𝐒 𝐉 𝐄𝐗𝐈𝐌 𝐒𝐞𝐫𝐯𝐢𝐜𝐞𝐬

“Indirect Tax I Indirect Tax Litigation I Customs & FTP I Central Licensing I Arbitration I Advisory”

Dated: 13.03.2025

Delhi High Court ruled that issuing two SCNs under Sections 28(1) and 28(4) simultaneously for the same facts is not permissible

The Delhi High Court has ruled that a subsequent Show Cause Notice (SCN) issued under Section 28(4) of the Customs Act cannot be considered ‘supplementary’ to a prior SCN issued under Section 28(1), as both provisions operate in separate legal fields. This judgment reaffirms that customs authorities cannot arbitrarily invoke Section 28(4) to impose harsher penalties when an SCN under Section 28(1) has already been issued for the same facts.

Background of the Case

The case involved M/S ISMARTU INDIA PVT. LTD., an importer that had classified mobile phone components under a specific tariff heading. However, the Customs Department disputed this classification, arguing that the goods should be classified as complete mobile phones, which attract higher customs duties.

Issuance of Two Show Cause Notices (SCNs):

1. First SCN (25 July 2023) under Section 28(1) – Alleging misclassification and short-payment of duty.
2. Second SCN (01 September 2023) under Section 28(4) – Alleging willful suppression of facts to evade customs duty.

The petitioner challenged the second SCN, asserting that it was legally unsustainable and merely a change of opinion by the customs authorities.

Key Legal Findings of the Delhi High Court

1. Section 28(1) and Section 28(4) Serve Different Purposes

• Section 28(1) applies in cases where no fraud, suppression, or misrepresentation exists.
• Section 28(4) is applicable only in cases involving collusion, deliberate misstatement, or suppression of facts.
• The court ruled that if the Customs Department initially issues an SCN under Section 28(1), it cannot later invoke Section 28(4) for the same set of facts.

2. A Second SCN Under Section 28(4) Cannot Be Considered ‘Supplementary’

• The Customs Department relied on Notification No. 42/2019, arguing that the second SCN was a supplementary notice.
• The court rejected this argument, stating that a supplementary notice should only add details to an existing charge, not introduce an entirely different legal basis.
• The second SCN under Section 28(4) was deemed an attempt to impose harsher penalties, making it legally invalid.

3. Classification Disputes Do Not Constitute ‘Suppression of Facts’

• The court ruled that a dispute over tariff classification does not equate to fraud, misrepresentation, or suppression.
• The importer had fully disclosed all relevant details, invalidating the Customs Department’s argument under Section 28(4).
• Mere disagreement with customs officials over classification cannot justify invoking an extended limitation period under Section 28(4).

4. Change of Opinion by Customs Authorities Is Impermissible

• The same customs officer issued both SCNs within six weeks, using identical facts but different legal provisions.
• The court ruled that this was a clear case of change of opinion, which is not permissible under tax laws.

Final Judgment:

• The Delhi High Court quashed the second SCN issued on 01 September 2023.
• The Customs Department was barred from taking any further action based on the second notice.
• The classification issue remained open for adjudication under the first SCN.

In case you face any issues related to Indirect Tax-Customs, GST, Foreign Trade Policy (FTP), Arbitration matters and Central Licensing and related advisory matters in India then please feel free to get in touch with SJ EXIM Services.

We offer Legal advice and litigation support in matters related to Indirect Tax-Customs, FTP, other Indirect Tax matters & Arbitration law, all sorts of Central licensing and related matters. Come and explore the new way of doing business with us!

Source: Delhi High Court

Download Delhi High Court Order Below

Connect with us for more-

@ Team S J EXIM SERVICES, New Delhi, IN

CP: Ms. Shubhra Jha, Founder

Tel: +91-11-4999 2707 I +91-9999005693

Web: www.sjexim.services

EMAIL: operations@sjexim.services  I shubhra@sjexim.services

Facebook: www.facebook.com/sjeximservices

LinkedIn: https://www.linkedin.com/company/90794255/admin/feed/posts/

YouTube: https://www.youtube.com/@sjeximIndia

Subscribe our WhatsApp Channel: https://whatsapp.com/channel/0029VaTxDT8JZg4CHEOSoK47

Subscribe our Telegram Channel: https://t.me/sjeximindia

Disclaimer:

1. The views expressed are based on the interpretation of the relevant information/documents, applicable law, and government policy and there is no assurance that a court or tribunal or regulatory body or other governmental authority may not interpret it differently.

2.  We are not responsible for updating or revising this article on account of any change in law or interpretation thereof or a change in events or circumstances informed or occurring after the date of this article unless specifically requested for it.

3. Our advice should not be taken or used out of context or reproduced for any other purpose or transaction. Views expressed in this update are strictly personal, based on our understanding of the underlying law.

4. We are not responsible for any injury, loss or cost arising to any person who refers to this update and acts or refrains from any act accordingly. We would suggest that detailed legal advice must be sought before relying on this update.

NOTE: All Inquiries/Consulting/Advisory/Assignments are solicited via email only & it is a PAID Service only!

#LawFirm #Lawyers #Arbitration #ArbitrationLaw #ADR #India #Law #LegalUpdates #NewDelhi #IndirectTax #IndirectTaxLaw #CBIC #FTP #CommercialLaw #CorporateLaw #ConstitutionalLaw #BarandBench #InternationalArbitration #InternationalCommercialArbitration #WTO #TBT #QCO #BIS #UnitedNations #UNO #DutyDrawback #CustomsAct #Advisory #ProBonoConsulting #IndiaCustomsAtWork #Facebook #Twitter #Instagram #LinkedIn #Tumblr #WhatsAppChannel #WhatsApp #YouTubeChannel #YouTube #KPMG #Deloitte #ErnstandYoung #GrantThornton #EY #PWC #BDO #Consulting #SettlementCase #DGFT #CII #FICCI #IndianChamberofCommerce #InternationalChamberofCommerce #PHDChamberofCommerce #FTP #FTP2023 #Compliance #CDSCO #HighCourts #SupremeCourt #DPIIT #CESTAT #CAAR #AdvanceRuling #CEX #Appeal #Refunds #IGSTRefund #Google #GoogleSearch #GoogleSEO #AIFTA #FTA #ASEAN #CustomsAdvanceRuling #JICA #JETROIndia #KITAIndia #KOTRAIndia #Multinationalcompanies #JapaninIndia #KoreainIndia #GovtofIndia #MinistryofcommerceIndia #TradeDeals #FTA #RulesofOrigin #SJEXIMServices #NewDelhi #India #Ministryofsteel #SteelQCO