2025 (8) TMI 180 - HC - Customs

No Jurisdiction for SCN Under Extended Limitation Without Collusion or Suppression of Facts

The HC held that the respondent authority lacked jurisdiction to issue the SCN under the extended limitation period as there was no collusion, willful ... Jurisdiction to issue SCN by the respondent authority - power of DRI to issue SCN by invoking extended period of limitation - mis-statement of facts or not - HELD THAT:- In view of the findings arrived at by the DRI, even on merits the show-cause notice would not be tenable against the petitioners who have purchased DEPB Licence from open market on payment of consideration for import of the goods without payment of duty. It is also pertinent to note that the demand raised qua the petitioners are below the threshold limit challenging the order by the Revenue before the CESTAT and, therefore, even if the decision is reversed against M/s. RSI Ltd by the CESTAT in view of the order-inoriginal which is in operation since 2017, but for pendency of these petitions would have been followed by the respondent in last 8 years. Considering the overall facts and the subsequent developments which have taken place coupled with the fact that it is not in dispute that there is no collusion or any willful mis-statement or suppression of fact alleged in the impugned show-cause notice, which would have permitted the respondent to extend the period of limitation by 5 years, as per provision of Section 28(1) of the Act, impugned notice would not survive. Thus, on both counts, on the ground of jurisdiction as well as on merits in view of subsequent developments, the impugned showcause notice would not survive. The impugned show-cause notice dated 27.8.2002 so far as the petitioners are concerned, is hereby quashed and set-aside - appeal allowed. ISSUES: Whether the show-cause notice issued under the extended period of limitation of five years without recording prima-facie satisfaction or alleging collusion, willful mis-statement, or suppression of facts is without jurisdiction.Whether transferees of DEPB Licences purchased in good faith can be held liable for recovery of customs duty on goods imported duty-free against such licences obtained fraudulently by the original exporter.Whether the valuation of exported goods and the consequent DEPB credit entitlement can be re-determined and duty recovered from transferees under the Customs Act.Whether penal provisions under Sections 112 and 114A of the Customs Act can be invoked against importers who utilized DEPB scrips without knowledge of any fraud.The applicability and effect of Section 28AAA of the Customs Act, 1962 on recovery of duty foregone from importers and exporters in cases of fraudulent export incentives. RULINGS / HOLDINGS: The show-cause notice invoking the extended period of limitation under Section 28(1) without any allegation of collusion or willful mis-statement or suppression of facts is without jurisdiction and non est.The petitioners, as bonafide transferees of DEPB Licences purchased from the open market with valuable consideration and without any knowledge of fraud, cannot be held liable for recovery of duty on goods imported duty-free against such licences.The investigation and re-determination of value by the DRI showed that the declared transaction value was fair and the DEPB entitlements were genuine, negating the demand for differential duty from both exporters and importers.Penal provisions under Sections 112 and 114A of the Customs Act are not applicable to importers who utilized the DEPB scrips in good faith without collusion or suppression of facts.Section 28AAA of the Customs Act restricts recovery of duty foregone to utilization of scrips on or after 28.05.2012, thus limiting retrospective recovery claims. RATIONALE: The Court applied the statutory framework of the Customs Act, particularly Section 28(1) and Section 28AAA, emphasizing that extended limitation periods require specific allegations of collusion or willful mis-statement or suppression of facts.The Court relied on precedent establishing that jurisdiction to proceed beyond six months under Section 28(1) is contingent upon such allegations being present in the show-cause notice.The investigation by the Directorate of Revenue Intelligence (DRI) and subsequent order-in-original demonstrated that the declared export values were consistent with market realities and that the DEPB credits were duly verified and granted by the competent authority (DGFT).The Court noted that the importers purchased DEPB Licences from authorized transferees and had no knowledge of any fraudulent procurement by the original exporter, thus negating any basis for penalty or duty recovery.The Court recognized that Section 28AAA, introduced by the Finance Bill effective 28.05.2012, limits recovery of duty foregone in cases of fraudulent export incentives to transactions occurring on or after that date, which precludes retrospective claims in this case.The Court also considered relevant Supreme Court decisions on jurisdiction and valuation, and the principle that High Court jurisdiction under Article 226 is invoked where the authority has no jurisdiction or usurps jurisdiction without legal foundation.