S. 28(4) and S. 28(1) under Customs Act Operates separately: Delhi HC [Read Order]

The Delhi High Court has held that notices under Section 28(1) and Section 28(4) of the Customs Act 1962 operate in different scenarios and even by an exaggerated stretch, cannot possibly be said to be interchangeably issued. Section 28 relates to recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded. It provides for two separate types of notices.

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Ismartu India Pvt. Ltd, the petitioner  challenged  the Show Cause Notice  dated 01 September 2023 issued under Section 28(4) of the Customs Act, 1962  by Respondent No. 2 and seeks a suitable writ quashing the same relying on various grounds inter alia, as follows:

The impugned SCN dated 01 September 2023 is a subsequent (second) SCN and since a prior SCN, dated 25 July 2023, was already issued under Section 28(1) of the Act, the subsequent SCN (the impugned SCN‖) is bad in Law and not maintainable particularly since the previously issued SCN dated 25 July 2023 was on a similar factual matrix relating to the importation of similar goods.

When the assessee's actions demonstrate elements of cooperation, deliberate misrepresentation, and suppression, one under Section 28(4). In the absence of the components of Section 28(4) of the Act, the other falls under Section 28(1). Ismartu India, a company that manufactures electronics and mobile gadgets, filed a petition contesting the show cause notice that was sent to it under Section 28(4).

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After the SCN issued under Section 28(1), the contested SCN was passed. Ismartu contended that the contested SCN would represent a "change of opinion" because the previously issued SCN was based on a comparable factual matrix pertaining to the importation of comparable items. Further, it was claimed that the contested SCN does not meet Section 28(4)'s standards because it contains no specifics about any alleged (a) cooperation, (b) willful deception, or (c) concealment of material facts.

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The Department, on the other hand, justified its action by pointing to a 2019 Notification that stipulates that a "supplementary notice" will be sent out following the issuance of a notice under Sections 28 or 124 of the Act under the conditions listed therein. The High Court noted right away that Section 28 by definition requires that a SCN be issued under either Section 28(1) or Section 28(4) of the Act, but not both, in a particular combination of facts and circumstances.

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A division bench of Justices Yashwant Varma and Harish Vaidyanathan Shankar observed that meaning thereby that it is only in those circumstances where Section 28(4) of the Act is not attracted that a Notice under Section 28(1) of the Act is issued.

It was noted that notices under both provisions cannot be issued in cases where (i) the factual matrix is nearly identical, (ii) the reports are submitted by the same chartered engineer, and (iii) the conclusions are nearly identical. This is because Section 28(1) can only function in the absence of the conditions outlined in Section 28(4).

To Read the full text of the Order CLICK HERE

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