Reasons to be communicated to Importer if SCN not served within 6 month of seizure: Madras HC [Read Order]

SCN - seizure - Madras High court - Taxscan

The Madras High Court held that in seizure cases, if Show Cause Notice is not issued within six months, extension of time and the reasons should be communicated to the importer before expiry of six months.

The petitioner, Kannan Ramdurai Iyer carries on the business of export and import and had, in the course of business, imported dry dates from, according to him, Jebel Ali UAE/Dubai, declaring the country of origin as Oman. There was a search by the Customs Officials and several summons issued under Section 108 of the Act. The petitioner appeared in response to a few summons but not all. Twenty two containers of dry dates, for which the shelf life is stated to be two years, were seized on the ground that the place of origin was Pakistan and not Oman as contended by the petitioner.

The rate of duty for import of dry dates from Pakistan is 200% whereas the rate for import from Oman is only 20%. According to the petitioner, there is no mis-declaration or violation of any of the provisions of the Act and no material on the basis of which the imports have been labelled as ‘smuggled’, as the respondents contend in counter.

The seizure was effected on March 6, 2020 and the provisions of Section 110(1) provide that where any goods are seized under sub-section (1) and no show cause notice in respect thereof is given under clause (a) of section 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized.

The period of six months expired on September 5, 2020, upon expiry of which, the petitioner is entitled to the return of the consignment.

The proviso to Section 110(2) states that the Principal Commissioner of Customs or Commissioner of Customs may, for reasons to be recorded by him in writing, extend the period of six months to a further period not exceeding six months, and inform the person from whom such goods were seized of such extension, before the expiry of the period so specified.

The impugned notice was issued on September 30, 2020 extending the period for issuance of show cause notice for further period of six months invoking the proviso to Section 110 (2) of the Act, received by the petitioner on October 7, 2020.

The petitioner challenged the actions of the authority on the ground that the impugned notice has been passed on September 30, 2020, and served on October 7, 2010, both beyond the periods stipulated under statute, and reliance upon the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 does not advance the case of the respondent.

On the other hand, the Assistant Director, Directorate of Revenue Intelligence has filed a counter wherein he states that an order of extension of time for issuance of show cause notice does not require prior opportunity to be afforded to the assessee concerned. The counter narrates various facts in relation to the transactions of import. It also states, inter alia, that investigation at the ‘overseas level’ and ‘correspondence with the overseas supplier’ proves mis-declaration of country of origin on the part of the petitioner.

The single judge bench of Justice Anitha Sumanth held that the intimation has been received by the petitioner only on October 7, 2020, beyond the date stipulated in the proviso to Section 110(2) and the reasons for extension have also not been supplied. The counter filed by the revenue also refers to subsequent extensions granted in September which are not relevant as a counter cannot improve an order that has to either stand or fall on its own merit.

Therefore, the court directed the respondent to release the consignment in question within a period of two weeks.

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