The Bombay High Court has quashed the show cause notice issued by the Directorate General of Foreign Trade (DGFT) to Essar Shipping citing the principle of res judicata.
The bench of Justice B. P. Colabawalla and Justice Somasekhar Sundaresan has observed that closed and settled claims of the past cannot be re-opened and that they were legitimate. It would also stand to reason that the term “Service Provider” contained in Paragraph 9.53 of the FTP had not made any exception for foreign exchange earned by an Indian shipping company on the basis of routes outside Indian territory.
The petitioner/assessee, Essar Shipping Ltd. has challenged the show cause notice issued by the Director General of Foreign Trade (DGFT) under Section 14 of the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act) and subordinate law.
It was alleged in the SCN that Essar availed of the benefits under the Foreign Trade Policy 2004-2009 (FTP) by furnishing information, making declarations and relying on certificates that were allegedly wrong.
The DGFT’s case is that the file opened on May 3, 2007 by Essar seeking SFIS benefits (SFIS File), containing documents, information and certificates, was misleading. The SCN was issued, evidently over 15 years later. The basis of alleging that the SFIS File was untruthful, is based on the assertion that Essar’s certification of the SFIS File being in conformity with the SFIS, was a material mis-statement.
A careful scrutiny of the Impugned SCN shows that it does not allege any mis-statement other than the assertion by Essar that the SFIS File was in conformity with the SFIS.
The court held that the SCN is covered by res judicata, and is unreasonable and arbitrarily attempts to re-open an issue already closed. The Recovery Notices having been quashed, the Impugned SCN is a circumvention of the effect of quashing. The SCN is quashed and set aside.
Case Details
Case Title: Essar Shipping Limited Versus Union of India
Case No.: Writ Petition No. 1960 Of 2024
Date: 07/02/2025
Counsel For Petitioner: Prithwiraj Choudhury
Counsel For Respondent: Jitendra Mishra
