If SCN against main Noticee is Set Aside, It would Automatically Invalidate the Proposals against Co-Noticees: CESTAT [Read Order]

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The Chennai bench of the Customs Excise and Service tax Appellate Tribunal (CESTAT), recently held that if a Show Cause Notice (SCN) against main Noticee is set aside, it would result in deleting the proposals against the co-noticees also.

In the instant case, the Directorate of Revenue Intelligence (DRI), after investigation, proposed to impose penalty on the main appellant, an exporter, on ground that they had grossly over invoiced the value of the export goods with an intention to avail ineligible drawback benefits.  It was also proposed to impose penalty on the other persons, such as, the CHAs, shipping lines, freight forwarders etc. by finding that this alleged fraud was facilitated by them.

Before the Tribunal, the appellants relied on the decision of the Tribunal in Monte International Vs CC Amristar wherein it was held that show cause notices issued by D.R.I for recovery of erroneously granted drawback in terms of Rule 16 of the Drawback Rules cannot be held as valid show cause notices and that D.R.I officers have no jurisdiction to issue such SCNs.

On the basis of the earlier order, the bench held that the Show Cause Notices issued by the DRI is without jurisdiction and therefore, is liable to be quashed.

Revenue further argued that the proposal for imposition of penalty on the main appellants is even if held as invalid, it cannot adversely affect the proposal for imposition of penalties on the other co-noticees.

Rejecting the arguments, the Tribunal noted that the Show Cause Notice has to be viewed in its entirety and cannot be vivisected as may be convenient for the Revenue. “Thus, if a show cause notice is found as not valid or issued without jurisdiction in respect of the main protagonist, the very same SCN cannot be held as sustainable for other noticees like the appellants herein.  Any attempt for such vivisection is akin to putting the cart before the horse.   This is because the penal consequences on alleged abettors to the alleged offence under the Customs Act or the Rules made there under or will be directly proportional to the adjudication fortunes of the main players. Any contrary proposition would lead to a ludicrous situation wherein the main offenders are left unscathed because of the SCNs being not valid or issued without jurisdiction, but other smaller players like the CHAs, shipping lines etc., who were also noticees in the same SCNs, getting penalized for alleged negligence or for abetting the main offender. This is certainly not the intention of the law. Moreover, when the Tribunal is hand tied   to determine the liability arising out of the main offence, due to the SCN being void, the liability for abetting the offence cannot be adjudged or sustained.”

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