2014 (2) TMI 730 - HC - Customs

Jurisdiction of Commissioner of Customs - Classification of goods - Bituminous coal or steam coal - Held that - The notice as reproduced hereinabove, first and foremost proposes to adopt certain classification which, in the opinion of the department, would be correct for the imported goods rejecting the classification canvassed by the petitioner. It is in this context that in para 24(1) of the notice calls upon the petitioner show cause why the classification of the imported goods under heading 27011920 should not be rejected and why the same should not be re-classified under the heading 27011200 of the First Schedule to the Customs Tariff Act, 1975. Further proposals are only consequential in nature and includes proposal for adopting correct classification and quantifying the differential customs duty on 37000 MT of coal imported by the petitioner. Proposal is also for recovery of the differential customs duty with interest - this is not a case where recovery of duty under section 28 of the Act is preceded the finalisation of the classification. As a matter of fact, the very notice issued is for finalization of the classification on the basis of the proposal and the prima facie opinion of the department rejecting the classification presented by the petitioner. - same is not without jurisdiction. Appellant contended that if the adjudication were to be undertaken by the Commissioner, the petitioner would lose its valuable right to appeal. - If the Commissioner under the provisions of the Act and the Rules framed thereunder is competent to adjudicate certain issues, merely because the noticee in such case may lose one stage of appeal would not render the action of the Commissioner per se without jurisdiction. - Decided against assessee.

Summary

Issues Involved:
1. Validity of the show cause notice issued by the Commissioner of Customs.
2. Classification of imported coal as steam coal or bituminous coal.
3. Jurisdiction of the Commissioner to issue a show cause notice before finalizing provisional assessment.
4. Right to appeal and the impact of the Commissioner's adjudication on this right.
5. Confiscation of goods and recovery of differential duty.

Detailed Analysis:

1. Validity of the Show Cause Notice:
The petitioner challenged the show cause notice dated 7.10.2013 issued by the Commissioner of Customs, Kandla, arguing it was wholly without jurisdiction as it was issued before the finalization of the provisional assessment. The court noted that the petitioner did not dispute the competence of the Commissioner to undertake final assessment and classification of goods but contended that such classification must be completed before any duty demand can be raised. The court referenced previous judgments, asserting that it is well-settled that courts should not interfere at the show cause notice stage unless there is a clear lack of jurisdiction or gross violation of principles of natural justice. The court found no such inherent lack of jurisdiction or violation in this case.

2. Classification of Imported Coal:
The central controversy was whether the imported coal was steam coal or bituminous coal. The petitioner did not raise any contentions regarding this classification before the court. The court highlighted that similar challenges by other importers had been dismissed at the show cause notice stage. The court emphasized that determining the nature of the coal and whether it was misdeclared involves highly disputed questions of facts and law, which should first be adjudicated by the departmental authorities.

3. Jurisdiction of the Commissioner:
The petitioner argued that no duty demand could be raised before the finalization of the provisional assessment. The court referred to the Supreme Court's decision in Serai Kella Glass Works Pvt Ltd. v. CCE, which stated that proceedings under Section 11-A of the Central Excise Act should commence only after final assessment. However, the court found that the show cause notice in question was for the finalization of the classification and the consequent quantification of differential customs duty, not a premature duty demand. Thus, the notice was not without jurisdiction.

4. Right to Appeal:
The petitioner contended that adjudication by the Commissioner would eliminate a valuable right to appeal. The court acknowledged that while the Commissioner's competence to issue and adjudicate the show cause notice was not disputed, the elimination of one stage of appeal does not render the action without jurisdiction. The right to appeal is a statutory creation, and if the Commissioner is competent under the law, the loss of an appeal stage does not invalidate the notice.

5. Confiscation of Goods and Recovery of Differential Duty:
The show cause notice included proposals for confiscation of goods and recovery of differential customs duty with interest. The court left open the question of whether confiscation could occur only after the duty demand is crystallized and the petitioner fails to pay, allowing the petitioner to raise this issue before the Commissioner during adjudication.

Conclusion:
The petition was dismissed. The court found no inherent lack of jurisdiction or gross violation of principles of natural justice in the issuance of the show cause notice. The petitioner could raise the issue of confiscation before the Commissioner during adjudication.