2021 (8) TMI 133 - HC - Customs

Invalidation of Order-in-Original for Misinterpreting Retrospective Notification

M/s. The Bell Match Company Versus The Commissioner of Customs (Preventive), Trichy, The Joint Commissioner of Customs (Preventive), Ramanathapuram

The court held that the order-in-original was without jurisdiction due to a misinterpretation of legal provisions regarding the retrospective application ... 100% EOU - purchase of certain machinery from another 100 % EOU - Effective date of amendment - From the date of notification or from retrospective effect - applicability of explanation II to N/N. 23/2003-CE - Section 25(1) of the Customs Act, 1962 - HELD THAT:- There is no dispute as to the fact that the condition imposed with regard to the date of installation or period within which installation has to take place stood amended by Notification No. 34/2015 dated 25.05.2015. In the said amended notification, it has been specifically stated that the amendment is by way of substitution. If such is the position, it is need to be considered, as to what would be the effect of a substituted resolution or the substituted notification. This issue is no longer res integra and has been considered in several decisions and one of which being M/S. MEHLER ENGINEERED PRODUCTS INDIA PVT. LTD VERSUS THE UNION OF INDIA, THE COMMISSIONER OF CUSTOMS, THE ASSISTANT COMMISSIONER OF CUSTOMS (GROUP-3) , THE ASSISTANT COMMISSIONER OF CUSTOMS (REFUNDS) [2018 (7) TMI 39 - MADRAS HIGH COURT] wherein after considering a catena of decisions on the point, it was held that after a subsequent act amends an earlier one in such a way as it incorporates itself or a part of itself into the earlier, the Act must be construed as 'retrospective'. The department has misapplied the explanation to Section 25 of the Act with regard to the coming into force of a notification. There appears to be no dispute as to on what date the notification was published, but, when was it given effect to by operation of law. Then, it has to be held that the notification is retrospective, as it is an amendment by substitution. The learned Single Bench has considered this aspect and has observed that it is true that the notification reads that it is a substitutive amendment, but has denied the relief to the petitioner on the ground that it is an accrued liability - Admittedly, on the date when the show cause notice was issued dated 29.01.2018, the exemption notification stood amended by issuance of Notification No.34/2015. Therefore, the question of treating the amount of duty as an accrued liability is incorrect. The order impugned in the writ petition is without jurisdiction - Petition allowed. Issues Involved:1. Jurisdiction of the order-in-original.2. Retrospective effect of the amended Notification No.34/2015.3. Validity of the accrued liability under the amended notification.Issue-wise Detailed Analysis:1. Jurisdiction of the order-in-original:The appellant challenged the order-in-original dated 25.06.2018, issued by the second respondent, on the grounds of jurisdiction. The appellant contended that the show cause notice and the order demanding duty and imposing penalty were without jurisdiction. The court found that the second respondent's order was based on a misinterpretation of the legal provisions, specifically regarding the retrospective application of the amended notification. Consequently, the court held that the order impugned in the writ petition was without jurisdiction and quashed the order-in-original.2. Retrospective effect of the amended Notification No.34/2015:The appellant argued that Notification No.34/2015, which amended Notification No.52/2003, should be deemed retrospective as it was a substitution. The court examined precedents, including the case of Mehler Engineered Products India Pvt. Ltd. vs. Union of India, which held that a subsequent act amending an earlier one by substitution must be construed as retrospective. The court noted that the term 'substituted' implies replacing the old provision with the new one, making the amendment retrospective. The court concluded that the amended notification was retrospective, and the second respondent's finding that it was effective only from the date of issue was incorrect.3. Validity of the accrued liability under the amended notification:The learned Single Bench had denied relief to the appellant, stating that the liability had crystallized and was an accrued liability. However, the court found that on the date the show cause notice was issued (29.01.2018), the exemption notification had already been amended by Notification No.34/2015. Therefore, treating the duty as an accrued liability was incorrect. The court held that the amended notification, being retrospective, should apply to the appellant's case, and thus, the duty demand and penalty were invalid.Conclusion:The court allowed the writ appeal, setting aside the order passed in the writ petition and quashing the order-in-original. The court clarified that if future decisions on the retrospectivity or prospectivity of the notification differ, the revenue could seek remedies in accordance with the law. The court ordered no costs and closed the connected miscellaneous petitions.