2021 (2) TMI 458 - AT - Customs

Supreme Court vacates show cause notices for delay, rules on admissibility of electronic records

The show cause notices issued on 07.10.2016 and adjudicated on 28.05.2019 were vacated as they were not adjudicated within the stipulated time frame ... Validity of SCN - Non-adjudication of show cause notice within reasonable period - Whether the show cause notices issued on 07.10.2016 and adjudicated on 28.05.2019 shall stand vacated in terms of the explanation 4 to Section 28 of the Customs Act, 1962 or not? - Whether the show cause notice can be issued for recovery under Section 28 of the Customs Act, 1962 without challenging the assessment under Section 17 of the Customs Act 1962? - Whether in the absence of following the procedure prescribed under Section 138C of the Customs Act, 1962, the documents relied by the adjudicating authority are admissible or not? - Difference of opinion. HELD THAT:- In view of the difference in opinion expressed by the Members hearing these appeals, the following question is referred to Hon’ble President for referring the same to third member for his consideration- “Whether in the facts and circumstances of this case,- these appeals should be allowed following the decision of Hon’ble Punjab & Haryana High Court in case of M/s Prabhat Fertilizers & Chemical Works Works [2020 (2) TMI 1443 - PUNJAB AND HARYANA HIGH COURT] as held by Hon’ble Member (Judicial); Or these appeals should be dismissed as the decision of Hon’ble Punjab & Haryana High Court in case of M/s Prabhat Fertilizers & Chemical Works Works [2020 (2) TMI 1443 - PUNJAB AND HARYANA HIGH COURT] is not applicable as has been held by Hon’ble Member (Technical). Issues Involved:1. Whether the show cause notices issued on 07.10.2016 and adjudicated on 28.05.2019 shall stand vacated in terms of the explanation 4 to Section 28 of the Customs Act, 1962 or notRs.2. Whether the show cause notice can be issued for recovery under Section 28 of the Customs Act, 1962 without challenging the assessment under Section 17 of the Customs Act 1962Rs.3. Whether in the absence of following the procedure prescribed under Section 138C of the Customs Act, 1962, the documents relied by the adjudicating authority are admissible or notRs.Issue-wise Detailed Analysis:Issue (i): Whether the show cause notices issued on 07.10.2016 and adjudicated on 28.05.2019 shall stand vacated in terms of the explanation 4 to Section 28 of the Customs Act, 1962 or notRs.The appellants argued that the show cause notices issued on 07.10.2016 and adjudicated on 28.05.2019 should be vacated based on the amended explanation 4 to Section 28 of the Customs Act, 1962, which mandates adjudication within one year from the date of the show cause notice. The Punjab & Haryana High Court in the case of M/s Harkaran Dass Vedpal held that the amendment made on 28.03.2018 is retroactive, implying that show cause notices issued before 29.03.2018 should be adjudicated within one year from 28.03.2018. The High Court further clarified in M/s Prabhat Fertilizers & Chemical Works that the amendment should be treated as retroactive, requiring adjudication within one year from 29.03.2018. Since the show cause notices in this case were not adjudicated within one year from the retroactive date, the notices stand vacated, and the impugned order was set aside.Issue (ii): Whether the show cause notice can be issued for recovery under Section 28 of the Customs Act, 1962 without challenging the assessment under Section 17 of the Customs Act 1962Rs.The appellants contended that the demand of duty under Section 28 cannot be made without reassessment under Section 17 and that the Department has no authority to issue a show cause notice under Section 28 without first reassessing the bill of entry. However, the Revenue argued that the proper officer has the power to reassess the duty under Section 17 and issue a show cause notice under Section 28 for recovery of duty short paid or not paid. The Supreme Court in the case of Virgo Steels and Jain Shudh Vanaspati Ltd held that the power to recover duty which has escaped collection is a concomitant power arising out of the levy of customs duty under Section 12 of the Act, and Section 28 provides the procedural aspect for recovery of duty. Therefore, the show cause notice under Section 28 can be issued without challenging the assessment under Section 17.Issue (iii): Whether in the absence of following the procedure prescribed under Section 138C of the Customs Act, 1962, the documents relied by the adjudicating authority are admissible or notRs.The appellants argued that the documents/conversations recovered from emails were taken without complying with Section 138C of the Act, which requires a certificate for admissibility of electronic records. However, the Revenue contended that the emails were retrieved from web-based email accounts and were signed by the respective owners, making them admissible under Section 139 of the Act. The Tribunal in the case of Copier Force India Ltd and Shri Ulacanavari Ammali Steels held that printouts from computers are admissible if corroborated by other evidence. The Supreme Court in Arjun Panditrao Khotkar clarified that the requirement of a certificate under Section 65B(4) of the Evidence Act is not always mandatory and can be relaxed in the interest of justice. Therefore, the electronic records in this case are admissible as evidence.Conclusion:The appeals were allowed on the first issue, vacating the show cause notices as they were not adjudicated within the stipulated time. The remaining issues were kept open for future reference. The Member (Technical) disagreed and opined that the appeals should be dismissed, holding that the decision of the Punjab & Haryana High Court in M/s Prabhat Fertilizers & Chemical Works is not applicable. The matter was referred to the Hon’ble President for consideration by a third member due to the difference in opinion.