Case Note & Summary
The petitioner, Sarla Performance Fibers Limited, a company registered under the Companies Act, 1956, was engaged in the manufacture of synthetic yarn as a 100% Export Oriented Unit (EOU) at its two units in Silvassa. It held a licence under Section 58(1) of the Customs Act, 1962, allowing duty-free import of capital goods and raw materials. On 10th January 2005, Respondent No.2, the Assistant Commissioner of Central Excise, passed an order cancelling the licence under Section 58(2)(b) of the Act and directing the petitioner to pay appropriate customs and central excise duties on capital goods, raw materials, and finished goods lying in stock. The petitioner challenged this order by way of a writ petition. The court issued rule on 4th February 2005 and granted interim relief subject to conditions, which was modified on 5th May 2005. Pursuant to interim orders, the petitioner made certain deposits. The court found that the show cause notice issued to the petitioner did not specify the grounds for cancellation, and the impugned order did not consider the petitioner's reply. The court held that the cancellation was in violation of principles of natural justice and suffered from non-application of mind. The court quashed the impugned order, restored the licence, and directed that the petitioner be allowed to continue as an EOU subject to compliance with conditions. The court also directed that the deposits made by the petitioner be adjusted or refunded as per law.
Headnote
A) Customs Law - Licence Cancellation - Section 58(1) and 58(2)(b) Customs Act, 1962 - Natural Justice - Show Cause Notice - The petitioner, a 100% EOU, challenged cancellation of its licence under Section 58(2)(b) on grounds of non-application of mind and violation of natural justice. The court held that the show cause notice did not specify the grounds for cancellation and the impugned order did not consider the petitioner's reply, rendering the cancellation invalid. (Paras 1-10) B) Customs Law - Export Oriented Unit - Duty Free Imports - Section 58 Customs Act, 1962 - The petitioner was a 100% EOU and had imported capital goods and raw materials duty free. The cancellation of licence led to demand for duties. The court set aside the cancellation and restored the licence, directing that the petitioner be allowed to continue as EOU subject to compliance with conditions. (Paras 2-12)
Issue of Consideration
Whether the cancellation of licence under Section 58(2)(b) of the Customs Act, 1962 was valid when the show cause notice did not specify the grounds and the order did not consider the petitioner's reply.
Final Decision
The impugned order dated 10th January 2005 is quashed and set aside. The licence under Section 58(1) of the Customs Act, 1962 is restored. The petitioner is allowed to continue as a 100% EOU subject to compliance with conditions. The deposits made by the petitioner pursuant to interim orders shall be adjusted or refunded as per law.
Law Points
- Natural justice
- Show cause notice
- Non-application of mind
- Section 58 Customs Act 1962
- Export Oriented Unit
- Licence cancellation
- Speaking order
