2023 (8) TMI 864 - HC - Customs

Show Cause Notice Lapsed Due to Jurisdictional Error and Delayed Adjudication Under Customs Act.

Swatch Group India Pvt Ltd & Ors. Versus Union Of India & Ors.

The court held that the show cause notice (SCN) issued by Respondent No. 2/DRI was without jurisdiction, as Respondent No. 2 was not a proper officer ... Lapsed SCN - Period of Limitation - whether the adjudication of the impugned SCN issued on 14.02.2018 is now barred by limitation and has lapsed in view of Section 28(9) of the Customs Act? HELD THAT:- From a bare perusal of amended Sub-sections (9) and (9A) of Section 28 of the Customs Act, it is evident that the proper officer is bound to pass an order within six months or one year from the date of notice as the case may be, in cases of duties not paid or short-levied or short-paid or erroneously refunded. The said period can be extended for a further period of six months or one year in the cases specified in clause (a) and (b) of Section 9, respectively, by an officer, senior in rank to the proper officer having regard to the circumstances under which the proper officer was prevented from determining the amount of duty or interest within the prescribed period - With effect from 29.03.2018, it is mandatory for the proper officer to adjudicate the Show Cause Notices that are issued after the amendment to Section 28(9) of the Customs Act within a period of six months or one year of the date of issuance as the case maybe. The same can be extended for a further period of one year by an officer senior in rank to the proper officer, after considering the circumstances under which the proper officer was prevented from passing an order within the prescribed period. The intention of the legislation, thus, is apparent that the show cause notices which were issued prior to the Finance Act coming into force the Finance Act, 2014 were required to be governed by unamended Act of Section 28(9) of the Customs Act. Whether in terms of erstwhile Section 28(9) of the Customs Act, the impugned SCN dated 14.02.2018 has lapsed having not been adjudicated within the period of 12 months? - HELD THAT:- The unamended Section 28(9) of the Customs Act, specifically provides that the proper officer ‘shall’ determine the amount of duty within six months or within one year, as the case may be, from the date of notice. It only provides certain degree of inbuilt flexibility by incorporating the words ‘where it is possible to do so’ - It is apparent from the documents and the timelines reflects by them that no sincere efforts have been made by the Department for adjudicating the impugned SCN. Despite being aware of the provisions of the Customs Act, admittedly, no steps were taken by the Department from 29.04.2019 that is the date, the Adjudicating Officer sent a letter to DRI seeking certain clarifications of the documents, and 15.10.2020 when they issued another letter granting personal hearing to the petitioners. It is, thus, admitted that the Department for almost a period of 17 months slept over the matter despite the specific mandate of even the unamended Section 28(9) of the Customs Act that the duty shall be levied within a period of 12 months from the date of issuance of the notice. It is the case of the Revenue that the amended provision of Section 28 of the Customs Act is not applicable in the present case for the reason that the impugned SCN was issued prior to the Finance Act, 2018, coming into force. Therefore, the benefit of extension of limitation as provided under Section 28(9A) of the Customs Act would be applicable only in those cases where the show cause notices have been issued after the enactment of the Finance Act, 2018 since even as per the Revenue the notice issued prior to coming into effect of Finance Act, 2018 would be governed by the unamended provisions. There is no material to show that it was not possible for the proper Officer to determine the amount of duty within the prescribed period. The mention of the words, “where it is not possible to do so”, in our opinion, does not enable the Department to defer the determination of the notices for an indeterminate period of time. The legislature in its wisdom has provided a specific period for the authority to discharge its functions. The indifference of the concerned officer to complete the adjudication within the time period as mandated, cannot be condoned to the detriment of the assessee. Such indifference is not only detrimental to the interest of the taxpayer but also to the exchequer. In the absence of any ground that it was not possible for the officer to determine the amount of duty within the prescribed period, the impugned SCN has lapsed and cannot be adjudicated - Petition allowed. Issues Involved:1. Jurisdiction of Respondent No. 2 under Section 2(34) of the Customs Act.2. Adjudication of the Show Cause Notice within the prescribed time limit under Section 28(9) of the Customs Act.Summary:Jurisdiction of Respondent No. 2:The petitioners challenged the show cause notice (SCN) issued by Respondent No. 2/DRI on the grounds that Respondent No. 2 is not a proper officer appointed under Section 2(34) of the Customs Act for assessment and re-assessment of goods under Section 28 of the Customs Act. This argument was supported by the judgment in Canon India Private Limited v. Commissioner of Customs, where it was held that such notices issued by DRI officers would be without jurisdiction. The respondents admitted that the SCN was issued by DRI and stated that the adjudication of the SCN is kept in abeyance following CBIC instructions dated 17.03.2021, pending a review petition before the Supreme Court.Adjudication of the Show Cause Notice:The petitioners argued that the SCN, issued in February 2018, was not adjudicated within the 12-month period as mandated by Section 28(9) of the Customs Act, making any subsequent adjudication time-barred. The respondents contended that the SCN was governed by the unamended Section 28(9) of the Customs Act, which did not provide strict timelines for determining duty. They argued that the phrase 'where it is possible to do so' provided flexibility, and the adjudication was delayed due to various procedural steps and communication exchanges.Court's Analysis:The court confined its judgment to whether the adjudication of the SCN was barred by limitation under Section 28(9) of the Customs Act. It noted that the unamended Section 28(9) required the proper officer to determine the amount of duty within six months or one year from the date of notice, with some flexibility provided by the phrase 'where it is possible to do so.' However, the court emphasized that this flexibility could not be equated with departmental lethargy. The court found that the department had not made sincere efforts to adjudicate the SCN within the prescribed period and had been inactive for significant periods.Conclusion:The court concluded that there was no material to show that it was not possible for the proper officer to determine the amount of duty within the prescribed period. The indifference of the concerned officer to complete the adjudication within the mandated time could not be condoned. Therefore, the SCN had lapsed and could not be adjudicated. The writ petition was allowed on these grounds.