2023 (9) TMI 1301 - HC - Customs

Jurisdiction of the Designated Officer to issue show cause notices to the petitioners who are foreign exporters - Applicability of Customs Act to the transactions which have taken place in a foreign territory - HELD THAT - When the proceedings are listed on the backdrop of such prior orders, Mr. Mishra, learned Counsel appearing for the revenue would submit that in issuing the impugned show cause notice, the department has basically relied on the decision of the learned Single Judge of the CESTAT in the case MS. PRERNA SINGH, CEO M/S. SEVILLE PRODUCTS LIMITED AND INDIAN AUTHORISED REPRESENTATIVE V. LAKHSMIKUMARAN VERSUS COMMISSIONER OF CUSTOMS (IMPORT-II) MUMBAI 2020 (1) TMI 905 - CESTAT MUMBAI , hence, the respondents were justified in issuing the show cause notice to a foreign party. Prima facie the stand of the department is not satisfying even assuming that the provisions of the amended sub-section (2) of Section 1 of the Customs Act are taken into consideration as applicable to the facts and circumstances in the present case. Accordingly, as purely an issue of law arises for consideration in the present proceedings which goes to the root of the authority and jurisdiction of the designated officer to issue the impugned show cause notices to a foreign entity, we would be required to hear the parties on the merits of their respective contentions, at the final hearing of the petition. Hence, Rule. Respondents waive service. Considering the provisions of Section 1(2) of the Customs Act prior to its amendment by Finance Act, 2018 (w.e.f. 29.3.2018) as also considering the effect of the said amendment, the petitioners have made out a prima facie case for grant of interim reliefs. Hence, pending the hearing and final disposal of the petitions, the impugned show cause notices shall stand stayed.

Summary

Issues Involved:
The primary issue involves the jurisdiction of the Designated Officer to issue show cause notices to foreign exporters based on the applicability of the Customs Act to transactions in foreign territories.

Detailed Judgment:

Issue 1: Jurisdiction of Designated Officer
The petitioners, foreign exporters, challenged the jurisdiction of the Designated Officer to issue show cause notices under the Customs Act for transactions in a foreign territory. They argued that the Act does not have extraterritorial operation. The petitioners contended that they were merely suppliers of machinery from Germany and not involved in any alleged conspiracy. They cited a previous case where a similar show cause notice was dropped against them, emphasizing the lack of jurisdiction of the Commissioner of Customs. The petitioners urged that the show cause notice be declared void ab initio due to lack of jurisdiction.

Issue 2: Court's Directions
The Court, after reviewing the record and previous orders, directed the concerned authority to determine if the show cause notice against the petitioners was invalid based on jurisdictional grounds. The Court emphasized the need for the authority to consider whether the petitioners' case aligns with the observations made in a previous case where a show cause notice was dropped against the petitioners. The Court instructed the respondent's counsel to seek instructions on this matter for further adjudication.

Issue 3: Compliance and Further Proceedings
Subsequent proceedings revealed dissatisfaction with the department's approach, leading to the Court directing the officer responsible for issuing instructions to appear before the Court. However, the officer's response did not address the jurisdictional concerns raised by the Court. As a result, the Court required the Deputy Commissioner of Customs, who issued the impugned notice, to justify the action by submitting an affidavit. The Court stayed the impugned show cause notices pending final disposal of the petitions, granting interim relief to the petitioners and allowing parties to apply for a final hearing after completing pleadings.

Conclusion:
The judgment primarily revolves around the jurisdictional challenges faced by foreign exporters regarding show cause notices issued under the Customs Act. The Court emphasized the need for the authority to assess the validity of the notices in light of jurisdictional limitations and granted interim relief to the petitioners pending final disposal of the case.