2020 (1) TMI 440 - HC - Customs

Mis-declaration of value and description of goods - Base Oil - penalty u/s 112 of CA - finalization of provisional assessment - extension of time for adjudication of SCN - HELD THAT - The DRI or the Custom Authorities, after the imported goods had been cleared from the custom area, had no authority to draw fresh samples on 28.01.2013 of such cleared imported goods from the factory premises in view of the provisions of Section 144 of the 1962 Act. In the absence of any extension of time after expiry of one year w.e.f. 28.03.2018 for adjudication on the Show Cause Notice dated 07.02.2014 (P-6), either under Section 28 Sub Section (9) or 9(A) of the 1962 Act, we hold that the impugned Show Cause Notice has lapsed. Petition allowed.

Summary

Issues:
1. Authority to draw fresh samples after goods clearance.
2. Validity of Show Cause Notice beyond the stipulated time limit.

Analysis:
1. The petitioner, a Partnership Firm, imported Pressed Distillate Oil (PDO) which was initially detained by Customs Authorities for testing. Two different laboratories confirmed the material as PDO. Subsequently, another report indicated the goods as Base Oil. The Directorate of Revenue Intelligence (DRI) drew fresh samples after goods clearance, leading to an impugned Show Cause Notice for mis-declaration. The petitioner argued that drawing fresh samples post-clearance is unauthorized under Section 144 of the Customs Act, 1962. The Court, citing a previous judgment, held in favor of the petitioner, stating that authorities cannot draw fresh samples after goods clearance.

2. The petitioner contended that the Show Cause Notice issued on 07.02.2014 had not been adjudicated within the stipulated time limit. Referring to a previous case, the petitioner argued that Customs Authorities cannot adjudicate a Show Cause Notice beyond five years from the date of issuance, unless an extension is granted. As no extension was provided in this case, the petitioner claimed the Show Cause Notice had lapsed. The Court agreed with the petitioner, citing the previous judgment and quashed the impugned Show Cause Notice dated 07.02.2014.

In conclusion, the High Court ruled in favor of the petitioner, holding that drawing fresh samples post-clearance is unauthorized and that the Show Cause Notice had lapsed due to non-adjudication within the stipulated time limit. The impugned Show Cause Notice dated 07.02.2014 was quashed based on these findings.