2023 (7) TMI 780 - AT - Customs

Validity of SCN - Department interpreted the remand order as a direction to issue SCN - recovery of differential duty - SCN in respect of past consignments have been issued after the appellate stage of the litigation - extended period of limitation - HELD THAT - In UTRACON STRUCTURAL SYSTEM PVT. LTD. VERSUS COMMR. OF CUS., CHENNAI 2008 (9) TMI 363 - CESTAT, CHENNAI passed by the Tribunal in the earlier round of litigation it has been categorically held by the Tribunal that department ought to have issued a SCN to the assessee before proceeding against the assessee for recovery of differential duty in respect of past consignments. The department is directed to refund the duty collected from the assessee in respect of past consignments as the same has been collected illegally without issuing a SCN. However, it appears that Tribunal has also remanded the matter in order to enable the Commissioner to afford opportunities to the parties to keep up with the principles of natural justice - there is no explicit or express direction to issue a SCN. The department has issued the SCN, by interpreting the remand as a direction to issue SCN. The genesis of a litigation is the issuance of show cause notice. The intention of such show cause notice is to inform the party about the allegations and also to give opportunity to the party to put forward any defence with regard to the allegations. The said requirement is the basic principle of natural justice. There is no provision in the Customs Act, 1962 which enables the Tribunal to direct the department to issue show cause notice to a party. Extended period of limitation - HELD THAT - The earlier order of adjudication was passed on 09.05.2008. After the appeal before the Tribunal, the department cannot invoke the extended period alleging that assessee has suppressed facts with intention to evade payment of duty. The Commissioner (Appeals) has rightly held that there are no grounds for invoking extended period - Further, it is the case of department that description of the goods in invoice is Steel 7 Ply Wire and assessee has misdeclared in the Bill of Entry as Non Alloy Steel Wire for wrongly availing the concessional rate of duty. But the department has failed to produce the invoices relied by them to allege misdeclaration of goods. The goods are not also not available. The SCN is apparently time barred. The demand of duty with interest is time barred and cannot sustain - Appeal allowed.

Summary

Issues:
The issues involved in this case are misdeclaration of imported goods, classification of goods, duty demand, penalties, confiscation of goods, issuance of show cause notice, and principles of natural justice.

Misdeclaration of Goods:
The importer declared goods as 'Non Alloy Steel Wire Rod' to claim a concessional rate of duty under Customs Notification No.21/2002. However, upon examination, it was found that the goods were actually 'Steel 7 ply Wire' which did not qualify for the concessional rate of duty. The misdeclaration led to duty demand and penalties.

Classification of Goods and Duty Demand:
The goods were classified as 'Steel 7 ply Wire' under CTH 73121090 instead of 'Non Alloy Steel Wire Rod' under CTH 72139990. The duty demand was confirmed by the original authority, and penalties were imposed under Section 114A of the Customs Act, 1962.

Confiscation of Goods and Penalties:
The original authority confirmed duty demand, penalties, and determined differential duty for past consignments. However, as the goods were not physically available for confiscation, they were not confiscated under Section 111 (m) of the Customs Act, 1962. The Commissioner (Appeals) modified the order, confirming duty demand but setting aside the penalties and confiscation of goods.

Show Cause Notice and Principles of Natural Justice:
After the Tribunal's remand, a show cause notice was issued to demand differential duty on past consignments. The Tribunal directed the refund of duty collected illegally without issuing a show cause notice. The Tribunal's order did not explicitly direct the issuance of a show cause notice, and the subsequent issuance of the notice was challenged on the grounds of natural justice.

Decision:
The Tribunal held that the demand of duty with interest was time-barred and could not be sustained. The appeal by the assessee was allowed, and the appeal by the Department was dismissed. The Tribunal clarified that it did not discuss the merits of the classification of goods.