Legal principle

The Board's power under Section 151A of the Customs Act cannot be used to issue executive instructions or Office Memoranda that pronounce on the merits of issues pending adjudication; the Revenue must plead its case in the Show Cause Notice and leave adjudication to the competent adjudicating authority.

Court decision

Partly in favour of the petitioners: the CBIC Circular dated 9.9.2019 was quashed to the extent of its directions (especially para 4), its effect being limited to conveying information about appeals against Tribunal orders; para 8 of the impugned Show Cause Notices was quashed; the DGFT OM dated 6.9.2017 was upheld to the extent of the legal position stated, with applicability on facts left to the adjudicator; and the CBEC OM dated 16.2.2018 was quashed to the extent it opined on classification and exemption eligibility. However, the prayers to set aside the Show Cause Notices were rejected, with the Court expressing no opinion on their merits; adjudication is to proceed independently, uninfluenced by the quashed materials.

Facts

Khandwala Enterprise Pvt. Ltd. (merged with Mink Tradecom Pvt. Ltd. in 2018) imported goods declared as 'gold coins of different purity (99.5% and above, other than legal tenders)' from South Korea under eight Bills of Entry (9–23 August 2017) with an assessable value of ₹163,30,51,803/-. It classified them under Sub-Heading 7114 1910 (articles of gold) and claimed nil duty under S.No. 526 of Notification 152/2009-Cus (as amended), the India–Korea preferential exemption. The Revenue issued Show Cause Notices (dated 12th/15th July 2019 to the petitioner and 28th June/19th July 2019 to Mink) proposing confiscation under Section 111(d) for violation of Section 3(3) FTDR Act and para 2.08 of the FTP 2015-20, denial of the exemption, differential duty, penalty under Section 112(a), and finalisation of provisional assessment, alleging correct classification under Sub-Heading 7118 9000 per the HSN Explanatory Note. The petitioners also challenged CBEC OM dated 16.2.2018, CBIC Circulars dated 31.5.2019 and 9.7.2019 (with corrigenda), and DGFT OM dated 6.9.2017.

Key provisions

• Section 151A, Customs Act, 1962 — Instructions to officers of customs
• Section 5, The Foreign Trade (Development and Regulation) Act, 1992 — Foreign Trade Policy.
• Section 111(d), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 25(1), Customs Act, 1962 — Power to grant exemption from duty
• Section 3(3), The Foreign Trade (Development and Regulation) Act, 1992 — Powers to make provisions relating to imports and exports.