Licence of Petitioner restored as court says “Issuance of show cause notice is not an empty formality”: Bombay High Court.

The Bombay High court, recently on Friday, 22nd of July, in the year 2022 passed a judgement in favour of the Petitioner and quashed the order that revoked the petitioner’s licence because the issuance of show cause notice by The Assistant Commissioner of Central Excise, Division – II, Silvassa was premature. This judgement was proclaimed in the case of Sarla Performance Fibers Limited vs. The Union of India & Anr.( Writ Petition No. 60 Of 2005) and the case was presided over by The Honourable Mr. Justice K. R. Shriram and The Honourable Mr. Justice A. S. Doctor.


The Petitioner is a company registered under the Companies Act, 1956 and is engaged in the manufacture of excise able goods such as synthetic yarn. The Petitioner had its factory at Piparia Industrial Estate, Silvasa and the company was 100% export-oriented unit in terms of the import export policy. The Petitioner was carrying on its manufacturing activity of synthetic yarn at its factory that is Unit-I and Unit-II, both independent units located at Pipariya, Silvasa. Unit-I had been licenced under Section 58 of the Act as private bonded warehouse vide licence dated 18th October 1994. The Respondent, The Assistant Commissioner of Central Excise, Division – II, Silvassa extended the licence for a further period of two years with effect from 18th October 1999. It was further extended for a period of four years to 31st March 2005.  Unit-II of petitioner also was licenced under Section 58 of the Act as private bonded warehouse vide licence dated 14th November 2003 and was valid till 31st March 2005.

The Petitioner received various show cause notices and complaints that alleged violation of the licence requirement and then the Petitioner’s licence was also suspended by Respondent without issuing any show cause notice and without providing an opportunity to be heard and without an enquiry under Clause (b) of Sub Section (2) of Section 58 of the Customs Act. This order was challenged by petitioner in a Writ Petition that was filed in this court and the court by an order dated 2nd September 2004, set aside the order of Respondent.

After that the Respondent issued a show cause notice dated 4th October 2004 calling upon petitioner to show cause as to why the licence granted to the petitioner should not be cancelled for the reasons mentioned in the show cause notice. The Petitioner replied to the show cause notice and was also granted personal hearing and despite the petitioner’s explanation, the Respondent, by an order dated 1st January 2005, cancelled the petitioner’s licence and also called upon the petitioner to pay the appropriate customs and central excise duty on the capital goods, raw material procured, semi-finished and finished goods lying in stock on the date of cancellation of the said licence. The petitioner then filed a writ impugning the said order.

The court said, Section 58 of the Customs Act, under Sub Section 2(b) provides that the Assistant Commissioner may cancel a licence if the licensee has contravened any provision of this Act or the rules or regulations or committed breach of any of the conditions of the licence and it also provides that before any licence is cancelled, the licensee shall be given a reasonable opportunity of being heard. The points which the Respondent has mentioned in the impugned order do not even find mention in the show cause notice that was issued to petitioner. The court said the issuance of show cause notice is not an empty formality and its purpose is to give a reasonable opportunity to the affected persons to contend with the allegations in the show cause notice and prove they are not correct. The person issuing the show cause notice should inform a person who is likely to be affected by any order proposed to be made about the materials based on which the authority proposes to take action and should give a fair and reasonable opportunity to such person to represent his case and to correct the material sought to be relied upon against him.

The Respondent has relied upon six show cause notices and an offence booked by DRI but none of these had attained finality and they were pending at various stages. The complaint on which Respondent No.2 had relied upon to issue show cause notice could have been discharged or withdrawn against petitioner. Therefore the court felt the issuance of the show cause notice itself was premature, therefore, the court quashed and set aside the impugned order and any amount deposited by the petitioner shall be returned to the company with interest.

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