Customs authorities cannot issue show-cause notices under Section 28(4) without proving willful suppression of facts

Gujarat HC held that customs authorities lacked jurisdiction to issue show-cause notices under Section 28(4) of Customs Act. The court found no suppression of material facts by the petitioner, who had submitted all required documents during inquiry. The case involved alleged breach of exemption notification conditions regarding utilization certificates and time limits, but authorities failed to establish willful mis-statement or suppression necessary for invoking extended limitation period under Section 28(4). Since jurisdiction was absent, the court quashed both show-cause notices and the Order-in-Original without examining case merits. Petition was allowed.

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Issues Involved:
1. Jurisdiction and maintainability of the show-cause notices under Section 28(4) of the Customs Act, 1962.
2. Alleged non-compliance with conditions of the exemption notifications.
3. Alleged suppression of material facts by the petitioner.
4. Demand for customs duty on conversion/transit loss during the regasification process.
5. Demand for customs duty due to alleged non-submission or delayed submission of utilization certificates.

Detailed Analysis:

Jurisdiction and Maintainability of the Show-Cause Notices:
The petitioner challenged the jurisdiction of the show-cause notices issued under Section 28(4) of the Customs Act, 1962, arguing that there was no willful misstatement or suppression of material facts. The court noted that the show-cause notices and the impugned Order-in-Original were based solely on the alleged breach of conditions of the exemption notifications. The court observed that the petitioner had submitted all necessary documents during the inquiry, and there was no suppression of material facts. Therefore, the court concluded that the Adjudicating Authority could not have assumed jurisdiction to issue the show-cause notices under Section 28(4) of the Act, rendering the entire proceedings vitiated.

Alleged Non-Compliance with Conditions of the Exemption Notifications:
The petitioner argued that the respondent authorities misinterpreted the provisions of the exemption notifications and failed to consider the petitioner's submissions and documentary evidence. The court examined the conditions of the exemption notifications, particularly Notification No. 31/2015 and Notification No. 52/2017, which required the submission of invoices and utilization certificates within specified time limits. The court found that the petitioner's submission of utilization certificates was within the extendable period and that the respondent authorities had not objected to the submitted documents at the time of submission. The court also noted that the petitioner had provided a reconciliation statement of the supply of RLNG to power generating companies, which was not doubted by the Adjudicating Authority.

Alleged Suppression of Material Facts by the Petitioner:
The respondent authorities alleged that the petitioner suppressed material facts by not disclosing the transit loss during the regasification process and failing to submit utilization certificates within the prescribed time limits. The court found that the petitioner had submitted all relevant documents and had clearly explained the technical impossibility of reconciling the LNG as shown in the Bills of Entry with the quantity of RLNG supplied to power generating companies. The court concluded that there was no suppression of material facts by the petitioner.

Demand for Customs Duty on Conversion/Transit Loss:
The petitioner contended that the demand for customs duty on the 0.66% conversion/transit loss during the regasification process was unjustified. The court referred to previous decisions by the CESTAT and the Commissioner (Appeals) that had accepted the technological impossibility of converting 100% LNG into RLNG and had allowed the loss of 0.66%. The court concluded that the adjudicating of the show-cause notices on account of the conversion loss was a reopening of an issue that had already been settled by competent forums and accepted by the Department.

Demand for Customs Duty Due to Alleged Non-Submission or Delayed Submission of Utilization Certificates:
The petitioner argued that the alleged delay in submitting utilization certificates was factually incorrect and that the certificates were submitted within the prescribed period or the extendable period. The court found that the utilization certificates submitted by the petitioner were within the extendable period and that the respondent authorities had not objected to the submitted documents at the time of submission. The court concluded that the impugned order was based on a literal application of the exemption notification without considering the petitioner's reconciliation statement and the continuous supply of RLNG to power generating companies.

Conclusion:
The court held that the Adjudicating Authority could not have assumed jurisdiction to issue the show-cause notices under Section 28(4) of the Customs Act, 1962, and that the entire proceedings pursuant to such show-cause notices were vitiated. Consequently, both the show-cause notices and the impugned Order-in-Original were quashed and set aside. The rule was made absolute to the aforesaid extent, with no order as to costs.

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