Pradeep Jain - Chartered Accountant

PJ/Case Laws/2012-13/1162

Case:- DELTA INTERNATIONAL LIMITED VERSUS COMMISSIONER OF CUSTOMS

Citation: - 2012 (281) E.L.T. 400 (Cal)
Issue: - Whether the show cause notice and the final determination made by the customs authority are acts without jurisdiction?

Brief fact: -The writ challenges a show cause notice dated 13th August 1997 issued by an Assistant Commissioner of Customs. In it, against the caption "subject" it was stated "non-realisation of customs duty". In the body of the show cause notice, which is very terse and ambiguous, it is stated that customs duty amount of Rs. 7,08,98,160/- was short levied for a consignment. Perusal of the show cause notice will not reveal any clear meaning. Nor will it indicate the circumstances under which it was issued. This show cause notice has been challenged. One very short point taken is that the customs authorities had no power to issue this show cause notice.
Examination of the show cause notice shows that this notice was issued alleging non-payment of customs duties of Rs. 7,08,98,160/-. But under what circumstances this customs duty is payable have not been disclosed. The appellant/writ petitioner did not file any reply to the show cause notice nor did they appear before the adjudicating officer. An adjudication order was passed confirming the demand on 19th/20th March, 1998. In the adjudication order some light can be seen regarding the foundation of the show cause notice. Between 18th September 1987 and 3rd April .1992 the 100% export oriented unit of the appellant writ petitioner sold 3161.86 metric tons of jute twine. While clearing the goods in the domestic tariff area the said unit of the appellant/writ petitioner paid only central excise duty; customs duty was not paid. Further the said unit transferred some of the finished goods to its main unit in the domestic tariff area during 1989-1990 and 1990 to 1991. Both customs and central excise duties were not paid. These duties amount to Rs. 7,08,98,160/-. Applicable interest @20% per annum from the date of clearance of the goods has also been claimed by the customs authorities.

Appellant Contention:- It is contended on behalf of the appellant/petitioner that the duty which was sought to be levied was under the proviso to Section 3 of the Central Excise Act, 1944 which is as follows :
"Provided that the duties of excise which shall be levied and collected on any excisable goods which are produced or manufactured, -
"(i) ****
(ii) by a hundred percent export-oriented undertaking and brought to any other place in India, shall be an amount equal to the aggregate of the duties of customs which would be leviable under the Customs Act, 1962 (52 of 1962) or any other law for the time being in force, on like goods produced or manufactured outside India if imported into India, and where the said duties of customs are chargeable by reference to their value; the value of such excisable goods shall, notwithstanding anything contained in any other provision of this Act, be determined in accordance with the provisions of the Customs Act, 1962 (52 of 1962) and the Customs Tariff Act, 1975 (51 of 1975)."

Therefore, central excise duty on excisable goods produced by a 100% export oriented undertaking would be according to the provisions of the Customs Act, 1962.
The ground of the appellant/writ petitioner is that it is central excise duty and that a customs officer had no power to issue the show cause notice or to adjudicate upon it. Therefore, the show cause notice and all proceedings emanating from it are invalid and a nullity.

The learned counsel for the petitioner has cited the following decisions:-
Commissioner of C. Ex. & Customs v. Suresh Synthetics, reported in 2007 (216) E.L.T. 662 (S.C.). In this case the Supreme Court while upholding the order of the Tribunal said that such duty was excise duty and not customs duty. It was held that the show cause notice was defective. He has also cited Commissioner of C. Ex. & Customs, Mumbai v. LT.C. Ltd. reported in 2006 (203) E.L.T. 532 (S.C.), and Collector of Central Excise, Bhubaneshwar v. Re-Rolling Mills reported in 1997 (94) E.L.T. 8 (S.C.), and argued that since there was provisional assessment and no final assessment, there could not be any demand for duty by the show cause notice. They also relied on Directorate of Enforcement v. Deepak Mahajan, reported in 1994 (70) E.L.T. 12 (S.C.) to argue that powers under the Customs Act, 1962 and Central Excise Act, 1944 are to be exercised by officers under those Acts.

Respondent contention ;- The learned Senior Counsel for the respondents cited ONGC Ltd. v. Sendhabhai Vastram Patel and Others, reported in (2005) 6 SCC 454. He has also referred to M/s. D. Cawasji and Co., etc., etc., v. State of Mysore & Another, reported in 1978 (2) E.L.T.(J154) (S.C.) = AIR 1975 S.C. 813 and Bombay Municipality v. The Advance Builders and Others, re-ported in AIR 1972 SC 792. The submission which was advanced was that the jurisdiction of the court under Article 226 of the Constitution was equitable and discretionary. In the facts and circumstances of this case this decision ought not to be exercised in favour of the appellant/writ petitioner.

Further, he has cited various provisions of the Customs and Central Excise Act. He submitted that this duty was computed as a customs duty but is only collected as central excise duty. He has cited various notifications where customs officers can act as central excise officers. He has relied on the following notifications
"(a) Notification No. 45/67 dated 1-4-1967, whereby Central Board of Excise and Customs have appointed Customs Officer as Central Excise Officers;
(b) Notification No. 40/97(NT), dated 10-9-1997 as amended uptil 16-3-2000 gives full territorial jurisdiction of Calcutta and Holdia Port, Dum Dum Airport, and upto high water mark of river Hooghly to Customs Officer.
(c) EOU Administrative Control over Export Oriented Units, Circular No. 72/2000-Cus., dated 31-8-2000 on Customs Officers;
(d) Notification No. 38/2001 dated 26-6-2001 whereby Customs Officers were authorized to act as Central Excise Officers in respect of 100% EOU. All the above notifications have been filed in Court being an-annexure to Affidavit of Document dated 17-11-2006.
(e) P.D. Bond dated 8-12-1998 in favour of the President of India through the Commissioner of Customs."

Reasoning of judgement :- The court in its appellate jurisdiction should not, on the basis of submissions made in the affidavit or in the notes of submission or from the bar, allow to incorporate the missing ingredients in the show cause notice. That is plainly impermissible. The show cause notice has to be adjudged the way it is issued. The duty described in the show cause notice is described as customs duty and the show cause notice has been issued by a customs officer. The court should not travel beyond this point and try to unearth the details of the matter so as to justify or unjustify the show cause notice.
The learned judge passing the final judgment and order dated 12th May 2003 in the writ application addressed the main issue correctly at page 239 of the paper book when he said "The principal question which falls for a decision is "whether the show cause notice and the final determination made by the customs authority are acts without jurisdiction. Then His Lordship proceeded to discuss the principle of restitution in detail. Then, the purported subject matter of the show cause notice was discussed in great detail. There is discussion as to how the appellant from a 100% export oriented unit was permitted to operate in a domestic tariff area unit. Several earlier orders of this court were discussed in detail including those in an earlier suit filed by the appellant being Suit No. 1044 of 1987. The learned Judge of the First Court has also discussed the point of limitation taken by the appellant, that the proposed assessment was barred by limitation and that the contention of the respondents that the earlier assessment was provisional was not tenable.
In the judgment and order under appeal The High Court do not find a discussion of the real issue in the writ application, that is, does or does not the show cause notice disclose prima facie case to initiate action. They think that substantially different arguments might have been made before the court below. The point of restitution was not taken before us at all. The point of limitation has been taken.
The learned judge of the court below seems to have dismissed the writ application only on the ground that in his opinion, the writ petitioner had not come to court with clean hands. Apart from that The Calcutta High Court do not find any other cogent reason in the judgment and order for dismissal of the writ application.
The only reason why the show cause notice falls through, in our opinion, is that it is completely devoid of any grounds or reasons or particulars in support of its claim for short paid customs duty against the appellant/writ petitioner. Therefore, on the basis of the principles in the above Supreme Court judgments this show cause notice has to be set aside.
The High Court think if a point of limitation has been raised, in the facts and circumstance of the case it cannot be appreciated at all because the show cause notice itself is atrociously vague. This question which is mixed question of facts and law cannot be gone into unless the show cause notice is apparently valid in all senses. Hence, there is no necessity of going into this question
They set aside the judgments and orders dated 12th May 2003 and 12th January 2006 and the respective show cause notices. However, this will not preclude the respondents or the Central Excise Authorities to issue a fresh show cause notice in accordance with law.

Decision: -Appeal allowed

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PJ/Case Laws/2012-13/1162

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