SCN on Penalty not Received: Madras HC Quashes DGFT Order Imposing Penalty for EPCG Export Obligation Default [Read Order]

The Madras High Court quashed the order passed by the Director General of ForeignTrade (DGFT) imposing a penalty on a private limited company after finding that the company was not granted a proper opportunity of personal hearing.

The petitioner, Integrated CNC Technologies Pvt. Ltd., represented by its director, is engaged in the manufacture of machine parts for automobiles and other engineering industries.

The company had obtained two Export Promotion Capital Goods (EPCG) authorisations in 2008 for importing capital goods at concessional customs duty, subject to the fulfilment of export obligations.

The DGFT issued a show cause notice alleging non-fulfilment of export obligations under one of the EPCG authorisations. The petitioner submitted a reply along with documentary evidence claiming that the export obligations had been fulfilled.

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The Deputy Director had imposed a penalty of ₹50 lakh on the petitioner for non-compliance with export obligations. Challenging the order, the petitioner approached the High Court, which set aside the order and directed the adjudicating authority to issue a fresh show cause notice and pass orders after granting an opportunity of personal hearing.

However, the Joint Director General of Foreign Trade passed an order dated 21.08.2024 holding that the petitioner had defaulted in complying with the export obligation and imposed a penalty of ₹1 lakh along with demand of customs duty for the unfulfilled export value.

Hari Radhakrishnan, the counsel for the petitioner, contended that the petitioner had not received the show cause notice, as it was only uploaded on the DGFT website.

AR.L.Sundaresan, appearing for the respondents, contended that the notices had been sent to the email address provided by the petitioner which were accessible to the petitioner. However, it was submitted by the respondents counsel that the respondents expressed willingness to provide the petitioner with an opportunity of hearing.

In the light of facts and circumstances, Justice P.T. Asha quashed the impugned order and remitted the matter back to the Joint Director General of Foreign Trade for fresh consideration.

The Court directed the petitioner to appear before the authority on 23.02.2026, where the authority shall hear the petitioner and receive relevant documents before passing a fresh order in accordance with law.

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