2013 (6) TMI 348 - HC - Customs

Import of prohibited goods - denial of the Customs duty concessions under Indo-Thailand Free Trade Agreement - Unbranded gold jewellery seized - demand from the petitioner-Company of differential Customs Duty, proposing to levy interest u/s 28AA and proposing to confiscate the seized gold jewellery - petitioner alleged to be wrongly availing the benefit of exemption under the Custom s Notification No.85/2004-Cus. dated 31.08.2004 read with Custom s Notification No.101/204-Cus.(N.T.) dated 31.08.2004 and thereby had been evading the payment of appropriate duty - Held that - A perusal of the impugned Show Cause Notice would reveal that the respondents have proceeded against the petitioner on evading payment of Basic Customs Duty on the import made by the petitioner by wrongfully availing exemption on the basis of the Certificate issued by the Kingdom of Thailand. Though the impugned Show Cause Notice is issued under Section 124 of the Customs Act, the relief sought by the petitioner is only for the issuance of a Writ of Prohibition prohibiting the respondents from proceeding with the adjudication of the said Show Cause Notice. In the instant case, it is admitted that the Government of India has written to the Kingdom of Thailand about the issuance of Certificate to the petitioner for availing exemption and the respondents are awaiting reply from the Kingdom of Thailand. Notwithstanding the outcome of the decision of the sovereign authority, namely, the Kingdom of Thailand, the respondents have got power to initiate proceedings against the petitioner. A reading of Section 124 of the Customs Act would make it clear that the respondents are empowered to issue show cause notice and proceed against the person alleged to have committed fraud, stating the ground on which they have initiated the proceedings. The respondents have substantiated that there was wrongful availment of exemption by the petitioner contrary to the law of our country and therefore, they have invoked Section 124 to issue the impugned show cause notice. When such things are substantiated, as there is no prohibition in the said provision not to proceed against the importer, who has availed wrongful exemption of duty, this Court cannot restrain the respondents from proceedings further, unless there is anything contrary to law. Therefore, it is for the petitioner to go before the respondents, explain the case and request them to stall the proceedings, till a decision is taken by the government authorities of the Kingdom of Thailand. Section 124(a) of the Customs Act contemplates that no order confiscating any goods or imposing any penalty on any person shall be made under the Chapter unless the owner of the goods or such person is given a notice in writing with the prior approval of the Officer of Customs not below the rank of an Assistant Commissioner of Customs, informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty. Such a provision has been followed by the authorities in this case. Therefore, there is no scope to prohibit the respondents from proceeding further. Accordingly, the petitioner is directed to submit his explanation to the impugned show cause notice, dated 14.11.2012, within a period of four weeks from today, in which event, the respondents, viz., the authorities concerned shall look into the same, but not take any final decision thereon. Also the respondents shall maintain status quo as on date till the conclusion of the proceedings.

Issues Involved:
1. Jurisdiction and legality of the Show Cause Notice issued under Section 124 of the Customs Act, 1962.
2. Compliance with Indo-Thailand Free Trade Agreement (FTA) and Customs Notifications.
3. Allegations of fraud and wrongful duty exemption availed by the petitioner.
4. Authority to confiscate goods cleared under Section 47 of the Customs Act.
5. Procedural fairness and the right to a fair hearing.

Detailed Analysis:

1. Jurisdiction and Legality of the Show Cause Notice:
The petitioner contended that once goods have been cleared under Section 47 of the Customs Act, 1962, the only recourse for the Revenue, if aggrieved, is to initiate proceedings under Section 129D. They argued that the Show Cause Notice issued under Section 124 is illegal and without jurisdiction. The court observed that Section 124 empowers the authorities to issue a show cause notice if fraud is established, and the respondents substantiated wrongful availment of duty exemption by the petitioner.

2. Compliance with Indo-Thailand Free Trade Agreement (FTA) and Customs Notifications:
The petitioner claimed compliance with all statutory formalities under the Indo-Thailand FTA, including submission of the Certificate of Origin. However, the respondents argued that the petitioner imported gold jewellery from Thailand by misusing the exemption benefits under the Customs Notifications, and investigations revealed non-compliance with Rule 4(b), Rule 6, and Rule 8(f) of the Interim Rules of Origin.

3. Allegations of Fraud and Wrongful Duty Exemption:
The respondents alleged that the petitioner conspired with suppliers in Thailand to import gold jewellery manufactured in Singapore and Dubai, thus misusing the FTA benefits. The respondents supported their claims with voluntary statements and email correspondences, asserting that the petitioner fraudulently availed duty exemptions. The court noted that the respondents have the authority to initiate proceedings under Section 124 if fraud is substantiated.

4. Authority to Confiscate Goods Cleared under Section 47:
The petitioner cited precedents to argue that goods cleared under Section 47 cannot be confiscated except through revision under Section 129D. The court acknowledged that goods cleared under Section 47 generally cannot be confiscated without revisional proceedings but noted that the respondents' actions were based on allegations of fraud, which justified the issuance of the Show Cause Notice under Section 124.

5. Procedural Fairness and Right to a Fair Hearing:
The petitioner argued that the seizure of documents and denial of copies hindered their ability to respond effectively. The court directed the petitioner to submit an explanation to the Show Cause Notice within four weeks and ordered the respondents to maintain the status quo until the investigation's conclusion. The court emphasized that the respondents' actions are subject to the outcome of the investigation with the Kingdom of Thailand.

Conclusion:
The court concluded that the respondents are empowered to issue the Show Cause Notice under Section 124 of the Customs Act, 1962, based on substantiated allegations of fraud. The petitioner was directed to respond to the notice, and the respondents were instructed to maintain the status quo until the investigation's outcome. The court upheld the respondents' authority to proceed under the law of the country, emphasizing compliance with both national and international agreements.

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