2009 (12) TMI 609 - HC - Customs

Demand - Vatted Malt and Grain Spirit Compound - after provisional assessment, the Department contended that the goods imported by the petitioners should be classified under residuary item 2208.90 and since the petitioners did not have the licence required for import of goods falling under the aforesaid tariff item, the said goods became liable to confiscation - Even assuming that there has been no violation of natural justice, no show-cause notice could be issued, since admittedly, there were doubts regarding classification of the said goods - The argument that by the impugned show cause notice, the petitioners were only given an opportunity to make their submissions before final assessment, cannot be accepted, since the petitioners have also been directed to show cause why the goods should not be held confiscable and why penalty should not be imposed - The writ application is disposed of

Issues:
Classification of imported goods under new tariff heading post-amendment - Provisional assessment under incorrect tariff heading - Show cause notice under Section 28 of the Customs Act, 1962 - Jurisdictional validity of show cause notice - Violation of principles of natural justice - Challenge to show cause notice - Submission to jurisdiction by replying to show cause notice - Confiscation, penalty, and interest without final assessment - Finality of provisional assessment - Set aside and quashing of demand-cum-show cause notice.

Detailed Analysis:

1. Classification of imported goods under new tariff heading post-amendment:
The petitioners imported goods that were classified under Tariff Heading 2208.10 before 1st January, 1996. However, post-amendment, these goods were transferred to Heading 21.06. The issue arises regarding the correct classification of the goods under the new tariff heading.

2. Provisional assessment under incorrect tariff heading:
Despite the goods being provisionally assessed under Heading 21.06, the Department contended that they should be classified under residuary item 2208.90. This discrepancy in classification led to a dispute regarding the correct assessment of duty and the requirement of a license for importation.

3. Show cause notice under Section 28 of the Customs Act, 1962:
A demand-cum-show cause notice was issued under Section 28 of the Customs Act, 1962, demanding a substantial amount along with penalties and interest. The key question was whether such a notice could be issued without final assessment being completed.

4. Jurisdictional validity of show cause notice:
The legality of issuing a show cause notice under Section 28 without final assessment was challenged. Precedents from the International Computers Indian Manufacturers case and the Commissioner of Central Excise and Customs, Mumbai case were cited to argue that such notices should only be issued post-final assessment.

5. Violation of principles of natural justice:
The petitioners alleged a violation of natural justice as relevant documents were not provided to them, including the order of provisional assessment and referenced materials. The respondents argued that the petitioners were allowed inspection and had replied to the notice, minimizing the impact of any alleged violation.

6. Challenge to show cause notice:
The petitioners contended that doubts regarding the classification of goods made the issuance of the show cause notice premature. The option to challenge the notice in court or reply to it was discussed, with the petitioners choosing to respond to the notice.

7. Submission to jurisdiction by replying to show cause notice:
The respondents argued that by responding to the notice, the petitioners submitted to the jurisdiction of the adjudicating authority. However, the court held that replying to the notice did not prevent the petitioners from challenging its validity.

8. Confiscation, penalty, and interest without final assessment:
The demand-cum-show cause notice included provisions for confiscation, penalty, and interest, which were deemed premature without a final assessment. The court emphasized that such actions should only follow the completion of assessment proceedings.

9. Finality of provisional assessment:
The argument regarding the finality of provisional assessment was discussed, with the court emphasizing that no demand, interest, or penalty could be imposed until a final assessment was completed. The correctness of the provisional assessment under the relevant tariff heading was acknowledged.

10. Set aside and quashing of demand-cum-show cause notice:
Ultimately, due to the absence of a final assessment, the court deemed the demand-cum-show cause notice to be without jurisdiction and ordered its set aside and quashing. The writ application was disposed of accordingly, providing clarity on the issue at hand.

← Previous Next →