2017 (11) TMI 1007 - HC - Customs

Diversion of the goods to the DTA - demand - two parallel proceedings in relation to the same subject matter - Held that - once the question of duty liability based upon the allegation of diversion of the goods to the DTA in relation to the goods imported vide Bill of Entry No. 2376, dated 25-9-2003 has already been adjudicated upon, it is not permissible for the respondents to pursue another proceeding in relation to the same subject matter as it is not permissible for the authorities to prosecute two parallel proceedings in relation to the same subject matter. While it is true that the show cause notice dated 18-12-2008 does not propose confiscation of goods and levy of penalty, an order of confiscation or penalty would be only consequential to the confirmation of the duty liability. In the facts of the present case, having regard to the fact that the adjudicating authority, albeit beyond the scope of the proceeding before him, has thought it fit to issue a show cause notice in respect of levy of duty and interest, and has already proceeded to adjudicate upon the same, it is now not permissible for the respondent authorities to proceed further to adjudicate upon the same controversy in another parallel proceeding. Confiscation of goods - Held that - though there may be additional proposals in the subsequent show cause notice, the basic proposal relates to confirmation of duty and interest based upon the allegation of diversion, which has already been adjudicated upon pursuant to the show cause notice dated 18-12-2008. The adjudicating authority having already adjudicated upon the issues, it is not permissible for it to keep the proceedings of the show cause notice dated 6-9-2007 in abeyance till the culmination of the proceedings arising from the show cause notice dated 18-12-2008. The continuance or otherwise of the show cause notice dated 6-9-2007 cannot be contingent upon the outcome of the proceedings arising out of the show cause notice dated 18-12-2008 - further proceedings pursuant to the show cause notice dated 6-9-2007, which relate to a subject matter which already stands adjudicated, stand vitiated - SCN do not sustain. Petition allowed - decided in favor of petitioner.

Summary

Issues Involved:

1. Legality of the show cause notice dated 6-9-2007.
2. Jurisdiction and authority of the Commissioner of Customs, Kandla.
3. Duplication and repetition of proceedings.
4. Principles of natural justice.
5. Confiscation of goods and imposition of penalty.
6. Duty liability and interest based on the alleged diversion of goods.
7. Abuse of the process of law.

Issue-wise Detailed Analysis:

1. Legality of the Show Cause Notice Dated 6-9-2007:
The petition challenges the show cause notice dated 6-9-2007 issued by the Commissioner of Customs, Kandla, under Article 226 of the Constitution of India. The notice proposed the confiscation of synthetic fabric stock lots and recovery of customs duties amounting to ?71,57,744/- with interest and penalties under Sections 114A and 112(a) of the Customs Act, 1962.

2. Jurisdiction and Authority of the Commissioner of Customs, Kandla:
The petitioners argued that the Commissioner of Customs, Kandla, lacked jurisdiction to pursue the show cause notice dated 6-9-2007 since the same subject matter had already been adjudicated by another competent Customs Officer, and the matter was pending before the Customs, Excise, and Service Tax Appellate Tribunal (Appellate Tribunal).

3. Duplication and Repetition of Proceedings:
The petitioners contended that the proposals in the show cause notices dated 6-9-2007 and 18-12-2008 were identical, leading to duplication of proceedings. They argued that initiating parallel and multiple proceedings for the same cause and subject matter is contrary to public policy and constitutes an abuse of the process of law.

4. Principles of Natural Justice:
The Commissioner of Customs (Appeals) had previously set aside the final assessment order dated 9-3-2007 on the grounds that the adjudicating authority had relied on a report that was not furnished to the petitioners. This was a violation of the principles of natural justice, leading to a remand for finalization of assessment after following due process.

5. Confiscation of Goods and Imposition of Penalty:
The show cause notice dated 6-9-2007 proposed the confiscation of goods under Sections 111(j), 111(m), and 111(o) of the Customs Act, 1962, and imposition of penalties. However, the petitioners argued that the goods were not available for confiscation, making the proposal for confiscation moot.

6. Duty Liability and Interest Based on the Alleged Diversion of Goods:
The adjudicating authority, in the order-in-original dated 16-11-2015, confirmed the duty demand of ?71,57,744/- with interest based on the alleged diversion of goods to the Domestic Tariff Area (DTA). The Commissioner (Appeals) set aside this order, and the matter was pending before the Appellate Tribunal.

7. Abuse of the Process of Law:
The petitioners argued that continuing with the show cause notice dated 6-9-2007 was illegal and without authority of law, as it constituted an abuse of the process of law. The Court observed that once the question of duty liability based on the alleged diversion of goods had been adjudicated, it was not permissible for the respondents to pursue another proceeding on the same subject matter.

Conclusion:
The Court held that the continuance of the show cause notice dated 6-9-2007 was not permissible as the subject matter had already been adjudicated. The proceedings pursuant to the show cause notice dated 6-9-2007 were vitiated and could not be sustained. The petition was allowed, and the impugned show cause notice dated 6-9-2007 was quashed and set aside to the extent it related to the petitioners. The rule was made absolute with no order as to costs.