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2024 (11) TMI 142 - HC - CustomsValidity of show cause notice issued u/s 28 of the Customs Act - invoking the extended period of limitation - Principal Commissioner of Customs jurisdiction to issue a show cause notice in respect of goods that were previously assessed - HELD THAT - Except under exceptional circumstances, the writ court does not entertain a challenge to a show cause notice. One of the exceptions is if the show cause notice was issued without jurisdiction. The conclusion that flows from the text of sub-sections (5), (6), (8) and (9) of Section 28 is that the proper officer is empowered to determine the amount payable as customs duty, including interest liability, under this provision. It is significant to notice that there is nothing in the text of Section 28 which indicates that the exercise of power u/s 28 is subject to the assessment being reopened by appellate proceedings or otherwise. Indeed, conspicuous by its absence from the text of Section 28 is any reference to Section 17 or to assessment under the said provision. Keeping in mind the above statutory context, it is relevant to consider the judgments relied upon by the petitioner. In ITC 2019 (9) TMI 802 - SUPREME COURT the question that arose for consideration was whether the refund application could be entertained in the absence of a challenge to the order of assessment. In that context, the Hon'ble Supreme Court examined Sections 17, 27 and 28. Upon consideration of the language of Sections 17 and 28 and the judgments relied upon by the contesting parties, conclude that the power under Section 28 is a power to determine duty and interest. Such power is not subject to or conditional upon the assessment being reopened or set aside. Consequently, it cannot be concluded that the respondent does not have the jurisdiction to invoke Section 28 either on account of not having verified the self-assessment in terms of Section 17 of the Customs Act or not appealing against such self-assessment. Respondent jurisdiction to invoke the enlarged period of limitation under sub-section (4) of Section 28 - contention of the petitioner was that the relevant goods were cleared by classifying such goods under CTH 8517 over a period of about four years, i.e. between 15.11.2018 and 16.12.2022, and that the enlarged period of limitation cannot be invoked in those circumstances - HELD THAT - As is noticeable from the language of sub-section (4), such power may only be exercised if the non-levy, non-payment, short levy, short payment, erroneous refund, etc., was by reason of collusion or wilful misstatement or suppression of facts. From paragraph 6 of the petitioner's affidavit, it appears that multiple goods, such as base stations and modules, servers and modules, LTE products and modules, MIMO products, OTN products and modules, POT products, PTN products and modules, session border controllers and modules, soft switches and modules, media gateway (modules) and VoIP equipment and modules were imported by the petitioner. This is also evident from the impugned show cause notice which expressly refers to the relevant bills of entry. The show cause notice is detailed and deals extensively with the nature of goods imported by the petitioner, and the self-classification thereof in the relevant bills of entry. Mr.Tarun Gulati contended that the show cause notice is replete with inferences of fact and that such inferences cannot be the basis for invoking jurisdiction under sub-section (4) of Section 28 on the ground of wilful misstatement or suppression of facts. The said contention is not entirely devoid of merit inasmuch as a finding of wilful misstatement cannot be recorded without some basis to hold that the petitioner's statements, as opposed to the inferences therefrom, were made with knowledge of falsity. It bears repetition, however, that the matter is at the show cause notice stage and only allegations have been made as on date. On examining the show cause notice, it is apparent that such allegations of wilful misstatement and suppression of facts have been made in several paragraphs. In order to interfere at this stage, a conclusion should be reached that the petitioner definitely did not indulge in suppression of facts or make wilful misstatements while importing the goods. Without closely and carefully considering disputed facts and documents relating to the import of multiple telecommunication-related products under a large number of bills of entry, the veracity of the respondent's allegations cannot be determined. Such detailed consideration is inappropriate at this juncture for multiple reasons. Hence, at this preliminary stage, in the factual matrix outlined above, especially in exercise of discretionary and summary jurisdiction, it cannot be concluded that the respondent invoked subsection (4) of Section 28 without jurisdiction. In this regard, it should also be noticed and recognized that it appears prima facie that the notice was issued within the period of five years specified therein. The upshot of this discussion is that the petitioner has failed to make out a case to interfere with the show cause notice. Since the hearing pursuant to the impugned show cause notice was deferred in view of this case, it is, however, just and appropriate that the petitioner be granted time to respond to the show cause notice. For reasons aforesaid, W.P. is disposed of by refusing to interfere with the show cause notice but by permitting the petitioner to respond thereto within one month from the date of receipt of a copy of this order. Upon receipt of such reply, it will be open to the respondent to proceed with the matter in accordance with law. Consequently, connected miscellaneous petitions are closed.
Issues Involved:
1. Jurisdiction to issue a show cause notice under Section 28 of the Customs Act. 2. Validity of invoking the extended period of limitation under Section 28(4) of the Customs Act. 3. Whether the self-assessment by the petitioner was final and could not be reopened. 4. Allegations of misclassification and wilful misstatement by the petitioner. Issue-wise Detailed Analysis: 1. Jurisdiction to Issue a Show Cause Notice: The primary contention raised by the petitioner was that the respondent lacked jurisdiction to issue a show cause notice under Section 28 of the Customs Act without first challenging the self-assessment. The petitioner argued that the assessments were final as the proper officer did not verify the self-assessment under Section 17 or appeal against it. The court examined Sections 17 and 28, concluding that the power under Section 28 is to determine duty and interest and is not contingent upon reopening or setting aside the assessment. The court emphasized that Section 28 does not reference Section 17, indicating that the customs authorities can invoke Section 28 without needing to challenge the self-assessment through appellate proceedings. 2. Validity of Invoking the Extended Period of Limitation: The petitioner argued that the extended period of limitation under Section 28(4) could not be invoked as the goods were cleared over a period of four years without any misstatement. The court noted that the extended period can be invoked if non-levy or short payment was due to collusion, wilful misstatement, or suppression of facts. The show cause notice contained allegations of wilful misstatement and suppression, which the court found to be sufficient for invoking the extended period. The court highlighted that these issues could not be conclusively determined at the show cause notice stage and required further examination. 3. Finality of Self-assessment: The petitioner contended that the self-assessment was final since no verification was conducted under Section 17. The court referred to the judgment in ITC Ltd. v. CCE, which established that self-assessment is an assessment order and is appealable. The court clarified that the power under Section 28 to determine duty or interest is distinct from the refund proceedings under Section 27 and is not limited by the finality of self-assessment. 4. Allegations of Misclassification and Wilful Misstatement: The petitioner was accused of misclassifying goods to avail of exemptions unjustly. The court noted that the show cause notice detailed the nature of goods and the alleged misclassification. While the petitioner argued that the notice was based on inferences rather than misstatements, the court found that the allegations warranted further investigation. The court emphasized that at the show cause notice stage, the veracity of these allegations could not be conclusively determined without examining the facts and documents related to the imports. Conclusion: The court concluded that the respondent had jurisdiction to issue the show cause notice under Section 28 and that the extended period of limitation was validly invoked. The petitioner's arguments regarding the finality of self-assessment and the absence of misclassification were not sufficient to interfere with the show cause notice at this stage. The court disposed of the writ petition by allowing the petitioner to respond to the show cause notice within one month, enabling the respondent to proceed in accordance with the law.
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