Penalty order cannot be passed without serving SCN

[CA Bimal Jain]

The Hon’ble Delhi High Court in M/S. SUN AVIATION PVT. LTD. VERSUS COMMISSIONER OF CUSTOMS (EXPORT) - 2023 (2) TMI 494 - DELHI HIGH COURT has set aside the penalty order passed by the Revenue Department on the ground that the order was passed in violation of principles of natural justice. The assessee was not afforded full opportunity to contest the allegations against it. Set aside the penalty order.

Facts:

M/s. Sun Aviation Pvt. Ltd. (“the Petitioner”) is an International Air Transport Association (“IATA”) Agent and is engaged in booking air freight for exporters and sub-agents through various airlines. The Petitioner receives bookings for air freight from clearing agents, sub-agents, importers/exporters and brokers. The Revenue Department (“the Respondent”) issued a penalty order dated August 31, 2022 (“the Impugned Order”) of INR 2,70,00,000/-, in respect of five shipping bills issued to M/s Manisha Enterprises on the grounds that the exporter was non-existent and the exports under the said Shipping Bills, were to avail export benefits fraudulently.

Being aggrieved, this petition has been filed.

The Petitioner contended that it had not received any Show Cause Notice (“SCN”) and, therefore, it was not afforded with sufficient opportunity of hearing. However, even on repeated requests of the Petitioner till the date of personal hearing, the Respondent never served the SCN.

Issue:

Whether the Impugned Order can be passed without serving a SCN to the Petitioner?

Held:

The Hon’ble Delhi High Court in M/S. SUN AVIATION PVT. LTD. VERSUS COMMISSIONER OF CUSTOMS (EXPORT) - 2023 (2) TMI 494 - DELHI HIGH COURT held as under:

• Analyzed Section 153 of the Customs Act, 1962 (“the Customs Act”) and noted that there were no material facts to indicate that the SCN was served upon the Petitioner in the manner prescribed under the said Section.
• Noted that, the Petitioner had informed the Respondent prior to the date of personal hearing regarding the non-receipt of the SCN and had also requested for a copy of the same. Hence, the Petitioner had discharged its burden to establish that it had not received a copy of the SCN.
• Held that, the Impugned Order was passed in violation of the principles of natural justice as the petitioner was not afforded full opportunity to contest the allegations made against it.
• Set aside the impugned order.
• Permitted the Respondent to issue a fresh SCN and pass appropriate orders after affording the opportunity of hearing to the Petitioner.

Relevant Provisions:

Section 153 of the Customs Act:

“Service of order, decision, etc. –

(1) An order, decision, summons, notice or any other communication under this Act or the rules made thereunder may be served in any of the following modes, namely:-

(a) by giving or tendering it directly to the addressee or importer or exporter or his customs broker or his authorised representative including employee, advocate or any other person or to any adult member of his family residing with him;

(b) by a registered post or speed post or courier with acknowledgement due, delivered to the person for whom it is issued or to his authorised representative, if any, at his last known place of business or residence;

(c) by sending it to the e-mail address as provided by the person to whom it is issued, or to the e-mail address available in any official correspondence of such person;

(ca) by making it available on the common portal;

(d) by publishing it in a newspaper widely circulated in the locality in which the person to whom it is issued is last known to have resided or carried on business; or

(e) by affixing it in some conspicuous place at the last known place of business or residence of the person to whom it is issued and if such mode is not practicable for any reason, then, by affixing a copy thereof on the notice board of the office or uploading on the official website, if any.

(2) Every order, decision, summons, notice or any communication shall be deemed to have been served on the date on which it is tendered or published or a copy thereof is affixed or uploaded in the manner provided in sub-section (1).

(3) When such order, decision, summons, notice or any communication is sent by registered post or speed post, it shall be deemed to have been received by the addressee at the expiry of the period normally taken by such post in transit unless the contrary is proved.”

(Author can be reached at info@a2ztaxcorp.com)