2024 (1) TMI 834 - HC - Customs

Jurisdiction - Power of DRI to issue SCN - Recovery of duties of customs u/s 28 AAA of Customs Act - HELD THAT - In the case of TITAN MEDICAL SYSTEMS PVT. LTD. VERSUS COLLECTOR OF CUSTOMS, NEW DELHI 2002 (11) TMI 108 - SUPREME COURT , it was held that since the licensing authority has not taken any steps to cancel the license and the licensing authority also has not claimed that there was misrepresentation in which case once an advance license was issued and not questioned by the licensing authority, the customs authorities cannot interfere on allegation that there was misrepresentation. In that case, the fact was that even the customs authorities questioned about the advance license itself. Therefore, the Hon'ble Supreme Court held that if at all anybody wanted to question about the advance license, the appropriate authority could only be the authority which issued the license viz., DGFT and not the customs authorities. In the instant case on hand, the principle laid down in Titan Medical Systems (P) Ltd v. Collector of Customs, New Delhi would only be applicable. It is an undisputed fact that Director General of Foreign Trade DGFT has issued the license under Section 9 of Foreign Trade Development and Regulation Act, 1992 FTDR Act and thereby issued SEIS Scrips Service Exports from India Scheme . Though DGFT has issued show cause notices on various dates viz., 1st SCN on 21.10.2020, 2nd SCN and 3rd SCN on 03.02.2021 and an order dated 23.10.2020 came to be passed by DGFT placing the petitioner under the Denied Entities List, the same were withdrawn in entirety by virtue of letter dated 20.09.2021. It is also undisputed that till date, DGFT has not initiated any steps to cancel the license issued by them and hence, this Court is of the considered view that the show cause notice dated 24th November 2020 issued by the second Respondent is without any jurisdiction. This Court is of the considered view that the show cause notice dated 24th November 2020 issued by the second Respondent is not in consonance with the Circular No.334/1/2012-TRU dated 01.06.2012 and hence, the same is liable to be set aside - Petition allowed.

Summary

Issues Involved:
1. Jurisdiction to issue show cause notice under Section 28 AAA of the Customs Act, 1962.
2. Applicability of Circular No.334/1/2012-TRU dated 01.06.2012.
3. Validity of actions taken by the DGFT and subsequent withdrawal.

Summary:

1. Jurisdiction to issue show cause notice under Section 28 AAA of the Customs Act, 1962:
The petitioner challenged the show cause notice dated 24.11.2020 issued by the second respondent under Section 28 AAA of the Customs Act, 1962. The petitioner contended that the notice was issued without jurisdiction as only the DGFT has the authority to inquire into the eligibility and validity of SEIS Scrips. The respondents argued that they had the jurisdiction to recover duties if the SEIS Scrips were obtained through collusion, wilful misstatement, or suppression of facts. The court held that unless the DGFT initiates proceedings to cancel the license, the customs authorities cannot assume jurisdiction to issue notices under Section 28 AAA.

2. Applicability of Circular No.334/1/2012-TRU dated 01.06.2012:
The petitioner argued that according to Circular No.334/1/2012-TRU dated 01.06.2012, the customs authorities can only initiate recovery proceedings after the DGFT has taken action for cancellation of the instrument. The court noted that the circular clearly states that recovery of duty can be initiated only after the DGFT initiates action for cancellation. Since the DGFT had withdrawn all show cause notices and orders against the petitioner, the customs authorities had no jurisdiction to issue the impugned notice.

3. Validity of actions taken by the DGFT and subsequent withdrawal:
The DGFT had issued multiple show cause notices and placed the petitioner under the Denied Entities List, but later withdrew all actions via a letter dated 20.09.2021. The court observed that since the DGFT had not taken any steps to cancel the license, the customs authorities could not interfere or assume jurisdiction. The court referred to the Supreme Court's decision in Titan Medical Systems (P) Ltd v. Collector of Customs, New Delhi, which held that if the licensing authority does not cancel the license, the customs authorities cannot allege misrepresentation.

Conclusion:
The court concluded that the show cause notice dated 24.11.2020 issued by the second respondent was without jurisdiction and not in consonance with Circular No.334/1/2012-TRU dated 01.06.2012. Therefore, the notice was set aside, and the writ petition was allowed.