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 ... Waiver of statutory notice - mandatory procedural requirement versus jurisdiction - condition precedent (procedural) under Section 28 - recovery of duty escaped - statutory right for personal benefit may be waivedWaiver of statutory notice - condition precedent (procedural) under Section 28 - mandatory procedural requirement versus jurisdiction - statutory right for personal benefit may be waived - Whether non-issuance of a notice under Section 28 of the Customs Act, 1962 vitiates recovery proceedings where the person concerned has expressly waived the notice. - HELD THAT: - The Court held that Section 28, as it stood at the relevant time, prescribes a mandatory procedural requirement to issue notice but does not confer the jurisdiction to recover duty; jurisdiction to levy and recover customs duty arises from other provisions (notably the charging and recovery provisions). The expression 'condition precedent' in earlier authority was referable to the procedural requirement and not to the Officer's jurisdiction. Following Privy Council and Supreme Court precedents, the Court reiterated that a statutory provision which confers a personal right or protection on an individual may be waived by that individual. Since the requirement of notice under Section 28 is intended for the benefit of the person concerned and is personal in nature, it can be validly waived. Where the assessee expressly renounces the entitlement to notice and hearing, the Revenue is not foreclosed from recovering the duty which has escaped collection; non-compliance with the procedural mandate may render proceedings voidable but does not oust jurisdiction to demand and collect duty. The Court rejected the contention that the waiver letter was obtained by coercion, observing the absence of any timely complaint, supporting affidavit, or action to rescind the admission, and noting that the letter and concomitant post-dated cheque were not retracted for a long period. [Paras 9, 14, 15, 16, 17]The waiver executed by M/s. Virgo Steels of the right to a notice under Section 28 was effective; non-issuance of the Section 28 notice did not bar recovery of the escaped duty in the facts of the case.Recovery of duty escaped - condition precedent (procedural) under Section 28 - Whether the imports by M/s. Virgo Steels were illegal and whether the factual finding of illegal import and market-sale should be interfered with. - HELD THAT: - The Tribunal and the Collector had found, on the material on record, that Virgo imported steel duty-free by misrepresenting that it was for use in an IBRD-aided project while in fact the material was sold in the market. The Supreme Court, treating this as a finding of fact based on evidence, declined to disturb those concurrent findings, finding no good ground to do so. [Paras 18]The finding that the imports were illegal and the material was sold in the open market is upheld; the appeals by M/s. Virgo Steels challenging that factual conclusion fail.Recovery of duty escaped - Whether ACC abetted the illegal import and whether the Tribunal's finding of no abetment should be interfered with. - HELD THAT: - The Tribunal found, on the material, that there was no evidence to conclude that ACC had abetted the illegal import; the Solicitor General conceded inability to persuade the Court to a contrary view. The Supreme Court treated this as a factual finding and declined to interfere. [Paras 19]The finding of no abetment by ACC is maintained; the Revenue's appeal against that finding fails.Final Conclusion: The appeal by the Revenue against M/s. Virgo Steels is allowed insofar as the Tribunal set aside the Collector's demand on the ground of non-issuance of a Section 28 notice; the Collector's order is restored and costs awarded against M/s. Virgo Steels. The Revenue's appeal against the Tribunal's acceptance of ACC's non-abetment is dismissed. The appeals by M/s. Virgo Steels contesting the finding of illegal import are dismissed. 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.