2025 (1) TMI 1330 - HC - Customs

Jurisdiction to issue SCN - entitlement to the release of duty drawback and other export incentives withheld by the respondent authorities. HELD THAT - The respondent authorities have adopted an arbitrary and capricious approach in dealing with the issue of claim of the duty drawback and have been annoyed by the petitioner s action of allegation of demand Rs. 75, 000/- for clearance of the goods consignment by the respondent no. 6 and the action of the petitioner to approach to this Court for claim of the duty drawback by issuing the impugned show cause notice after a gap of 9 months on service of the notice issued by this Court. It is not in dispute that that goods have been permitted to be exported on final assessment made by the respondent authorities on 21.06.2018 and thereafter the Manifest was also filed by the petitioner. The petitioner also furnished the Export Realization Certificate from the concerned bank to the effect that the foreign exchange has been received on the export made by the petitioner. Therefore in the facts of the case the petitioner is entitled to the claim of duty drawback and in accordance with the duty drawback rules as there is no other deficiency found by the respondent authorities. So far as the issuance of the impugned show cause notice is concerned the only reliance is placed on Section 14 of the Customs Act 1962 read with Rule 8 of the Valuation Rules 2007 to invoke the provisions of Section 113 (i) (ia) of the Customs Act 1962. On perusal of Section 14 of the Customs Act 1962 it mandates that the respondent authorities are bound to accept the transaction value and only recourse to the valuation rules can be made pursuant to Clause (iii) of the proviso if the proper officer has reason to doubt the truth or accuracy of such value. It appears that the valuation done by the valuer as per Rule 8 of the Valuation Rules 2007 was available since July 2018 however no action was taken by the respondent authorities till the notice issued by this Court is served by the petitioner to the respondents. In such circumstances in absence of any further allegations of irregularities in furnishing the material particulars with an information furnished by the petitioner for the purpose of claim for drawback the respondents could not have assumed the jurisdiction to issue the impugned show cause notice. Considering the facts of the case there is nothing on record to show that the goods which were exported by the petitioner the petitioner has failed to provide information which do not correspond in material particular with the exported goods and the information has nothing to do with the valuation of the goods for the purpose of claim of the drawback - the contention raised by the respondent authorities that the goods were provisionally assessed which were tried to be justified by the screenshot appearing on the EDI system is nothing but an eye wash so as to see that the petitioner is again relegated back to the respondent authorities for adjudication of the show cause notice which is apparently issued without jurisdiction. The Hon ble Supreme Court in the case of Commissioner of Central Excise and Service Tax Noida vs. M/s. Sanjivani Non-Ferrous Trading Pvt. Ltd. 2018 (12) TMI 738 - SUPREME COURT while considering valuation of the goods as per Section 14 of the Customs Act 1962 has held that assessable value has to be arrived at on basis of price which is actually paid which is the basic principle enshrined in the provisions of Section 14 of the Customs Act 1962. Conclusion - The administrative actions must be fair just and within jurisdiction. The valuation of goods should reflect the transaction value unless substantial evidence suggests otherwise. The petitioner was entitled to duty drawback and the respondents actions were deemed arbitrary. The impugned show cause notice dated 16.04.2019 is hereby quashed and set aside. The respondents are directed to adjudicate the claim of the duty drawback of the petitioner in accordance with the duty drawback rules within a period of 4 weeks from the date of receipt of the copy of this order - Petition allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this case include:

• Whether the issuance of the show cause notice dated 16.04.2019 by the respondents was within jurisdiction and legally justified.
• Whether the petitioner is entitled to the release of duty drawback and other export incentives withheld by the respondent authorities.
• Whether the actions of the respondent authorities, particularly in issuing a show cause notice after a significant delay, were arbitrary and capricious.
• Whether the valuation of goods for the purpose of duty drawback was correctly determined under the applicable legal framework.

ISSUE-WISE DETAILED ANALYSIS

1. Issuance of Show Cause Notice

• Legal Framework and Precedents: The legal framework involves Section 14 and Section 113 of the Customs Act, 1962, along with the Customs Valuation (Determination of Value of Export Goods) Rules, 2007.
• Court's Interpretation and Reasoning: The Court found that the issuance of the show cause notice was not justified. The notice was issued as a counterblast to the petitioner's legal actions and was considered arbitrary.
• Key Evidence and Findings: The petitioner alleged that the show cause notice was issued without jurisdiction and was a retaliatory measure following allegations of bribery against respondent no. 6.
• Application of Law to Facts: The Court noted that the valuation had been completed much earlier, and the show cause notice was issued only after the petitioner approached the Court. This timing suggested an arbitrary exercise of power.
• Treatment of Competing Arguments: The respondents argued that the notice was necessary due to discrepancies in valuation. However, the Court found no substantial basis for the delay in issuing the notice.
• Conclusions: The show cause notice was quashed as it was issued without jurisdiction and was a retaliatory action.

2. Entitlement to Duty Drawback

• Legal Framework and Precedents: Sections 75 and 76 of the Customs Act, 1962, govern the entitlement to duty drawback.
• Court's Interpretation and Reasoning: The Court held that the petitioner was entitled to the duty drawback as the goods were exported following a final assessment, and there were no valid grounds for withholding the drawback.
• Key Evidence and Findings: The petitioner provided an Export Realization Certificate, confirming the receipt of foreign exchange, which supported the claim for duty drawback.
• Application of Law to Facts: The Court applied the provisions of the Customs Act and found that the petitioner met all the necessary conditions for receiving the duty drawback.
• Treatment of Competing Arguments: The respondents claimed provisional assessment; however, the Court found that the assessment was final, and the petitioner had complied with all requirements.
• Conclusions: The petitioner was entitled to the duty drawback, and the respondents were directed to process the claim within four weeks.

3. Arbitrary and Capricious Actions by Respondents

• Legal Framework and Precedents: The principles of natural justice and administrative fairness were considered.
• Court's Interpretation and Reasoning: The Court observed that the respondents' actions were colored with vengeance, particularly in light of the bribery allegations and subsequent legal actions by the petitioner.
• Key Evidence and Findings: The sequence of events, including the delay in issuing the show cause notice and the withholding of duty drawback, indicated an arbitrary approach.
• Application of Law to Facts: The Court found that the respondents failed to act in a fair and just manner, as required by law.
• Treatment of Competing Arguments: The respondents' justification for their actions was not supported by the evidence or legal standards.
• Conclusions: The respondents' actions were deemed arbitrary, and the Court ruled in favor of the petitioner.

4. Valuation of Goods

• Legal Framework and Precedents: Section 14 of the Customs Act, 1962, and related valuation rules were central to this issue.
• Court's Interpretation and Reasoning: The Court emphasized that the transaction value should be accepted unless there are valid reasons to doubt its accuracy.
• Key Evidence and Findings: The respondents attempted to justify the valuation discrepancy, but the Court found no substantial evidence to support the re-determined value.
• Application of Law to Facts: The Court applied the principles from relevant Supreme Court judgments, affirming the transaction value as the basis for assessment.
• Treatment of Competing Arguments: The Court rejected the respondents' valuation arguments due to lack of evidence and procedural delays.
• Conclusions: The petitioner's declared value was upheld, and the respondents' valuation was dismissed.

SIGNIFICANT HOLDINGS

• Verbatim Quotes of Crucial Legal Reasoning: "The impugned show cause notice dated 16.04.2019 is hereby quashed and set aside."
• Core Principles Established: The Court reinforced the principle that administrative actions must be fair, just, and within jurisdiction. The valuation of goods should reflect the transaction value unless substantial evidence suggests otherwise.
• Final Determinations on Each Issue: The show cause notice was quashed, the petitioner was entitled to duty drawback, and the respondents' actions were deemed arbitrary.