2002 (4) TMI 53 - SC - Customs

Importer's waiver of s.28 customs duty notice in duty evasion case upheld; recovery and penalty proceedings reinstated on appeal

The dominant issue was whether recovery of customs duty and penalty could be invalidated for want of a notice under s. 28 of the Customs Act where the ... Applicability of the principle of waiver - Illegality of the import - project of substantial expansion and modernisation of its cement factory - claimed that the project was aided by the International Bank for Reconstruction and Development (the IBRD'), which would give the importer exemption from the import duty - advance licence under the Deemed Export Scheme for duty-free import of the concerned steel under Notification No. 210/82 - violation of conditions of the licence granted to it under the Deemed Export Scheme as also the firm's liability to pay duty and penalty - Held that:- The term 'condition precedent' used in the case of Tin Plate Co. [1996 (10) TMI 81 - SUPREME COURT] is referable to the procedural requirement of Section 28 and not to the jurisdictional aspect of the proper Officer to recover the escaped duty. In the said view of the matter, we are of the opinion that the law laid down by this Court in Tin Plate Co.'s case (supra) is that issuance of a notice under Section 28 is a mandatory requirement of that Section, with which we are in agreement. We also notice the very important fact that in that case the question of waiver did not arise and what was considered by this Court was the contention of the Revenue that a subsequent letter written by the Revenue after the expiry of the period of limitation would cure the defect of non-issuance of a notice. The mandatory requirement of issuance of notice under Section 28 of the Act, it will be seen that that requirement is provided by the Statute solely for the benefit of the individual concerned, therefore, he can waive that right. In other words, this Section casts a duty on the Officer to issue notice to the person concerned of the proposed action to be taken. This is not in the nature of a public notice nor any person other than the person against whom the proceedings are initiated has any right for such a notice. Thus, this right of notice being personal to the person concerned, the same can be waived by that person. We think it is, M/s. Virgo Steels, having specifically waived its right for a notice, cannot now be permitted to turn around and contend that the proceedings initiated against them are void for want of notice under Section 28 of the Act, so as to frustrate the statutory duty of the Revenue to demand and collect customs duty which M/s. Virgo Steels had intentionally evaded. Since the sole ground on which the appeal of M/s. Virgo Steels was allowed by the Tribunal is based on non-issuance of a notice under Section 28 and we having found such a notice was not necessary in the facts and circumstances of the case, the appeal of the Revenue as against M/s. Virgo Steels has to be allowed. Issues Involved:1. Waiver of Notice under Section 28 of the Customs Act, 1962.2. Legality of Import by M/s. Virgo Steels.3. Abetment by ACC in the Illegal Import.4. Procedural Validity of the Customs Proceedings.Issue-wise Detailed Analysis:1. Waiver of Notice under Section 28 of the Customs Act, 1962:The Tribunal had allowed the appeal of M/s. Virgo Steels on the ground that the non-issuance of a show-cause notice under Section 28 vitiated the proceedings. The Supreme Court, however, held that the requirement of notice under Section 28 is procedural and can be waived by the concerned party. The Court cited several precedents, including Vellayan Chettiar v. Government of Province of Madras, Dhirendra Nath Gorai v. Sudhir Chandra Ghosh, and others to establish that a mandatory statutory requirement meant for the benefit of an individual can be waived by that individual. M/s. Virgo Steels had expressly waived their right to a notice in their letter dated 30-3-1991, thus they could not later claim that the absence of such notice invalidated the proceedings. The appeal of the Revenue against M/s. Virgo Steels was allowed, and the Tribunal's order was set aside.2. Legality of Import by M/s. Virgo Steels:The Tribunal and the Collector had found that M/s. Virgo Steels imported steel duty-free under the Deemed Export Scheme, falsely representing that it was for a project financed by the IBRD, and subsequently sold it in the open market. The Supreme Court upheld this finding, noting that it was based on substantial evidence. The appeals by M/s. Virgo Steels questioning this finding were dismissed.3. Abetment by ACC in the Illegal Import:The Tribunal had allowed the appeal of ACC, holding that there was no intentional abetment by ACC in the illegal import of steel by M/s. Virgo Steels. The Supreme Court affirmed this finding, noting that ACC had informed M/s. Virgo Steels about the abandonment of the expansion project and had refused to issue a certificate justifying the import. The appeal by the Revenue against ACC was dismissed.4. Procedural Validity of the Customs Proceedings:The Supreme Court addressed the procedural aspects under Section 28 of the Customs Act. It held that while the absence of a notice might invalidate the procedure, it does not take away the jurisdiction of the proper Officer to initiate action for the recovery of duty. The power to recover escaped duty is derived from the charging Section 12 of the Act, and not from Section 28. Thus, any procedural irregularity in issuing a notice does not denude the Officer of jurisdiction but makes the proceedings voidable, not void.Conclusion:The Supreme Court allowed the appeal of the Revenue against M/s. Virgo Steels, restoring the Collector's order, and dismissed the appeals of M/s. Virgo Steels and the Revenue against ACC. The procedural requirement of notice under Section 28 was found to be waivable, and the findings on the illegality of the import and the lack of abetment by ACC were upheld.