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2016 (8) TMI 709 - MADRAS HIGH COURT

2016 (8) TMI 709 - MADRAS HIGH COURT - 2016 (340) E.L.T. 477 (Mad.) - Misuse of advance licence/advance authorisation scheme - proper officers - undue haste in issuance of show cause notice - we do not find any impediment to the Customs Authorities issuing show cause notice on the basis of materials gathered/input received from Excise Authorities. In fact, Custom notification No.31/97 Cus (NT) dated 07.07.1997 and the amendment of Section 28 of Customs Act, 1962 by introduction of sub-section .....

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at petitioners are complaining about is what really is in the nature of intra departmental communications, a course not open to them. - It is for the company to respond to the show cause notice and satisfy the authority concerned that the allegations against them are unfounded. The contention of the company having met its export obligations with the consequence that it was free to dispose of imported materials is also to be raised only before the authority concerned. - We find no merit e .....

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nior counsel for Mr.Mohammed Shaffiq, Mr.C.Natarajan, senior counsel for Mr.Y.Prakash For the Respondent : Mr.B.Vijay Karthikeyan, Mr.P.Paul Pandi, Central Government Standing Counsel COMMON JUDGMENT C.T.SELVAM, J. Since the parties and issues involved are one and the same, the present writ appeal and writ petition are heard together and disposed by this common judgment. 2. The Commissioner of Customs (Tuticorin) vide proceedings C.No.VIII/48/61/2013-SIIB dated 13.01.2015 alleged misuse of advan .....

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mmissioner of Customs, Custom House, Tuticorin within 30 days of receipt of this notice as to why: (a) Benefit of Customs Notifications No.91/2004-Cus dated 10.09.2004 and No.93/2004-Cus dated 10.09.2004 should not be denied for the import of 77214.024 MT of Copper in Copper Concentrate imported by them for violations of the conditions stipulated in the said Notifications read with the provisions of the Foreign Trade Policy; (b) the amount of ₹ 399,60,57,592 as calculated in the worksheet .....

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n Copper Concentrate used in the Copper products diverted to domestic market should not be held liable for confiscation under Section 111 (o) and 111 (d) of the Customs Act 1962 for violation of the conditions of the Notifications and provisions of the Foreign Trade Policy subject to which they were allowed clearance and as the goods are not available for confiscation, and since exemption under the said Notifications were extended against the bonds executed by them, why redemption fine should no .....

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2 for abetting the commission of the above offence by SIIL. 54. M/s.Sterlite Industries (India) Ltd, Unit-I and Shri S.Varadharajan, Vice President, M/s.Sterlite Industries (India) Ltd, Unit-I are directed to produce all the evidences upon which they intend to rely in support of their defense. They may also state in their written reply as to whether they wish to be heard in person before the case is adjudicated. 55. Reliance for the issue of this notice is based on the documents mentioned in Ann .....

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/2011 and any related petitions. This SCN shall not be adjudicated unless and until directions are obtained from the Hon'ble High Court and will be kept pending until such time. 58. This notice issued without prejudice to any other action that may be or has already been initiated against any other Act or Rules made thereunder or under any other laws for the time being in force and enforceable in India. Quash thereof is sought in W.P.(MD) No.626 of 2015. 3. The company imports Copper Concentr .....

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ed before the jurisdictional Range Office once in a fortnight. Alleging failure on the part of the company, the Assistant Commissioner of Central Excise, Tuticorin/fourth respondent passed an ex parte order dated 08.06.2010 demanding reversal of CENVAT credit of ₹ 315,91,42,459/-. The fourth respondent, addressed a letter dated 09.06.2010 to the Assistant Commissioner of Central Excise, Division III, Silvassa, on the basis of the order dated 08.06.2010 and called for reports from various d .....

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king issuance of a writ of mandamus directing the first respondent to appoint 'proper officers' of customs to investigate and examine issues, if any, not arising or connected to orders passed by the fourth respondent dated 08.06.2010 and 09.06.2010 inasmuch as respondents 3 to 6 lack jurisdiction to enquire into the alleged offences under the Customs Act, 1962 and the Foreign Trade Regulation Act, 1994 read with the EXIM policy and in any way have disqualified themselves to enquire any f .....

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ferred against the finding in W.P.(MD) No.9744 of 2010 while W.A.No.704 of 2011 was preferred against the finding in W.P.(MD) No.9745 of 2010. Both Mr.C.Natarajan, learned senior counsel for petitioner and Mr.A.R.L.Sundaresan, learned senior counsel for appellant, stated that W.A. (MD)No.704 of 2011 has become infructuous. 4. Heard Mr.C.Natarajan, learned senior counsel for petitioner, Mr.A.R.L.Sundaresan, learned senior counsel for appellant, Mr.B.Vijay Karthikeyan, learned counsel for Customs .....

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, r/w the EXIM policy, as they were not proper officers. In circumstance where persons holding the office of the respondents 3 to 6 had undergone a change, learned senior counsel fairly did not press the contention of personal bias and malice. He took us through the order under challenge to explain that the distinction between Customs Officer and Proper Officer had been missed. Referring to the preamble to the show cause notice, learned senior counsel submitted that the Commissioner of Customs, .....

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that the Commissioner of Customs, Tuticorin, had undertaken to keep the show cause notice pending and not to adjudicate the same till Court directions were obtained and raised the question of the need for such directions if, in the first place, the Commissioner of Customs, Tuticorin, was right in issuing the show cause notice. Learned senior counsel submitted that the show cause notice in paragraph No.50 informed that the company attempted to redeem its advance licenses by DGFT suppressing the .....

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issioner of Customs, Tuticorin, was empowered to issue the show cause notice in C.No.VIII/48/61/2013-SIIB dated 13.01.2015, he had done so not on his own accord but at the instance of Commissioner of Central Excise, Tirunelveli. The draft show cause notice had been prepared by one who is not a Proper Officer. Learned senior counsel referred to copies of communication obtained under the Right to Information Act. Learned senior counsel also referred to the following in the communication in C.No.VI .....

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9.5 of the Foreign Trade Police, Actual user (Industrial) means a person who utilizes imported goods for manufacturing his own industrial units or manufactures for his own use in another unit including jobbing unit. This means that as per the policy the scheme is to allow duty free import of inputs which are physically incorporated in export product but is no one-to-one correlation between imports and exports. The Tribunals in a series of decisions have taken a view that there is no bar in sale .....

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possible to identify the quantity of copper concentrate as being physically identifiable with the goods cleared duty free. In the instant case copper concentrate are stored in bulk in bonded warehouse. In the absence of identifying particulars of the commodity on itself or on its package or container it would be impossible to identify any particular quantity stored or issued for the manufacture of a batch of finished products as one imported duty free or imported on payment of duty or indigenou .....

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ner of Central Excise, Tirunelveli, has used the hands of the Commissioner of Customs, Tuticorin, to carry out his intention and as such the show cause notice must be seen as one issued by him. Learned senior counsel contended that issue of show cause notice was quasi-judicial in nature and the power to do so must be exercised in a neutral and untainted manner. Learned senior counsel submitted that a reading of the show cause notice informed overt hostility towards the company and indicated lack .....

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uasi judicial authority. That is the essence of our judicial system. There is no provision in the Act empowering the Board to issue directions to the assessing authorities or the Appellate Authorities in the matter of deciding disputes between the persons who are called upon to pay duty and the department. It is true that the assessing authorities as well as the Appellate Authorities are judges in their own cause; yet when they are called upon to decide disputes arising under the Act they must a .....

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e Board and the Collectors may issue written instructions providing for any supplemental matters arising out of these Rules. Under this rule the only instruction that the Board can issue is that relating to administrative matters; otherwise that rule will have to be considered as ultra vires Section 35 of the Act. Learned senior counsel also relied on the decision of the Apex Court in Mahadayal Premchandra v. Commercial Tax Officer, Calcutta and another [1959 SCR 551], a case wherein, on facts i .....

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ta and others [(1980) 122 ITR 55 (SC)] was relied upon to impress that considerations of limitation would not stand in the way of doing so. Relying on the decision in Jay Engineering Works Ltd. v. Commissioner of Customs, Chennai [2003 (162) E.L.T. 680 (Tri-Bang.), learned senior counsel submitted that the Company had fulfilled its export obligation and therefore, there could be no restriction on its disposal of imported materials. 9. The show cause notice has been issued pending the present wri .....

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judicated unless and until directions are obtained from the High Court enabling such adjudication. 10. Learned senior counsel contended that in the decision in Siemens Ltd. v. State of Maharashtra and others [2006 (12) SCC 33], the Apex Court had held that a show cause notice issued with premeditation may be challenged by way of writ petition since directing the authority to hear the matter afresh would not yield any fruitful purpose. Reliance was also placed on the judgment of this Court in Raj .....

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g: The Cenvat Credit that accrues on account of the duty paid Copper Concentrates is more than sufficient to discharge the duty liability on the final products viz Copper Cathodes/rods arising out of the same. Hence, excess Cenvat Credits are bound to accumulate in the Cenvat account of M/s.Sterlite Industries India Limited, Tuticorin. These excess Cenvat Credits would have been lying idle and could not have been encahsed on any account. Given this situation, M/s.Sterlite Industries Ltd., Tutico .....

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arances and thus encashed the duty amount charged to their buyers using excess cenvat accumulations and conveniently avoiding PLA payments. In this process, there are two serious offences involved. 1. What was legally bound for export was wilfully cleared into the DTA as if the same had been made out of the duty paid inputs. This is a serious violation of the Advance License Scheme. 2. The accumulated Cenvat Credits, which would have otherwise lied idle and gone unutilised, were illegally encash .....

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subsequent notification, the sixth respondent was an authorised officer competent to issue show cause notice. Such finding had not been challenged. The notice of the Assistant Commissioner of Central Excise, Tuticorin, dated 08.06.2010 referred to a matter exclusively of the concern of the Central Excise Department. 13. Mr.B.Vijay Karthikeyan, learned counsel for Customs, referred to amendment to Section 28 of the Customs Act. Section 28 of the Customs Act, as amended, reads as follows: 2. In se .....

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proper officers for the purposes of this section. 14. Learned counsel submitted that such amendment came about pursuant to judgment of the Apex Court in Commissioner of Customs vs. Sayed Ali and another, Civil Appeal Nos.4294 and 4295 of 2002. Therein, the Apex Court had held that only a Customs Officer who had been specifically assigned the duties of assessment and re-assessment in the jurisdiction area would be a 'proper officer' competent to issue a notice for demand of duty. Several .....

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d counsel that in the light of the said amendment the cause of action for W.P(MD) No.9744 of 2010 seeking a direction to the first respondent to appoint 'proper officers' of customs to investigate and examine issues, does not survive. Meeting the contention of the show cause notice issued by the Commissioner of Customs, Tuticorin, being the handiwork of another, learned counsel submitted that the draft show cause notice did not bear a date or signature. The Customs authorities may choose .....

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e show cause notice had not done so in a pre-determined manner. Learned counsel contends that the decision in Siemens Limited v. State of Maharashtra [2006 (12) SCC 33] did not apply. Learned counsel relied on the decision in Mahadayal Premchandra v. Commercial Tax Officer, Calcutta and another [1959 SCR 551] to submit that a show cause notice cannot be read as an assessment order. In response to communication of the Commissioner of Customs, Tuticorin, in C.No.VIII/48/55/2014-SIIB dated 09.01.20 .....

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ther autority. Once this section says that all persons appointed as officers of Customs under Section 1(4) before 6th July, 2011 shall be deemed to have been and always to be the proper officers for the purpose of this section, then, the Notifications, which are referred by us above at page 369 and 373 of the paper book are specifically saved and validated. They have been given a retrospective effect. These Notifications were holding the field and were not quashed or set aside. In the teeth of s .....

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le Supreme Court in the case of Sayed Ali (supra). There, for want of jurisdiction or competence in the Collector of Customs (Preventive), the show cause notice was quashed by the Tribunal and that order was upheld by the Supreme Court. Before us, the issue is not whether any Collector of Customs (Preventive) could be said to be on par with the officers mentioned in the earlier Notification dated 26th April, 1990. The assignment of functions to these officers, who were earlier carrying on preven .....

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rgone a change and from 6th July, 2011, admittedly, they have been assigned these functions and of the Custom officers. They are therefore competent and the Notification in that behalf at page 373 of the paper book has been given a retrospective effect. It is not the argument of Mr.Singh that the law cannot be amended retrospectively. It is also not his argument that the validating Act does not validate anything which may be or is invalid. In the circumstances and the Parliament being competent .....

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xercise, the excise authorities have stumbled upon violations committed under Customs Act and brought the same to the notice of the Customs Authorities. Though an order of status-quo passed by this Court had been extended only upto 28.09.2011 both Customs and Central Excise Departments had moved petitions to vacate stay and taken steps to have the same listed by letters dated 17.09.2011 and 07.09.2014 addressed to the Registrar and cited that huge Government revenue is at stake. The same was don .....

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or violation having taken place out of duty free imports under advance licence availed of through Customs Department at the Tuticorin Court, a draft show cause notice had been prepared and forwarded to the authority, who had issued the show cause notice. As per the Notification No.31/97 - Cus (NT) dated 07.07.1997 all Central Excise Officers are Customs Officers and hence, it is wrong to contend that the Central Excise Officers have no jurisdiction to investigate customs violations and issue sho .....

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n which prevailed on 31.05.2010 in the subsequent enquiry. There is no settled law which bars issue of show cause notice on the basis of enquiry or investigation conducted by the Central Excise authorities. In the writ appeal, the company itself has contended that issues on customs violations are within the exclusive domain of Commissioner of Customs (Port), Tuticorin and hence, the company should not have any grievance when the show cause notice has been issued by the customs authorities with a .....

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thout any jurisdiction. On a perusal of the writ petition and writ appeal, it is clear that as on the date of issuance of show cause notice, there was no stay against doing so. As the order of status quo passed in W.A.No.704 & 705 of 2011 was in force only till 28.09.2011, there was no bar restraining the Commissioner of Customs from issuing show cause notice on misuse of advance license scheme. The writ petition filed challenging the show cause notice should not be entertained since the sho .....

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y free copper concentrate. While disposing of W.P.No.8135 of 2010, this Court clearly has held that there shall be stay of the communication dated 09.06.2010 insofar as it relates to non-compliance of Cenvat Credit Rules only. No stay was granted regards misuse of advance license scheme. 16. This Court has considered the rival submissions and perused the materials on record. 17. We straightaway would observe that the distinction between a 'proper officer' and 'customs officer' ha .....

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uld be deemed to have always had the power of assessment u/s.17 of the Customs Act, 1962 and shall be deemed to have been and always had been the proper officers for the purposes of 'this section' viz., Section 28 which confers powers to issue show cause notice regards duty not levied or short levied or erroneously refunded or regards interest payable, part paid or erroneously refunded, the prayer in W.P.No.9774 of 2010 seeking issue of writ of mandamus directing the first respondent to .....

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slative intent that various wings of revenue act closely and cohesively towards avoiding loss thereof. Central Excise Officers deemed to be Customs Officers had gathered material which forms the basis of the show cause notice. Such Excise officials/ Customs officers are deemed to be proper officers for the purposes of Sections 17 and 28 of the Customs Act, 1962. Thus, when viewed through the prism of Section 28(11) of the Customs Act, 1962, it can be seen that what petitioners are complaining ab .....

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s communication dated 09.01.2015. Upon having had clarification from the Commissioner of Central Excise, Tirunelveli, under his reply dated 12.01.2015, the show cause notice had been issued. There is nothing to indicate that the Commissioner of Customs (Tuticorin) had not been satisfied with the clarification offered. Again, as rightly pointed out, the show cause notice informing that 'a position deemed to emerge' was indicative that the same had not been issued in a predetermined manner .....

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