No Penalty via SCN issued by DRI as DRI have no jurisdiction to issue SCN

M/s. Sattva CFS and Logistics Private Limited vs.  Commissioner of Customs (CESTAT Chennai)

In M/s. Sattva CFS & Logistics Private Limited v. The Commissioner of Customs [Customs Appeal No. 40298 of 2021, decided on July 15, 2021] M/s. Sattva CFS & Logistics Private Limited (“the Appellant”) contended that the Directorate of Revenue Intelligence (DRI) had issued Show Cause Notice (SCN) on the allegations of seizure of Red Sanders to the levy of penalty under Section 114 of the Customs Act, 1962 (the Customs Act).

The Adjudicating Authority (“AA”) had refrained from imposing penalty on the Appellant. The Commissioner of Customs (“the Respondent”) being aggrieved, filed appeal.

The Appellate Authority without considering the pleadings of the Respondent and without finding any fault with the findings of the AA, ordered de novo adjudication.

The Hon’ble CESTAT, Chennai relied on the judgement passed by the Hon’ble Supreme Court in case of M/s. Canon India Private Limited v. Commissioner of Customs [Civil Appeal No. 1827 of 2018 & 3 ors. dated March 09, 2021] and held that the penalty can’t be levied, since the SCN issued by the DRI is invalid.

Further, stated that there is no jurisdiction with the DRI to issue SCN in question and consequently, the whole proceeding is ab initio void. Thus, penalty cannot sustain.

FULL TEXT OF THE CESTAT CHENNAI ORDER

The assessee-appellant has filed this appeal assailing the findings of the Commissioner of Customs (Appeals-II), Chennai, in the impugned Order-in-Appeal Seaport C.Cus.II No. 160/2021 dated 30.03.2021 whereby, the First Appellate Authority has allowed the appeal of the Revenue by way of remand to the file of the Adjudicating Authority.

2.1 Ms. A. Aruna, Learned Advocate appearing for the assessee-appellant, seriously contended, inter alia, that the Directorate of Revenue Intelligence (DRI) had issued a Show Cause Notice dated 08.11.2018 on the allegations of seizure of Red Sanders on seven noticees while the proposal against the appellant herein was as to the levy of penalty under Section 114 of the Customs Act, 1962; that vide Order-in-Original No. 68825/2019 dated 29.04.2019, the Adjudicating Authority, being satisfied, had refrained from imposing penalty on the appellant herein; that the Revenue being aggrieved, had preferred the first appeal; that the First Appellate Authority vide impugned order had, without considering the pleadings of the assesse-respondent therein and without finding any fault with the findings of the Adjudicating Authority, ordered de novo adjudication, etc.

2.2 She would also rely on various decisions to support her contention that no penalty under the Customs Act could be imposed for any violation by a Customs House Agent or Customs Broker under the respective regulations.

3. Per contra, Shri M. Jagan Babu, Learned Departmental Representative, supported the findings of the First Appellate Authority to contend that it was an order for de novo adjudication and hence, prayed for retention of the impugned order.

4.1 Having heard the rival contentions and after going through the documents placed on record, the Show Cause Notice in particular, I am of the view that the penalty levied is invalid, since the Notice issued by the DRI is held to be invalid, by the Hon’ble Supreme Court in the case of M/s. Canon India Private Limited v. Commissioner of Customs in Civil Appeal No. 1827 of 2018 & 3 ors. dated 09.03.2021. The Hon’ble Court, after a threadbare analysis of the relevant Sections of the Customs Act and also the Notifications, had held as under:

“23. We, therefore, hold that the entire proceeding in the present case initiated by the Additional Director General of the DRI by issuing show cause notices in all the matters before us are invalid without any authority of law and liable to be set-aside and the ensuing demands are also set- aside.”

4.2 The Board had thereafter issued an Instruction No. 04/2021-Customs dated 17.03.2021 in F.No.450/72/2021-Cus-IV stating that the said instruction is issued specifically in respect of the Show Cause Notice against Shri Anil Aggarwal and 11 others and, in any case, the Instruction cannot override the decision of a three Judge Bench of the Apex Court, which is binding as the law of the land. Clearly therefore, there was no jurisdiction with the DRI to issue the Show Cause Notice in question and consequently, the whole proceedings become ab initio void.

5. In view of the above, no demand, much less any penalty, can sustain.

6. Accordingly, the impugned order is set aside and the appeal is allowed with consequential benefits, if any, as per law.

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