2023 (7) TMI 550 - HC - Customs

Validity of SCN - time limitation - period for completion of proceedings as prescribed in Section 28(9) of the Act has expired, the authorities would retain no jurisdiction to adjudicate upon the same - HELD THAT - It is pertinent to note that the SCN against Gautam Spinners had been issued in purported exercise of powers conferred by Section 28(4) of Customs Act, and which enables the Customs authority to initiate proceedings where duty has either not been levied, not paid, short levied, short paid or erroneously refunded on account of collusion, wilful misstatement or suppression of facts by the importer or the exporter as the case may be. Since the question which stands raised would have to be examined in the backdrop of Section 28 of the Act. As would be evident from a reading of provision of section 28, sub-section (4) provides a window of five years from the relevant date within which proceedings under the said provision may be initiated. The proceedings so initiated are liable to be brought to a close in accordance with the statutory timelines which stand set out in subsection (9). In terms of sub-section (9) and since the notice had been issued with reference to Section 28(4), the proceedings were liable to be brought to a close within one year from the date of the notice and in the facts of the present case, the same being computed from 05 August 2021. Of equal significance is the amendment which came to be introduced in Section 28(9)(b) in terms of Finance Act, 2018 and pursuant to which the words where it is possible to do so came to be deleted. The statutory amendment as introduced in terms of the aforenoted Act 13 of 2018 thus clearly lends credence to the submission of learned counsel for the petitioner that the period of one year as prescribed in clause (b) was legislatively conferred a mandatory flavour - The Court then takes note of Section 28(9A)(c) and which is the principal provision which is sought to be invoked by the respondents in order to save the SCNs which have been impugned. Clause (c) speaks of SCN proceedings being kept pending in light of directions that may be issued by the Board. It significantly employs the phrases similar matter , specific direction and such matter . Undisputedly, the SCNs which had been issued against Anil Aggarwal and 11 other individuals did not stand on the same pedestal as the SCNs impugned here since the former, undisputedly, had been issued by the officials of the DRI. In fact, it was those SCNs which formed the primary subject matter of the Board s directives dated 17 March 2021 and 16 April 2021. As was noticed hereinbefore, the SCNs which stand impugned in these petitions had admittedly been issued post the promulgation of those directives by the Board and admittedly by the competent jurisdictional Commissionerates. The proceedings initiated against the present petitioners cannot be said to be covered under the directives of the Board. Those SCNs would also not fall within the ambit of Section 28(9A)(c). Since admittedly, the maximum period as prescribed under Section 28(9) has expired, those proceedings would not survive in law. Petition allowed.

Summary

Issues Involved:
1. Validity of show cause notices (SCNs) issued under Section 28(4) of the Customs Act, 1962.
2. Jurisdiction of Customs authorities post the expiry of the period prescribed under Section 28(9) of the Act.
3. Impact of Supreme Court judgment in Canon India Private Limited v. Commissioner of Customs on the SCNs.
4. Applicability of directives issued by the Central Board of Indirect Taxes and Customs (CBIC) in light of the Canon India judgment.

Summary of Judgment:

1. Validity of SCNs Issued Under Section 28(4) of the Customs Act, 1962:
The petitions challenged the SCNs primarily on the ground that the period for completion of proceedings as prescribed in Section 28(9) of the Act had expired, thereby nullifying the jurisdiction of the authorities to adjudicate upon the same.

2. Jurisdiction of Customs Authorities Post Expiry of the Period Prescribed Under Section 28(9):
The Court noted that the SCNs issued against the petitioners were dated post the directives of the CBIC and were issued by competent jurisdictional Commissionerates. The statutory timelines set out in Section 28(9) mandated that proceedings be brought to a close within one year from the date of the notice, which was not done in this case.

3. Impact of Supreme Court Judgment in Canon India Private Limited v. Commissioner of Customs:
The judgment in Canon India held that the Directorate of Revenue Intelligence (DRI) officers were not "proper officers" to issue SCNs under Section 28(4). The Court observed that this ruling did not impact the jurisdiction of Customs authorities to initiate proceedings under Section 28(4) or to conclude them.

4. Applicability of Directives Issued by the CBIC in Light of the Canon India Judgment:
The Court examined the CBIC directives dated 17 March 2021 and 16 April 2021, which directed SCNs issued by DRI officers to be kept pending. The Court found that these directives did not apply to the SCNs issued by the jurisdictional Customs authorities against the petitioners. The directives were specific to SCNs issued by DRI officers and did not place a cloud on the authority of Customs officers to proceed under Section 28(4).

Conclusion:
The Court concluded that the SCNs issued against the petitioners did not fall within the ambit of Section 28(9A)(c) and the directives of the CBIC. Since the period prescribed under Section 28(9) had expired, the proceedings could not survive in law. Consequently, the SCNs were quashed and set aside.