1994 (9) TMI 73 - HC - Customs

Summary

Issues Involved:
1. Classification of imported Coal Tar Pitch under the correct sub-heading of the Central Excise Tariff.
2. Validity of the show cause notice issued by Customs authorities.
3. Burden of proof regarding the manufacturing process of the imported Coal Tar Pitch.
4. Allegations of evasion of countervailing duty by the petitioner.
5. Whether the Customs authorities had prejudged the matter.

Issue-wise Detailed Analysis:

1. Classification of Imported Coal Tar Pitch:
The petitioner company imported Coal Tar Pitch, which they claimed was manufactured by the "cut-back" method and should be classified under sub-heading 2708.11 of the Central Excise Tariff, attracting a duty of Rs. 100/- per metric tonne. Customs authorities, however, suspected that the Coal Tar Pitch was manufactured by another method and classified it under sub-heading 2708.19, attracting a higher duty of 15%.

2. Validity of the Show Cause Notice:
The petitioner challenged the show cause notice issued by the Collector of Customs, Calcutta, arguing that it did not establish any concrete evidence that the imported Coal Tar Pitch was manufactured by a method other than the "cut-back" method. The court observed that the notice did not contain any positive conclusion regarding the manufacturing process and was based on suspicions without conclusive proof.

3. Burden of Proof:
The court reiterated that the onus of proving that the imported goods were different from what the petitioner claimed was on the Customs authorities. The authorities failed to provide positive evidence to support their claim that the Coal Tar Pitch was not manufactured by the "cut-back" method. The court cited the Supreme Court's decision in Deputy Commissioner of Sales Tax v. M/s. G.S. Pai & Co., emphasizing that the burden of proof lies with the Revenue authorities.

4. Allegations of Evasion of Countervailing Duty:
Customs authorities alleged that the petitioner company conspired with foreign suppliers to evade higher countervailing duty by fabricating documents. However, the court found no positive evidence in the show cause notice to support these allegations. The certificates provided by foreign suppliers indicated that the Coal Tar Pitch was indeed manufactured by the "cut-back" method.

5. Prejudgment by Customs Authorities:
The petitioner argued that the Customs authorities had prejudged the matter, as indicated by the language of the show cause notice. The court agreed that the notice appeared to be a roving enquiry to procure evidence rather than being based on existing conclusive proof. The court found that the notice and subsequent proceedings were initiated without a solid foundation and were liable to be quashed.

Judgment:
The court allowed the writ petition, quashing the show cause notice dated 23rd April 1992, and the proceedings initiated based on it. The court emphasized that the Customs authorities had not made out a prima facie case against the petitioner and lacked conclusive proof regarding the manufacturing process of the imported Coal Tar Pitch. The decision underscored the principle that the burden of proof lies with the Revenue authorities when imposing a higher rate of duty or tax. The court also stayed the order for four weeks and directed all parties to act on a xerox signed copy of the judgment.