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 (DGFT) 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 centered on whether foreign exchange earnings from shipping services on routes between two foreign countries (not touching India) qualified for duty credit scrips. A Policy Circular dated January 1, 2008, clarified that only services originating from or touching India were eligible. In an earlier writ petition (WP No. 1335 of 2010), a Division Bench of the Bombay High Court had held that the Policy Circular was clarificatory and prospective, and quashed recovery notices issued to Essar, ruling that settled claims could not be reopened. Despite this, the DGFT issued the impugned show cause notice, relying on Paragraph 56 of that judgment, which allegedly permitted action if Essar had made misstatements in its application. The court found that the show cause notice was based on a misreading of the Division Bench judgment. The Policy Circular had been upheld as prospective, and the earlier judgment had already quashed recovery notices on the same issue. The court held that the notice sought to reopen settled claims without any new misrepresentation outside the scope of the earlier ruling. Consequently, the show cause notice was quashed and set aside. The court emphasized that the DGFT could not use Paragraph 56 to circumvent the finality of the earlier decision.
Headnote
A) Foreign Trade Law - Show Cause Notice - Section 14 of Foreign Trade (Development and Regulation) Act, 1992 - Reopening of Settled Claims - The impugned show cause notice sought to reopen benefits granted under the Served from India Scheme (SFIS) based on a policy circular that was held to be prospective by a Division Bench. The court held that the notice was based on a misreading of the Division Bench judgment and was untenable, as the judgment had quashed recovery notices and held that settled claims could not be reopened. (Paras 2-3, 12-13, 15-16) B) Foreign Trade Law - Policy Circular - Prospective Clarification - Foreign Trade Policy 2004-2009 - The Policy Circular dated January 1, 2008, which required route-wise bifurcation for SFIS benefits, was held to be clarificatory and prospective. The Division Bench had ruled that it could not be applied retrospectively to settled claims. The present court reaffirmed that the circular's prospective nature precluded reopening of benefits already granted and utilized. (Paras 7, 11-12) C) Foreign Trade Law - Misreading of Judgment - Paragraph 56 of Division Bench Judgment - The DGFT relied on Paragraph 56 of the earlier judgment to issue the show cause notice, but the court found that the paragraph only permitted action based on misstatements outside the scope of the earlier ruling. Since the notice was based on the same route-wise issue already decided, it was a misreading and could not be sustained. (Paras 14-16)
Issue of Consideration
Whether a 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, can be sustained when the underlying policy circular was held to be prospective and settled claims could not be reopened.
Final Decision
The impugned show cause notice dated January 13, 2023 is quashed and set aside. Rule made absolute.
Law Points
- Prospective application of clarificatory policy circulars
- Finality of settled claims under Foreign Trade Policy
- Misreading of judgment cannot justify reopening of concluded matters
- Presumption of legality attaches to official acts processing benefits
