2016 (12) TMI 1439 - HC - Customs

Natural justice - exemption from statutory obligation for submitting extension application - Section 28 of the Customs Act - Held that - the matter deserves consideration as the learned Counsel for the petitioners is prima facie correct in contending that the demand for the period in question could not have been justified on the face of it in light of the provisions of Section 28 of the Customs Act. Even assuming for the sake of examining without holding that in a given case, the same is permissible then also, so far as the merit of the demand if concerned, unfortunately, prima facie, there appears to be no justification whatsoever for treating the consumed goods to be goods warranting any extension application - appeal allowed by way of remand.

Summary

Issues:
1. Validity of demand notice and Order-in-Original under Customs Act, 1962.
2. Compliance with statutory obligations for submitting extension application.
3. Breach of principles of natural justice.
4. Availability of alternative remedy under Customs Act.

Analysis:
1. The petitioners challenged the demand notice and Order-in-Original dated 18.02.2016, contending that the period mentioned for duty imposition from 1996 to 2012 was not justified under Sections 61, 65, and 72 of the Customs Act, 1962. They argued that the demand was untenable in law, especially as the goods were exempt and used in the manufacturing process. The petitioners claimed a breach of natural justice due to the unavailability of necessary documents for a response, seeking relief through writs of Certiorari and Mandamus to quash the impugned notices.

2. The respondents argued that the petitioners were not exempt from their statutory obligation to submit an extension application for goods consumed in the fine product. They claimed that no extension application was submitted for the entire period, justifying the Order-in-Original. The Court noted the lack of extension applications but found prima facie merit in the petitioners' argument regarding the demand's justification under Section 28 of the Customs Act. The Court opined that consumed goods did not warrant an extension application, especially when the goods were exempt and no surreptitious removal was alleged.

3. The Court considered the petitioners' argument regarding breach of natural justice and the lack of findings on the nature of the goods in question. It noted the absence of dispute regarding the goods being exempt and the need for a clear conclusion from the assessing authority. The Court found a prima facie case for granting interim relief, especially in light of the orders made by the Chief Commissioner in a similar case. The respondents agreed not to take coercive steps until final disposal, leading the Court to fix the matter for further hearing on 08.09.2016.

4. The Court granted a rule returnable on the specified date and noted the waiver of service by the respondents' counsel. It was agreed that no coercive steps would be taken until the next hearing, ensuring the status quo. The matter was adjourned for final disposal, with the respondents' counsel's statement regarding non-coercive action standing until further orders if the matter was not heard on the specified date.