Dismissed

M/s. R. K. Trade Links v. Union of India

Telangana HC16 Aug 2023WP/21245/2023

Case brief

AI extract

What is this about?

This common order disposed of two writ petitions challenging show-cause notices issued by customs authorities regarding duty evasion on imported nut products. The bench held that writ petitions are normally not maintainable against mere show-cause notices, directing petitioners to exhaust statutory remedies first.

What did the court decide?

Both writ petitions were dismissed at the stage of admission. Petitioners' right to respond to the show-cause notice and avail statutory remedies was reserved.

M/s. R. K. Trade Links Vs Union of India — Customs and Excise | Telangana HC (2023)

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[³³⁸⁶ ]

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IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD

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(Special Original Jurisdiction)

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WEDNESDAY, THE SIXTEENTH DAY OF AUGUST TWO THOUSAND AND TWENTY THREE

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PRESENT

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THE HONOURABLE SRI JUSTICE P. SAM KOSHY AND

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THE HONOURABLE SRI JUSTICE LAXMI NARAYANA ALISHETTY

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WRIT PETITION No.: 20748 OF 2023

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AND

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WRIT PETITION No.: 21245 OF 2023

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WRIT PETITION NO: 20748 OF 2o23:

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Between:

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M/s. Venkateswara Feeds, Rep by its Proprietor Gunnam Naga Narendra Vasu, S/o. Adiyya aged about 41 years Flat No.5-2-396/55ClP123, Sahebnagar, Mandh Colony, Ranga Reddy District, Hyderabad-500070

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...PETITIONER

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AND

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1 Union of lndia, Represented by Secretary, Department of Revenue, Ministry of Finance, Department of Revenue, Central Secretariat, North Block, New Delhi-1 10 066

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2 Central Board of lndirect Taxes and Customs, Represented by Chairman, Department of Revenue, Ministry of Finance, North Block ,Central Secretariat, New Delhi-1 10 001

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The Principal Commissioner of Customs, GST Bhavan, L.B.Stadium Road, Basheerbagh, Hyderabad-500004.

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Deputy Commissioner of Customs, lCD, Sanathnagar, Hyderabad

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Assistant Commissioner of Customs, S.l.l.B. Office of principal Commissioner of Customs, GST Bhavan, L.B.Stadium Road, Basheerbagh, Hyderabad500004

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Superintendent of Customs, S.l.l.B., Office of^principal Commissioner of Customs, GST Bhavan, L.B.Stadium Road, Basheerbagh, Hyderabad-500004

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...RESPONDENTS

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Petition under Article 226 of the Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue a writ, order, or direction more particularly one in the nature of Writ of mandamus and declare the impugned Show Cause Notice No.12512023

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Adjn-Cus (PC) dated 2610512023 bearing refe'erce number C.No.Cus/Hyd 11112O23-S;llB as illegal and set aside the same^zrs being opposed to Article 14 and 19⁽¹ )^(,1) of constitution of lndia.

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lA NO: 1 OF 2023

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Petition under Se:tion 151 CPC^praying that in th3 circunrsternces stated in the affidavit filed in srrpport of the petition, the High C,turt nra^y b,.'^pleased to stay, by virtue of an inlerim/ad-interim relief, operation cf theⁱ npugned Show Cause Notice No.125l2tl23 Adjn-Cus^(PC) dated 26-05-'.2023^'rearirtg reference number C. No.Cus/ Hy< I 111 2023-5llB and all such further enri crrnsequential proceedings.

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Counsel for the Petitioret': SRI G .VIDHYADHAR REDDY

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Counsel forthe Respordent No.1: SRI GADI PRAVEEN KUMAR

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(Dy. SOLICITOR GENERAI. C)F INDIA)

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Counsel for the Respor dent No.2 to 6: SRI DOMINIC FEIRNANDES, SENIOR SC FOR CENTRAL BOARI) I)F INDIRECT TAXES AND CUSTOM!i

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WRIT PETITION NO: 21 245 OF 2023

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Between:

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M/s. R. K. Trade Links, Represented by its Proprietor l(c lli^{t/enkateswara} Rao, S/o. Radha Krishna Murthy, Aged about 62 yt:ars Fla No.201 , Shilpa Residency, Vivekrrnandanagar colony, Kukatpally, Hvderat,arJ- 500072

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.. PETITIONER

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AND

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1 Union of lndia, Urrion of lndia, Represented by Secretary, [)epariment of Revenue, Ministn,of Finance, Department of Revenrre, Cent.al llecretariat, North Block, New Delhi- 1'10 066

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Central Board of ndirect Taxes and Customs, Representerj t)y^()hairman, Department of Rr venue, Ministry of Finance, North EJlock, Cr:ntral Secretariat, New Delhi- 110 011

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3 The Principal Cornmissioner of Customs, GST Bhav:rn, L. 3. St;rdium Road, Basheerbagh, Hy derabad- 500004.

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4 Deputy Commiss oner of Customs, lCD, Sanathnagar, Hyrle'abild

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5 Assistant Commi ;sioner of Customs, S. l. l. B. Officer of princ:ipal Commissioner of Customs, GST Bhavan, L. B. Stadium RoaC, E;asheerbagh, Hyderabad- 500C04

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6 Superintendent of Customs, S. l. l. B. , Office of prin:ipal Oomnissioner of Customs, GST Bravan, L. B. Stadium Road, Basher:rbagtr, lycerabad500004

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...RE:SPONDENTS

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Petition under Lrticle 226 of lhe Constitution of lndia playing that in the circumstances stated in the affidavit filed therewith, the F igh^()ourt may be pleased to issue a wri ., order, or direction more particularly (rn,3 ir the nature of Writ of mandamus an<{ declare the impugned Show Cause Notice No. 12412023

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Adjn-Cus (PC) dated 26-05-2023 bearing reference number C. No. Cus/Hyd/.t 112023- SllB as illegal and set aside the same as being opposed to Article 14 and 19 (1) (g) of constitution of lndia.

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lA NO: 1 OF 2023

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Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to stay, by virtue of an interim/ad- interim relief, operation of the impugned Show Cause Notice No.12412023 Adjn- Cus (PC) dated 26-05-2023 bearing reference number C. No. Cus/Hydl11l2023-SllB and all such further and consequential proceedings.

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Counsel for the Petitioner: SRI G .VIDHYADHAR REDDY

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Counsel forthe Respondent No.1: SRI GADI PRAVEEN KUMAR (Dy. SOLlclToR GENERAL oF INDIA)

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Counsel for the Respondent No.2 to 6: SRI DOMINIC FERNANDES, SENIOR SC FOR CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS

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The Couft made the following: COMMON ORDER

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THE HONC.URABLD SRI JUSTICE P. SAM K()SH}

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AND

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THE HONOURAB].E SRI JUSTICE LAXMI NARAYANA,IT,ISIIETTY

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Writ Petition No.2O748 of 2023 and Writ Petition No.21245 of 2023

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COMMON ORDEIT:

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Since the fac.s zrnd issues involved in both the Writ Petitions ar. common, the.y rrre disposed of by way oi this <:omn: o:-r order

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I{eard Mr. C . Vidhyadhar Reddy, learne,l corrr sel for the petitioner ir-r both tl-re rvrit. petitions; Mr. Gadi Pravt:en Kumar, leialned D1'. Solicit rr General of India, for thc 1^.t respondent; and Mr.Dominic F-erne ndes, learned Senior Stan,ling^(lounsel lor Central Board of Ir direct Taxes and Customs, for resp,or-rd<'nt Nos.2 to 6.

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For conr,enie rcc, the lacts in Writ Petition No.20,'4t of 2023 are discussccl hcre n.

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Aggrievcd b., the issuance of show-cause n trtice dated 26.C5.2O23 i;nder Section 28(41 of the Custorns A:t, 1962, the inst.ant writ petitio r has been filed b1.' the petitroner

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2 PSK.] & LNA..I sp 207,18&21245,2023

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The facts in brief leading to the fi1ing of present writ petition are that the petitioner is said to have imported few consignments of nut pieces from M/s.Hai NHI Production Trading One Member Company Limited, and another consignment from M/s.November Import Export Co. Ltd., Vietnam.

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The petitioner imported these goods taking advantage of the notification dated O 1.06.201 1 granting exemption of such goods from a-11 duties as well as notihcation dated 3 1 . 12.20O9 which stated 'determination of origin of goods under the preferential trade agreement between Government of AStrAN and India Rules 2009'. The petitioner imported these nut pieces declaring the said goods 1n as agricultural rejected nut pieces residues and waste (used animal feed) which is otherwise unfit for human consumption. The petitioner declared the category of the goods under the classification under Customs Tariff Sub- Heading 2 3 080000.

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7 . Initially, the 4tn respondent did not a-l1ow clearance of the goods as per the classification claimed by the petitioner including the certificate given by the authority in the exporting country on the basis of the alleged wrong classihcation of the said goods. The product was seized by the custom authorities upon the same

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I'SK.J & T,NA-.I ,p 2071 l&21 245 _202i

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reaching the destir ation in India. Subsequently, after [he product \1'a s subjected to laboratory test in two differe nt ctrt,:gories, the product was cleare<l. The test report of both the laboratories showed the said prrcluct to be unfit for human c()nsurll.,tion.

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It is said that trretitioner took possession of all those products and thereafter is srri<l to have sold it in the marl.:et. f ir-rbsr:quently, a pre-notice consultation was convened between the partie;. It was contended by the respondent-Department that from the dccuments was available on record, it appears that the product imported broken cashew nuts and have been wrongly classifiecl under the Customs Tariff Sub-Heading 23080000 whereas it cught to have been under CTH 080 132 10. This product unce:' the CTH 08013210 would heve attracted BCD @)3O%, SWS(d l0'lo rrnd IGST @,so/a.

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It is said th:.t petitioner has submitted his res;ponr;e to the pre-notice consultirtjon. However, dissatisfied \vith lh,r same, the authorities have n<,vr issued the impugned show-causrr rlotice dated 26.05.2023 under Section 28(41 of the Customs Act, 19(j2. It is this shcw-cause n<,tice which is under challenge in th3^present w t petition. The im:;trgned show-cause notice has b,len orimarily

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4 PSK..r & t_Nn.J wp 20748&2 r2.ls-202:1

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challenged on the ground of :^(a) the authority issuing the showcause notice not being the competent authority under the Customs Act; (b) the authorities have not taken into consideration the response and explanation given to the department at the time of the pre-notice consultation; (c) the show-cause notice does not deal with the submission of the petitioner made in their explanation to the pre-notice consultation; (d) the shor.r,-cause notice proceedings is per se bad in law lor the reason that the product has already been subjected to test before two of the laboratories and both the laboratories have given a re1:ort that the product being unfit for human consumption.

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According to petitioner, the impugned show-cause notice under challenge does not deal \i/ith the laboratory report at ail. It was also the contention that since admittediy as per the test report the product was unfit for human consumption, that itself would be sufficient to hold that the product would not attract any duty under the Customs Act. If the. product, since it was unfit for human consumption, stood exempted from payment of duty under the Customs Act, the impugned show-cause notice per se is bad and requires intervention by the Writ Court at this juncture without

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I'SK.J & I.NA.J !, p 2071 i&2 t 245 2021

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subjecting the peti ioner to further harassment ert the hanCs of the respondent- Depart^"rrent.

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According to petitioner, the petitioner has been s;ubjected to great inconvenien<:e when the 4tt respondent had not granted clearance ol the^goods when it reached the Indian port, artd now the petitioner bein q subjected to the impugned show-cause notice proceedings would ftrrther put the petitioner to nlore inr:onvenience and harassment.

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Per contra, l:arned counsel for the respc,ndent- De'lartment raised the issue of maintainability of the nrit petition itself particuiarly at thc show-cause stage. Learned cor-lrlse for the respondent-Depart ment took us through variorts conlen "s of the impugned sho"r,-cz use notice highlighting the natur,: of illegality, irregularity and tl e mischief played by the petition3r in evading payments of custc m s duty. It was the lurther conl ention of the Iearned counsel fol the respondent-Department that sirLce it is only at the show-cause stage, no prejudice would br: causr'd rpon the petitioner il thel enter appearance before the respondentDepartment and tr nder their expianation or repiy to ihe i:npugned show-cause notice The authorities concerned tirerea'1r'r sha1l duly

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6 PSK.J & t.NA.J wp 20748&21245 2023

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consider the contents of the reply and take appropriate recourse in accordance with iaw.

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Learned counsel for the respondent-Department, further also drawing the attention to the averments of the impugned showcause notice, submitted that the petitioner even at the time of the pre-notice consultation has not been able to satisfactorily put forth convincing documents which would reflect that the petitioner has soid the products to the agencies dealing with animal feeds. According to learned counsel for the respondent-Department, since the petitioner had bought the product itself knowing fully well of the fact that it was unfit for human consumption, further it had bought the product with a specific intention of selling it as animal feeds, in addition the petitioners themselves have tendered a declaration before the respondent-Department of the same to be only meant for use as animal feeds. It was therefore incumbent upon the petitioners to have disclosed providing details of the same so as to ascertain whether it has been used for animal feeds or for any other purpose. Drawing the attention of the impugned showcause notice, learned counsel for the respondent-Department also submitted that the petitioners in lact did not have sufficient invoices to show that it has been sold to agencies only dealing with

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7 PSK.J & LNA.J !p 20?.18&2 | 245_ 202_r

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animal feeds, rath rr petty cash sales have been shou.r. ttLat too of small quantities tl.at too made to individuals orL cash sal:s. With all this, learner I counsel for the respo ndent--l)egrartment, emphasized on tht. zrllegation that the petitioner, inst.ead of selling the product as an animal feed, had literally sold the products in open market for human consumption which by itself is i1 serious offence and misconduct on the part of petitioner and. thus, prayed for dismissal of thr writ petition.

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L4. Having hearc the contentions on either sidr: and on flerusal of the record , thoug h the learned counsel for^-,he gre :itioner has referred to catena ol'decisions in support of his conterrtions firstly on the ground t hat the burden of proof being t.rat on the respondent-Deparl ment to establish that the pet:,tioner har; sold the goods other than frrr anima1 feed.

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Learned counsel for the petitioner had also relied upon certain decisions vrhere the exemption has been granted in respect of waste materials and scrap materials. Howe',,er, vzhen we went through the cont(:nts of the impugned show-<:ause rrotice there u,ere certain serious allegations Ievelled against t1r. petitioner, firstly, so far as selling the product in the open rnarket loosely and

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8 PSK.J & L\A.] !!p 20748&2 t245 2021

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which presumably was for human constrmption; secondly, the sale being not made to aly of the agencies dealing with animal feeds; thirdly, the petitioner violating the declaration that he had given in the course of the import being made; fourthly, there being no sufficient documents / invoices or details of the sale made by the petitioner in respect of the entire consignment imported by them. Further, taking note of the CTH classification, cashew nuts and broken cashew nuts both are leviable \Mith BCD @ 3O%, SWS @ lOok and IGST @ 5%. Unlike the CTH sub-heading 23080000 which is agricultural rejected nut pieces residues and waste unfit lor human consumption, which is totally free from the duties under the Customs Act. Thus, if the allegations are found to be true, the petitioner would stand evading huge amount of tax money.

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It wouid be relevant at this juncture to take note of the decision of the Hon'ble Apex Court in Malladi Drugs and Pharma Limited vs. Union of Indial, wherein the Hon'ble Apex Court held at para Nos.2 and 3 as under :

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'2. The Htgh Court, has, bg the impugned^judgment held thot the appellant sLnuld first raise all the objections before the authoity u.tho haue issued the shou.t-cause notice and in

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'^{(2020)t2 s.c.c.806}

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P:JK.J & LNAJ vp 207. 8&2124J -2021

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case anA adwrse order is passed against the 'zppellari, then libertg has betm granted to approach the High^('ourt.

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The High Courl's order was passed wag back itt 1997. Neither partg knous whether the Deparlment has F,raceeded further^and / 'tr^{whether ang orderhas been passedptLrsrLant} to the show-czuse notice. Euen othentise, in our uiew, the High Court utc.s absolutely right in dismissing the writ pet,tion dgainst o mere shot -cause notice. We see no reasoil to interfere. Th,z appeals stand dismissed. There u'ili b<' no order as to corrts. "

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L7. Similarly, 1:) yet another decision in t h,: case of Commissioner o i Central Excise vs. Kris.nna \tr'ax Private

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Limited2, the Hon ble Apex Court held as undcr^:

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" 12. It I as been laid down bg this Court that thc' e^.cise law is a conq lete code in itself and it ruould normatlA not be appropriate jtr a Writ Courl to entertain a petition wtder Article 226 of tlle Constitution and lhat the corrcerne'd peison must first raisz all the objections before the authority u'ho had issued a shot t <:ause notice and the redressal in tern:; oJ'the eisting proui:;iotts of the laut could be taken resorl to i.' an aduerse order uns passed against such person. For exannple in Union of Indla and another vs. Guuahatl Catbon Limiteds, it uas corLcluded; "Tlte Dxcise Lau is a complete code in order to seek redre,ss tn excise matters Qnd h,?nce ,naA not be approltr'"aie^jor the utril court to enteftoin o oetition ,-1

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'^{(2020 l2 scc 572} 'rzotz) tt scc 651\

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PSK..I & T,NA.J ,p-20741i&l1245 2021

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under Article 226 of the Constitution", uthile in Mdlladi Dntgs c.nd Pha,rmrr Ltd. r.ts. Union of Indiaa, it utas obserued:-

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"...The High Court, has, bg the impugned judgment held tLnt the Appellant should first raise all the objections before the Authoitg utho hnue issued. the shout couse notice and in cose ang aduerse order is possed against the Appellant, then libertg has been granted to approach the Htgh Cour7...

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...irt our uieu.t, tLe High Court u.tas absolutelg ighf in dismissing tte uit petition against a mere shou-t cause notice, "

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/t is lhus u.tell settled that urit petition stnuld normallg not be entertained against mere issuance of shotu cause notice. ln the present case no shotu cause notice uas euen issued uhen the Lligh Court had initiallg entertained the petition and directed the DeparTment to prima facie consider whether there uas mnterial to proceed uith. the matter. "

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Moreover, the judgments which have been cited by the learned counsel for the petitioner are those rvhich have travelled to the High Court or the Hon'ble Apex Court after exhausting the statutory remedies available under the statute and most of them were not at the stage of show-cause notice.

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For all the aforesaid facts and reasons narrated in the preceding paragraphs, more particularly, taking into consideration '(zozo) rz scc sos

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I I'SK.J & I,NA.J , p 2074]&21245 2021

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the gravity of the contents of the show-cause^.rotico, we are not inclined to enterta:n the writ petitions at this^jlLncture. {owever, the right of the pe.itioner stands reserved to respond t,r the showcause notice dated 26.O5.2023 and to avail appropriale rernedies in accordance with la,v under the Act.

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20, With these olrservations, both the writ petitions ere dismissed

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at the stage of adn:ission. No costs.

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2L. As a sequel, miscellaneous applications^pend:ng if any in these Writ Petition,;, shall stand closed.

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SD/. K. AMMAJI ASSISTT\N-T REGISTRAR //TRUE coPYtt ( til :;E:CTION OFFICER /

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To, 1. One CC to SRI Ci. VIDHYADHAR REDDY, Advocak; [OPtrC] 2. One CC to SRI t,OMlNlC FERNANDES, SENIOR SCFOI] T]EIJTRAL BOARD OF tNDtRECT TAXES AND CUSTOMS [OI'UC] 3. One CC to SRI CIADI PRAVEEN KUMAR (Dy. SOLICITOft^(}ENERAL OF rNDrA) [OPUC] 4. Two CD Copies BN

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BSCfi(

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HIGH COURT

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DATE D : 1 6l08l1t(t23

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COMMON ORI)ER

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WP.No.20748 of 2023 & WP.No.21245 of 2023

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