Karnataka HC Refuses Relief To Apple India In Show Cause Notice Issued By Customs Department [Read Order]

Karnataka High Court has rejected a petition filed by M/s Apple India Private Limited, seeking to quash a show cause notice, issued by the Additonal Commissioner of Customs, alleging the company of short paying customs duty on goods imported.

The company was issued the notice on June 27, 2017, calling upon them to explain why the goods imported as warranty replacement goods but a small portion of them subsequently sold for out of warranty valued at Rs.8,65,68,087, should not be confiscated under Section 111[m] of the Customs Act, 1962.

The differential duty of Rs.9,70,981, should not be demanded and recovered from them under the provisions of Section 28[4] of the Customs Act, 1962.

Interest under Section 28AA of the Customs Act, 1961 should not be levied and demanded from them. Penalty under Section 112 and 114A of the Customs Act, 1962 should not be imposed on them.

Senior advocate S.S.Naganand, representing the company submitted that the impugned show cause notice suffers from the vice of arbitrariness and lacks jurisdiction. The executive order dated February 27, 2013, states that all the goods under the 'Apple Care' umbrella of services were to be assessed to customs duty under the RSP Valuation. It was argued that the impugned show cause notice is in complete contradiction to the circular dated 10.03.2017 issued by the Central Board of Excise and Custom.

Advocate Jeevan J Neeralagi and Advocate K M Shivayogiswamy A, appearing for the Union of India and Customs Department, argued "The writ petition is not maintainable before this court by-passing the efficacious alternative remedy provided under the Act. It was submitted that to meet the principles of natural justice, personal hearing was fixed on January 30.2018 and the same has been adjourned at the request of the petitioner from time to time.

Further it was argued that only during the queries raised the petitioner admitted the fact that in very small percentage of cases, if the damage is not covered under warranty, they support the customer with a replacement item for exchange price. The company sells their products which is not covered under warranty. These material facts were placed before the original Authority vide their letter 20.6.2017.

Till, June 19, 2017, in all the correspondence with the department, the company has stated that apple care products, have been imported for warranty replacements. The said fact was suppressed by the petitioner with an intent to evade payment of differential duty arising out of such sale and hence the department invoking the extended period has issued the show cause notice.

The court said "On the examination of the show cause notice impugned it cannot be held that such ingredients are not present. In such circumstances, the show cause notice issued to submit a written explanation cannot be held to be ill founded. Writ petition is premature and deserves to be rejected.

The company informed the court that by a notice issued on October 14, 2019 calling upon the petitioner for personal hearing. The court said "The petitioner is at liberty to put forth the reply/explanation before the respondent No.2.

The respondent No.2 shall consider the submissions/reply of the petitioner and shall take a decision in accordance with law without being influenced by any of the observations made hereinabove, after providing reasonable opportunity of hearing to the petitioner." 

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