Addition unsustainable as SCN issued by DRI lacks jurisdiction

ITO Vs Sonal Jain (ITAT Jaipur)

ITAT Jaipur held that officers of DRI are not proper officers for the purposes of Section 28 of Customs Act, 1962 and hence order and show cause notice are not maintainable. Accordingly, addition confirmed thereon is unsustainable.

Facts- The AO received information from DRI that assessee imported paper cup machines from China and evaded custom duty by undervaluation of these machines by 50% of actual transaction value before the Indian Customs. These were sold in domestic market by undervaluing them and balance amount was collected in cash from domestic customers. The AO provided the information as received from DRI to the assessee and issued a Show cause notice which was replied by the assessee to the AO. The DRI informed the AO that adjudicating authority had confirmed demand against the assessee and imposed penalty. Thus the AO held that assessee imported paper cup machines from China by undervaluing them and balance amount was paid by Hawala and thus the assessee sold machines to domestic customers by undervaluing them and the balance amount was taken in cash from the domestic customers. According to the AO, the assessee imported 298 paper cup machines in Four A.Ys i.e. 2013-14 to 2016-17 but the assessee claimed that it had imported 366 paper cup machines during this period as per its books of accounts. The assessee declared sale of 12 paper cup machines during the year under consideration. Thus the AO calculated the undervalued purchase of 12 machines at Rs.7,65,602/- and made addition as undisclosed income in the hands of the assessee for the year under consideration. To this effect, the assessee filed further appeal before CESTAT who decided the appeal vide order dated 08-02-2012 in favour of the assessee.

Being aggrieved, revenue has preferred the present appeal.

Conclusion- CESTAT held that We find that Learned Counsel for the appellant have relied upon the Apex Court judgment in the case of Canon India and other High Court decisions and this Tribunal, holding that officers of DRI are not proper officers for the purposes of Section 28 of Customs Act, 1962 and hence show cause notice issued, lacks jurisdiction, and, on this ground, the impugned order requires to be set aside. As per our discussion above, we find that the show cause notice and the OIO are not maintainable and that the OIO is liable to be set aside, we are of the considered opinion that we need not deliberate on the issue of Jurisdiction and the same can be kept open. Hence, the CESTAT concluded in its order that impugned order and show cause notice are not maintainable on merits and thus liable to be set aside. Hence, the appeals of the assessee were allowed.

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