Denial of Exemption by issuance of Letter by Department without show cause notice

PJ/Case Laws/2012-13/1004

Denial of Exemption by issuance of Letter by Department without show cause notice - whether sustainable?

Case: COMMISSIONER OF CUSTOMS, BANGLORE V/S MERCHANT IMPEX.

Citation: 2012 (276) E.L.T. 458 (KARNATKA)

Issue:- Whether exemption available to importer can be rejected by mere issuance of letter by Jurisdictional authority and not by issuing show cause notice?

Brief Facts: - Respondent-assessee filed a bill of entry dated 21-8-2003 for clearance of 1,70,050 pieces of melamine spoons classified under chapter sub heading 3924.9 with concessional rate of duty under custom notification No. 26/2000.

The Deputy Commissioner felt that the benefit of the Notification no. 43/2003 is not applicable to them. Therefore, Deputy Commissioner issued a letter dated 17-1-2004 without issuing a show cause notice in the terms of law and passed an order in original holding that the assessee is liable for the duty, interest and penalty. The same was challenged by the assessee in front of the Commissioner (Appeals) which was dismissed.

In appeal, the Tribunal relying upon the judgment in METAL FORGINGS V/S UNION OF INDIA [2002 (146) ELT 241 (SC) held that issue of show cause notice is a mandatory requirement for raising demands and that communications/orders suggestions or advises from the Department cannot be deemed to be a show cause notice. It was held that the letter issued by the Department cannot be deemed to be a show cause notice and therefore, the entire proceedings are vitiated. Impugned orders were set aside.

Aggrieved by the same, Revenue is in appeal before the High Court.

Appellant’s Contention:- Revenue contended that a show cause notice is a pre requirement for the confirmation of demands as contemplated in section 28 of the customs act which includes even short levy.

Reasoning of Judgment: -The High Court held that the letter did not satisfy the requirement of a show cause notice. Issue of a show cause notice is a condition precedent for initiation of proceedings under Section 28 of the Customs Act. In view of Apex Court judgment, it was held that the entire proceedings were bad in law. Tribunal was justified in setting aside the order passed by the Appellate Authority as well as Adjudicating Authority. Liberty reserved to Revenue to issue a fresh show cause notice subject to law of limitation.

Decision: - Appeal dismissed.

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PJ/Case Laws/2012-13/1004

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