The High Court of Bombay quashed and set aside the Impugned SCN, holding that it was barred by the doctrine of res judicata and constituted an arbitrary attempt to reopen settled issues already adjudicated in the Division Bench Judgment.

The Impugned SCN was quashed and set aside. Rule was made absolute, and the Writ Petition was disposed of with no order as to costs.

Acts and Sections Discussed:

• Foreign Trade (Development and Regulation) Act, 1992 – Section 14

• Foreign Trade Policy, 2004–2009 – Served From India Scheme (SFIS)

Subjects:

Show Cause Notice – Duty Credit Scrips – Policy Circular – Res Judicata – Quashing of Notice – Prospective Clarification – Export of Services – Foreign Exchange Earnings – Shipping Services – Indian Company

Nature of the Litigation: Writ Petition filed under the Ordinary Original Civil Jurisdiction of the High Court of Bombay challenging the issuance of a Show Cause Notice (SCN) dated January 13, 2023, by the Director General of Foreign Trade (DGFT) under Section 14 of the Foreign Trade (Development and Regulation) Act, 1992.

Petitioner’s Remedy Sought: Quashing and setting aside the Impugned SCN, on the ground that it was based on a misreading of the Division Bench Judgment (Writ Petition No. 1335 of 2010) dated February 8, 2022.

Reason for Filing the Case: Essar Shipping Limited claimed that the SCN was issued over 15 years after the alleged misstatement and that it was based on an erroneous interpretation of settled and closed claims under the Served From India Scheme (SFIS), which had already been adjudicated in their favor.

Previous Decisions: The Division Bench of the High Court of Bombay had already ruled in favor of Essar Shipping Limited on February 8, 2022, holding that the Policy Circular dated January 1, 2008, was clarificatory and prospective, and that closed and settled claims could not be reopened.

Issues:

(a) Whether the Impugned SCN violated the principle of res judicata by attempting to reopen settled and closed claims. (b) Whether the Policy Circular could be applied retrospectively to recover duty credit scrips already granted and utilized. (c) Whether there was any suppression or misstatement of facts by the Petitioner outside of the route-wise break-up of foreign exchange earnings.

Submissions/Arguments:

• Petitioner: Argued that the Impugned SCN was a clear attempt to circumvent the earlier Division Bench Judgment and reopen settled claims.

• Respondents: Contended that Paragraph 56 of the Division Bench Judgment allowed for action against the Petitioner in case of misstatement or suppression of information.

Ratio:

• The Policy Circular was held to be clarificatory and prospective, not retrospective.

• The Division Bench Judgment explicitly ruled that settled and closed claims could not be reopened.

• No material evidence was presented by the Respondents showing suppression or misstatement outside the scope of what had already been adjudicated.