Supplementary show cause notice valid as independent notice under Section 124 Customs Act despite pre-2018 amendment

Calcutta HC held that a supplementary show cause notice dated 18.05.2017, issued before the 2018 amendment to Section 124 of the Customs Act, was valid as an independent notice. The court ruled that despite being labeled "supplementary," it constituted a separate show cause notice based on new facts emerging after investigation of the original 26.08.2016 notice. The HC set aside the tribunal's order and restored the adjudicating authority's decision, finding the supplementary notice legally sustainable even without the 2018 statutory amendment that formally recognized supplementary notices.

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Issues Involved:
1. Legality of the Supplementary Show Cause Notice issued on 18.05.2017.
2. Retrospective or prospective application of the second proviso to Section 124 of the Customs Act, 1962.
3. Applicability of the Customs (Supplementary Notice) Regulation, 2019.

Summary:

Issue 1: Legality of the Supplementary Show Cause Notice
The appeal concerns the legality of the Supplementary Show Cause Notice issued on 18.05.2017 by the Commissioner of Customs (Port), Kolkata. The tribunal had set aside this notice, holding it was not legally sustainable as it was issued prior to the insertion of the second proviso to Section 124 of the Customs Act, 1962, which became effective on 29.03.2018. The court examined whether the power to issue such supplementary notices existed before the amendment.

Issue 2: Retrospective or Prospective Application of the Second Proviso
The court analyzed whether the second proviso to Section 124, effective from 29.03.2018, should be considered retrospective or prospective. The court concluded that the power to issue supplementary show cause notices was implicit in Section 124 even before the insertion of the second proviso. The second proviso was deemed declaratory of the previous law, implying retrospective operation.

Issue 3: Applicability of the Customs (Supplementary Notice) Regulation, 2019
The tribunal had also failed to appreciate the scope and context of the Customs (Supplementary Notice) Regulation, 2019. The court held that the proper officer's power to issue supplementary notices was inherent in the statute, and the 2019 Regulations merely provided explicit guidelines for issuing such notices.

Conclusion:
The court found the tribunal erred in its decision, reinstating the adjudicating authority's order dated 09.01.2023. The court directed the adjudicating authority to proceed with the adjudication of the show cause notice dated 18.05.2017 and the addendum dated 22.09.2017, ensuring reasonable opportunity for the parties involved. The appeal was allowed, and the substantial questions of law were answered in favor of the appellant revenue.

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