2014 (9) TMI 185 - HC - Customs

Recovery of irregular duty drawback - discrepancy in the show cause notice - period of limitation - allegation that the duty drawback claimed and paid for export of readymade garments of cotton was irregular/fraudulent - 100% EOU of Gemini Textile industries - Held that - In the show cause notice all facts have been mentioned. The petitioners have been called upon to show cause as to why penalty should not be imposed on them under Section 114(iii) of the Customs Act, 1962. In the original show cause notice, the petitioners were not asked to show cause as to why the duty drawbacks should not be recovered. However, in the addendum dated 2-5-2002, the petitioners have been asked to show cause as to why the duty drawbacks drawn by them should not be recovered. A careful reading of the addendum shows that the changes to the original show cause notice do not structurally alter the show cause notice. Whatever is alleged in the show cause notice is virtually repeated in the addendum except calling upon the petitioners to show cause as to why the duty drawbacks should not be recovered. Therefore, it cannot be said that the addendum structurally alters the nature of the show cause notice and it is barred by limitation. - In fact no limitation has been prescribed for recovery of duty drawbacks. - petition dismissed - Decided against the assessee.

Issues Involved:
1. Validity and sustainability of the impugned order dated 4-7-2011.
2. Whether the addendum to the original show cause notice was barred by limitation.
3. Whether the addendum structurally altered the original show cause notice.
4. Applicability of a reasonable period of limitation for recovery of duty drawbacks.
5. Validity of the penalty imposed under Section 114(iii) of the Customs Act, 1962.

Detailed Analysis:

1. Validity and Sustainability of the Impugned Order:
The petitioners challenged the common order dated 4-7-2011 passed by the second respondent, which confirmed the Order-in-Original and the appellate order. The petitioners contended that the impugned order was devoid of reasons and could not be sustained in law. The court, however, found that the authorities had properly considered the material on record and assigned reasons for confirming the demand and imposing penalties. Thus, the impugned order did not call for interference.

2. Whether the Addendum to the Original Show Cause Notice was Barred by Limitation:
The original show cause notice was issued on 18-7-2001, and the addendum was issued on 2-5-2002. The petitioners argued that the addendum was barred by limitation as it was issued beyond a reasonable period. The court noted that no specific limitation period was prescribed for recovery of duty drawbacks under the Customs Act or the Drawback Rules. The court referred to the Gujarat High Court's decision, which held that in the absence of a statutory limitation period, a reasonable period should be considered, and in this case, the reasonable period could not be beyond five years. The court, however, found that the addendum was issued within a reasonable period and was not barred by limitation.

3. Whether the Addendum Structurally Altered the Original Show Cause Notice:
The petitioners contended that the addendum completely changed the structure of the original show cause notice, thus amounting to a fresh demand beyond the period of limitation. The court observed that the addendum did not structurally alter the original show cause notice but merely included additional details regarding the recovery of duty drawbacks. The facts stated in the addendum were substantially the same as those in the original show cause notice. Therefore, the addendum did not amount to a fresh show cause notice and was not barred by limitation.

4. Applicability of a Reasonable Period of Limitation for Recovery of Duty Drawbacks:
The petitioners argued that a reasonable period of limitation should be read into the Drawback Rules, and this period should not exceed five years. The court referred to various decisions, including those of the Gujarat High Court and the Supreme Court, which held that where no statutory limitation period is prescribed, a reasonable period should be considered. The court, however, found that the addendum was issued within a reasonable period, and the authorities were justified in recovering the duty drawbacks.

5. Validity of the Penalty Imposed under Section 114(iii) of the Customs Act, 1962:
The original show cause notice and the addendum called upon the petitioners to show cause as to why penalties should not be imposed under Section 114(iii) of the Customs Act for claiming irregular duty drawbacks. The court found that the authorities had properly considered the material on record and assigned reasons for imposing the penalties. Therefore, the impugned order, as well as the orders passed by the original and appellate authorities, did not call for interference.

Conclusion:
The court dismissed the writ petitions, upholding the impugned order and confirming the demands and penalties imposed on the petitioners. The addendum to the original show cause notice was found to be within a reasonable period and did not structurally alter the original notice. The authorities' actions were deemed justified and in accordance with the law.

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