1983 (4) TMI 56 - HC - Central Excise

Summary

Issues Involved:
1. Jurisdiction of the show cause notice in light of the exemption order under Section 25(2) of the Customs Act.
2. Credence to the Government order and the respondents' challenge to their own order.
3. Bar of limitation under Section 130 read with Section 28 of the Customs Act.
4. Arbitrariness and lack of application of mind in the show cause notice.

Issue-wise Detailed Analysis:

1. Jurisdiction of the show cause notice in light of the exemption order under Section 25(2) of the Customs Act:

The petitioners exported 3677 cases of Flue Cured Virginia Tobacco to the UK, which were later rejected and re-imported to India. The petitioners paid the appropriate excise duty upon clearance for manufacturing cigarettes. The Assistant Collector of Customs initially demanded a substantial amount as duty short-levied on the re-imported tobacco. However, the Union of India, under Section 25(2) of the Customs Act, exempted the petitioners from payment of duty on the re-imported tobacco, leading to the withdrawal of the demand by the Assistant Collector of Customs. The court held that Section 25(2) does not restrict the Central Government on the timing of granting exemptions, allowing exemptions even after the levy but before recovery. Consequently, the show cause notice issued by the second respondent was deemed without jurisdiction due to the prior exemption order.

2. Credence to the Government order and the respondents' challenge to their own order:

The court emphasized that the respondents are bound by the exemption order dated 19th March 1977, passed by the Union of India under Section 25(2) of the Customs Act. The Supreme Court's ruling in "The State of Assam and another v. Raghava Rajagopala shari" was cited, establishing that a respondent cannot attack its own order. Thus, the Union of India and the Collector of Customs, who acted based on the exemption order, are equally bound by it. The show cause notice did not reference the exemption order, rendering the notice invalid unless the exemption order is set aside.

3. Bar of limitation under Section 130 read with Section 28 of the Customs Act:

The petitioners argued that the show cause notice was barred by limitation. However, this contention was not addressed in detail by the court, as the primary issue of jurisdiction due to the exemption order was sufficient to quash the notice.

4. Arbitrariness and lack of application of mind in the show cause notice:

The court found the show cause notice arbitrary, highlighting that it lacked a date and did not consider the relevant materials. The notice failed to acknowledge the exemption order and merely stated the intention to review the case without substantial grounds. The absence of reference to the exemption order and the lack of application of mind in the notice contributed to its invalidation.

Conclusion:

The court quashed the show cause notice issued by the second respondent, deeming it without jurisdiction due to the exemption granted under Section 25(2) of the Customs Act. Consequently, W.P. Nos. 3025 and 3026 of 1978 were allowed, with no order as to costs. The other contentions raised by the petitioners were not addressed, as the primary issue of jurisdiction was decisive.