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- 1 - 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:
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.
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.
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.,)
- 2 - AND:
The Commissioner of Customs,
C.R.Building,
No.1, Queens Road,
Bangalore – 01.
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.
- 3 - 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.
Aggrieved by that, the petitioners have filed these writ petitions.
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.
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
- 4 - drawback after preparing necessary documents and complying with all requirements stipulated.
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.
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
- 5 - issued requiring the petitioners to show cause to the Additional Commissioner of Customs instead of Commissioner of Customs.
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.
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.
- 6 - 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.
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.
Aggrieved by that, the petitioners have filed these writ petitions.
- 7 - 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
- 8 - 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.
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-
- 9 - 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.
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
- 10 - 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.
- 11 -
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.
I have carefully considered the submissions made by the learned counsel for the parties.
The point that arises for my consideration is,
Whether the impugned order calls for interference?
- 12 -
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
- 13 - 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
- 14 - 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
- 15 - 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
- 16 - 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.
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:
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,
- 17 - 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.
By addendum dated 2.5.2002, changes have been made to the original show-cause notice. The relevant paras read as follows:
In para 20 page 17 of the show cause notice in the 40th line after the words Section 28 AA
- 18 - of the Customs Act, 1962 the following be incorporated.
“However, duty is demanded only in respect of claims made through Bangalore Air Cargo Complex.”
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
- 19 - 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
- 20 - 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
- 21 - 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
- 22 - 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
- 23 - 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
- 24 - 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
- 25 - 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
- 26 - 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.
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.
The learned counsel for the respondents submitted that when the Statute does not fix any period of
- 27 - 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.
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:
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.
- 28 -
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.
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.
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
- 29 - 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
- 30 - 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.
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
- 31 - erroneously paid, such powers can be exercised at any point of time, even beyond a reasonable period.
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
- 32 - 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.
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
- 33 - 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
- 34 - 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:
- 35 -
“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
- 36 - 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
- 37 - 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.
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
- 38 - the exercise of power had the effect of disturbing rights of a citizen.
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.
- 39 - 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.
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
- 40 - 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.