Supplementary SCN Although Termed As Supplementary, Is Actually Independent SCN Even Though It Relates To Smuggling: Calcutta High Court

The Calcutta High Court has held that the supplementary show cause notice, although termed the supplementary, is actually an independent show cause notice even though it relates to the case of smuggling.

The bench of Chief Justice T.S. Sivagnanam and Justice Supratim Bhattacharya has observed that no order confiscating any goods or imposing any penalty on any person shall be made under Chapter (XIV) of the Act unless the owner of the goods is given a notice in writing with the prior approval of the officer of the Customs not below the rank of Assistant Commissioner of Customs, informing him of the grounds on which it is proposed to confiscate the goods or impose a penalty. Clauses (b) and (c) would not be relevant for the purpose of this case; equally, the first proviso is also not relevant. The second proviso, which was inserted by Act 13 of 2018 with effect from March 29, 2018, states that notwithstanding the issue of notice under Section 124, the proper officer may issue a supplementary notice under such circumstances and in such manner as may be prescribed.

The respondent/department filed the writ petition challenging the validity of the notice dated May 18, 2017 and the addendum dated September 22, 2017. By order dated March 2, 2022, the department was directed to consider and dispose of the objections given by the respondent. The Commissioner of Customs (Port), the appellant, considered the representation of the respondent and, by order dated January 9, 2023, held that there was no reason to set aside the notice dated May 18, 2017 titled “Supplementary Show Cause Notice." The respondent preferred to appeal before the tribunal. The tribunal held that the supplementary show cause notice is not legally sustainable as it was issued prior to the insertion of the second proviso to Section 124 of the Customs Act, 1962. Challenging the correctness of the order, the department has preferred the present appeal under Section 130.

The department contended that the tribunal ought to have appreciated that the respondent is an officer of the department and was found to have played an active part in the smuggling of 14,790 kilograms of red sand and was suspected of smuggling another 225 metric tons of red sand valued at Rs. 100 crores in connivance with others. Further involvement of the respondent in the smuggling of red sanders came to light only during the course of the investigation of another case by DRI, Kolkata, by which time the show cause notice dated August 26, 2016 had already been issued. Further, it is contended that the notice dated May 18, 2017, though titled “supplementary show cause notice," only implies that it is in connection with the original show cause notice dated August 26, 2016. The power and jurisdiction to issue such notice are inherent in the statute, and the conclusion drawn by the tribunal is wholly erroneous.

The respondent contended that in clause (a) of Section 124, power has been given to issue notice in writing with the prior approval of the officer of customs not below the rank of Assistant Commissioner of Customs, informing the person of the grounds on which it should confiscate the goods for the imposition of penalties, and such power vests with any officer of customs, but the requirement is that before issuance of the notice, approval of the officer of customs not below the rank of Assistant Commissioner of Customs has to be obtained. In the second proviso, it has been stated that the proper officer may issue a supplementary notice under such circumstances and in such manner as may be prescribed. Section 2(34) was referred to, which defines the term “proper officer." The power given under Section 124(a) and the power given in the second proviso are distinct and different.

The court held that the adjudicating authority was correct in rendering the finding in his order dated January 9, 2023 that the supplementary show cause notice, although termed the supplementary, is actually an independent show cause notice even though it relates to the case of smuggling, which is also a subject matter of the first show cause notice dated August 26, 2016.

The court held that the tribunal had committed an error in interfering with the order dated January 9, 2023, passed by the adjudicating authority.

Counsel For Petitioner: K.K. Maiti

Counsel For Respondent: Arijit Chakraborty

Case Title: Commissioner Of Customs (Port), Kolkata Versus M/S. Sandeep Kumar Dikshit

Case No.: CUSTA NO. 12 OF 2023 (I.A G.A NO. 01 OF 2023)

Click Here To Read The Order