Preventing Docket Explosion - Pre-SCN Consultation Should Be Held : Delhi High Court

The Delhi High Court has held that it is obligatory on the part of the concerned officer to ensure that prior to the issuance of the show-cause notice (SCN), a pre-notice consultation is held with the person chargeable with customs duty or interest.

The division bench of Justice Rajiv Shakdher and Justice Tara Vitasta Ganju has observed that the person chargeable with duty or interest was required to be given fifteen days to make his submission, in writing, concerning the grounds communicated to him in the pre-consultation notice, which is required to be served prior to the issuance of the SCN.

The court said that the importance of pre-show cause notice consultation is exemplified in the provisions of sub-regulation (4) of Regulation 3. It is quite possible that, after consultation, the concerned authority may decide to drop the proceedings if it is satisfied with the explanation it received during the process.

The court opined that the pre-show cause notice consultation, as provided, both in the 1962 Act as well as the 2018 Regulations, is necessary, as the object of having such provisions is to stem the tide of litigation between the revenue and assessee.

"With the docket explosion that Courts are experiencing, this is a wholesome provision, which the revenue needs to scrupulously adhere to," the court said.

The petitioner challenged the order passed on the basis of the show cause notice, which was untenable in law. The petitioner contended that the SCN could only have been issued after pre-show cause notice consultation had occurred, as contemplated in the proviso appended to Section 28(1) (a) of the Customs Act, 1962.

The department contended that an exchange of communication between the respondent/department and the petitioner would suffice. Broadly, it would substantially take care of the safeguards incorporated in the proviso appended to Section 28(1)(a) of the Customs Act, 1962 and Regulation 3(2) of the Pre-Notice Consultation Regulations, 2018.

The court held that the SCN was issued prior to the expiry of the statutory timeframe. There has been a violation of not only the safeguard provided in the proviso appended to Section 28(1)(a) requiring a pre-notice consultation with the person chargeable with tax and interest.

The court set aside the order passed on the basis of the show cause notice, which was untenable in law.

Case Title: M/s Victory Electric Vehicles International Pvt. Ltd. Versus Union of India

Citation: 2022 LiveLaw (Del) 950

Date: 20.9.2022

Counsel For Petitioner: Advocate S. Sunil

Counsel For Respondent: Advocate Nidhi Raman

Click Here To Read Order