2022 (7) TMI 1285 - HC - Customs

Validity of SCN - 100% EOU - Private Warehouse - Cancellation of licence under Sub Section 2(b)of Section 58 granted to petitioner under Sub-Section (1) of Section 58 of the Customs Act, 1962 - demand of appropriate customs and central excise duties under the Customs and Central Excise Act, 1944 on the capital goods and raw material procured duty free, semi finished and finished goods lying in stock on the date of cancellation of the said licence - HELD THAT - The entire show cause notice proceeds on the basis of six show cause notices that had been issued to petitioner and an offence have been booked by DRI against petitioner and hence it appears that petitioner has contravened the provisions of Section 71, 72 of the Customs Act, 1962 read with Condition No. 6 of licence dated 14 th November 2003 and 18th October 1994. There is nothing more in the show cause notice. Even in the impugned order which was passed almost more than three months later, there is no reference to any of the orders being passed as suggested by Mr. Kantharia. Even the impugned order proceeds on the basis of show cause notice issued to petitioner which was pending adjudication and the offence that had been booked by DRI which was pending investigation. Respondent No.2 gives finding against petitioner of diverting of goods in contravention of the provisions of Section 71 of the Act and he also relies on certain panchanams. None of these points were mentioned in the show cause notice to enable petitioner to satisfactorily show cause - The points which Respondent No.2 has mentioned in the impugned order do not even find mention in the show cause notice that was issued to petitioner. Issuance of show cause notice is not an empty formality. Its purpose is to give a reasonable opportunity to the affected persons to contend with the allegations in the show cause notice are not correct. The person issuing show cause notice shall inform a person who is likely to be affected by any order proposed to be made about the materials on the basis of which the authority proposes to take action and give a fair and reasonable opportunity to such person to represent his case and to correct or controvert the material sought to be relied upon against him. If Respondent No.2 was relying on any seizure panchanama or any other material, the same should have been mentioned in the show cause notice issued to afford fair and reasonable opportunity to petitioner to respond. That has not been done. Further, Respondent No.2 for issuing show cause notice has relied upon six show cause notices and an offence booked by DRI but none of these had attained finality. They were pending at various stages. At the time show cause notice in the case at hand was issued there was every possibility that the show cause notices and the complaint on which Respondent No.2 had relied upon to issue show cause notice could have been discharged or withdrawn against petitioner. Thus, issuance of show cause notice itself was premature. Petition disposed off.

Summary

Issues Involved:
1. Legality of the cancellation of the petitioner's license under Section 58 of the Customs Act, 1962.
2. Adequacy and fairness of the show cause notice issued to the petitioner.
3. Validity of the impugned order based on pending show cause notices and complaints.

Issue-wise Detailed Analysis:

1. Legality of the cancellation of the petitioner's license under Section 58 of the Customs Act, 1962:
The petitioner challenged the order dated 10th January 2005, in which Respondent No.2 canceled the license granted under Sub-Section (1) of Section 58 of the Customs Act, 1962. The cancellation was based on alleged contraventions of the Act, rules, regulations, and conditions of the license. The court noted that the cancellation was premature since the show cause notices and complaints relied upon were still pending adjudication. The court emphasized that before any license is canceled, the licensee must be given a reasonable opportunity of being heard, as per Section 58(2)(b) of the Act. The impugned order failed to provide such an opportunity, thus rendering the cancellation illegal.

2. Adequacy and fairness of the show cause notice issued to the petitioner:
The show cause notice dated 4th October 2004, issued by Respondent No.2, was based on six pending show cause notices and a complaint by DRI, which were still under investigation. The court highlighted that issuance of a show cause notice is not an empty formality but a crucial step to give the affected party a reasonable opportunity to respond to the allegations. The notice must inform the affected party about the materials on which the authority proposes to take action and provide a fair opportunity to represent their case. The court found that the show cause notice issued to the petitioner was vague and did not specify the grounds for the proposed action, thus failing to provide a reasonable opportunity to the petitioner to show cause.

3. Validity of the impugned order based on pending show cause notices and complaints:
The court observed that the impugned order dated 10th January 2005, was based on pending show cause notices and a complaint by DRI, none of which had reached finality. The court noted that the impugned order proceeded on the assumption that the petitioner had contravened the provisions of the Act, rules, and conditions of the license, without any conclusive findings. The court emphasized that relying on pending show cause notices and complaints to cancel the license was premature and unjustified. The court also noted that the impugned order did not mention any adjudicated orders against the petitioner, further weakening the basis for the cancellation.

Conclusion:
The court concluded that the issuance of the show cause notice and the subsequent cancellation of the petitioner's license were premature and lacked a reasonable opportunity for the petitioner to respond. The court quashed and set aside the impugned order dated 10th January 2005, allowing Respondent No.2 to take appropriate steps in accordance with the law, if still within the limitation period. The court also ordered the return of any amount deposited by the petitioner, with interest, within four weeks of receiving an application from the petitioner. The petition was disposed of with no order as to costs.