2022 (9) TMI 1302 - HC - Customs

Court grants interim relief, stays show-cause notice, cites legal flaws. Stay tuned for updates.

The court granted interim relief by staying the operation of the show-cause notice dated 08.07.2022, noting legal flaws in the adjudication steps and a ... Seeking grant of interim relief - classification of goods - HELD THAT:- A perusal of the extract of the order dated 24.08.2022 would show that the petitioner has been able to demonstrate, at least before the Customs Authority for Advance Rulings (CAAR), that the subject goods have been correctly classified under the Customs Tariff Heading (CTH) 84248990. It is not disputed by the counsel for the respondents, as noticed in the hearing held on 24.08.2022, that a review application was filed before CAAR, which was dismissed on 08.08.2022. Furthermore, the allegation that the petitioner had employed fraud or misrepresentation was rejected by CAAR. The steps taken by the concerned authority towards adjudication are fraught with legal flaws and/or impediments - till the next date of hearing, the operation of the show-cause notice dated 08.07.2022 shall remain stayed. List the matter on 28.10.2022. Issues Involved:1. Challenge to the show-cause notice dated 08.07.2022.2. Alleged constitutional violations by amendments in the Customs Act, 1962 via Finance Act 2022.3. Classification dispute of imported goods.4. Legality of the investigation and search conducted by the Directorate of Revenue Intelligence (DRI).5. Interim relief sought by the petitioner.Issue-wise Detailed Analysis:1. Challenge to the Show-Cause Notice Dated 08.07.2022:The petitioner sought to contest the show-cause notice issued on 08.07.2022. The court noted that the notice was predicated upon a classification dispute between the parties. Despite the pendency of the writ petition, the respondents issued the show-cause notice, leading the petitioner to amend the writ petition to include a challenge to this notice. The court observed that the petitioner had demonstrated before the Customs Authority for Advance Rulings (CAAR) that the goods were correctly classified under Customs Tariff Heading (CTH) 84248990. Given that the CAAR had rejected the respondents' review application and allegations of fraud or misrepresentation, the court found prima facie legal flaws in the steps taken by the concerned authority towards adjudication. Consequently, the operation of the show-cause notice was stayed until the next hearing date.2. Alleged Constitutional Violations by Amendments in the Customs Act, 1962 via Finance Act 2022:The petitioner asserted that the amendments brought about in the Customs Act, 1962 by the Finance Act 2022 violated Articles 14 and 19(1)(g) of the Constitution. The court acknowledged this assertion and allowed the prayers made in the petitioner's application, taking the amended writ petition on record.3. Classification Dispute of Imported Goods:The core dispute revolved around the classification of imported actuators and aerosol valves meant for perfumes and toilet sprays. The petitioner classified the goods under CTH 84248990, while the respondents argued for classification under CTH 9616, which would attract a higher customs duty. The CAAR had ruled in favor of the petitioner, classifying the goods under CTH 84248990. The court noted that the CAAR's ruling was not obtained by fraud or misrepresentation, as alleged by the respondents, and the classification dispute, as of now, stood settled in favor of the petitioner.4. Legality of the Investigation and Search Conducted by the Directorate of Revenue Intelligence (DRI):The petitioner challenged the legality and jurisdiction of the investigation and search conducted by the DRI. It was contended that the searches and summons issued by the DRI were arbitrary and without jurisdiction. The court recorded that the respondents had issued multiple summons to the petitioner, with significant gaps between them, and that the petitioner had approached the court due to these actions. The court also referenced a related case where another entity had its grievances resolved after approaching the court, indicating that similar reliefs might be applicable to the petitioner.5. Interim Relief Sought by the Petitioner:The petitioner sought interim relief to stay the operation of the show-cause notice dated 08.07.2022. The court, noting the prima facie legal flaws in the adjudication steps taken by the concerned authority and the favorable CAAR ruling for the petitioner, granted interim relief by staying the operation of the show-cause notice until the next hearing date. The court directed the respondents to file a counter-affidavit within three weeks and allowed the petitioner to file a rejoinder before the next hearing.Conclusion:The court addressed multiple issues, including the challenge to the show-cause notice, alleged constitutional violations, the classification dispute, the legality of DRI's investigation, and the interim relief sought by the petitioner. The court's interim order stayed the operation of the show-cause notice and directed further filings from both parties, setting the next hearing date for 28.10.2022.