2003 (12) TMI 73 - HC - Customs

Customs Department's Authority to Investigate Upheld; Court Validates Notices u/s 108 of Customs Act.

The court affirmed the Customs Department's jurisdiction to issue notices and conduct investigations under Section 108 of the Customs Act, despite prior ... Advance licences - Export-oriented units - EXIM policy - Investigation - Jurisdiction of Customs Authorities vs. Licensing Authorities - Notification Nos. 80/95 and 30/97 issued u/s 25 - HELD THAT:-There was no question regarding the power of the Customs authorities to initiate investigation or the enquiry, as the case may be. Again, this was not a case of manufacturing licence but pertained to the import of raw materials under the exemption notifications issued under the EXIM Policy. The basic issue in the proposed enquiry by the Customs authorities appears to be as to whether there at all was a manufacturing factory or manufacturing unit for utilising the imported stainless steel sheets and if such manufacturing unit was not there, how the imported stainless steel sheets were actually utilised. It is also true that the further question in that enquiry is going to be as to whether it was the imported material alone which was used in the manufacturing activity. Now, if there was no manufacturing unit available or any such manufacturing unit as would have the capacity to manufacture the goods worth crores of rupees, how was the imported stainless steel utilised. The question would not only be misrepresentation while getting the Advance Licence but also about the utilisation of the imported material, which would squarely fall under Section 111(o) of the Customs Act. We do not think that the recovery of the evaded customs duty can be the only result or the fall out of the enquiry. There could be number of other issues involved, which we would be slow to discuss. In view of the fact that the enquiry has yet not been completed and it is not decided as to whether the action should ensue from the same or not, the contention that the exercise is redundant and, therefore, without jurisdiction has, therefore, to be rejected. We do not think this is an admission at all because there will be no question of there being no authority to the first respondent in enquiring into the breach of the conditions of the licence. However, that authority cannot exclude the jurisdiction of the Customs authorities to enquire into the matter. We were taken through the Notification Nos. 80/95 and 30/97 issued u/s 25 of the Customs Act. In the first notification, i.e. Notification No. 80/95, there is a clear reference to the export obligation being discharged after the necessary documents in support of the export are produced to the satisfaction of the Assistant Commissioner of Customs. It is pointed out that in this case, out of sixteen licences, fifteen have been so discharged and in respect of the sixteenth licence also a major portion of the export obligation has also been fulfilled. From this learned senior Counsel argues that, therefore, there will be no question now of re-opening the matters particularly when the licences have been redeemed. We do not think that such an approach would be a right approach to the problem. We have already clarified that even if the redemption of the licences is completed, still there would be a power in the Customs authorities to effect the investigation or, as the case may be, enquiries to see that whether there was any evasion of the Customs duty. Therefore, in our opinion, the discharge of the export obligation per se cannot put an end to the whole story. It is trite law that where it is only a summons, there will be no question of considering the fall-out, at least at this stage. Learned Senior Counsel for this proposition has relied upon the celebrated decision in Union of India v. Prakash P. Hinduja [2003 (7) TMI 744 - SUPREME COURT] wherein the Apex Court held that there is no power in the Magistrate or the Court to interfere in the investigation or during the course of the investigation. Though the said decision pertains to an entirely different jurisdiction like criminal jurisdiction, learned Senior Counsel wants us to read the observations to be applicable even to the present proceedings, which are likely to be penal in nature. He says that even before any penalty is contemplated or ordered, the Court should not interfere in the matter of investigation. There can be no dispute about the proposition. However, in our opinion, there would always be a question of jurisdiction, as for example, if such a notice has been given by an authority of the Sales Tax Department, this Court could always have interfered on the ground of the lack of jurisdiction. Such is not the case here, which we have shown by referring to the various provisions of the Customs Act. We would have nothing to say about the merits of the order as we have already expressed that it is not our task to see the correctness of the order. We do feel that the criticism, atleast about the last licence, is justified. In short, there will be no question of interfering with the notice issued by the Customs Department and, in our view, the learned single Judge has correctly dismissed the writ petitions. The writ appeals are, therefore, dismissed with the costs of Rs. 3,000/- each. Connected WAMPs are closed. Issues Involved:1. Jurisdiction of Customs Authorities vs. Licensing Authorities2. Validity of Notice Issued u/s 108 of the Customs Act3. Impact of Adjudication Order by Licensing Authority4. Applicability of Supreme Court JudgmentsSummary:1. Jurisdiction of Customs Authorities vs. Licensing Authorities:The petitioners argued that any breach of the conditions of their advance licences should be dealt with exclusively by the licensing authority under the Foreign Trade Act, not by the Customs Department. The court, however, held that the Customs Department has the inherent power to investigate potential smuggling activities, including breaches of conditions attached to duty-free imports, as per Section 111(o) of the Customs Act. The court cited the Supreme Court's decision in Sheshank Sea Foods Pvt. Ltd. v. Union of India, which upheld the Customs Department's jurisdiction to investigate such matters.2. Validity of Notice Issued u/s 108 of the Customs Act:The petitioners contended that the notice issued u/s 108 of the Customs Act was invalid as it was not issued by a Gazetted Officer. The court dismissed this argument, accepting the respondents' statement that the concerned officer was indeed a Gazetted Officer. The court emphasized that Section 108 empowers any Gazetted Officer of the Customs Department to summon individuals for inquiries related to smuggling.3. Impact of Adjudication Order by Licensing Authority:The petitioners argued that since the licensing authority had already exonerated them in an adjudication order, there was no need for further investigation by the Customs Department. The court rejected this argument, stating that the Customs Department's jurisdiction to investigate smuggling activities is not negated by the licensing authority's adjudication. The court referred to Section 12 of the Foreign Trade Act, which allows for penalties under other laws despite any adjudication under the Foreign Trade Act.4. Applicability of Supreme Court Judgments:The petitioners relied on the Supreme Court's decision in East India Commercial Company case to argue against parallel proceedings. However, the court found that the principles laid down in Sheshank Sea Foods case were more applicable, affirming the Customs Department's authority to investigate potential breaches of conditions attached to duty-free imports. The court also distinguished the facts of the present case from those in Sampat Raj Dugar and Titan Medical Systems Pvt. Ltd. cases, noting that the primary issue here was the jurisdiction to investigate, not the legality of the imports per se.Conclusion:The court upheld the Customs Department's jurisdiction to issue notices and conduct investigations u/s 108 of the Customs Act, even if the licensing authority had previously adjudicated on the matter. The writ appeals were dismissed, affirming the validity of the notices and the ongoing investigation by the Customs Department.