1. The petitioner is a limited company and has its main office at Calcutta. The petitioner is exporter of textiles and fabrics and is engaged in the manufacture of Art Silk fabrics. Between April 1979 and January 1980, the petitioner imported polyester filament yarn from M/s. Greenland Corporation, Japan. The importation was effected under the cover of valid R.E.P. Licences granted to the petitioner in accordance with the Import Trade (Control) Order, 1955. The licences were issued to the petitioner in the capacity as merchant exporter against export of goods.
2. On February 7, 1977, the Ministry of Finance, Department of Revenue and Banking, issued a notification in exercise of the powers under Section 25 of the Customs Act exempting nylon filament yarn and polyester filament yarn imported into India from whole of duty of customs leviable thereon which is specified under the First Schedule to the Customs Tariff Act. The notification requires the importer to comply with certain requirements set out in the notification. The notification was subsequently amended and the exemption was restricted only to such goods which are specified in the First Schedule. By subsequent notification dated June 21, 1978, a further proviso was added that in respect of polyester filament yarn allowed to be imported under the import replenishment licences against the export of the products on or before May 31, 1978 the exemption shall only be from so much of that portion of duty of customs leviable thereon as is in excess of 80% ad valorem. The duty at the relevant time was 200% ad valorem, with the result that the exemption was granted only to the extent of 120% ad valorem. A very elaborate procedure is prescribed to ensure that the import is made under the import replenishment licence.
3. The petitioner imported six consignments against replenishment licences issued to them in accordance with the Import Trade Control Policy in force and cleared the said consignments by paying the customs duty of 80% on the c.i.f. value of the imported goods. The petitioner on February 23, 1980 received a show cause notice dated February 18, 1979 issued by respondent No. 1 to the effect that the customs duty amounting to Rs. 1,99,920/- has been short levied erroneously in respect of the consignment imported by the petitioner. The petitioner was called upon to explain as to why the said amount of customs duty should not be recovered from the petitioner. The show cause notice further recites that it appears that the proviso to section 28 is attracted. The petitioner was also called upon to produce all the relevant documents, including the licence, exchange control copies etc. in respect of the import of the consignment. The petitioner has filed this petition under Article 226 of the Constitution of India on April, 23, 1980 to challenge the legality of the show cause notice.
4. Shri Jagtiani, learned counsel appearing on behalf of the petitioner, submitted that the initiation of the proceedings by the Assistant Collector of Customs by issue of the impugned notice under Section 28 of the Customs Act, 1962 is without jurisdiction. The learned counsel urged that the notice does not set out any reasons which led the officer to the conclusion that the duty was short levied. It was urged that the respondents have not cared to file any return in answer to the petition and the learned counsel for the respondents is unable to point out any material which could have led the officer to a prima facie opinion that the duty was short levied. In my judgment, the submission is sound and deserves acceptance. Section 28, inter alia, provides that when any duty has not been levied or has been short levied or erroneously refunded the proper officer may serve notice on the person chargeable with duty requiring to show cause why he should not pay the amount specified in the notice. It is not in dispute that the petitioner imported the consignment and paid the requisite duty of 80% ad valorem in accordance with the notification. As mentioned hereinabove, a detailed procedure is prescribed before an importer is permitted to clear the consignment. It could not be debated that while the petitioner cleared the consignment, the Customs authorities had perused and examined the required documents and were satisfied that the petitioner is liable to pay duty only at the rate of 80% ad valorem. Almost a year thereafter the petitioner was served with the impugned notice and the notice is clearly silent as to how the officer came to a prima facie opinion that the duty was short levied. The notice merely recites that it appears that the proviso to Section 28 is attracted. The proviso to Section 28 reads as under :
'Provided that where any duty has not been levied or has been short levied or has been erroneously refunded by reason of collusion or any wilful misstatement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter the provisions of this sub-section shall have effect as if for the words 'six months' the words 'five years' were substituted.'
It is not possible to appreciate how and on what basis the officer came to the conclusion that there was any collusion or any wilful misstatement or suppression of facts on the part of the importer. It was open for the respondents to file a return to the petition and set out what was the material available to the officer while initiating the proceedings. Not only the return is not filed, but the learned counsel for the respondents is unable to assist the Court for want of instructions. In these circumstances, it is not proper to permit the respondents to proceed with the show cause notice. The respondents have undoubtedly jurisdiction to issue notice in case duty is short levied, but where the initiation of proceedings are challenged, then the respondents must come out with the material to establish that the officer had sufficient material, prima facie to come to the conclusion that the duty was short levied. As the respondents have produced no material whatsoever, in my judgment, the proceedings commenced by the impugned show-cause notice are required to be struck down.
5. Accordingly, petition succeeds and the rule is made absolute in terms of prayer (a). In the circumstances of the case, there will be no order as to costs.