2022 (7) TMI 105 - HC - Customs

Jurisdiction - competent officer to issue SCN - Power of Additional Director General, DRI, Mumbai to issue SCN - HELD THAT - In the instant case, show cause notice dated 27/29.8.2002 (Annexure-D) came to be issued by the Additional Director General, DRI, Mumbai would be without jurisdiction in the teeth of principles enunciated by the Hon ble Apex Court 2021 (3) TMI 384 - SUPREME COURT and as such the point formulated hereinabove deserves to be answered in favour of the appellant and against the respondent, as it goes to the root of the matter and consequently the order of the Tribunal cannot be sustained. It is made clear that substantial questions of law framed in the background of the facts obtained in the present case are kept open and no opinion is expressed on the same since the very issuance of show cause notice by the Additional Director General, DRI has been held as without authority of law. The SCN was without authority of law and consequential proceedings pursuant thereto including the impugned order of the CESTAT dated 2.6.2010 / 5.8.2010 (Annexure-J) and accordingly, they are set aside - Appeal allowed.

Summary

Issues Involved:
1. Competence of the authority to issue the show cause notice.
2. Interpretation of conditions under Foreign Trade Policy and exemption notifications regarding the manufacturer exporter's obligations.
3. Permissibility of selling duty-free goods post-export obligation without waiting for the Licensing Authority's endorsement.

Issue-Wise Detailed Analysis:

1. Competence of the Authority to Issue the Show Cause Notice:
The primary issue addressed was whether the Additional Director General, Directorate of Revenue Intelligence (DRI), Mumbai, was competent to issue the show cause notice dated 27/29.8.2002. The appellant contended that, based on the Supreme Court's judgment in Canon India Private Limited vs. Commissioner of Customs, the DRI officer lacked the authority to issue such a notice. The Supreme Court had clarified that the power to issue a show cause notice under Section 28(4) of the Customs Act is conferred specifically on "the proper officer," meaning the officer who initially assessed and cleared the goods or his successor. The High Court adopted this reasoning, concluding that the show cause notice issued by the Additional Director General, DRI, was invalid and without jurisdiction. Consequently, the Order-in-Original dated 30.9.2005, which had been favorable to the appellant, was to be restored, and the CESTAT's order dated 2.6.2010 / 5.8.2010 was set aside.

2. Interpretation of Conditions Under Foreign Trade Policy and Exemption Notifications:
The court was to consider whether the Tribunal was correct in holding that the conditions on advance licenses and exemption notifications barred the manufacturer exporter from producing or sourcing export goods to discharge the export obligation. However, since the show cause notice itself was deemed invalid, the court did not express an opinion on this substantial question of law. The issue was left open for future consideration.

3. Permissibility of Selling Duty-Free Goods Post-Export Obligation:
Another substantial question was whether the sale of duty-free goods imported under the said notification was permissible once the export obligation was completed and foreign exchange realized, without waiting for the Licensing Authority to redeem the Legal Undertaking (LUT) and endorse the Advance License as transferable. As with the previous issue, the court did not address this question due to the invalidity of the show cause notice. The court left this issue open as well.

Conclusion:
The High Court allowed the appeal, holding that the show cause notice issued by the Additional Director General, DRI, was without authority of law. Consequently, all proceedings initiated pursuant to the said show cause notice, including the CESTAT's order, were set aside. The court did not express any opinion on the substantial questions of law framed earlier, leaving those issues open for future adjudication. No costs were ordered, and any pending civil applications were disposed of accordingly.