2024 (7) TMI 331 - HC - Customs

Misappropriation of duty free gold bullion received by the petitioners under the Special Economic Zone Scheme for manufacture and export of studded gold jewellery - fraudulent diversion into the local market for delivery at the shops in Hyderabad - HELD THAT - A plain reading of the clause 5.0 of the circular dated 10.03.2017 clearly envisages that the conditions stipulated in the said master circular would be an exemption to a proceeding drawn by way of preventive or in matters related to an offence under the Customs Act. The said clause clearly says that pre show cause notice consultation is mandatory except for preventive/offence related show cause notices. This, in other words also means that where the proceeding is preventive and offence related, pre show cause notice consultation would not be mandatorily required to be followed, rather it would stand excluded. The contents of the show cause notices by no stretch of imagination can be termed to conclusive or determinative in nature. On the contrary, if the petitioners are able to give a plausible and satisfactory explanation with cogent proof in support of their explanation and reasoning, there is no reason to believe that the authorities concerned would not appreciate the same and take appropriate steps and measures based upon the response so to be given by the petitioners. Explanation 1 to Section 28 of the Act deals with the relevant date in connection with the said Section. In the instant case, the relevant date as per the documents enclosed along with the show cause notices i.e. the worksheet, shows the date to be 24.11.2017 i.e. the date of the bill of entry. Therefore, for all practical purposes, the limitation would be five (05) years from the relevant date, and hence, the show cause notices in the two writ petitions are within the extended period of limitation as envisaged under Section 28(4) of the Act. Moreover, even the aspect of limitation is one which could be factual as also legal which can also be looked into by appropriate authority basing upon the objections and reply that the petitioner would be raising to the show cause notices. The said cannot be determined in exercise of the writ jurisdiction of this Court even before the petitioners responding to the show cause notices. It has been repeatedly reiterated by the Hon ble Supreme Court that ordinarily a writ Court may not exercise its discretionary jurisdiction in entertaining writ petitions questioning a show cause notice unlessinter alia the show cause notice being without jurisdiction or in excess of jurisdiction - In the instant writ petitions also, it is not the case of the petitioners that the authority who has issues the show cause notices lacks jurisdiction, neither is the show cause notices under challenge on violations of the principles of natural justice which are primarily two grounds available for a writ Court to entertain a writ petition so far as the challenge to a show cause notice is concerned. On this ground also, we do not find any case made out by the petitioners calling for an interference. Petition dismissed.

Issues Involved:
1. Validity of the show cause notices due to non-compliance with pre-notice consultation requirements.
2. Determinative nature of the show cause notices.
3. Barred by limitation.

Issue-wise Detailed Analysis:

1. Validity of the show cause notices due to non-compliance with pre-notice consultation requirements:

The petitioners challenged the show cause notices on the grounds that the mandatory pre-notice consultation as per the CBEC circular dated 10.03.2017 was not followed. The circular mandates pre-show cause notice consultation by the Principal Commissioner for demands above Rs. 50 lakhs, except for preventive/offence-related cases. The petitioners argued that this requirement is mandatory and should be applied universally, including under the Customs Act. They cited the Delhi High Court decision in Amadeus India Pvt. Ltd., which emphasized the necessity of pre-show cause notice consultation. However, the respondent countered that the circular explicitly exempts preventive/offence-related cases from this requirement. The court agreed with the respondent, stating that the circular's clause 5.0 clearly excludes preventive/offence-related cases from mandatory pre-notice consultation. The court also referenced the Jharkhand High Court's decision in Himanchal Construction Company Pvt. Ltd. and concluded that the petitioners' cases fell within the preventive/offence-related exception.

2. Determinative nature of the show cause notices:

The petitioners contended that the show cause notices were issued with a predetermined mindset, as the authorities had already quantified the demand and concluded the petitioners' liability. They argued that such notices violate the principles of fairness and reasonable opportunity. The court examined the contents of the show cause notices and found that the language used, such as "it appears," indicated that the notices were not conclusive or determinative. The court referenced several judgments, including those of the Madras High Court in Additional Director, Directorate of Revenue Intelligence, Chennai vs. M. Rathakrishnan and Bharath Marine Co. vs. Commissioner of Customs, which held that show cause notices should be read in their entirety and not be considered pre-determined if they provide an opportunity for the noticee to respond. The court concluded that the show cause notices in this case were not determinative and allowed for the petitioners to provide explanations.

3. Barred by limitation:

The petitioners argued that the show cause notices were barred by limitation under Section 28 of the Customs Act, which prescribes a five-year period from the relevant date. They claimed that the relevant date was not specified in the notices, making them time-barred. The respondent countered that the notices invoked the extended period of limitation under Section 28(4) due to willful misstatement and suppression of facts by the petitioners. The court noted that the show cause notices explicitly mentioned the invocation of the extended period and that the relevant date was provided in the accompanying documents. The court referenced the Supreme Court's decision in Uniworth Textiles Limited vs. Commissioner of Central Excise, Raipur, which clarified that the extended period of limitation applies in cases of deliberate default. The court concluded that the show cause notices were within the extended period of limitation and that the issue of limitation could be addressed during the adjudication process.

Conclusion:

The court found no merit in the petitioners' challenges to the show cause notices on the grounds of non-compliance with pre-notice consultation requirements, determinative nature, and limitation. The court emphasized that writ petitions should not be entertained at the stage of show cause notices unless there is a lack of jurisdiction or violation of principles of natural justice. The court dismissed the writ petitions, allowing the adjudication process to proceed.

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