2022 (8) TMI 1260 - HC - Customs

Validity of SCN - absolute non-application of mind on the part of R1 while issuing show cause notices, which is a pre-requisite for the issuance thereof - Power of Assessing Officer to issue SCN - Principles of natural justice - HELD THAT - Incidentally, the issue relates to proposed cancellation of scrips on a difference of opinion qua the petitioners and the Department on the nature of product exported, that is whether the wax candle manufactured by the petitioners satisfies the definition of handcrafted product. In this case, though such certification has been produced before the investigating authority, it is for the petitioners to place such a certificate before the Assessing Authority. Since this has not been done thus far, even on this score, it is stated that the present Writ Petitions are rendered pre-mature. The challenge to the show cause notices is rejected. The petitioners are permitted to file a reply to the same within a period of three (3) weeks from date of receipt of a copy of this order - petition dismissed.

Issues:
1. Challenge to show cause notices issued under the Customs Act, 1962 on various grounds.
2. Allegation of non-application of mind by the Assessing Authority while issuing show cause notices.
3. Compliance with the requirements of Section 28AAA of the Act regarding allegations of collusion, willful mis-statement, or suppression of facts in the show cause notices.
4. Dispute regarding the nature of the product exported and the requirement of certification from the Development Commissioner.

Analysis:

Issue 1: Challenge to show cause notices
The petitioners challenged the show cause notices issued under the Customs Act, 1962, citing various grounds. They argued that the Assessing Authority did not apply their mind adequately while issuing the notices, as they merely reproduced the report of the investigating authority without clearly identifying the specific issues for the assessee to respond to. The petitioners relied on several legal decisions to support their argument, emphasizing the need for the authority to address issues clearly in the notices.

Issue 2: Allegation of non-application of mind
The court noted that while the show cause notices were based substantially on the report of the investigating authority, it did not find a fatal flaw in this approach. The Assessing Authority was deemed to have the liberty to draw from various sources for issuing notices, as long as the material forming the basis of the notices was made available to the party concerned. The court highlighted that the petitioners could raise objections before the authority and challenge the conclusions drawn from the investigating officer's report.

Issue 3: Compliance with Section 28AAA requirements
The petitioners argued that the show cause notices did not contain allegations of collusion, willful mis-statement, or suppression of facts as required by Section 28AAA of the Act. However, the court observed that the officer's conclusion indicated willful mis-statement and suppression of facts, leaving this point open for the petitioners to address in their response to the notices.

Issue 4: Dispute over product certification
Regarding the dispute over the nature of the product exported, the court highlighted the requirement for the petitioners to produce a certification from the Development Commissioner in case of a dispute. Since the certification had not been presented to the Assessing Authority, the court deemed the petitions premature on this ground as well.

In conclusion, the court rejected the challenge to the show cause notices and allowed the petitioners to file a reply within a specified period. The court emphasized the need for expeditious proceedings and clarified that its observations were aimed at aiding the effective disposal of the writ petitions. Ultimately, both writ petitions were dismissed without costs.

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