Act, 1992 - The Division Bench had earlier held that the Policy Circular of 2008 was clarificatory and prospective, and could not be used to reopen settled claims. The present SCN ignored this ruling. (Paras 7-13) C) Interpretation of Judgments - Misreading of Paragraph - The DGFT relied on Paragraph 56 of the earlier judgment to justify the SCN, but the court found that the paragraph only permitted action based on misstatements outside the scope of the earlier ruling, which was not the case here. (Paras 14-16)
Issue of Consideration
Whether the show cause notice issued under Section 14 of the Foreign Trade (Development and Regulation) Act, 1992, based on an alleged misreading of a Division Bench judgment, is sustainable.
Final Decision
The show cause notice dated January 13, 2023, is quashed and set aside. Rule made absolute.
Law Points
- Prospective application of policy circulars
- Res judicata
- Misreading of judgment
- Show cause notice quashed for being based on erroneous interpretation of earlier decision
