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2015 DIGILAW 44 (CAL)

Spectra Fashions v. Union of India

2015-01-20

SANJIB BANERJEE

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JUDGMENT : Sanjib Banerjee, J. 1. The short ground canvassed by the petitioners is that the show-cause notice issued and recovery proceedings initiated by the Customs authorities after a period of more than eight years from the completion of the export transaction by the first petitioner are hopelessly barred by Section 28 of the Customs Act, 1962. 2. The petitioners obtained an advance licence in 2002 for export of ladies' garments. The raw material imported was polyester with limited content of cotton and spandex. 3. The petitioners exported short-sleeved T-shirts and ladies' trousers. The Customs authorities drew samples from the goods exported by or about the year 2005. It was only by a notice of July 11, 2011, which the petitioners claim to have received in 2013, that the Customs authorities complained that the fabric imported into India under the advance licence had not been used for the purpose of manufacturing of the goods exported. As a consequence, the duty exemption allowed to the first petitioner was demanded to be refunded. A personal hearing was also afforded to the first petitioner by the show-cause notice dated July 11, 2011. 4. The petitioners have relied on the envelope in which the show-cause notice was served on the first petitioner. It is evident that the envelope bears a date of February 04, 2013. The petitioners, however, claim that the show-cause notice was received by post on December 16, 2013. 5. It is not necessary, in the light of the challenge thrown by the petitioners, to either dwell on the petitioners' reply to the show-cause notice or to the order that was passed by the relevant official in pursuance of the notice. 6. The respondents say that the petitioners could not have approached this Court directly against the order-in-original and the petitioners ought to have exhausted their statutory remedies before invoking this extraordinary jurisdiction. 7. Since the very authority to issue the show-cause notice and continue further proceedings pursuant thereto has been questioned, the existence of an alternative remedy will not stand in the way of this Court, in exercise of its powers under Article 226 of the Constitution, considering such challenge and quashing the proceedings if the same are found to be without jurisdiction. 8. 8. Section 28 (4) of the said Act mandates, inter alia, that where any duty has not been levied or short-levied or erroneously refunded by reason of collusion or wilful misstatement or suppression of facts, the notice in such regard may be issued by the authority within a period of five years from the relevant date. The expression "relevant date" has been defined in the first explanation to the Section as the date on which the proper officer makes an order for the clearance of the goods. 9. In the present case, the advance licence was obtained in the year 2002. Though the condition-sheet appended to the advance licence obliged the first petitioner to complete the corresponding export within a period of 18 months from the date of the licence, the export was permitted to be continued till the year 2005. The export transaction appears to have been completed in 2005 as would be evident from a writing dated February 23, 2005 issued by the office of the Director General of Foreign Trade certifying that the export obligation against the relevant advance licence had been fulfilled. 10. The date of the last of the shipping bills relied upon by the petitioners is February 09, 2005. 11. If every benefit of doubt is given to the department, the samples should have been drawn latest by February 09, 2005 and the relevant date can also be reckoned to be February 09, 2005. The notice ought to have been issued within five years of February 09, 2005, but it appears that it took more than six years for the department to realise that the ladies' garments exported by the first petitioner may not have been manufactured with the material that had been imported on the basis of the advance licence obtained. 12. There are only two scenarios possible: that the first petitioner had duly exported the goods and had complied with the conditions of the advance licence; or, the first petitioner had acted in derogation of the conditions appended to the licence and, as such, was liable to refund the duty exemption obtained. In the second case, it was mandatory for the department to issue a notice to the petitioner within five years of the date by which the export obligation ought to have been completed or within five years of the actual export of the last consignment. 13. In the second case, it was mandatory for the department to issue a notice to the petitioner within five years of the date by which the export obligation ought to have been completed or within five years of the actual export of the last consignment. 13. Since it is evident that no notice was issued by the department to the first petitioner within five years of February, 2005, the steps taken by the respondent authorities to recover the duty exemption afforded to the first petitioner cannot be permitted to continue. The show-cause notice dated July 11, 2011, a copy whereof appears as Annexure P-8 to the petition at page 60 thereof, is set aside as being without jurisdiction. As a consequence, all steps taken pursuant to the show-cause notice, including the order-in-original dated February 26, 2014, are also set aside. 14. W.P. No.12999 (W) of 2014 is allowed but without any order as to costs. 15. The Registrar (Judicial) of this Court will forward a copy of this order to the secretary in the Ministry of Finance for the matter to be referred to the Central Vigilance Commission for an inquiry as to whether the issuance of the notice was deliberately delayed for extraneous considerations. It is difficult to accept that the results of the tests conducted on the samples drawn in the year 2005 came to be available with the Customs authorities only in the year 2011. 16. Certified website copies of this order, if applied for, be urgently made available to the parties, subject to compliance with all requisite formalities.