In W.P.(C) 122/2023 -DEL HC- Delhi High Court declares SCNs issued to Gautam Spinners under Customs Act as invalid due to expiry of prescribed time limit
Justice Yashwant Varma & Justice Dharmesh Sharma [11-07-2023]

Read Order: Gautam Spinners & Anr V. Commissioner of Customs (Import), New Delhi & Anr

Chahat Varma

New Delhi, August 3, 2023:  The Delhi High Court has granted relief to Gautam Spinners and other (petitioners), by quashing the show cause notices (SCNs) issued under Section 28(4) of the Customs Act, 1962. The Court ruled that the SCNs were not covered under the directives issued by the Central Board of Indirect Taxes and Customs and had exceeded the prescribed time limit under Section 28(9).

The present batch of writ petitions had challenged various SCNs issued under Section 28(4) of the Customs Act, on the grounds that the time limit for completing the proceedings under Section 28(9) had expired, thereby negating the authorities' jurisdiction to adjudicate the matters.

The division bench of Justice Yashwant Varma and Justice Dharmesh Sharma carefully examined the two directives issued by the Central Board of Indirect Taxes and Customs on 17 March 2021 and 16 April 2021. The first directive pertained to cases where SCNs may have been issued by officers of the Directorate of Revenue Intelligence (DRI) assuming authority under Section 28 of the Customs Act. The Supreme Court's judgment in M/s Canon India Private Limited v. Commissioner of Customs [LQ/SC/2021/186] had clarified that DRI officers were not ‘proper officers’ for initiating proceedings under Section 28. However, the directive stated that in cases where investigations by the DRI were ongoing, fresh show cause notices could be issued by Jurisdictional Commissionerates. The second directive, dated 16 April 2021, addressed the issues arising from the Canon India judgment. It was decided that as a precautionary measure, in cases where the DRI had issued the original SCNs, SCNs should be reissued by the concerned Deputy Commissioners/Assistant Commissioners of the relevant port of import.

The bench noted that the SCN against Gautam Spinners was issued under Section 28(4) of the Customs Act, which empowered the Customs authority to initiate proceedings in cases where duty had not been levied, paid, short levied, short paid, or erroneously refunded due to collusion, wilful misstatement, or suppression of facts by the importer or exporter. Such proceedings can be initiated within five years from the relevant date, but under sub-section (9), they must conclude within one year from the notice's issuance. The SCNs against the petitioners were issued on 05 August 2021, and hence the proceedings were required to be concluded within one year from that date.

The bench clarified that there were no legal impediments that would restrict the jurisdiction or authority of the concerned Jurisdictional Commissionerates to finalize the SCNs in accordance with Section 28(9)(b) of the Customs Act. The bench stressed that the directive to place similar SCNs in abeyance, as mentioned in the directives, was only applicable to SCNs originally issued by DRI officers. The judgment in the Canon India case did not cast doubt on the Customs authorities' authority and jurisdiction to initiate or conclude proceedings under Section 28(4). Thus, the authorities were justified in keeping the impugned SCN proceedings pending only in cases where the original SCNs were issued by DRI officers.

Consequently, the bench held that the proceedings initiated against the present petitioners were not covered under the Board's directives and did not fall under Section 28(9A)(c). Since the maximum period prescribed under Section 28(9) of the Customs Act had already expired, the bench ruled that those proceedings were not legally valid and could not be sustained.