Madras High Court
In Both Wps vs The Principal Commissioner Of Customs on 6 November, 2024
Author: Senthilkumar Ramamoorthy
Bench: Senthilkumar Ramamoorthy
2024:MHC:3774
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IN THE HIGH COURT OF JUDICATURE AT MADRAS
Order reserved on 01.08.2024
Order pronounced on 06.11.2024
CORAM
THE HONOURABLE MR. JUSTICE SENTHILKUMAR RAMAMOORTHY
W.P.Nos. 768 & 769 of 2018
&
WMP Nos. 933 & 934 of 2018
In both WPs
M/s. Huawei Telecommunications (India) Company Pvt. Ltd,
Plot No. K-24,
SIPCOT Industrial Park,
Chennai-602 105 .....Petitioner
vs
1. The Principal Commissioner of Customs
Chennai VII, Commissionerate (Air Cargo)
New Customs House, Meenambakkam
Chennai- 600 027
2. The Development Commissioner
Office of the Development Commissioner
MEPZ- Special Economic Zone
NH45, Administrative Office Building
Tambaram, Chennai-600 045, India .....Respondents
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Prayer in W.P. No. 768 of 2024: Writ petition filed under Article 226
of the Constitution of India to issue a writ of Certiorari or a writ in
the nature of Certiorari, or any other appropriate Writ, Order or
direction, calling for the records of the Order bearing order-in-
original no. 689/2017-AIR, and, dated 30.12.2017 issued by the
Respondent no. 1 and quash the same.
Prayer in W.P. No. 769 of 2024: Writ petition filed under Article 226
of the Constitution of India to issue a writ of Certiorari or a writ in
the nature of Certiorari, or any other appropriate Writ, Order or
direction, calling for the records of the Order bearing order-in-
original no. 688/2017-AIR, and, dated 30.12.2017 issued by the
Respondent no. 1 and quash the same.
In both WPs
For Petitioner: Mr. Satish Parasaran,
Sr. Advocate, assisted by
Mr. Karthik Sundaram
For Respondents: ARL. Sundaresan, ASG
assisted by
Mr.A.P. Srinivas for R1,
and Mr. B. Rabu Manohar
for R2.
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COMMON ORDER
Factual Background:
By these writ petitions, the petitioner assails the Orders-in-
Original (OIOs), both dated 30.12.2024 and issued by the first
respondent, demanding Anti-Dumping Duty (ADD) of Rs.
146,72,95,243/- and Rs. 189,76,79,197/-, respectively, along with
interest and penalty applicable thereto.
2. The petitioner-company, Huawei Telecommunications
(India) Company Pvt. Ltd. (‘petitioner’), is engaged in the business of
manufacture and sale of telecom related equipment in India. The
Special Economic Zone (SEZ) unit of Flextronics Technologies (India)
Pvt. Ltd. (‘Flextronics SEZ unit’) imported the goods, described by
the petitioner as stand-alone parts/components, into India from
Huawei, China. After the PCBAs were populated using Surface
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Mounting Technology (STM) at the abovementioned SEZ unit, they
were procured in a domestic tariff area (DTA)by the petitioner. Since
the goods were moved from a SEZ to a DTA, bills of entry were filed
and the goods were cleared after paying customs duty. The PCBAs
were then used for further assembly of telecommunication
equipment in the petitioner’s DTA unit and sold to the petitioner’s
customers in India.
Notification 125/2010:
3. After receiving an application from the domestic industry
represented by a manufacturer, Tejas Network Ltd. (Tejas), alleging
that the Synchronous Digital Hierarchy Transmission equipment
(SDH equipment), originating in or exported from the People’s
Republic of China and Israel were being dumped in the Indian
market causing them material injury, the Directorate General of Anti-
dumping and Allied Duties (DGAD) conducted Anti-Dumping
investigations concerning the import of these SDH equipment.
Pursuant to its investigations, the DGAD, in its preliminary findings,
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recommended the imposition of ADD on the imports of these goods
vide notification No.14/2/2009-DGAD dated 07.09.2009; and
provisional anti-dumping duties were imposed on this basis vide
Notification No. 132/2009- Customs dated 8.12.2009 issued by the
Ministry of Finance (Department of Revenue). Subsequently, the
DGAD issued its final findings and recommendations through its
notification No.14/2/2009-DGAD dated 19.10.2010 (‘DGAD Final
Findings’). On the basis of the recommendations, by notification no.
125/2010- Customs dated 16.12.2010 (the ADD Notification), ADD
was imposed for a period of five years beginning from the date of
imposition of the provisional duty, i.e., 8.12.2009 – 7.12.2014. Note 1 to
the said Notification clarifies the meaning of product under
consideration (PUC). It includes inter alia SDH equipment, Populated
Circuit Boards (PCB) (for application in SDH), parts or components
imported as a part of equipment or its assemblies or sub-assemblies
but excludes from its purview components imported on a stand-
alone basis.
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4. Initially, the petitioner imported SDH equipment directly
from Huawei, China. In respect thereof, ADD was demanded under
the ADD Notification. The petitioner paid ADD of Rs. 52,15,09,653/-
along with interest of Rs.1,67,16,885 under protest for the period from
September 2010 to December 2010 in April 2011. This continued until
June 2011. From July 2011, the Flextronics SEZ unit imported goods
described by the petitioner as stand-alone parts/components from
Huawei, China. After being populated at the said SEZ unit,
assembled PCBAs were purchased by the petitioner and entered the
DTA under bills of entry after clearing the goods by paying customs
duty.
Show cause notices and preceding writ petitions:
5. Against this backdrop, Show Cause Notice dated 1.12.2014
(SCN-I) regarding levy of ADD for the period July, 2011 to August,
2014, Show Cause Notice dated 28.10.2015 (SCN-II) regarding levy of
ADD for the period 14.11.2014 to 31.08.2015 and Show Cause Notice
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dated 15.7.2017 (SCN-III) regarding levy of ADD for the period i)
01.09.2015 to 7.12.2015; and ii) 26.4.2016 to 2.12.2016 were issued to
the petitioner. Four writ petitions challenging the aforementioned
SCNs were filed prior to the current petitions. Before setting out the
details of the challenge, it is germane to note that after the lapse of
the ADD Notification, Notification No.1/2015 – Cus. (ADD) dated
05.01.2015 (Second ADD Notification) was issued to amend the
original ADD Notification to extend the latter’s operation till
7.12.2015; and Notification No. 15/2016- Cus. dated 26.04.2016 (Third
ADD Notification) which was issued post sunset review to levy ADD
for a period of 5 years, i.e., from 26.4.2016 to 25.4.2021. The following
table sets out the details of these SCNs, the challenges thereto and the
outcome thereof:
SCN Period of Particulars of WP and outcome
demand of thereof
ADD
SCN dated July, 2011 SCN-I was challenged in WP
1.12.2014 33904/2014; WP 27873/2014 was
to August,7
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8SCN Period of Particulars of WP and outcome
demand of thereof
ADD
(SCN-I) 2014 filed to restrain the Development
Commissioner and Authorized
Officer of the Flextronic SEZ Unit
(respondents therein) from
levying ADD on PCBA clearance
from SEZ into DTA under
section 30, Special Economic
Zones Act, 2005 (the SEZ Act)
read with the ADD Notification
and Section 9, Customs Tariff
Act, 1975.
Common order dated 2.12.2016
of the Hon’ble High Court in WP
33904 and WP 27873/2014:
While declining to determine
whether the Development
Commissioner has jurisdiction to
act as the adjudicating authority,
the Court transferred the file to
the jurisdictional customs officer
to decide the matter, including
the jurisdictional issue, after
providing hearing opportunity to
the parties pursuant to the
respondents therein agreeing to
such transfer without conceding
jurisdiction.
8 https://www.mhc.tn.gov.in/judis 9 SCN Period of Particulars of WP and outcome demand of thereof ADD Current Proceedings: OIO No.688/2017 passed by the first respondent herein dated 30.12.2017 and emanating from SCN-I stayed in WP 769/2018 via interim order dated 11.1.2018. SCN dated 14.11.2014 WP 22770/2017 was filed 28.10.2015 challenging SCN III and to to (SCN-II) restrain the Principal
31.08.2015 Commissioner of Customs from
charging ADD for the period
from 8.12.2024 to 26.4.2016; In
WP 22771/2017, the petitioner
prayed for a direction to the
respondents therein to refund
the ADD collected in terms of the
ADD Notification and to return
the bank guarantee furnished for
the period 8.12.2014 to 26.4.2016.
Common order dated 6.10.2017
in W.P. 22770/2017 and W.P.
22771/2017 was issued setting
aside the demand for the period
8.12.2014 to 31.08.2015 and the
Development Commissioner, the
Specified Officer, and the
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SCN Period of Particulars of WP and outcome
demand of thereof
ADD
Authorized Officer of the SEZ
were restrained from demanding
ADD for the said period holding
that the ADD Notification cannot
be extended after it elapsed. The
writ appeal (W.A. 1498/2018)
preferred by the Principal
Commissioner of Customs
against the order dated 6.10.2017
in WP 22770/2017 was dismissed
by holding that the validity of
the ADD Notification cannot be
extend after its expiry.
As regards the prayer for refund
made in WP 22771 of 2017, the
petitioner was directed to pursue
the application for refund before
the authority.
Current Proceedings:
OIO No.689/2017 passed by the
respondent and emanating from
SCN-II has been stayed by
interim order dated 11.1.2018
(WP No. 768/2018)
SCN dated 1) 1.9.2015 In the common order dated
15.7.2017 6.10.2017 in W.P. 22770/2017 and
to 7.12.2015
(SCN-III) W.P. 22771/2017, WP 22770 was
2) 26.4.2016 allowed by setting aside the
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11SCN Period of Particulars of WP and outcome
demand of thereof
ADD
to 2.12.2016 demand for the period from
1.09.2015 to 7.12.2015.
Counsel and their contentions:
Petitioner’s Contentions:
6. Oral arguments on behalf of the petitioner were advanced by
learned senior counsel, Mr. Satish Parasaran, assisted by Mr Karthik
Sundaram. The petitioner also filed brief written submissions.
7. The first contention of Mr. Satish Parasaran was that the
impugned order in W.P.No.768 of 2018 is contrary to and disregards
the common order dated 06.10.2017 in W.P.Nos.22770 and 22771 of
2017 insofar as it pertains to the imposition of ADD for the period
running from 08.12.2014 to 31.08.2015. He submitted that the above
order was placed before the Principal Commissioner of Customs and
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12was referred to at paragraph 33 of the impugned order. He also
pointed out that the writ appeal against the order was dismissed
subsequently by order dated 17.02.2022. Consequently, learned
senior counsel contended that the impugned order cannot be
sustained and is liable to be set aside. Even with regard to the
imposition of ADD for the period running from 14.11.2014 to
07.12.2014, he contended that the impugned order cannot be
sustained on other grounds common to W.P.No.769 of 2017.
On Jurisdiction
8. His second contention was that the Development
Commissioner of the SEZ did not have the jurisdiction to issue the
show cause notices because Rule 47(5) of the Special Economic Zones
Rules, 2006 (the SEZ Rules) was only notified on 05.08.2016, thereby
conferring jurisdiction on customs officers. Likewise, he contended
that offences under inter alia sections 28, 28A and 28AAA of the
Customs Act, 1962 (the Customs Act) were notified as offences under
the Special Economic Zones Act, 2005 (the SEZ Act) only with effect
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from 05.08.2006. Relying on an order of the Customs, Excise and
Service Tax Appellate Tribunal (CESTAT) order dated 17.11.2016 in
CESTAT Appeal No. E/41901/2015, he contended that the Chennai
Bench of CESTAT held that the SEZ Act had no provision for
demand of duty that was short paid or not paid at the time of
clearance for the relevant period from 22.9.2010 to 16.12.2010. He
also submitted that CBEC’s Circular dated 31.3.2017 only clarifies the
existing legal position and does not detract from the position that the
relevant amendments in the SEZ Act and Rules regarding recovery
and adjudication were introduced with effect from 05.08.2016.
9. Even after the introduction of Rule 47(5), he contended that
only the jurisdictional customs officer and not the SEZ Development
Commissioner has the jurisdiction to recover ADD in terms of section
30, SEZ Act read with Rule 47(5) of the SEZ Rules. Under the
Customs Act, he pointed out that the power of recovery can be
exercised only by a customs officer and not by authorized officers
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under the SEZ Act. Since the Development Commissioner is not a
‘proper officer of customs’ under section 2(34) of the Customs Act, he
submitted that the issuance of SCNs was without jurisdiction.
10. His third contention was that the clearance of goods from an
SEZ to the DTA is not an import either under section 2(o) of the
Foreign Trade Development and Regulation Act, 1992 (the FTDRA)
or under section 2(e) of the SEZ Act. Consequently, he contended that
the Development Commissioner did not have the jurisdiction to issue
the show cause notices under section 21(1) of the SEZ Act read with
section 14(1) of the FTDRA. On both these jurisdictional grounds, he
submitted that no findings were recorded by the Principal
Commissioner in spite of this Court directing him to adjudicate on
the question of jurisdiction by common order dated 02.12.2016 in
W.P.Nos.22873 of 2014 and W.P.No.33904 of 2014.
Other contentions including on merits
11. Learned senior counsel next submitted that stand-alone
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components are outside the scope of the ADD Notification. In spite of
raising the argument that Flextronics SEZ imported PCBs as stand-
alone components, he contended that no determination was made on
this aspect. He also pointed out that the import of the same
components were considered as stand-alone in the case of Tejas. In a
separate note filed by the petitioner on the issue of ‘standalone
parts/components’, the petitioner referred to the DGAD’s Final
Findings that formed the basis for the ADD Notification. By referring
to paragraphs 51-55 of the DGAD’s Final Findings, it was submitted
that the ADD Notification excludes the import of stand-alone parts
from ADD levy even if they are imported from China as they do not
form part of the PUC.
12. By referring to and comparing the impugned orders with
the written submissions of the respondents, he further contended that
these orders are a reproduction of the written submissions. He also
pointed out, in this regard, that the petitioner’s written submissions
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were provided to the respondents, but the respondents’ written
submissions were not provided to the petitioner until after the
impugned orders were issued. Learned senior counsel contended
that this was in breach of principles of natural justice.
13. His last contention was that the respondents have
proceeded on the implied basis that the petitioner had circumvented
ADD by entering into purchase transactions through Flextronics SEZ.
In order to do so, he contended that a determination that there was
circumvention is an essential pre-requisite and that such
determination can only be made by the designated authority.
14. The petitioner cited the following precedents in support of
the propositions set out below in WP 768/2018:
i) Levying ADD for the period that was already set aside by the
High Court amounts to judicial indiscipline, as held in UOI v
Kamalakshmi Finance Corp. Ltd. 1991 (55) ELT 433 (SC) and Pushpanjali
Silks Pvt. Ltd v CC, Chennai, Chennai, 2007 (211) ELT 206.
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ii)The demand for the period 8.12.2014 to 31.8.2015 is contrary
to the Supreme Court decision in UOI & Ors v Kumho Petrochemicals
Pvt. Ltd., (2017) 351 ELT 65 (SC).
The following precedents were relied on in support of the
propositions set out below in WP 769/2018:
iii) The first respondent failed to take into account the detailed
submissions of the petitioner, which clearly shows that he acted in a
pre-meditated manner while passing the order contrary to the
principles of natural justice as discussed by the Supreme Court in
Oryx Fisheries (P) Ltd. v. UOI, 2011 (26) ELT 422 (SC) and Seimens Ltd
v. State of Maharashtra, 2007 (207) ELT 168 (SC).
iv) Kranti Associates Pvt Ltd v. Masood Ahmed Khan, 2011 (273)
ELT 345 (SC) holds that the pretence of reasons or “rubber-stamp”
reasons is not to be equated with a valid decision-making process
v) A writ petition will lie where the proceedings initiated by a
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18quasi-judicial authority are without authority: Harbanslal Sahnia and
Anr v Indian Oil Corporation Ltd & Ors (2003) 2 SCC 107
vi) A writ petition would lie where principles of natural justice
were violated: Whirlpool Corporation v Registrar of Trademarks, Mumbai,
(1988) 8 SCC 1 and UOI v. Tantia Construction Pvt. Ltd., (2011) 5 SCC
697 .
vi) M/s. Raza Textiles Ltd, Rampur v The Income Tax Officer,
Rampur, AIR 1973 SC 1362 lays down that a quasi-judicial authority
cannot confer jurisdiction upon itself by determining a jurisdictional
fact wrongly and that the question whether a jurisdictional fact has
been rightly decided or not is a question for determination by the
High Court.
vii) The Development Commissioner is not a ‘proper officer of
customs’ under section 2(34) of the Customs Act, 1962 and therefore
issuance of SCN I is without jurisdiction as per Commissioner of
Customs v. Sayed Ali, 2011 (265) ELT 17 (SC) (‘Sayed Ali’).
viii) According to Essar Steel Ltd. v UOI 2010 (249) ELT 3 (Guj) ,
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SEZ is a territory wholly within India.
ix) Flextronics Technologies (India) Pvt. Ltd. v The State of Tamil
Nadu (‘Flextronics’), 2016-VIL-230-MAD, holds that a) the leviability of
ADD should be determined when the goods are imported for the first
time into the SEZ from outside India, and not when goods are cleared
from the SEZ into the DTA; b) the fundamental pre-condition for
ADD levy is not satisfied as clearance from SEZ to DTA cannot be
regarded as an export of a product from outside India into India; and
therefore, the PCBA which originates wholly for the first time only
within the Flextronics SEZ which is a part of the Indian territory
cannot be regarded as a product exported into India from China or
Israel or any other foreign country.
Respondents’ contentions:
15. Oral arguments were advanced by Mr. ARL. Sundaresan,
learned Additional Solicitor General (ASG), assisted by learned
senior standing counsel, A.P. Srinivas, for the first respondent. Mr.
Rabu Manohar appeared for the second respondent.
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16. As regards the impugned OIO in W.P.No.768 of 2018,
learned ASG submitted that the ADD demand also covers the period
between 14.11.2014 and 07.12.2014, which is squarely within the
validity period of the ADD Notification de hors the extension
notification.
17. As regards the jurisdictional objections, learned ASG
submitted that both parties consented to the relevant files being
transferred to the jurisdictional customs officer for adjudication.
Hence, he submitted that the impugned orders can longer be assailed
on the ground that the Development Commissioner did not have
jurisdiction to issue the show cause notices. He also submitted that
the impugned OIOs dated 30.12.2017 were issued after providing
sufficient hearing opportunity on 5.3.2017 and 28.10.2017 and by
considering the submissions of the petitioner. He further submitted
that the petitioner raised the same jurisdictional objections in WP
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Nos. 27873 and 33904 of 2014 and that writ jurisdiction was wrongly
invoked in the present cases without resorting to the appellate
remedy.
18. On the merits, learned ASG submitted that PCBA is
covered by the ADD Notification and that disputed questions of fact
are involved in adjudicating as to whether the imports by Flextronics
SEZ are excluded from the purview of the ADD Notification.
Consequently, he contended that this aspect can only be raised in
statutory appeal and not under Article 226 of the Constitution.
19. In support of the contention regarding the availability of an
alternative remedy to the petitioner, the respondents relied on the
following precedents:
i) M/s Siddhi Vinayak Syntex Pvt Ltd vs Union of India-2017(352)
E.L.T. 455(Guj)
ii) M/s Rational Business Corporation Pvt Ltd vs Union of India
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222017 (346) E.L.T. 247 (P &H);
iii) M/s Srao International Fright system vs Commissioner of
Customs, Chennai VIII 2016(334) E.L.T. 289(MAD);
iv) M/s Viahsl Lubetech Corporation vs Additional Commissioner of
Customs -2016(342) E.L.T. 201 (MAD);
v) M/s British India Steam Navigational Company PVT Ltd vs
Additional CC Calcutta 1999(110) E.L.T. 266(SC).
Discussion, analysis and conclusion:
ADD levy from 08.12.2014 to 31.8.2015 in the OIO challenged in
W.P.No. 768 of 2018
20. The impugned OIO challenged in W.P. No. 768 of 2018
levies ADD from 14.11.2014 to 31.08.2015. The first issue to be
examined is whether the imposition of ADD for the period
commencing on 08.12.2014 and ending on 31.8.2015 is in violation of
common order dated 06.10.2017 in W.P. Nos. 22770 and 22771 of
2017. The admitted position is that the validity period of the ADD
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Notification was a five year period from 8.12.2009 to 7.12.2014. The
Second ADD Notification was admittedly issued on 05.01.2015, after
the lapse of the ADD Notification, and purports to extends the
validity of the ADD Notification till 7.12.2015. The Supreme Court
examined the validity of the Second ADD Notification in Kumho
Petrochemicals and held as under:
“ 40. Two things which follow from the reading of
the Section 9A(5) of the Act are that not only the
continuation of duty is not automatic, such a duty
during the period of review has to be imposed
before the expiry of the period of five years,
which is the life of the Notification imposing anti-
dumping duty. Even otherwise, Notification dated
January 23, 2014 amends the earlier Notification
dated January 2, 2009, which is clear from its
language, and has been reproduced above.
However, when Notification dated January 2,
2009 itself had lapsed on the expiry of five years,
i.e., on January 1, 2014, and was not in existence
on January 23, 2014 question of amending a non-
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24existing Notification does not arise at all. As a
sequitur, amendment was to be carried out
during the lifetime of the Notification dated
January 2, 2009. The High Court, thus, rightly
remarked that Notification dated January 2, 2009
was in the nature of temporary legislation and
could not be amended after it lapsed.”
(emphasis added)
After noticing the judgment in Kumho Petrochemicals, this Court heldas under in paragraph 26 of the common order dated 06.10.2017 in
W.P.Nos.22770 and 22771 of 2017:
“Therefore, the demand of ADD under the above
show cause notice dated 28.10.2015, for the period
from 08.12.2014 to 26.04.2016 is not sustainable.
The said show cause notice has been issued seeking
ADD payable on PCBAs for the period from
14.11.2014 to 31.08.2015. The Notification
No.125 of 2010 was in vogue till 07.12.2014. In
the light of the decision of the Hon’ble Supreme
Court, in Kumho Petrochemicals Pvt. Ltd.
(supra), such Notification cannot be extended after
it had lapsed. Consequently, the demand of ADD
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for the period from 08.12.2014 to 26.04.2016 is
not sustainable. Therefore, the ADD demanded in
the show cause notice dated 28.10.2015, for the
period from 08.12.2014 to 31.08.2015 has to be
held to be without jurisdiction. Hence, the second
issue is answered in favour of the petitioner.”
21. While the matter was being heard by the Principal
Commissioner, the above mentioned common order was issued. The
order was also placed before the authority, and this fact is recorded
in paragraph 33 of the impugned order at internal page 77 thereof.
There is, however, nothing to indicate that the order was considered.
In view thereof, the demand of ADD for the period commencing on
08.12.2014 and ending on 31.08.2015 cannot be sustained.
Subsequently, by judgment dated 17.02.2022, the common order
dated 06.10.2017 was affirmed in writ appeal. In the operative part of
the order impugned in W.P. No.768 of 2018, a consolidated sum of
Rs,146,72,95,243 was imposed as ADD for the period commencing on
14.11.2014 and ending on 31.08.2015. Out of this period, by virtue of
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the common order of this Court, the ADD claim could not have been
made for for the period commencing on 08.12.2014 and ending on
31.08.2015. As regards the prior period (14.11.2014 to 07.12.2014), no
break-up of either ADD liability or penalty has been provided.
Therefore, interference with the impugned OIO in W.P. No.768 of
2018 is warranted. As regards the prior period (14.11.2014 to
7.12.2014), a conclusion can be drawn only after deciding on the other
objections of the petitioner.
Jurisdictional objections apropos ADD levy from 14.11.2014 to
7.12.2014 in the OIO challenged in W.P.No. 768 of 2018 and for the
period July 2011-August 2014 in the OIO challenged in W.P.No. 769
of 2018:
22. The contention that the Development Commissioner did not
have jurisdiction to issue SCN I for the period July 2011 to August
2014 or SCN II for the period 14.11.2014 to 31.08.2015 was raised in
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27the earlier round of litigation in W.P. Nos. 27873 and 33904 of 2014.
With regard to the transfer of the files to the jurisdictional
Commissioner of Customs, the following statements from the
petitioner’s affidavit were set out in this Court’s order:
“10. ….The petitioner further submits that if the
case is transferred to the jurisdictional
Commissioner of Customs, the adjudicating
authority should decide the issue independently,
after giving due opportunity of personal hearing
and file a written submissions to the present
petitioner, without being influenced by any of the
findings on merits in this Court….”
In this context, after taking note of the rival contentions andaffidavits, this Court concluded, in relevant part, as under:
“14. The first respondent/Development
Commissioner shall transfer all the files to the
jurisdictional customs officer to enable the
jurisdictional Customs Officer to take up cases for
adjudication as a regular case based on merits and
in accordance with law. The files pertaining to the
show cause notice dated 28.10.2015 in File27
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28No.05/2014/SO-Part-II, also be transferred to the
jurisdictional Customs Officer. The jurisdictional
Customs Officer shall afford the petitioner an
opportunity to submit their objections and
thereafter take the show cause notices for
adjudication. The jurisdictional Customs Officer,
while adjudicating the show cause notices, shall
adjudicate as to whether the Development
Commisioner has jurisdiction to issue the show
cause notices or to adjudicate the matter in issue.
Apart from the same, the other issues which have
been raised in the show cause notices shall also be
adjudicated. For this purpose, the Development
Commisioner shall be heard by the jurisdictional
Customs Officer.”
Thus the transfer of the files to the jurisdictional customs officer wasby consensus between the rival parties.
23. Pursuant to the order of this Court, the Principal
Commissioner of Customs examined whether the Development
Commissioner had the jurisdiction to issue the show cause notice and
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29recorded the following findings in the impugned OIO in W.P. No.769
of 2018. Identical findings were also recorded in the impugned OIO
in W.P. No.768 of 2018:
“36. I find that the Notice has been issued under
Section 30 of the SEZ Act, 2005 inter alia the
provisions of Foreign Trade Development
Regulation Act (FTDR), and the Customs Act.
The Special Economic Zone Act, 2005 (SEZ Act,
2005) and Special Economic Rules, 2006 (SEZ
Rules, 2006) are independent Act/Rules
incorporated exclusively for governing the
Functions of SEZ Zones. Sub Section (a) of
Section 30 of the SEZ Act, 2005 clearly provides
for levy of ADD duty on the goods cleared from
SEZ; and the demand has been issued under
Section 30 of SEZ Act, 2005 in addition to the
Customs Provisions;
37. I find that the SEZ Act and the Rules Provides
from collection of applicable customs duty by the
Authorized officer. Consequently, the customs
officer derives the power to demand any short levy
automatically under the customs Act 1962 even if
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30
there is no provision in the SEZ Act. The
Development Commissioner being the
administrative head of the SEZ can also exercise
the powers of the customs officers working under
him. Thus the Notice issued by the Development
Commisioner is in order.”
24. The petitioner contended that the above and other related
findings are incorrect on about three grounds. First, it was contended
that offences under sections 28, 28A and 28AA of the Customs Act
were notified as offences under the SEZ Act only with effect from
05.08.2016 under notification bearing S.O. 2665(E) of the Ministry of
Commerce and Industry dated 05.08.2016. Since the show cause
notices were issued prior thereto, it was contended that the
Development Commissioner had no authority. Secondly, it was
contended that Rule 47(5) of the SEZ Rules was incorporated with
effect from 05.08.2006 by notification bearing G.S.R. 772(E) of the
Ministry of Commerce and Industry. Consequently, only with effect
from 05.08.2016, were the jurisdictional customs officers empowered
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31
to deal with refund, demand, adjudication, etc. in relation to
operations under the SEZ Act.
25. In order to understand the scope of notification bearing S.O.
2665(E), it is necessary to examine section 21 of the SEZ Act, which is
as under:
“ 21.Single enforcement officer or agency for
notified offences – (1) The Central Government
may, by notification, specify any act or omission
made punishable under any Central Act, as
notified offence for the purpose of this Act.
(2) The Central Government may, by general or
special order, authorise any officer or agency to be
the enforcement officer or agency in respect of any
notified offence or offences committed in a Special
Economic Zone.
(3)Every officer or agency authorised under sub-
section 92) shall have all the corresponding powers
of investigation, inspection, search or seizure as is
provided under the releavnt Central Act in respect
of the notified offences.”
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32
When viewed in light of section 21, it is clear that the object and
purpose of notification bearing S.O. 2665(E) was to notify the
violation of specific provisions of the Customs Act as offences under
the SEZ Act so as to confer powers of investigation, inspection, search
and seizure in relation thereto. Therefore, it has no bearing on the
validity of the show cause notices.
26. I deal with the second contention on jurisdiction next. As a
result of the amendment of Rule 47 of the SEZ Rules by the
introduction of sub-rule (5), with effect from 05.08.2016, jurisdictional
customs, central excise and other tax authorities were empowered to
deal with refunds, demands, adjudications, etc. arising out of
operations under the SEZ Act. By Circular No.11/2017-Cus, a
clarification was provided with regard to the amendment. In respect
of adjudication, it was stated therein as follows:
“ All pending demands shall be adjudicated by the
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33appropriate authority as prescribed under the
Customs, Central Excise, Service Tax or GST laws
and the rules made there under including demands
issued prior to 05.08.2016 because the act of
adjudication is prospective in nature.”The conclusion that follows from the amendment and clarification
thereto is that jurisdiction is vested in the jurisdictional officer of the
customs, central excise, GST departments, as the case may be, to issue
show cause notice and adjudicate refunds, demands, adjudications
arising out of operations under the SEZ Act on or after 05.08.2016. If
show cause notice had been issued prior to 05.08.2016, adjudication
would be undertaken by the appropriate officer from and out of the
above list if the adjudication is taking place on or after 05.08.2016. In
this case, both the show cause notices were issued prior to 05.08.2016
and the adjudications took place after 05.08.2016. Therefore, the
adjudications were in order and, significantly, it cannot be concluded
that this amendment had the effect of invalidating the notices issued
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34by the Development Commissioner.
27. The third contention on jurisdiction was that clearance from
the SEZ to the DTA does not qualify as an import either under
section 2(o) of the SEZ Act or section 2(e) of the FTDRA and,
therefore, ADD should not have been imposed on goods cleared from
the SEZ into the DTA. The petitioner also relied on the judgment of
the Division Bench of this Court in Flextronics to contend that ADD is
only applicable when goods are cleared for import into India. As
regards section 2(o) of the SEZ Act, the petitioner is correct in
contending that the definition of import only covers bringing goods
into a SEZ from a place outside India or receiving goods or services
from another SEZ unit or another SEZ. This should, however, be
considered in the light of section 30 of the SEZ Act. Clause (a) thereof
is as under:
“30. Domestic clearance by units – Subject to
the conditions specified in the rules made by the
Central Government in this behalf, –
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35
(a) any goods removed from a Special Economic
Zone to the Domestic Tariff Area shall be
chargeable to duties of customs including anti-
dumping, countervailing and safeguard duties
under the Customs Tariff Act, 1975 (51 of 1975),
where applicable, as leviable on such goods
when imported; and
(emphasis added)
The statute, therefore, provides for the imposition of duties of
customs, including ADD, on goods that are removed from a SEZ to a
DTA in the same manner as leviable on such goods when imported.
Therefore, the fact that the definition of import does not cover
removal of goods from a SEZ to a DTA is immaterial. As regards
Flextronics, as contended by learned ASG, the ratio of the said
judgment was that VAT should be included while determining ADD.
Especially in view of the unambiguous statutory prescription in
section 30 of the SEZ Act, it cannot be construed as holding that ADD
cannot be levied on goods removed from a SEZ into a DTA.
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36
28. In sum, as regards jurisdiction, the SEZ Act clearly
envisages the imposition of ADD on goods removed from a SEZ to a
DTA. On and from 5.08.2016, the jurisdiction to issue show cause
notices and adjudicate the matter has been vested in the jurisdictional
customs officers. As the administrative head of the SEZ, who is
empowered to take all steps to discharge his functions under the SEZ
Act under section 12(1) of the SEZ Act, the Development
Commissioner issued the show cause notices. Section 30 of the SEZ
Act was in the statute when the show cause notices were issued. If
the contention of the petitioner on jurisdiction were to be accepted,
neither the Development Commissioner nor customs officers could
have issued the show cause notices prior to 5.08.2016. This contention
cannot be countenanced. Hence, all the jurisdictional objections are
rejected and the findings in the impugned OIOs thereon are upheld.
Issues regarding written submissions
29. The petitioner contended that interference with the
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37
impugned orders is called for because the written submissions of the
respondents were not provided to the petitioner before the
conclusion of proceedings and that the impugned orders are no more
than a minor modification of such written submissions. As regards
the first of these aspects, written submissions are intended to capture
the oral arguments in writing so as to facilitate the adjudicator to
consider the arguments while issuing the order of adjudication. Since
written submissions, unlike pleadings, do not require a response
from the counter party, the alleged failure to provide a copy of the
written submissions to the petitioner in time for the petitioner to
respond thereto is immaterial. On examining the impugned orders
closely, I find that the discussion and analysis is elaborate and such
orders are not vitiated on the ground of some commonality of
language between the written submissions of the respondents and
the impugned orders.
Applicability of ADD to the subject goods
30. The last aspect to be examined is whether the goods fall
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38
within the scope of the ADD Notification. The relevant paragraph
35(g) of the DGAD Final Findings, which can also be found in
paragraph 18(vii) in DGAD’s further final findings dated 10.12.2012,
is as follows:
“35. Scope of Product Under Consideration
g. Populated Circuit Boards/cards- The
cards/PCB’s are populated as per the design
developed by the manufacturer and thereafter,
apart from loading of software, there is only a need
to arrange them in a shelf and adjust them to a
circuit. Since Populated Circuit Boards are
propriety of the manufacturer, the same are within
the scope of Product under consideration. It is
however clarified that in case PCB or cards are
meant for production/ assembly of a product other
than SDH equipment, the same is beyond the
scope of the product under consideration. PCB and
cards are within the scope of the product under
consideration only if such PCB or cards are meant
for production of SDH equipment.”38
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39Paragraph 36 of the DGAD Final Findings which can also be found in
Note 1 to the ADD Notification describes the PUC as hereinunder:
“36. Having regard to the petition,
initiation notification, preliminary findings,
arguments raised by the domestic industry and
opposing interested parties, the Authorities holds
that the scope of the product under consideration
is as follows:
“Synchronous Digital Hierarchy transmission
equipments, viz STM-1 STM-4, STM-16, STM-
64, STM-256 in assembled, CKD, SKD form, its
assemblies and sub-assemblies or fitted with
eventual broadband/ cellular equipment. Product
under consideration will also include Ada Drop
Multiplexers (ADM) (For SDH Application
only), Multiple Add Drop Multiplexers (MADM)
(For SDH Application only), and Digital Cross
Connect (DXC) (For SDH Application only),
Populated Circuit Boards (For SDH Application
Only) and parts/components imported as a part of
equipment, so long they are imported along with39
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40the equipment or its assemblies / sub-assemblies.
The Product under consideration will also include
Software meant for SDH, which is an integral part
of these equipments, which may be bought either
as a part of the equipment or separately. However
components/ parts imported on a standalone basis
are outside the purview of Product under
Consideration.”
31. From the above extracts, it is clear that the determination
whether the relevant goods were stand-alone components or SDH
equipment in some form is a determination involving disputed
questions of fact. Likewise, the determination as to whether ADD
was imposed because the business model of the petitioner involved
circumvention of the ADD Notification would also involve detailed
examination of disputed questions of fact. Such determinations
would further entail detailed consideration of evidence. In the
impugned OIOs, there is detailed consideration and analysis
followed by conclusions in paragraphs 48 to 76. Hence, it is
inappropriate to consider and determine this issue in exercise of
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41
summary and discretionary jurisdiction under Article 226 especially
when a statutory remedy is prescribed. Since interim protection was
granted when these writ petitions were filed and these cases were
pending for about 7 years, it is just and necessary to grant leave to the
petitioner to file a statutory appeal on merits within a specified time
line.
32. For reasons set out above, I conclude as under:
(i) Impugned OIO No.689/2017-AIR dated 30.12.2017 is set
aside by leaving it open to the respondents to initiate action in
respect of only the period running from 14.11.2014 to 7.12.2014 in
accordance with law.
(ii) The jurisdictional objections in respect of both the
impugned orders are rejected.
(iii) The petitioner is granted leave to file a statutory appeal
against OIO No.688/2017-AIR dated 30.12.2017 within 30 days from
the date of receipt of a copy of this order. If filed within such time
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42limit, such appeal shall be received and adjudicated on merits
without going into the questions of limitation or jurisdiction.
(iv) Both the writ petitions are disposed of on the above terms
without any order as to costs.
(v) Consequently, the miscellaneous petitions are closed.
06.11.2024
Index : Yes/No
Internet : Yes/No
NC : Yes/No
kal
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43
To
1. The Principal Commissioner of Customs
Chennai VII, Commissionerate (Air Cargo)
New Customs House, Meenambakkam
Chennai- 600 027
2. The Development Commissioner
Office of the Development Commissioner
MEPZ- Special Economic Zone
NH45, Administrative Office Building
Tambaram, Chennai-600 045, India
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44
SENTHILKUMAR RAMAMOORTHY J.
kal
Pre-delivery order made in
W.P.Nos. 768 & 769 of 2018
&
WMP Nos. 933 & 934 of 2018
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45
06.11.2024
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