By TIOL News Service

HYDERABAD, JULY 08, 2014: THE issue involves demand of customs duty (Rs.5,75,65,331/-) along with interest under Section 28AB of the Customs Act, 1962 and Central Excise duty (Rs.1,28,26,974/-) along with interest under Section 11AB of the Central Excise Act, 1944 in terms of the bond executed before the Assistant Commissioner of Customs and Central Excise, Hyderabad-A Division, in fulfillment of the conditions laid down for duty free import under an exemption notification within seven days of receipt of the demand notice.

The Petitioner stated that the impugned notice has been issued quantifying the amount of demand in violation of the principles of natural justice, as no show cause notice intending to afford, opportunity of being heard was issued before adjudication of the aforesaid amount allegedly due and payable.

The respondent department submitted if Section 28 of the Customs Act is read , it would appear that the dispute in this matter is not covered thereunder . Thus, it is legally permissible for the respondent to issue demand notice straight way. In any event, post decisional hearing has been given to the petitioner. Hence, there cannot be any grievance with regard to the alleged violation of principles of natural justice. Revenue relied on the decision of the Supreme Court in the case of Commissioner of Customs, New Delhi vs. C.T. Scan Research Centre (P) Ltd. 2003-TIOL-04-SC-CUS on the point that issuance of show cause notice is not a mandatory requirement for raising demand.

After hearing both sides, the High Court held:

From the facts of this case it appears that the petitioner was otherwise liable to pay the duty, but for the exemption notification. It follows logically that duty is leviable in absence of exemption. Naturally, show cause notice is a must before adjudication of the quantity of the duty sought to be levied followed by demand. Clause (a) of sub-section (1) of Section 28 is a mandatory in character and it is well settled that in the regime of interpretation of statute the mandate of fiscal law has to be strictly construed. Accordingly, this has to be complied with.

The entire adjudication and consequent demand notice are absurd and in breach of principles of natural justice. More so, they are noncompliant with the mandatory provision of the aforesaid Section. We therefore set aside the impugned demand and direct the adjudicating authority to decide the issue with an independent mind, without being influenced by the earlier decision.

(See 2014-TIOL-1075-HC-AP-CUS)