the hon’ble mr.justice h.billappa between -...
TRANSCRIPT
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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 11th DAY OF SEPTEMBER, 2013
BEFORE
THE HON’BLE MR.JUSTICE H.BILLAPPA
WRIT PETITION Nos.44217-219/2011 (T)
BETWEEN: 1. Gemini Dyeing & Printing Mills Ltd., No.16-B, Phase – I, Peenya Industrial Area,
Bangalore – 560 058. Rep. by its Managing Director Mr.Gullu.G.Talreja. 2. M/s.R.V.Corporation, V P K No.108, Survey No.21/22/23, T.Dasarahalli,
Bangalore – 57. Rep. by its Partner Mr.Gullu.G.Talreja. 3. M/s.Gemini Fashions (P) Ltd., Now known as M/s.Aryan Garments Pvt. Ltd.,
1E, II Phase, 1st Main Road, Peenya Industrial Area, Bangalore – 560 058. Rep. by its Director Mr.Gullu.G.Talreja. …Petitioners
(By Sri.K.Parameshwaran, Adv.,)
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AND: 1. The Commissioner of Customs, C.R.Building,
No.1, Queens Road, Bangalore – 01. 2. The Revisionary Authority, The Joint Secretary to the Government of India u/s.129DD of the Customs Act, 1962
Ministry of Finance, Department of Revenue, 14, Hudco Vishala Building, B Wing, 6th Floor, Bhikaji Cama Place, New Delhi – 110 066. …Respondents
(By Sri.P.S.Dinesh Kumar, Adv., for R1 & 2) ******
These petitions are filed under Articles 226 and 227 of the Constitution of India praying to set aside and quash the said common order dated 4.7.2011 passed by the second respondent herein under the provisions of 129DD of the
Customs Act, 1962 vide Annexure – A, as vitiated bad in law and unsustainable thereto. These petitions coming on for Dictating Judgment this
day, the Court made the following:-
O R D E R
In these writ petitions under Articles 226 and 227 of the
Constitution of India, the petitioners have called in question,
the common order dated 4.7.2011 bearing No.131-133/11-
CUS passed by the second respondent vide Annexure-A.
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2. By the impugned order at Annexure-A, the second
respondent has confirmed the order-in-Original vide
Annexure-H and the order passed in appeal No.168/2008
vide Annexure-J.
3. Aggrieved by that, the petitioners have filed these
writ petitions.
4. Briefly stated the facts are:
The 1st petitioner is a Company incorporated under the
Companies Act. It is engaged in the activity of independent
processors of textiles falling under Chapters 52, 55, 58 and
60 of the Schedule to the Central Excise Tariff Act, 1985. The
1st petitioner exports products like readymade garments and
claims duty drawback after preparing necessary documents
and complying with all requirements stipulated.
5. The second petitioner is a partnership concern. It
exports readymade garments to various countries from its
factory situated at T.Dasarahalli, Bangalore. It claims duty
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drawback after preparing necessary documents and
complying with all requirements stipulated.
6. The third petitioner is a Private Limited Company
incorporated under the Companies Act, 1956. Presently it is
known as M/s Aryan Garments Private Limited. It is engaged
in the manufacture of readymade garments and exports to
various countries. The third petitioner has been claiming
duty drawback after preparing necessary documents and
complying with all requirements stipulated.
7. A common show cause notice dated 18.7.2001
was issued to the petitioners along with others alleging that
the duty drawback claimed and paid for export of readymade
garments of cotton was irregular/fraudulent. The same was
proposed to be recovered from the 100% EOU of Gemini
Textile Industries. The petitioners were asked to show cause
as to why the penalty should not be imposed u/s 114(iii) of
the Customs Act. Thereafter on 19.9.2001 Corrigendum was
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issued requiring the petitioners to show cause to the
Additional Commissioner of Customs instead of
Commissioner of Customs.
8. The petitioners submitted their reply on
20.12.2001. Thereafter, on 2.5.2002 Addendum to the initial
show cause notice dated 18.7.2001 read with Corrigendum
dated 19.9.2001 was issued altering the basis and scope of
the show cause notice dated 18.7.2001. The petitioners were
required to show cause as to why the duty drawback should
not be recovered as irregular duty drawback was claimed by
suppressing the factual position. There was proposal for
imposition of penalty also.
9. On 5.8.2002 the petitioners submitted their
detailed reply mainly contending that the demands made
would be hit by limitation. Thereafter, personal hearing was
given on 19.2.2008.
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10. On 3.4.2008 common order-in-Original
No.29/2008 ADC was passed by the Additional Commissioner
of Customs vide Annexure-H confirming the demands made
in the show cause notice and imposing penalties. The
petitioners preferred appeals in Appeal Nos.206/08, 207/08,
208/08, 209/08-Cus (B). The Commissioner of Customs
(Appeals), Bangalore, by order dated 31.12.2008 rejected the
appeals confirming the order in Original No.29/2008 dated
3.4.2008.
11. Aggrieved by that, the petitioners preferred
revisions in F.Nos.373/82, 83, 84/DBK/09-RA before the
Government of India. The Revisional Authority by its order
dated 13.7.2011 has rejected the revisions confirming the
order-in-Original and also the order in appeal.
12. Aggrieved by that, the petitioners have filed these
writ petitions.
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13. The learned counsel for the petitioners contended
that the impugned order cannot be sustained in law. He also
submitted that the original show-cause notice was issued on
18.7.2001. In the original show-cause notice, the petitioners
were asked to show-cause as to why penalty should not be
imposed on them. The petitioners were not asked to show-
cause as to why the duty drawback drawn by them should
not be recovered. It is only in the addendum which was
issued on 2.5.2002 the petitioners were asked to show-cause
as to why the drawback amount paid to the petitioners
should not be recovered and penalty should not be imposed.
The addendum was issued on 2.5.2002. The duty drawback
drawn by the petitioners relate to the year 1996-97.
Therefore, the addendum was clearly barred by limitation.
The addendum cannot be read into the original show-cause
notice. It is a fresh demand beyond the period of limitation.
The addendum completely changes the structure of the
original show-cause notice and therefore, barred by
limitation. In the original show-cause notice, the petitioners
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were asked to show-cause as to why penalty should not be
imposed, but in the addendum the petitioners have been
asked to show-cause as to why duty drawback should not be
recovered. It is clearly afterthought and beyond limitation.
Further he also submitted that though limitation is not
prescribed to recover duty drawback, the reasonable time
could not be beyond five years. He also submitted that the
authorities have failed to consider the matter in proper
perspective and the impugned order is devoid of reasons and
therefore, it cannot be sustained in law.
14. Placing reliance on the decision of the Gujarat
High Court reported in 2013 (287) E.L.T. page 290, the
learned counsel for the petitioners submitted that where
statutory provision does not prescribe any period of
limitation, a reasonable period has to be read and what is
reasonable period would depend upon the facts and
circumstances of each case. In the present case, the original
show-cause notice was issued asking the petitioners to show-
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cause as to why penalty should not be imposed. Thereafter,
after the lapse of some time, addendum has been issued
asking the petitioners to show-cause as to why drawbacks
should not be recovered. It is clearly barred by limitation.
Therefore, the authorities were not justified in upholding the
demand made in the show-cause notice. He, therefore,
submitted that the impugned order cannot be sustained in
law.
15. As against this, the learned counsel for the
respondents submitted that the impugned order does not call
for interference. He also submitted that the original show-
cause notice was issued to 16 noticees including the
petitioners also. The petitioners have responded to the show-
cause notice. Further he submitted that the show-cause
notice was not barred by time as no limitation has been
prescribed to recover duty drawbacks. He also submitted
that Section 28 of the Customs Act is not applicable to the
present case. It is only section 75(a) and 75(a)(ii) which is
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applicable to the present case. He also submitted that in the
original show-cause notice all details were given asking the
petitioners to show-cause as to why penalty should not be
imposed. But, there was no mention regarding recovery of
duty drawbacks. Thereafter, addendum has been issued
asking the petitioners to show-cause as to why duty
drawbacks should not be recovered. There is no structural
change. Based on the same facts stated in the original show-
cause notice, the petitioners have been asked to show-cause
as to why duty drawbacks should not be recovered and
penalty should not be imposed. Therefore, it cannot be said
that the show-cause notice or addendum is barred by time.
Further he submitted that the authorities on proper
consideration of the material on record have rightly passed
the orders confirming the demand made in the show-cause
notice. Therefore, the impugned orders do not call for
interference.
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16. Placing reliance on the decision of the Gujarat
High Court reported in 2010 (260) E.L.T. page 61 and also
of this Court reported in 1963 Income Tax Reports page
808, the learned counsel for the respondents submitted that
no limitation is provided for recovery of duty drawbacks in
Customs, Central Excise Duties and Service Tax Drawback
Rules, 1995. When limitation is not provided by the Statute,
the Court cannot prescribe any limitation. For recovery of
drawbacks, no limitation has been prescribed. However, even
assuming that under section 28 of the Customs Act the
limitation prescribed is five years, then also, the show-cause
notice is within time. Therefore, the impugned order does not
call for interference.
17. I have carefully considered the submissions made
by the learned counsel for the parties.
18. The point that arises for my consideration is,
Whether the impugned order calls for interference?
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19. It is relevant to note, show-cause notice dated
18.7.2001 has been issued to M/s.Gemini Textile Industries
along with 15 others including the petitioners herein. The
allegations made in the show cause notice against the
petitioners are at para 22(i) to (vi). They read as follows:
22. Now therefore, M/s.Gemini Textile Industries,
Bangalore are hereby required to show cause
to the Commissioner of Customs,
C.R.Building, PB No.5400, Queen’s Road,
Bangalore – 1 as to why
(i) Licence bearing No.26/96 dated 1.5.96
should not be cancelled in as much as they
have violated the conditions of the provisions
relating to 100% EOU.
(ii) The duty drawback amounting to
`.4,40,455/- in respect of goods valued at
`.21,19,984/-, exported through Bangalore
Air Cargo Complex should not be recovered as
per the provisions of sub section 2 of Section
75A and also the interest on the same as
contemplated under Section 28AA of the
Customs Act 1962 read with Rule 2(d) of
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Customs & Central Excise Duties Drawback
Rules, 1995 as contemplated in Notification
49/96 Customs (NT) dated 1.10.96 in as
much as M/s Gemini Textile Industries have
manufactured the goods in their 100% EOU
premises and had cleared the finished goods
in the name of M/s Gemini Fashions Private
Limited (GFPL) of Gemini group who in turn
had claimed irregular duty draw back by
suppressing the factual positions.
(iii) The duty drawback amounting to `.64,432/-
in respect of goods valued at `.4,29,549/-
exported through Bangalore Air Cargo
Complex should not be recovered as per the
provisions of Sub-section 2 of Section 75A and
also the interest on the same as contemplated
under Section 28AA of the Customs Act, 1962
read with Rule 2(d) of Customs & Central
Exercise Duties Draw Back Rules, 1995 as
contemplated in notification 49/96 Customs
(NT) dated 01.10.96 in as much as
M/s.Gemini Textile Industries have
manufactured the goods in their 100% EOU
premises and had cleared the finished goods
in the name of M/s.R V Corporation (RVC) of
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Gemini group who in turn had claimed
irregular duty drawback by suppressing the
factual positions.
(iv) The duty amounting to `.9,56,981/- in respect
of goods valued at `.45,57,058/- exported
through Bangalore Air Cargo Complex which
has been claimed as drawback amount by
Gemini Fashions Pvt. Ltd. (GFPL) a DTA unit
of Gemini group should not be demanded
under Sub section 2 of Section 75 A of
Customs Act, 1962 read with Rule 2(d) of
Customs and Central Exercise Duties
Drawback Rules, 1995 as contemplated in
notification 49/96 Customs (NT) dated
01.10.1996 in as much as M/s.Gemini Textile
Industries had sent ready made garments for
some specific job work without obtaining
permission from the Customs Department and
the same were not sent back after completion
of job work but were exported in the name of
DTA unit of Gemini Group claiming duty draw
back.
(v) The duty amounting to `.53,618/- in respect
of goods valued at `.2,55,322/- exported
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through Bangalore Air Cargo Complex, which
has been claimed as drawback amount by
M/s.Gemini Dyeing and Printing Mills Ltd.
(GDPM) a DTA unit of Gemini group should not
be demanded under Sub section 2 of Section
75 A of Customs Act, 1962 read with Rule
2(d) of Customs & Central Excise Duties
Drawback Rules, 1995 as contemplated in
notification 49/96 Customs (NT) dated
01.10.1996 in as much as M/s.Gemini Textile
Industries had sent ready made garments for
some specific job work without obtaining
permission from the Customs Department and
the same were not sent back after completion
of job work but were exported in the name of
DTA unit of Gemini group claiming duty draw
back.
(vi) The duty amounting to `.21,625/- in respect
of goods valued at `.1,02,974/- exported
through Bangalore Air Cargo Complex, which
has been claimed as drawback amount by
M/s.R V Corporation (RVC) a DTA unit of
Gemini Group should not be demanded under
Sub section 2 of section 2 of Section 75 A of
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Customs Act, 1962 read with Rule 2(d) of
Customs & Central Excise Duties, Drawback
Rules, 1995 as contemplated in notification
49/96 Customs (NT) dated 1.10.1996 in as
much as M/s.Gemini Textile Industries had
sent ready made garments for some specific
job work with out obtaining permission from
the Customs Department and the same were
not sent back after completion of job work but
were exported in the name of DTA unit of
Gemini group claiming duty draw back.
20. In para 23, the petitioners were called upon to
show-cause as to why penalty should not be imposed on them
under section 114(iii) of the Customs Act, 1962. It reads as
follows:
23. M/s.Gemini Fashions Pvt.Ltd., (GFPL) 1
– E, Peenya Industrial Area, Phase –II, 1st Main
Road, Bangalore 58, M/s.Gemini Fashions, Plot
No.6, Abbigere Main Road, Kammagondanahally,
Bangalore – 15, M/s.Gemini Dyeing and Printing
Mills Ltd., 16-B, Peenya Industrial Area, 1st Phase,
Bangalore – 58, M/s.Fashion Today, 600/27, 7th
Main, K N Extension, Yeshwanthpur, Bangalore 22,
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M/s.Time Textile Industry, Shed No.198-A, 4th
Cross, Peenya Industrial Estate, Bangalore -57 and
M/s.R V Corporation, VPK No.108, Survey
No.21/22/23, Dasarahalli, Bangalore – 57 are all
required to show cause to the Commissioner of
Customs, C.R.Building, PB No.5400, Queen’s Road,
Bangalore – 1, as to why penalty should not be
imposed on them under Section 114 (iii) of the
Customs Act 1962 in as much as they have
received and sent raw materials as well as finished
goods from M/s.Gemini Textile Industries and
claimed undue benefit of duty drawback in
respect of goods manufactured by M/s.Gemini
Textile Industries, thereby contravening the
provisions of Customs Act 1962 read with
provisions (iii) to Rule 3(i) of the Customs and
Central Excise Drawback Rules, 1995.
21. By addendum dated 2.5.2002, changes have been
made to the original show-cause notice. The relevant paras
read as follows:
3. In para 20 page 17 of the show cause
notice in the 40th line after the words Section 28 AA
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of the Customs Act, 1962 the following be
incorporated.
“However, duty is demanded only in respect
of claims made through Bangalore Air Cargo
Complex.”
4. Para 22 (i) to (ix) in pages 18, 19 and 20
may be deleted and the following be substituted.
Para 22. Now therefore, M/s.Gemini Textile
Induatries, Bangalore and hereby required to show
cause to the Additional Commissioner of Customs,
C.R.Building, P.B.No.5400, Queens Road,
Bangalore – 1, as to why;
(i) License bearing No.26/96 dtd. 1.5.96 should
not be cancelled in as much as they have
violated the conditions of the provisions
relating to 100 EOUs.
(ii) Duty amounting to `.3,04,788/- on the raw
materials valued at `.4,29,652/- should not
be recovered under Section 72 of Customs
Act, 1962 in as much as M/s.Gemini Textile
Industries had removed duty free raw
materials under their own private Delivery
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challans to various other DTA units and also
had not received back the said duty free
materials and no permission was obtained
from the Customs Department thereby
M/s.Gemini Textiles Industries have violated
the provisions of Sub Section 4b of Section 72
of Customs Act, 1962.
(iii) The 1329 nos of readymade garments valued
at `.1,32,900/- found in the premises on the
day of visit of officers of Customs belonging to
M/s.Alka International, Bangalore should not
be confiscated as per the provisions of Section
11 (o) of the Customs Act, 1962.
(iv) Penalty should not be imposed on them under
Section 114(ii) of the Customs Act, 1962 in as
much as M/s.Gemini Textiles Industries has
utilized the infrastructure for the
manufacture of goods in their 100% EOU
premises and removed the said raw materials
as well as finished goods to the DTA units of
Gemini Group who in turn have exported and
claimed undue drawback benefit thereby
contravening the provisions of Section 72 read
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with proviso (ii) of Rule 3(1) of Customs and
Central Excise Duties Drawback Rules, 1995.
Para 23. M/s.Gemin Fashions Pvt. Ltd., (GFPL)
IE, Peenya Industrial Area, Phase – II, 1st Main
Road, Bangalore, are hereby required to show
cause to the Additional Commissioner of Customs,
C.R.Buildings, P.B.No.5400, Queen’s Road,
Bangalore – 1, as to why
(i) The duty drawback amounting to
`.4,40,455/- in respect of goods valued at
`.21,19,984/- exported through Bangalore Air
Cargo Complex should not be recovered as
per the provisions of Sub Section 2 of Section
75 A and also the interest on the same as
contemplated under Section 28 AA of the
Customs Act, 1962 read with Rule 16 of the
Customs Act and Central Excise Duties
Drawback Rules, 19555 as contemplated in
para 2(d) of the Notification 49/96 Cus (NT)
dated 1.10.1996 in as much as M/s. Gemini
Textile Industries have manufactured the
goods in their 100% EOUs premises and had
cleared the finished goods in the name of
M/s.Gemini Fashion (P) Ltd., (GFPL) of Gemini
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Group who in turn had claimed irregular duty
drawback by suppressing the factual
position.
(ii) The duty amounting to `.9,56,981/- in respect
of goods valued at `.45,57,058/- exported
through Bangalore Air Cargo Complex which
has been claimed as drawback amount by
M/s.Gemini Fashions Pvt. Ltd., (GFPL), a DTA
unit of Gemini Group should not be demanded
under sub section 2 of Section 75 A of
Customs Act, 1962, read with Rule 16 of the
Customs and Central Excise Duties Drawback
Rules, 1995 as contemplated in para 2(d) of
Notification 49/96 Cus(NT) dated 1.10.1996
in as much as M/s.Gemini Textile Industries
had sent ready made garments for some
specific job work without obtaining
permission from the Customs Department and
the same were not sent back after completion
of job work but exported in the name of DTA
unit of Gemini Group claiming duty
drawback.
(iii) Why penalty should not be imposed on them
under section 114(iii) of Customs Act, 1962, in
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as much as they had received and sent raw
materials as well as finished goods from
M/s.Gemini Textile Industries and claimed
undue benefit of duty drawback in respect of
goods manufactures by M/s.Gemini Textile
Industries, thereby contravening the
provisions of Section 75 of the Customs
Act,1962 read with Rule 16 of the Customs
Act and Central Excise Duties Drawback
Rules, 1995.
Para 24. M/s.R.V.Corporation, VPK No.108,
Survey No.21/22/23, Dasarahalli, Bangalore -57 is
hereby required to show cause to the Additional
Commissioner of Customs, Bangalore, as to:
(i) Why the duty drawback amounting to
`.64,432/- in respect of goods valued at
`.4,29,549/- exported through Bangalore
Air Cargo Complex should not be recovered as
per the provisions of sub section 2 of Section
75 A and also the interest on the same as
contemplated under Section 28AA of the
Customs Act, 1962, read with Rule 16 of the
Customs and Central Excise Duties Drawback
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Rules, 1995 as contemplated in para 2(d) of
the Notification 49/96 Cus (NT) dated
1.10.1996, in as much as M/s.Gemini Textile
Industries have manufactured the goods in
the name of M/s.R V Corporation (RVC) of
Gemini Group who in turn have claimed
irregular duty drawback suppressing the
factual position.
(ii) Why the duty amounting to `.21,625/- in
respect of goods valued at `.1,02,974/-,
exported through Bangalore Air Cargo
Complex, which has been claimed as
drawback amount by M/s.R V Corporation
(RVC) a DTA unit of Gemini Group should not
be demanded under sub section 2 of Section
75A of the Customs Act, 1962 readwith Rule
16 of the Customs and C.Excise Duties
Drawback Rules 1995 as contemplated in
para 2(d) of the Notification 49/96 Cus (NT)
dated 1.10.1996 in as much as M/s.Gemini
Textile Industries had sent ready made
garments for some specific job work without
obtaining permission from the Customs
Department and the same were not sent back
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after completion of job work but were
exported in the name of DTA unit of Gemini
Group claiming duty drawback.
(iii) Why penalty should not be imposed on them
under section 114(iii) of Customs Act, 1962, in
as much as they had received and sent raw
materials as well as finished goods from
M/s.Gemini Textile Industries and claimed
undue benefit of duty drawback in respect of
goods manufactures by M/s.Gemini Textile
Industries, thereby contravening the
provisions of Section 75 of the Customs
Act,1962 read with Rule 16 of the Customs
Act and Central Excise Duties Drawback
Rules, 1995.
Para 25. M/s.Gemini Dyeing and Printing
Mills Ltd., 16B, Peenya Industrial Area, 1st Phase,
Bangalore – 58 is hereby called upon to show
cause to the Additional Commissioner of Customs,
C.R.Buildings, Queen’s Road, P.B.No.5400,
Bangalore, as to why;
(i) the duty amounting to `.53,618/-, in respect
of goods valued at 2,55,322/- exported
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through Bangalore Air Cargo Complex which
has been claimed as drawback amount
M/s.Gemini Dyeing and Printing Mills Ltd.,
(GDPM) a DTA unit of Gemini group should not
be demanded under Sub section 2 of Section
75A of the Customs Act, 1962 read with Rule
16 of Customs and C.Excise Duties Drawback
Rules, 1995,as contemplated in Notfn.
No.49/96 Customs (NT) dated 1.10.1996 in
as much M/s.Gemini Textile Industries had
sent readymade garments for some specific
job work without obtaining permission from
the Customs Department and the same were
not sent back after completion of job work but
were exported in the name of DTA unit of
Gemini Group claiming duty drawback.
(ii) Why penalty should not be imposed on them
under Section 114 (iii) of the Customs Act,
1962 in as much as they have received and
sent raw materials as well as finished goods
from M/s.Gemini Textile Industries and
claimed undue benefit of duty drawback in
respect of goods manufactured by
M/s.Gemini Textiles Industries, thereby
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contravening the provisions of Section 75 of
the Customs Act, 1962 read with Rule 16 of
the Customs and C.Excise Duties Drawback
Rules, 1995.
22. The learned counsel for the petitioners contended
that the addendum completely changes the structure of the
original show cause notice and it is barred by limitation.
Placing reliance on the decision of the Gujarat High Court
reported in 2013 (287) E.L.T. page 290, the learned counsel
for the petitioners submitted that in the absence of any
provision with regard to specific period of limitation, a
reasonable period of limitation has to be read into the Rule.
In the present case, though there is no limitation prescribed
for recovery of drawbacks, keeping in view section 28 of the
Customs Act, a reasonable period cannot be beyond five
years. The addendum issued is beyond five years and
therefore, barred by limitation.
23. The learned counsel for the respondents
submitted that when the Statute does not fix any period of
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limitation, the Courts cannot prescribe any period of
limitation. He placed reliance on the decisions reported in
2010 (260) E.L.T. page 61 and 1963 Income Tax Reports
page 808.
24. In PRATIBHA SYNTEX LTD. vs. UNION OF
INDIA reported in 2013 (287) E.L.T. page 290, the Gujarat
High Court has observed as follows:
20. In Collector of Central Excise, Jaipur
v.M/s.Raghuvar (India) Pvt. (supra), the Supreme
Court held that any law or stipulation prescribing a
period of limitation to do or not to do a thing after
the expiry of period so stipulated has the
consequence of creation and destruction of rights
and, therefore, must be specifically enacted and
prescribed therefor. It is not for the courts to
import any specific period of limitation by
implication, where there is really none, though
courts may always hold when any such exercise of
power had the effect of disturbing rights of a citizen
that it should be exercised within a reasonable
period.
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21. In Torrent Laboratories Pvt. Ltd. v.
Union of India (supra), a Division Bench of this
Court in the context of Rule 57-1 of the Central
Excise Rules, 1944 held that in absence of any
provision with regard to specific period of limitation,
reasonable period of limitation has to be read into
the rule.
22. Thus, it is a settled legal proposition
that where a statutory provision does not prescribe
any period of limitation for exercise of power
thereunder, a reasonable period has to be read
therein. As to what is a reasonable period would
depend upon the facts of each case.
23. Examining the facts of the present cases
in the light of the aforesaid legal position, in all
these cases, drawback had been paid to the
petitioners between December 1995 and August
1996. Thereafter, despite a clarification having
been issued as regards the interpretation of
condition (c) of the Note under SS No.5404(1)(i) of
the Drawback Schedule, no action was taken by
the concerned authorities at the relevant time. It is
only after a period of more than three years that
show cause notices came to be issued to the
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petitioners seeking to recover the differential
amount of drawback erroneously paid to them.
Judging the period of delay from the armchair of a
reasonable man, under no circumstances can the
period of more than three years be termed to be a
reasonable period for recovery of the amount
erroneously paid. As held by the Supreme Court in
the case of Collector of Central Excise, Jaipur v.
M/s.Raghuvar (India) Ltd. (supra), where no period
of limitation is prescribed, the courts may always
hold that any such exercise of powers which has
the effect of disturbing the rights of citizen should
be exercised within a reasonable period of time. In
the present case, the drawback had been paid
more than three years prior to the issuance of the
show cause notices, and despite the fact that
clarification in respect of condition (c) of the Note
under SS No.5404 (1)(i) of the Schedule had been
issued way back in the year 1996, no efforts were
made to recover the drawback paid to the
petitioners at the relevant time. Thus, the
petitioners were entitled to form a belief that the
matter has attained finality and arrange their
finances accordingly. Now, when after a period of
more than three years has elapsed, if the
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respondents seek to recover the amount of
drawback paid, it cannot be gainsaid that such
exercise of powers would have the effect of
disturbing their rights. Under the circumstances,
reading in the concept of reasonable period in Rule
16 of the Rules, this Court is of the view that the
show cause notices in question were clearly time-
barred.
24. Insofar as the decision of this court in
the case of Dadri Inorganics Pvt. Ltd. v.
Commissioner of Customs (supra) on which reliance
has been placed by the learned counsel for the
respondents is concerned, a perusal of the said
decision indicates that the said case fell within the
ambit of willful misstatement or suppression of fact
as envisaged under the proviso to Section 28 of the
Customs Act. It is, therefore, in the light of the
peculiar facts of the said case that the court had
held that the contention that the extended period of
limitation could not be invoked was misconceived.
The decision cannot be said to be laying down any
absolute proposition of law to the effect that since
Rule 16 of the Drawback Rules does not provide for
any limitation for recovery of amount of drawback
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erroneously paid, such powers can be exercised at
any point of time, even beyond a reasonable period.
25. In DADRI INORGANICS Pvt. Ltd. vs.
COMMISSIONER OF CUSTOMS reported in 2010 (260)
E.L.T. page 61, the Gujarat High Court has observed as
follows:
11. Another contention advanced on behalf
of the appellant is that in the light of the provisions
of Section 28 of the Customs Act, the extended
period of limitation could not have been invoked.
However, the said contention does not merit
acceptance, inasmuch as a perusal of the Customs,
Central Excise Duties and Service Tax Drawback,
Rules, 1995 (‘the Drawback Rules”) which have
been framed in exercise of the powers conferred
under Section 75 of the Act, it is apparent that the
provisions regarding drawback are self-contained
provisions. The Drawback Rules nowhere provide
for any limitation for recovering any amount of
drawback erroneously paid. In the circumstances,
the contention that the extended period of limitation
could not have been invoked is misconceived.
Even otherwise, in light of the fact that the
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appellant had claimed drawback on the excise duty
component without there being any supporting
manufacture, the claim would squarely fall within
the ambit of willful misstatement or suppression of
fact as envisaged under the proviso to Section 28 of
the Act. Hence, even if the provisions of Section 28
were applicable, the extended period of limitation
could have been validly invoked.
26. The Division Bench of this Court in N.SUBBA RAO
vs. THIRD INCOME-TAX OFFICER, CITY CIRCLE II,
BANGALORE reported in 1963 INCOME TAX REPORTS
page 808, has observed as follows:
We may now proceed to consider the second
contention of Sri.Srinivasan. He strenuously urged
that a notice of demand issued four years after the
assessment was made is clearly illegal. Section 29
does not prescribe any period of limitation for
issuing a notice. Wherever the legislature thought it
necessary, it has prescribed periods of limitation in
the Act. No support for the contention of
Sri.Srinivasan can be gathered from the language
of section 29. But he bases his contention on some
decided cases which have taken the view that a
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notice of demand under section 29 should be
issued within a reasonable time. The first decision
cited is the one decided by the Patna High Court, In
the matter of Narayan Bhanja Deo. Delivering the
judgment of the court, Dawson-Miller, Chief Justice,
repelled the contention of the learned counsel
appearing for the assessee that a notice of demand
should be issued in the year of assessment. This is
what the learned Chief Justice observed:
“I cannot believe, however, that it was
intended by prescribing a form of notice of this sort
to create a limitation period within which such
notice must be given. If it had been the intention of
the legislature to prescribe a period of limitation for
such notices I think that such an important
provision would have found place in the body of the
Act itself indicating that intention. In other sections
of the Act we do find that where certain notices
have to be given the period within which they have
to be given is prescribed. But so far as section 29
is concerned no period at all is prescribed in the
Act. Again it is quite possible that in certain cases
no demand could be made within the actual year
for which the tax is payable. Provision is made for
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disputes which may arise as to the acceptance or
rejection of the assessee’s return. If his return is
not accepted then an enquiry takes place, evidence
may be demanded of him and much time may be
expended in carrying on the enquiry, and it is quite
possible that such enquiry would not terminate
until after the year of assessment and I do not
think it can be suggested that because the ordinary
form prescribed for such a demand contemplates
that it will be issued during the current year of
assessment, it is tantamount to an enactment that
it cannot be issued afterwards. If any part of the
form should be applicable to the particular facts of
the case then I presume it can be altered in the
ordinary course before the form is sent out, but the
mere fact that forms are prescribed under the Act
does not seem to me to carry with it the result that
unless everything is done exactly as provided by
the form it is of no force and effect.”
The above observations are undoubtedly of no
assistance to Sri.Srinivasan’s client. On the other
hand, they repel the contention advanced by
Sri.Srinivasan. But Sri.Srinivasan wants us to
reply on the further observation:
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“Although no time is prescribed for issuing the
notice in question I suppose it may be said that
such a notice must be issued within a reasonable
time. What would be a reasonable time might vary
according to circumstances.”
This observation of the learned Chief Justice
is clearly obiter. If the legislature did not choose to
prescribe any period of limitation, we very much
doubt whether the court could step in and prescribe
its own period of limitation by bringing in the ides
of “reasonable time.” It would not be correct to
assume that every claim, to be valid, must be made
within some period and that is no period of
limitation is prescribed by the statute, then it
should be done within a reasonable time. Unless a
period of limitation is prescribed, the courts are not
justified in prescribing any period in the nature of
limitation. We do not think that the observation of
the learned Chief Justice can be taken advantage
of for contending that the period taken in the
instant case is an unreasonable period. If the
decision above referred to had stood by itself
Sri.Srinivasan’s contentions would have been
extremely weak. But fortunately for him a Bench of
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the Single Judicial Commissioner’s Court in Firm
Khemchand Ramdas v. Commissioner of Income
Tax held that the form of notice of demand under
section 29, Income Tax Act, 1922, provided by the
Income-Tax Rules shows a simultaneous demand
both for income-tax and super-tax; that in order to
be valid a demand for super-tax should be made
within a reasonable time of the assessment for
income tax. The Bench further held that two years
and four months or thereabouts was a wholly
unreasonable time. For this proposition they placed
reliance on the decision in Rajendra Narayan’s
case which we have already considered. With
respect, we dissent from the view expressed in he
above case as in our view that decision does not
lay down the law correctly. When that case,
Khemchand’s case, was taken up in appeal to the
Judicial Committee, the Judicial Committee
observed in Commissioner of Income tax v.
Khemchand, Ramdas thus:
“Aston, A.J.C., considered that the demand
for super-tax should be made within a reasonable
time of the assessment for income-tax, meaning no-
doubt, by assessment the service of the notice of
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demand for income-tax which normally completes
the assessment. Rupchand Bilaram, A.J.C., was of
opinion, that the demand for super-tax should be
made within a reasonable time, and therefore,
almost simultaneously with the demand for income-
tax. Both of them held for this reason (amongst
others) that the service of the notice of demand of
May 4, 1929, was illegal and inoperative to impose
liability upon the respondents. Their Lordships do
not find it necessary to express any opinion upon
this point inasmuch as in their view and for the
reasons which they will now proceed to give it does
not call for determination in the present case.”
Even if we had agreed with the contention
that a notice under section 29 should be issued
within a reasonable time, we are of the opinion that
in the circumstances of this case the notice issued
to the assessee petitioner was within a reasonable
time.
27. From the above decisions, it is clear, if the
limitation is not prescribed by the Statute, the Court cannot
prescribe any limitation. However, in the facts and
circumstances of each case, the Court can consider whether
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the exercise of power had the effect of disturbing rights of a
citizen.
28. In the present case, the show-cause notice has
been issued to the petitioners along with others on 18.7.2001.
In the show-cause notice all facts have been mentioned. The
petitioners have been called upon to show-cause as to why
penalty should not be imposed on them under section 114(iii)
of the Customs Act, 1962. In the original show-cause notice,
the petitioners were not asked to show-cause as to why the
duty drawbacks should not be recovered. However, in the
addendum dated 2.5.2002, the petitioners have been asked to
show-cause as to why the duty drawbacks drawn by them
should not be recovered. A careful reading of the addendum
shows that the changes to the original show cause notice do
not structurally alter the show cause notice. Whatever is
alleged in the show-cause notice is virtually repeated in the
addendum except calling upon the petitioners to show-cause
as to why the duty drawbacks should not be recovered.
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Therefore, it cannot be said that the addendum structurally
alters the nature of the show-cause notice and it is barred by
limitation. In fact no limitation has been prescribed for
recovery of duty drawbacks. Therefore, I do not find any
merit in the contention that the addendum structurally alters
the nature of show cause notice and it amounts to fresh
show-cause notice. When Statute does not prescribe any
limitation, the court cannot prescribe it. However, depending
upon the facts and circumstances of each case court can
consider whether the exercise of power has the effect of
disturbing the rights of a citizen.
29. In the present case, though there is some delay in
issuing addendum, the facts stated in the addendum are
substantially the same as stated in the original show-cause
notice. Therefore, it does not structurally alter the nature of
the original show-cause notice. Therefore, it cannot be said,
the addendum amounts to fresh show cause notice and it is
barred by limitation. Accordingly, it is rejected. The
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authorities considering the material on record and assigning
reasons have confirmed the demand made in the show-cause
notice and called upon the petitioners to pay duty drawbacks
and also the penalty. The impugned order as well as the
order passed by the original authority and also the appellate
authority do not call for interference. There is no merit in
these writ petitions and therefore, they are liable to be
dismissed.
Accordingly, the writ petitions are dismissed.
Sd/- JUDGE Dvr/Bss.