2025 (10) TMI 1140 - AT - Customs

Adjudicating authority wrongly invoked s.28(9A) to defer determination before s.28(9) period expired, without s.28(8) hearing

Online Instruments India Private Ltd Versus Commissioner of Customs City Commissionerate Bangalore

CESTAT held that the adjudicating authority erred in invoking s.28(9A) Customs Act to defer determination before the s.28(9) period expired and without ... Invocation of section 28(9) of Customs Act, 1962 - Determination of a show cause notice by invoking section 28(9A) when the prescribed period under section 28(9) had not yet expired - intent to alter classification of impugned goods from the declared tariff item 8528 5900 of First Schedule to Customs Tariff Act, 1975 to proposed tariff item 8471 4190 of First Schedule to Customs Tariff Act, 1975 - HELD THAT:- The two, viz., sub-section (9) and sub-section (9A) of Section 28 are, though mutually exclusive, to be read as harmonious construct from the non obstante preliminary in the latter. Thus, the default limit in sub-section (9), of six months and one year from date of notice respectively extendable by a further like period respectively, would apply to void the notice except by one of the circumstances enumerated in sub-section (9A) operating to erase ‘date of notice’ only to be substituted with ‘reason (specified therein and recourse had by adjudicating authority in intimation to person concerned) ceases to exist’ and thereby defer the proceedings. It is not the claim of the adjudicating authority that the very dispute is pending before the Settlement Commission or appeal of the noticee, or any other person, on like matter is pending before the High Court or the Supreme Court or that any stay subsists on disposal thereof or that instructions of the Board warrant withholding of closure. There is no suggestion that competent authority under sub-section (9) had ever been approached for ‘close-ended’ extension to the extent permitted therein; instead, the adjudicating authority has opted for ‘open-ended’ extension pinning hopes on some Learned Authorized Representative persuading the appropriate bench of the Tribunal to refer to the Hon’ble President for constitution of a Larger Bench that may, hopefully, overturn the existing judicial finality accorded to the classification by a normal bench of the Tribunal. Absent that, it may be the fond hope of the adjudicating authority that the appeal thereto would be carried to the Hon’ble Supreme Court to permit the retention of the proceedings before him in suspended animation for the foreseeable future - Reasonable and proximate nexus of the pending notice with pending appeal is not ascertainable unilaterally; there must be justified cause tempered by uncontroverted acquiescence. Here the noticee, in the absence of opportunity afforded for challenge to the recourse had by the adjudicating authority, preferred this appeal to demonstrate error thereof. There can be no two opinions that the adjudication process attains closure with determination contemplated by section 28(8) of Customs Act, 1962 with sub-section (9) and sub-section (9A) offering scope, within the conditions respectively specified, for deferment. The adjudicating authority is still frozen at the stage of notice facilitated by section 28(4) of Customs Act, 1962 and has not proceeded either to consider response, if any, or any further. From sub-section (9) and sub-section (9A), it is abundantly clear that only ‘determination’ may be deferred. From sub-section (8) it is abundantly clear that ‘determination’ must be preceded by ‘opportunity of being heard’ on the notice under section 28(4) of Customs Act, 1962 which has not occurred. It is only the final stage of ‘determination’ and impeded by difficulty thereof in arriving at conclusions after completion of hearing, that may be cause for pause and recourse to either of the facilitation for deferment. The adjudicating authority has not granted personal hearing within the normal time permitted in sub-section (9) and unilateral resort to sub-section (9A) within barely six months from date of notice devoid of tenable explanation for inability to determine the amount of duty and interest has rendered the such deferment to be invalid. The impugned order is set aside - appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether an adjudicating authority validly deferred determination of a show cause notice by invoking section 28(9A) when the prescribed period under section 28(9) had not yet expired and no exigency under the enumerated clauses of section 28(9A) (appeal/stay/Board direction/like circumstance) was demonstrably present. 2. Whether prior decisions of coordinate benches of the Tribunal on identical classification questions constitute binding precedent on an adjudicating authority and thereby preclude unilateral deferral of adjudication pending disposal of a similar appeal before another Tribunal bench. 3. Whether the impugned communication deferring adjudication is a non-justiciable administrative/intimation act beyond the scope of appellate jurisdiction, or whether it amounts to a quasi-judicial decision amenable to challenge under the statutory appellate mechanism. 4. Whether failure to afford personal hearing and unilateral invocation of section 28(9A) at an early stage (before completion of hearing and within the period mandated by section 28(9)) renders the deferment invalid and the show cause proceedings void or otherwise defective. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of deferment under section 28(9A) when section 28(9) period had not elapsed Legal framework: Section 28(8)-(9)-(9A) operate as an integrated regime obligating the adjudicating authority to determine the amount of duty/interest within specified time-limits (default periods in sub-section (9)) subject only to the narrowly enumerated exceptions in sub-section (9A) (pending appeal/stay/Board direction etc.). Sub-section (9A) is introduced as a non obstante provision to permit deferment of determination only where one of the specified reasons exists. Precedent treatment: The judgment relies on legislative history and prior judicial admonitions concerning adherence to appellate orders, treating statutory time limits and their exceptions as binding constraints on revenue officers. Earlier judicial dicta (as set out in the judgment) emphasize that subordinate revenue authorities must give effect to higher appellate decisions absent an order of stay. Interpretation and reasoning: The Court interprets sub-section (9) as the default rule obligating timely closure and sub-section (9A) as a closed list of permissible deferments. The adjudicating authority may defer only the final determination (post-hearing) and only for the reasons expressly enumerated. The Tribunal reasons that a unilateral, early invocation of sub-section (9A) without demonstrable nexus to the particular notice (and without the situation contemplated in (9A)(a)-(c)) subverts parliamentary intent to avoid prolonged suspended animation of notices. The Court observes that deferment must be based on inability to determine amount after completion of hearing, not as a pre-hearing administrative expedient or speculative hope for a different outcome elsewhere. Ratio vs. Obiter: Ratio - section 28(9A) cannot be used to defer determinations before hearing is afforded or absent the specific circumstances it enumerates; early unilateral deferment is invalid. Obiter - remarks on the motives of revenue or on speculative outcomes of appeals elsewhere. Conclusion: The impugned deferment was invalid because it was invoked within the statutory period without satisfying any of the specific contingencies in section 28(9A) and without having advanced to the determination stage contemplated by section 28(8). Issue 2 - Binding effect of Tribunal decisions of coordinate benches on adjudicating authorities Legal framework: Principles of judicial discipline require subordinate authorities to follow appellate/Tribunal decisions on identical issues unless and until such decisions are stayed or reversed by a higher court. The appellate hierarchy established under the statute contemplates that coordinate-bench decisions, when not disturbed, confer finality for purposes of adjudication. Precedent treatment: The Court recalls and applies established authority admonishing revenue officers to give effect to orders of higher appellate authorities; failure to do so causes harassment and chaos. The judgment endorses the view that a Tribunal's decision, if undisturbed by a superior court or stay, binds adjudicating officers. Interpretation and reasoning: The Tribunal rejects the contention that coordinate-bench precedents lack finality until affirmed by the highest court. It reasons that treating Tribunal decisions as non-binding until Supreme Court scrutiny would nullify the appellate role of the Tribunal and produce administrative chaos. Where a prior Tribunal decision on classification is applicable and not under suspension, the adjudicating authority must follow it; resort to section 28(9A) to await a possible change via a different bench or higher forum is not among the statutory exceptions. Ratio vs. Obiter: Ratio - undisturbed Tribunal decisions on identical questions are binding on adjudicating authorities and cannot be circumvented by administrative deferment under section 28(9A). Obiter - discussion of internal mechanisms for reference to larger Benches and their proper use. Conclusion: The adjudicating authority was bound by the existing Tribunal precedent on like classification and could not legitimately defer adjudication in reliance on the pendency of a similar appeal before another bench as a means to escape that binding precedent. Issue 3 - Justiciability and appealability of the impugned communication Legal framework: Adjudication under the Customs Act is a quasi-judicial function exercised by designated officers; decisions affecting rights or liabilities under the Act fall within the scope of statutory appellate review (section 129A). An intimation that effectively postpones or obstructs adjudicatory closure may amount to a decision amenable to appeal if it impacts the adjudicatory process and the noticee's rights. Precedent treatment: The Court uses established principles that quasi-judicial acts by statutory officers are subject to judicial discipline and appellate scrutiny; show cause notices and resultant adjudications form the foundation of the Department's case and generate reviewable adjudicatory acts. Interpretation and reasoning: The Tribunal rejects the respondent's submission that the impugned communication was a mere administrative intimation beyond appeal. The Court reasons that the communication amounted to exercise of adjudicatory power (deferral of determination under the statutory scheme) and therefore falls within the scope of review. Quasi-judicial powers cannot be disaggregated into an administrative envelope to evade appellate accountability. Ratio vs. Obiter: Ratio - a deferment affecting conclusion of adjudication under the statutory scheme is not a non-justiciable administrative intimation and is amenable to challenge under the appellate provisions. Obiter - commentary on separation of executive and quasi-judicial functions in tax administration. Conclusion: The impugned communication constituted a reviewable quasijudicial act and the appeal against it was maintainable. Issue 4 - Effect of failure to afford hearing and premature invocation of section 28(9A) Legal framework: Section 28(8) mandates that determination must be preceded by opportunity of being heard on the show cause notice. Section 28(9) prescribes time-limits for such determination; section 28(9A) permits deferment of determination (not the hearing) only in specified circumstances. Adjudicatory closure is the culmination of hearing and determination; after disposal, the authority becomes functus officio in that proceeding. Precedent treatment: The Court refers to jurisprudence that treat show cause notices as the foundation of departmental cases and that final adjudicatory orders terminate jurisdiction in a given proceeding. Interpretation and reasoning: The Tribunal emphasizes that deferment under section 28(9A) is available only to delay the determination, not to evade the statutory duty to afford hearing within the prescribed period. In the present case the adjudicating authority had not granted personal hearing and invoked section 28(9A) prematurely within six months of the notice; this is contrary to the statutory sequence and deprives the noticee of the mandated opportunity to be heard. Such unilateral, early deferment without tenable explanation is invalid and vitiates the impugned action. Ratio vs. Obiter: Ratio - deferment must follow (or at least not preclude) the opportunity of being heard; premature invocation of section 28(9A) without hearing renders the deferment invalid. Obiter - observations on the practical mischief of indefinite delays and the inappropriate reliance on speculative appellate outcomes. Conclusion: The deferment was procedurally and legally improper because it was invoked before providing the statutory hearing and without satisfying the specific grounds of section 28(9A); accordingly the impugned communication was set aside and the appeal allowed with legal consequences to follow.