Subsequent Notice U/S 28(4) Customs Act Cannot Be 'Supplementary' To Prior Notice U/S 28(1), Both Provisions Operate In Separate Fields: Delhi HC

Section 28 relates to recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded. It provides for two separate types of notices:

One under Section 28(4) where elements of collusion, wilful mis-statement and suppression are made out in assessee' conduct.

The other under Section 28(1) where the elements of Section 28(4) of the Act are absent.

“Meaning thereby that it is only in those circumstances where Section 28(4) of the Act is not attracted that a Notice under Section 28(1) of the Act is issued,” a division bench of Justices Yashwant Varma and Harish Vaidyanathan Shankar observed.

The development comes in a petition filed by Ismartu India, a firm engaged in electronics and mobile devices manufacturing, challenging the show cause notice issued to it under Section 28(4).

The impugned SCN was passed subsequent to the SCN issued under Section 28(1). Ismartu argued that since the previously issued SCN was on a similar factual matrix relating to the importation of similar goods, the impugned SCN would constitute a 'change of opinion'.

It was further argued that the impugned SCN does not satisfy the requirements of Section 28(4) as the same lacks any particulars regarding any alleged (a) collusion (b) deliberate misrepresentation, or (c) the withholding of crucial information.

The Department on the other defended its action by citing a 2019 Notification which provides for a 'supplementary notice' to be issued once a notice under Sections 28 or 124 of the Act has been issued under circumstances enumerated therein.

At the outset, the High Court observed that Section 28, by its very nature posits in a given set of facts and circumstances, the issuance of a SCN either under Section 28(1) or under Section 28(4) of the Act and not under both.

“Under the circumstances, we are unable to agree that the impugned SCN under section 28(4) of the Act post the issuance of the SCN under Section 28(1) could be termed a 'Supplementary Notice'.”

It observed that since Section 28(1) can operate only in the absence of the conditions prescribed in Section 28(4), notices under both the provisions cannot be issued where there is (i) an almost identical factual matrix, (ii) reports are submitted by the same Chartered Engineer and (iii) with almost identical conclusions.

It agreed with Ismaruti that the same officer, within a span of just 6 weeks, presented with an almost identical set of facts, had chosen to issue the two notices under different Sections, which would “taint the impugned SCN with the vice of a 'change of opinion'”.

As such, the Court allowed Ismaruti's petition and quashed the impugned SCN under Section 28(4).

Appearance: Mr. Tarun Gulati, Sr. Adv. with Mr. Tarun Jain, Ms. Kritika Tuteja, Mr. Devansh Garg & Ms. Sheena Tyagi, Advs. for Petitioner; Mr. Gibran Naushad, SCC with Mr. Harsh Singhal, Adv. for Respondent

Case title: M/S Ismartu India Pvt. Ltd. v. Union Of India And Others

Citation: 2025 LiveLaw (Del) 309

Case no.: W.P.(C) 15199/2023

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