2022 (4) TMI 951 - HC - Customs

Recovery of refund sanctioned - Validity of Show Cause Notice (SCN) - it is alleged that the refund has been sanctioned erroneously based on the false and fabricated documents - violation of principles of natural justice - HELD THAT - This Writ Petition is premature. It cannot be said that the impugned Show Cause Notice is without jurisdiction. Whether the petitioners have indeed indulged in submitting fraudulent and fabricated documents / certificates to wrongly claim refund of duty paid, is the subject matter of evidence. A Writ Court under Article 226 of the Constitution of India cannot examine the factual aspects. The petitioners have to submit to the jurisdiction of the respondents by filing suitable reply to the impugned Show Cause Notice. If the petitioners suffer an adverse order, there is a hierarchy of the Appellate Authority under the Customs Act, 1962. Therefore, the petitioners have to work out their remedy before the Authorities under the Act. There is no merit in the present Writ Petition - the first respondent is therefore directed to complete the proceedings initiated pursuant to the impugned Show Cause Notice after following the principles of natural justice and affording an opportunity of personal hearing, preferably within a period of six months from the date of receipt of a copy of this order. Petition dismissed.

Summary

Issues:
Challenge to Show Cause Notice for recovery of refund amount, applicability of exemption, validity of refund applications, jurisdiction of issuing Show Cause Notice, reliance on fraudulent documents, premature filing of Writ Petition.

Analysis:
The petitioners challenged a Show Cause Notice dated 19.06.2021, seeking recovery of a refund amount of ?2,26,75,276 under Sections 28(4), 28AA, 114A, and 114AA of the Customs Act, 1962. The petitioners contended that they were entitled to exemption under Notification No.30/2004-CE based on the classification of goods under Chapter Heading No.5509. They relied on a Supreme Court judgment to support their claim of exemption. The petitioners filed refund applications supported by certificates from Chartered Accountants stating non-passing of countervailing duty incidence to buyers. Refunds were granted for 162 Bills of Entry, but refund applications for 97 Bills of Entry were initially rejected due to procedural issues. An appeal led to the refund being granted. The impugned Show Cause Notice alleged erroneous refund based on false documents, leading to the petitioners challenging its jurisdiction and legality.

The petitioners cited various legal decisions to support their case, emphasizing the validity of their refund claims. The respondents argued that the refund claims were based on wilful mis-declaration and suppression of facts, claiming that the Chartered Accountants' certificates were manipulated to fraudulently obtain refunds. The Court noted that determining the validity of the refund claims required factual evidence, which falls outside the scope of a Writ Court under Article 226. The Court deemed the Writ Petition premature, directing the petitioners to respond to the Show Cause Notice and avail appellate remedies under the Customs Act, 1962 if needed.

Ultimately, the Court dismissed the Writ Petition, instructing the first respondent to proceed with the Show Cause Notice after following principles of natural justice. The petitioners were given six months to respond, with the option to appeal any adverse decision. The Court emphasized the need for the petitioners to exhaust remedies under the Customs Act, 1962. The judgment highlighted the importance of factual evidence in determining the validity of refund claims and the necessity for proper legal recourse in challenging administrative actions within the established legal framework.