2024 (9) TMI 127 - HC - Customs

Jurisdiction to issue SCN - Maintainability of show-cause notices under Section 28 (4) of Customs Act - no satisfaction of the respondents before the issuance of such show-cause notices about any willful mis-statement or collusion or suppression of fact by the petitioner - suppression of material facts on part of the petitioner - HELD THAT - Considering the contents of the show-cause notice, there is no allegation made against the petitioner for suppression of facts. The show-cause notice and the impugned Order-in-Original is passed only based on alleged breach of conditions of the exemption notification by the petitioner for not submitting utilisation certificate within the prescribed time limit or non-production of such certificates from the power generating companies or the certificates produced were not proper certificates in respect of the quantity supplied to the generating companies during the relevant period. Considering the documents made available on record and statements recorded during inquiry, it was prima facie observed in the impugned order that the petitioner failed to comply with the conditions stipulated under the Exemption N/N. 12/2012-Cus dated 17th March, 2012 - From the above alleged failure on part of the petitioner, it was concluded that petitioner was not eligible for exemption from custom duty under the Exemption Notification more particularly to reconcile conditions of Exemption Notification as the invoices issued by the petitioner to the power generating companies towards sell of RLNG and utilisation certificate issued by the generating companies did not contain any reference to the corresponding entry to the Bills of Entry. The Respondent-Department therefore invoked provision of Section 28 (4) of the Act on the alleged breach of the conditions by the petitioner on the ground that the utilisation certificate was not produced within the time limit of three months and twelve months and the transit loss of LNG not supplied to the power generating companies during the gasification during the relevant period - thus, in view of the alleged allegation levelled against the petitioner, it is clear that there is no suppression or failure to disclose of the material facts on part of the petitioner because the petitioner has submitted all the documents during the course of the inquiry along with reconciliation statement and it was also made clear that it is technically impossible for the petitioner to reconcile the LNG as shown in the Bills of Entry with the quantity of regasification Natural Gas supplied to the generating companies through pipeline in a continuous manner. Thus, it is apparent that the allegation levelled against the petitioner for suppression of material facts are not born out from in findings arrived at in the impugned Order-in-Original to invoke provision of section 28 (4) of the Act for extended period of limitation to assume jurisdiction by the respondent authorities to issue show cause notices and pass the impugned order. The Adjudicating Authority could not have assumed the jurisdiction to issue show-cause notice under Section 28 (4) of the Act and the entire proceedings pursuant to such show-cause notice are vitiated. As the show-cause notices are held to be without jurisdiction, no further analysis on merits of the case is required. Both the show-cause notices as well as the impugned Order-in-Original are hereby quashed and set aside - Petition allowed.

Issues Involved:
1. Jurisdiction and maintainability of the show-cause notices under Section 28(4) of the Customs Act, 1962.
2. Alleged non-compliance with conditions of the exemption notifications.
3. Alleged suppression of material facts by the petitioner.
4. Demand for customs duty on conversion/transit loss during the regasification process.
5. Demand for customs duty due to alleged non-submission or delayed submission of utilization certificates.

Detailed Analysis:

Jurisdiction and Maintainability of the Show-Cause Notices:
The petitioner challenged the jurisdiction of the show-cause notices issued under Section 28(4) of the Customs Act, 1962, arguing that there was no willful misstatement or suppression of material facts. The court noted that the show-cause notices and the impugned Order-in-Original were based solely on the alleged breach of conditions of the exemption notifications. The court observed that the petitioner had submitted all necessary documents during the inquiry, and there was no suppression of material facts. Therefore, the court concluded that the Adjudicating Authority could not have assumed jurisdiction to issue the show-cause notices under Section 28(4) of the Act, rendering the entire proceedings vitiated.

Alleged Non-Compliance with Conditions of the Exemption Notifications:
The petitioner argued that the respondent authorities misinterpreted the provisions of the exemption notifications and failed to consider the petitioner's submissions and documentary evidence. The court examined the conditions of the exemption notifications, particularly Notification No. 31/2015 and Notification No. 52/2017, which required the submission of invoices and utilization certificates within specified time limits. The court found that the petitioner's submission of utilization certificates was within the extendable period and that the respondent authorities had not objected to the submitted documents at the time of submission. The court also noted that the petitioner had provided a reconciliation statement of the supply of RLNG to power generating companies, which was not doubted by the Adjudicating Authority.

Alleged Suppression of Material Facts by the Petitioner:
The respondent authorities alleged that the petitioner suppressed material facts by not disclosing the transit loss during the regasification process and failing to submit utilization certificates within the prescribed time limits. The court found that the petitioner had submitted all relevant documents and had clearly explained the technical impossibility of reconciling the LNG as shown in the Bills of Entry with the quantity of RLNG supplied to power generating companies. The court concluded that there was no suppression of material facts by the petitioner.

Demand for Customs Duty on Conversion/Transit Loss:
The petitioner contended that the demand for customs duty on the 0.66% conversion/transit loss during the regasification process was unjustified. The court referred to previous decisions by the CESTAT and the Commissioner (Appeals) that had accepted the technological impossibility of converting 100% LNG into RLNG and had allowed the loss of 0.66%. The court concluded that the adjudicating of the show-cause notices on account of the conversion loss was a reopening of an issue that had already been settled by competent forums and accepted by the Department.

Demand for Customs Duty Due to Alleged Non-Submission or Delayed Submission of Utilization Certificates:
The petitioner argued that the alleged delay in submitting utilization certificates was factually incorrect and that the certificates were submitted within the prescribed period or the extendable period. The court found that the utilization certificates submitted by the petitioner were within the extendable period and that the respondent authorities had not objected to the submitted documents at the time of submission. The court concluded that the impugned order was based on a literal application of the exemption notification without considering the petitioner's reconciliation statement and the continuous supply of RLNG to power generating companies.

Conclusion:
The court held that the Adjudicating Authority could not have assumed jurisdiction to issue the show-cause notices under Section 28(4) of the Customs Act, 1962, and that the entire proceedings pursuant to such show-cause notices were vitiated. Consequently, both the show-cause notices and the impugned Order-in-Original were quashed and set aside. The rule was made absolute to the aforesaid extent, with no order as to costs.

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