2025 (5) TMI 1927 - AT - Customs

Preliminary objection with regard to the jurisdiction of the officer issuing the Show Cause Notice - Demand Notice under Section -28 of Customs Act 1962 - HELD THAT - We find that the Show Cause Notice issuing authority has assumed the role of the Adjudicating Authority by directing the assessee to pay the demanded amount or else file the defence reply before him (the Show Cause Notice issuing authority). Hence for all practical purposes it has to be taken that the Show Cause Notice issuing authority is wielding the power of the Adjudicating Authority. Therefore we find force in the arguments of the appellants. Without going into the merits of the appeal we take the view that the Revenue was in error in issuing the Show Cause Notice through the Dy. Commissioner who was not authorized to adjudicate the matter. Therefore on this ground itself we set aside the impugned order and allow the appeal filed by the appellant. The appellant would be eligible for consequential relief if any as per law.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal are:

• Whether the Show Cause Notice (SCN) issued under Section 28(1)(a) of the Customs Act, 1962, by the Deputy Commissioner of Customs, was valid in light of the monetary jurisdiction and authority to adjudicate the matter.
• Whether the same officer who issues the Show Cause Notice must also be the adjudicating authority as mandated by Section 28(1)(a) and Section 28(9) of the Customs Act.
• Whether the issuance of the SCN by an officer who does not have the jurisdiction to adjudicate a demand exceeding Rs.1.49 crore vitiates the entire adjudication process and the consequent order.
• Whether the principles of natural justice were followed during the adjudication process.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the Show Cause Notice issued by the Deputy Commissioner of Customs in relation to monetary jurisdiction and authority to adjudicate

Relevant legal framework and precedents: Section 28(1)(a) of the Customs Act, 1962 mandates that the "proper officer" shall issue a Show Cause Notice requiring the person chargeable to show cause why the amount demanded should not be paid. Section 28(9) further requires that the "proper officer" shall adjudicate the matter and determine the amount of duty or interest payable. The term "proper officer" implies the officer authorized by law to adjudicate the demand.

Court's interpretation and reasoning: The Tribunal emphasized a harmonious reading of Sections 28(1)(a) and 28(9), concluding that the same "proper officer" who is empowered to adjudicate the matter must also issue the SCN. The issuance of the SCN by a lower cadre officer (Deputy Commissioner) who lacks jurisdiction to adjudicate a demand exceeding Rs.1.49 crore is inconsistent with the statutory mandate.

Key evidence and findings: The SCN was issued by the Deputy Commissioner of Customs, Apprising Group - V(A & B), Custom House, Kolkata, demanding Rs.1,49,10,350/-. The adjudication was subsequently carried out by the Commissioner of Customs (Port), a higher authority. The SCN did not specify to whom the reply should be addressed or who would adjudicate the matter, creating ambiguity regarding the proper officer.

Application of law to facts: Since the Deputy Commissioner did not have the jurisdiction to adjudicate demands above a certain monetary threshold and the SCN was issued by him without clarity on adjudicating authority, the Tribunal found this to be a procedural defect. The SCN effectively assumed the role of adjudicating authority by directing the appellant to pay the demanded amount or file a reply, which is beyond the scope of a mere notice issuance.

Treatment of competing arguments: The Revenue contended that the Adjudicating Authority (Commissioner of Customs) followed principles of natural justice and gave the appellant a fair opportunity to be heard. However, the Tribunal held that the procedural error in issuance of the SCN by an unauthorized officer was a fundamental flaw that vitiated the entire process, irrespective of the fairness of the subsequent adjudication.

Conclusions: The Tribunal concluded that the Show Cause Notice issued by the Deputy Commissioner, who was not the proper officer authorized to adjudicate the matter, was invalid. The Revenue erred in issuing the SCN through an officer lacking jurisdiction for the monetary amount involved.

Issue 2: Requirement that the officer issuing the Show Cause Notice must also be the adjudicating authority

Relevant legal framework and precedents: The statutory language of Sections 28(1)(a) and 28(9) of the Customs Act, 1962, uses the phrase "proper officer" in both contexts of issuance of SCN and adjudication, implying the same officer must perform both functions.

Court's interpretation and reasoning: The Tribunal interpreted the statutory provisions to mean that the SCN and adjudication must be carried out by the same officer to maintain procedural propriety and jurisdictional consistency. The issuance of SCN by one officer and adjudication by another, especially when the former lacks jurisdiction, is impermissible.

Key evidence and findings: The SCN included directions that the appellant should pay the demanded amount or file a representation with the issuing officer, thus assuming adjudicatory powers. However, the adjudication was conducted by the Commissioner, a different officer.

Application of law to facts: The Tribunal found that the SCN issuing officer had overstepped the role of a mere notice issuer by directing payment and inviting representations, thereby acting as adjudicating authority without jurisdiction. This procedural irregularity undermined the validity of the entire adjudication process.

Treatment of competing arguments: The Revenue's argument that the appellant was given a fair hearing by the Commissioner was rejected on the ground that the fundamental jurisdictional defect in issuance of SCN could not be cured by subsequent procedural fairness.

Conclusions: The Tribunal held that the SCN must be issued by the proper officer who is also authorized to adjudicate the matter, and this requirement was not met in the present case.

Issue 3: Effect of procedural irregularity on the adjudication order and entitlement to relief

Relevant legal framework and precedents: Procedural irregularities, especially relating to jurisdiction and authority of officers issuing SCNs and adjudicating demands, can vitiate the entire adjudication process and render the resulting orders liable to be set aside.

Court's interpretation and reasoning: The Tribunal reasoned that the jurisdictional defect in issuance of the SCN could not be overlooked. The adjudication order passed pursuant to such a defective notice was rendered invalid. The appellant was entitled to have the impugned order set aside on this ground alone without delving into the merits of the case.

Key evidence and findings: The demand was for Rs.1.49 crores, which was beyond the monetary jurisdiction of the Deputy Commissioner. The SCN did not designate the adjudicating authority, and the Deputy Commissioner assumed adjudicatory functions improperly.

Application of law to facts: The Tribunal applied the principle that jurisdictional defects cannot be cured by subsequent proceedings or by adherence to principles of natural justice during adjudication. Hence, the impugned order was set aside.

Treatment of competing arguments: Although the Revenue argued that the appellant was given an opportunity to be heard and principles of natural justice were followed, the Tribunal held that these procedural safeguards could not validate a notice issued by an unauthorized officer.

Conclusions: The appeal was allowed on the ground of jurisdictional defect in issuance of SCN, and the impugned order was set aside. The appellant was entitled to consequential relief as per law.

3. SIGNIFICANT HOLDINGS

"A harmonious reading of these provisions would clarify that only the proper officer who is authorized to adjudicate the matter, should issue the Show Cause Notice."

"We find that the Show Cause Notice issuing authority has assumed the role of the Adjudicating Authority by directing the assessee to pay the demanded amount or else file the defence reply before him (the Show Cause Notice issuing authority). Hence, for all practical purposes, it has to be taken that the Show Cause Notice issuing authority is wielding the power of the Adjudicating Authority."

"Without going into the merits of the appeal, we take the view that the Revenue was in error in issuing the Show Cause Notice through the Dy.Commissioner who was not authorized to adjudicate the matter. Therefore, on this ground itself, we set aside the impugned order and allow the appeal filed by the appellant."

Core principles established include:

• The officer issuing the Show Cause Notice under Section 28 of the Customs Act must be the same officer authorized to adjudicate the matter.
• Issuance of SCN by an officer lacking jurisdiction to adjudicate, especially in cases involving high monetary demands, is a fundamental procedural defect that vitiates the adjudication process.
• Procedural fairness and adherence to natural justice during adjudication cannot cure jurisdictional defects in issuance of the SCN.
• Where such jurisdictional defects exist, the impugned adjudication order must be set aside without examining the merits of the case.

Final determinations on each issue were in favor of the appellant, with the Tribunal setting aside the impugned order on the sole ground of jurisdictional defect in issuance of the Show Cause Notice.