Madras High Court
M/S.Primacy Industries Limited vs The Commissioner Of Customs on 30 June, 2022
Author: Anita Sumanth
Bench: Anita Sumanth
WP.Nos.16456 and 16460 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 30.06.2022
CORAM
THE HONOURABLE DR. JUSTICE ANITA SUMANTH
WP.Nos.16456 and 16460 of 2022
WMP Nos.15739 and 15742 of 2022
M/s.Primacy Industries Limited
Having registered office at
Udayavani Building,
Press Corner,
Manipal, Udupi,
Karnataka – 576 104
represented by its Chief Financial Officer
Mr.Prabhakara Kamath
... Petitioner in W.P.No.16456 of 2022
Mr.Prabhakara Kamath
... Petitioner in W.P.No.16460 of 2022
Vs
1.The Commissioner of Customs,
Chennai-II , 60, Customs House, Rajaji Salai,
Chennai – 600 001.
2.The Additional Director General
Directorate of Revenue Intelligence,
Chennai Zonal Unit,
Chennai – 600 017.
... Respondents in both W.Ps
1
https://www.mhc.tn.gov.in/judis
WP.Nos.16456 and 16460 of 2022
Common Prayer:Writ Petitions filed under Article 226 of the Constitution of India,
to issue a Writ of Certiorari to quash the proceedings initiated by respondent vide
Show Cause Notice E.F.No.CUS/APR/MISC/1607/2022-GR6-O/OCOMMR.CUS-
IMP-CHENNAI dated 29.04.2022.
In both W.Ps.
For Petitioner : Mr.Raghavan Ramabadran
For Respondents: Mrs.R.Hemalatha
Senior Standing Counsel – R1
Mr.V.Sundareswaran
Senior Panel Counsel – R2
COMMONORDER
Mrs.R.Hemalatha, learned Senior Standing Counsel accepts notice for R1 and Mr.V.Sundareswaran, learned Senior Panel Counsel accepts notice for R2. Heard all learned counsel in detail. By consent expressed by all learned counsel and seeing as the challenge in the Writ Petitions is to show cause notices, final orders are passed disposing these Writ Petitions, even at the stage of admission.
2. The petitioners are in receipt of show cause notices dated 29.04.2022 issued in terms of Section 110AA read with Section 28AAA and Section 124 of the Customs Act, 1962 (in short ‘Act’) and assails on the same on various grounds. 2 https://www.mhc.tn.gov.in/judis WP.Nos.16456 and 16460 of 2022
3. Firstly, my attention is drawn to the fact that the contents of the show cause notices, when compared with the report of the investigating authority, corresponds to the former to the 'T' including on the aspect of punctuation. Thus, learned counsel for the petitioner would allege that there has been absolute non-application of mind on the part of R1 while issuing show cause notices, which is a pre-requisite for the issuance thereof.
4. He would submit that it was incumbent upon the authority to have addressed the issues arising for resolution clearly and identify the same, putting the assessee to notice as to the specific issue for response. In the present case, what the Assessing Authority has done is merely reproduce the report of the investigating authority, which cannot validate the issuance of a show cause notice, per se.
5. He relies in this regard, upon the following decisions:
(i) Tvl. Sri Kumaran Mills V. The Assistant Commissionr (CT) (2019 (12) TMI 1055)
(ii) J.A.Motor Sport V. State of Tamil Nadu (2016 SCC Online Mad 29237)
(iii) Madras Granites Pvt. Ltd. V. CTO (2006 (146) STC 642)
(iv) Tvl. Narasus Roller Flour Mills V. The Commercial Tax Officer ((2015 ) 81 VST 560)
(v) Simplex Infrastructure Limited V. Commissioner (2016 (42) STR 634 (Cal.)
(vi) Axiom Cordages Ltd. V. CC (2020 (9) TMI 478) (CESTAT, Mumbai) 3 https://www.mhc.tn.gov.in/judis WP.Nos.16456 and 16460 of 2022
6. It is to be noted that barring the decisions in Sri Kumaran Mills (supra) and Simplex (supra), the challenge in all other decisions relate to orders of assessment wherein the officers had merely adopted the reasoning in the proposals of the Enforcement Department/Investigating Authority. This distinguishes these cases from the present one.
7. However, as far as a notice is concerned, the threshold is far higher and the burden lying upon the party that challenges a show cause notice far greater. In the case of Sri Kumaran Mills (supra), the order records that the notice in that case contains a statement by the Assessing Authority that the notices had been issued ‘to implement the VSI-3 proposals received from the Enforcement Wing (Group-V) Coimbatore.’ This is recorded in paragraph 4 of the order, as reported in 2019 (12) TMI 1055. It is based upon this honest submission by the Assessing Authority that the Court had been persuaded to take the view that there is not even a semblance of application of mind and on the contrary the authority has himself, proceeded only to implement the proposals of the Investigating Authority.
8. In this case, though the petitioners may be right in stating that the contents of the report of the Investigating Authority, substantial form the basis of the impugned notices, I see no fatal flaw in this, for the moment. Being a notice, the Assessing Authority is at liberty to borrow from either the conclusions of the report of the 4 https://www.mhc.tn.gov.in/judis WP.Nos.16456 and 16460 of 2022 investigating authority, materials available in public domain and other material as he may have recourse to, for the issuance of the show cause notices. What is important is that such material upon which the notices are premised, are made available to the party.
9. There is no dispute that there is compliance of this condition as far as the petitioners are concerned. Thus, the mere fact that the body of the notices may be a reproduction of the report of the authority without there being any conclusive evidence to state that the conclusion of the investigating authority would be adopted by the Assessing Authority even thereafter, would not validate the challenge at this stage, which, in my view, is pre-mature.
10. It is entirely open to the petitioners to put forth all their objections before the authority including the fact that the Assessing Authority has no other material, save that of the investigating officer, to arrive at a conclusion adverse to the petitioners. In such a case, it would be incumbent upon the authority to substantiate his stand and assign his own reasons for agreeing with the conclusion of the investigating authority.
11. In the case of Simplex (supra), the challenges to the show cause notice were manifold and the Court appears to have been persuaded in conclusion, that on the merits of the matter, the contracts constituted service contracts simplicitor and not 5 https://www.mhc.tn.gov.in/judis WP.Nos.16456 and 16460 of 2022 composite works coming within the ambit of service tax under the provisions of Finance Act, 1994.
12. Before me, apart from the fact of non-application of mind on the part of the Assessing Officer, the only other point that is argued is as regards non-compliance with the ingredients of Section 28AAA of the Act.
13. Learned counsel for the petitioners would argue that Section 28AAA requires an allegation of collusion, willful mis-statement or suppression of facts in the show cause notice itself. According to him, the impugned show cause notices do not contain such an allegation.
14. However, since the officer, in conclusion (paragraph 36.4) states that the exemption claimed was by willful mis-statement and suppression of facts, prima facie, this aspect of the matter has weighed with the Assessing Officer in issuing the impugned show cause notices. Having said so, I would still leave this point open, to be agitated by the petitioners in the reply to be filed in response to the show cause notices.
15. Mr.Sundareswaran, learned Senior Panel counsel for R2 relies upon the following decisions:
i) Commissioner of Central Excise, Bangalore V. Brindavan Beverages (P) Ltd. and ors. (2007 (213) ELT 487 (SC)) 6 https://www.mhc.tn.gov.in/judis WP.Nos.16456 and 16460 of 2022
ii) Abhishek Mundhra V. The Additional Director General (2015 (318 ELT 245 (Mad.))
iii) KVS Cargo V. The Commissioner of Customs (General) New Customs House New Delhi (2016 (342) ELT 24 (Del.))
iv) R.R.Financial Consultants Ltd. V. Union of India and Ors.
((2014)69VST378 (Delhi))
v) The Director General, Directorate of Revenue Intelligence and Ors. V. Navneet Kumar and Ors. (2020 (371) ELT 270 (Cal.)
16. The proposition that is advanced is that the power of an Assessing Authority to issue a show cause notice is wide. Incidentally, the issue relates to proposed cancellation of scrips on a difference of opinion qua the petitioners and the Department on the nature of product exported, that is whether the wax candle manufactured by the petitioners satisfies the definition of handcrafted product. Learned counsel for the petitioners would submit that the petitioner company holds a certification from the Development Commissioner (Handicrafts), New Delhi. The Foreign Trade Policy requires, in the event of a dispute regarding the nature of the product, that the concerned assessee to produce a certification from the Development Commissioner.
17. In this case, though such certification has been produced before the investigating authority, it is for the petitioners to place such a certificate before the 7 https://www.mhc.tn.gov.in/judis WP.Nos.16456 and 16460 of 2022 Assessing Authority. Since this has not been done thus far, even on this score, I would state that the present Writ Petitions are rendered pre-mature.
18. That apart, learned counsel for the petitioners would submit that the scrips are themselves not been cancelled and are viable till date. This submission may well be made before the Assessing Authority who will consider the same in accordance with law.
19. In fine, the challenge to the show cause notices is rejected. The petitioners are permitted to file a reply to the same within a period of three (3) weeks from date of receipt of a copy of this order. Upon receipt thereof, let the petitioners be heard and proceedings completed, expeditiously thereafter. It is made clear that the observations made in this order are only to aid effective disposal of the Writ Petitions.
20. With the above observations, both the Writ Petitions stand dismissed. No costs. Connected Miscellaneous Petitions are also dismissed.
30.06.2022 Index: Yes/No Speaking/non-speaking order Sl 8 https://www.mhc.tn.gov.in/judis WP.Nos.16456 and 16460 of 2022 To
1.The Commissioner of Customs, Chennai-II , 60, Customs House, Rajaji Salai, Chennai – 600 001.
2.The Additional Director General Directorate of Revenue Intelligence, Chennai Zonal Unit, Chennai – 600 017.
9 https://www.mhc.tn.gov.in/judis WP.Nos.16456 and 16460 of 2022 Dr.ANITA SUMANTH,J.
Sl WP.Nos.16456 and 16460 of 2022 WMP Nos.15739 and 15742 of 2022 30.06.2022 10 https://www.mhc.tn.gov.in/judis