2019 (11) TMI 740 - HC - Customs

Scope of the Show cause notice (SCN) - Issuance of Circular contrary to Decision of CESTAT - Power of CBIC - Confiscation of imported Gold Coins - freely importable or not - the impugned SCN allege that the gold coins imported by the petitioner and Mink, having been imported in violation of the FTP, were not entitled to the benefit of exemption under S. No. 526 of Notification. 152/2019-Cus - demand of differential duty with interest - imposition of penalty - Circular No. 450/67/2019-Cus. IV, dated 9th September, 2019 - HELD THAT - When the issue of classification, and entitlement to exemption, of the gold coins, imported by the petitioner, and other similarly situated importers, is at large before competent adjudicating authorities, who are in seisin thereof, the CBEC was completely unjustified in issuing the Office Memorandum dated 16th February, 2018. The powers of the CBEC, as conferred by Section 151A of the Customs Act, cannot extend to issuance of executive instructions, or Office Memoranda, pronouncing on the merits of issues which are pending before adjudicating authorities. Such an attempt would result in reducing the adjudicatory process to a mockery, and deserves to be deprecated. If the Revenue is of the opinion that an assessee has imported goods in violation of the law, or claimed the benefit of exemption to which it is not entitled, the grounds for such an opinion are required to be contained in the Show Cause Notice issued to the assessee. It is completely impermissible for the Revenue to issue a Show Cause Notice and, thereafter, seek to support, or even supplement, the recitals in the Show Cause Notice by way of Office Memoranda, or executive instructions, such as the Office Memorandum dated 16th February, 2018, under challenge in these writ petitions. Circular No 450/67/2019-Cus. IV, dated 31st May, 2019, stands modified by Circular No 450/67/2019-Cus. IV, dated 9th September, 2019, issued by the Central Board of Indirect Taxes and Customs. While no orders are, therefore, required to be passed in respect of Circular dated 31st May, 2019, Circular dated 9th September, 2019, is quashed and set aside, to the extent of the directions contained therein, especially in para 4 thereof - The authorities, adjudicating the Show Cause Notices impugned in these writ petitions would be required, independently, and uninfluenced by the Circular dated 9th September, 2019, to examine, for themselves, whether such appeals have, in fact, been filed and, if so, the effect of the orders passed therein. Para 8 of the impugned Show Cause Notices, dated 12th July, 2019/15th July, 2019, 28th June, 2019/19th July, 2019, 5th July, 2019/9th July, 2019 - HELD THAT - The impugned SCN are quashed and set aside. The authorities, adjudicating the said Show Cause Notices, would do so, uninfluenced by para 8 thereof, and keeping in view the directions/observations contained in this judgment. Office Memorandum No. 01/89/180/36/AM-11/PC-II(A), dated 6th September, 2017, issued by the DGFT, is upheld, to the extent of the position in law stated therein. However, the authority, adjudicating the Show Cause Notices, impugned in these writ petitions, would have to assess the applicability, of this Office Memorandum, to the facts of the case of the petitioners, on merits. Office Memorandum No. 20000/5/2015-OSD (ICD), dated 16th February, 2018, issued by the Central Board of Excise and Customs, is quashed and set aside, to the extent it seeks to opine on the classification of the gold coins imported by the petitioners, and other importers similarly situated, and of the eligibility, of such gold coins, to exemption. The Show Cause Notices, impugned in these writ petitions, would be adjudicated on their own merits, uninfluenced by the opinion conveyed by the Office Memorandum dated 16th February, 2018. Petition disposed off.

Summary

Issues Involved:
1. Validity of Office Memorandum dated 16th February, 2018, issued by CBEC.
2. Validity of Circular dated 31st May, 2019, issued by CBIC.
3. Validity of Office Memorandum dated 6th September, 2017, issued by DGFT.
4. Validity of Show Cause Notices dated 15th July, 2019, and 19th July, 2019.
5. Classification and exemption of imported gold coins under the Customs Tariff and FTP.

Issue-wise Detailed Analysis:

1. Validity of Office Memorandum dated 16th February, 2018, issued by CBEC:
The Office Memorandum dated 16th February, 2018, issued by the CBEC, was found to be an impermissible attempt to influence the impartial adjudication of the Show Cause Notices issued to the petitioner and Mink. The court held that such executive instructions, pronouncing on the merits of issues pending before adjudicating authorities, were beyond the powers conferred by Section 151A of the Customs Act. Consequently, the Office Memorandum was quashed to the extent it sought to opine on the classification of gold coins and their eligibility for exemption.

2. Validity of Circular dated 31st May, 2019, issued by CBIC:
The Circular dated 31st May, 2019, was deemed objectionable as it directed field formations to deal with consignments pending clearance at ports and airports in accordance with the CBIC's view, rather than the Tribunal's decisions. This was found to be in direct violation of judicial discipline and Section 151A of the Customs Act. The court declared this direction illegal and emphasized that adjudicating authorities must follow the Tribunal's decisions unless stayed by a higher authority.

3. Validity of Office Memorandum dated 6th September, 2017, issued by DGFT:
The Office Memorandum dated 6th September, 2017, issued by the DGFT, was upheld as it merely reiterated the statutory position regarding the classification of gold coins under Heading 7118 9000 of the ITC(HS) and their import being subject to RBI guidelines. The court found no reason to interfere with this Office Memorandum, stating that it correctly set out the legal position.

4. Validity of Show Cause Notices dated 15th July, 2019, and 19th July, 2019:
The court refrained from commenting on the merits of the allegations in the Show Cause Notices, emphasizing that such issues should be thrashed out before the competent adjudicating authority. The court clarified that it would not interfere with adjudicatory proceedings emanating from a Show Cause Notice issued by a competent authority under a fiscal statute unless the authority was incompetent to issue the notice. The prayers for setting aside the Show Cause Notices were rejected, and the adjudication was directed to proceed uninfluenced by the invalidated portions of the Circulars and Office Memoranda.

5. Classification and exemption of imported gold coins under the Customs Tariff and FTP:
The petitioner had classified the imported gold coins under Sub-Heading 7114 1910 and claimed exemption from customs duty under Notification 152/2009-Cus. However, the Revenue contended that the gold coins should be classified under Sub-Heading 7118 9000, making them subject to RBI guidelines. The court noted that the classification and exemption issues would have to be assessed on their merits by the adjudicating authorities, uninfluenced by the invalidated executive instructions. The court clarified that the adjudicating authorities must independently examine the applicability of the Office Memorandum dated 6th September, 2017, and the merits of the Show Cause Notices.

Conclusion:
The writ petitions were disposed of with the following directions:
- Circular dated 9th September, 2019, was quashed to the extent of its directions, limiting its effect to conveying information about pending appeals.
- Para 8 of the Show Cause Notices was quashed, and the adjudication was directed to proceed uninfluenced by the invalidated portions.
- The Office Memorandum dated 6th September, 2017, was upheld, but its applicability to the petitioner's case was to be assessed on merits.
- The Office Memorandum dated 16th February, 2018, was quashed to the extent it sought to opine on the classification and exemption eligibility of gold coins.
- The prayers for setting aside the Show Cause Notices were rejected, and the adjudication was directed to proceed in accordance with the court's findings and observations.