2022 (5) TMI 592 - HC - Customs

Power of DRI officials to seize goods though found outside SEZ area - property is in SEZ zone or not - Maintainability of the Writ Petition - availability of alternative remedy of appeal - HELD THAT - It is not in dispute that a remedy of appeal is available, but here is a case where jurisdiction of the authority in issuing the Show Cause Notice is questioned. The Hon ble Supreme Court in M/S RADHA KRISHAN INDUSTRIES VERSUS STATE OF HIMACHAL PRADESH ORS. 2021 (4) TMI 837 - SUPREME COURT has laid down certain guidelines as to when a Writ Petition would lie before the Court though there is a remedy of appeal - From the judgment of the Hon ble Supreme Court, it is very much clear that a Writ Petition can be entertained by this Court though an alternate remedy is available when the authority issuing the Show Cause Notice has no jurisdiction to issue the same. Hence, there are no hesitation in coming to the conclusion that in the given set of circumstances, Writ Petition can be entertained. Whether the DRI officials have jurisdiction to seize goods though found outside SEZ area but in relation to a SEZ unit? - HELD THAT - A reading of Section 53 of Customs Act, provisions makes it clear that the Customs authorities (DRI officials) have no power or jurisdiction to inspect or seize goods in respect of units situated in SEZ area. The power to investigate in respect of any offence committed in SEZ unit is conferred on Officers empowered under Section 22 of the SEZ Act - the Central Government in exercise of powers conferred under Sections 21 and 22 of the Act issued a Notification dated 05.08.2016, authorizing the Additional Director General, Directorate of Revenue Intelligence to investigate into offences under Customs Act committed in a SEZ - But, the same cannot be invoked in the instant case as the alleged violation was prior to 2016. Whether the property can be said to be in Special Economic Zone? - HELD THAT - The fact that the goods were imported from U.S.A. is not in dispute. Even assuming that the goods imported were not subjected to physical process in view of the report of the Analyst, but, as observed by us earlier, the petitioner has licence to import and trade in Bio Diesel as well, which fact is not disputed. Therefore, processing of the imported material is not mandatory as the petitioner has licence to trade - the passage of goods from SEZ to a Port has to necessarily take place for the purpose of export, more so, when there is no enough space for storage of these goods in SEZ area, which is also an admitted fact. Merely, because, the goods were taken out from SEZ area to be transported to Port or to a storage unit before they are exported cannot be brought within the purview of Customs authority. A reading of the undertaking issued in the year 2010 would makes it clear that the goods can be moved from SEZ to bonded warehouse which shall be informed to Customs Department within 45 days. The delivery challans show that the goods were moved after filing shipping and delivery challans not disputed . The endorsement made by the Preventive Officer of SEZ Customs also evidences the same. The delivery was at East India Petroleum Private Limited, which is a bonded warehouse. Therefore, removal of the goods from SEZ area or storage of goods in bonded warehouse for the purpose of export, imported under a licence issued for the said purpose as and when vessel is available or otherwise, cannot be brought within the purview of DRI officials under the Customs Act and it is only officials under SEZ Act, who would be bestowed with jurisdiction to initiate the proceedings. As the petitioner is having licence to trade, storage of goods outside the SEZ area namely in a bonded warehouse, for the reasons stated earlier, cannot automatically confer power on the DRI Officers to initiate proceedings under the Customs Act - The judgment of the Hon ble Supreme Court in M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS 2021 (3) TMI 384 - SUPREME COURT squarely applies to the facts in issue, but however, learned Assistant Solicitor General would contend that a Bill is being introduced in the Parliament making suitable amendments, but no information about the same is placed before this Court. The DRI officials have no jurisdiction to issue the impugned show cause notice - Petition allowed.

Summary

Issues Involved:
1. Jurisdiction of DRI officials to issue Show Cause Notice for SEZ units.
2. Validity of the Show Cause Notice and subsequent Order-in-Original.
3. Applicability of Customs Act to SEZ units.
4. Maintainability of the Writ Petition despite the availability of alternative remedies.

Issue-wise Detailed Analysis:

1. Jurisdiction of DRI officials to issue Show Cause Notice for SEZ units:
The primary issue was whether the Directorate of Revenue Intelligence (DRI) officials had the jurisdiction to inspect, seize goods, and issue a Show Cause Notice to a unit situated in a Special Economic Zone (SEZ). The court noted that the SEZ Act, 2005, provides an overriding effect over other laws, including the Customs Act, 1962, as per Section 51 of the SEZ Act. The SEZ Act mandates that any investigation, inspection, or seizure related to SEZ units must be conducted by officers empowered under the SEZ Act. The court emphasized that the Customs authorities (DRI officials) have no power or jurisdiction to inspect or seize goods in respect of units situated in SEZ areas unless authorized by a specific notification, which came into effect only in 2016. Given that the alleged violations occurred before this notification, the court concluded that the DRI officials lacked jurisdiction in this case.

2. Validity of the Show Cause Notice and subsequent Order-in-Original:
The petitioner challenged the validity of the Show Cause Notice dated 11.12.2014 and the subsequent Order-in-Original dated 30.06.2020, arguing that they were issued without jurisdiction. The court agreed with the petitioner, stating that since the DRI officials had no jurisdiction over SEZ units for the period in question, the Show Cause Notice and the Order-in-Original were invalid. The court referred to the SEZ Act's provisions and previous judgments, which supported the conclusion that the DRI officials could not initiate proceedings under the Customs Act for SEZ units.

3. Applicability of Customs Act to SEZ units:
The court examined the applicability of the Customs Act to SEZ units. It noted that Section 52 of the SEZ Act explicitly states that the provisions of Chapter XA of the Customs Act, 1962, do not apply to SEZ units. Additionally, the SEZ Act's Section 53 deems SEZs as territories outside the customs territory of India for undertaking authorized operations. The court highlighted that the SEZ Act prevails over the Customs Act due to its non-obstante clause. Therefore, the Customs Act's provisions could not be applied to SEZ units unless specifically authorized, which was not the case here.

4. Maintainability of the Writ Petition despite the availability of alternative remedies:
The respondents argued that the Writ Petition should not be entertained as the petitioner had an alternative remedy of appeal. However, the court cited the Supreme Court's guidelines in Radha Krishan Industries vs. State of Himachal Pradesh, which allow for the maintainability of a Writ Petition when the authority issuing the Show Cause Notice lacks jurisdiction. The court emphasized that the jurisdictional challenge to the Show Cause Notice warranted the exercise of its writ jurisdiction despite the availability of alternative remedies.

Conclusion:
The court concluded that the DRI officials had no jurisdiction to issue the impugned Show Cause Notice and the subsequent Order-in-Original. Consequently, the Writ Petition was allowed, and the Show Cause Notice dated 11.12.2014 and the Order-in-Original dated 30.06.2020 were quashed. The court held that the SEZ Act's provisions prevailed over the Customs Act, and only officials empowered under the SEZ Act could initiate proceedings related to SEZ units. The court also affirmed the maintainability of the Writ Petition due to the jurisdictional challenge.